OLYMPIC STEEL INC 10-K Analysis & Summary – 2/21/2025

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OLYMPIC STEEL INC

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Olympic Steel Inc. experienced a decrease in net sales and net income in 2024 due to declining metals prices. Recent acquisitions are having a positive impact on gross profit margins, but investors should monitor metals price volatility and integration of acquisitions.

ELI5:

Olympic Steel made less money this year because the price of metals went down. They bought some new companies that are helping them make a bit more profit, but there are still some risks to watch out for, like prices changing a lot and making sure the new companies fit in well.

Accession #:

0001437749-25-004742

Published on

March 16, 2025

Analyst Summary

Net Sales decreased by 10.0% from $2.16 billion in 2023 to $1.94 billion in 2024.
Gross Profit Margin increased from 21.9% in 2023 to 23.2% in 2024.
Operating Income decreased from $77.7 million in 2023 to $47.9 million in 2024.
Net Income decreased from $44.5 million in 2023 to $23.0 million in 2024.
Average Selling Price per Ton decreased from $2,023 in 2023 to $1,837 in 2024.
Current Ratio increased from 3.3 to 4.4, a 33.3% increase.
Debt-to-Equity Ratio increased from 0.34 to 0.48, a 41.2% increase.
Interest Coverage Ratio decreased from 4.8 to 2.9, a -39.6% decrease.
Revenue decreased by 10.0%.
Net income decreased by 48.4%.
EPS decreased by 48.8%.
P/E ratio is 19.2, in line with the industry average.
P/B ratio is 0.74, below the industry average.
P/S ratio is 0.22, in line with the industry average.
EV/EBITDA ratio is 8.7, in line with the industry average.

Opportunities and Risks

Metals Price Volatility: Fluctuations in metals prices can significantly impact sales, gross profits, and inventory values.
Supply Chain Disruptions: Disruptions in the supply of raw materials can affect production and customer deliveries.
Labor Costs: Increased labor costs and potential labor disruptions could negatively impact profitability.
Integration Risks: Failure to successfully integrate recent acquisitions could hinder growth and profitability.
Cybersecurity Threats: Cybersecurity incidents could disrupt operations and compromise sensitive data.
Acquisition Synergies: Continued integration of recent acquisitions can drive revenue growth and cost savings.
Value-Added Services: Expanding value-added processing capabilities can attract new customers and increase margins.
Strategic Investments: Investments in automation and technology can improve efficiency and reduce labor costs.
Strong Customer Relationships: Maintaining strong customer relationships can ensure stable demand and recurring revenue.

Potential Implications

Stock Price

Investors should monitor metals prices, integration progress, and labor costs.
A HOLD rating is recommended, pending further stabilization of the metals market and successful integration of recent acquisitions.

Olympic Steel Inc. (ZEUS) – 10-K Report Analysis (FY 2024)

Executive Summary

This report analyzes Olympic Steel Inc.’s 10-K filing for the fiscal year ended December 31, 2024. Overall, the company experienced a decrease in net sales and net income compared to 2023, primarily due to declining metals prices. Recent acquisitions, however, are having a positive impact on gross profit margins. While the company remains profitable, investors should monitor metals price volatility, integration of acquisitions, and labor costs. A HOLD rating is recommended, pending further stabilization of the metals market and successful integration of recent acquisitions.

Company Overview

Olympic Steel Inc. is a leading metals service center operating in three segments: specialty metals flat products, carbon flat products, and tubular and pipe products. The company focuses on value-added processing and distribution. Recent acquisitions (Metal Works, CTB, and Metal-Fab) have expanded product offerings and geographic reach. The company’s strategy focuses on profitable growth, diversification, and operational efficiencies.

Detailed Analysis

Financial Statement Analysis

Key Ratios and Trends:

Net Sales: Decreased by 10.0% from $2.16 billion in 2023 to $1.94 billion in 2024.
Gross Profit Margin: Increased from 21.9% in 2023 to 23.2% in 2024.
Operating Income: Decreased from $77.7 million in 2023 to $47.9 million in 2024.
Net Income: Decreased from $44.5 million in 2023 to $23.0 million in 2024.
Average Selling Price per Ton: Decreased from $2,023 in 2023 to $1,837 in 2024.

Trend Analysis: The decrease in net sales is primarily attributed to lower metals prices. However, the increase in gross profit margin suggests improved efficiency and the positive impact of recent acquisitions. The decline in operating and net income reflects the impact of lower sales and increased operating expenses.

Segment Performance:

Specialty Metals Flat Products: Net sales decreased, but gross profit margin increased.
Carbon Flat Products: Net sales decreased, but gross profit margin increased.
Tubular and Pipe Products: Net sales decreased, but gross profit margin increased.

Segment Insights: All segments experienced a decline in net sales, reflecting the overall market conditions. The improved gross profit margins across all segments indicate successful cost management and value-added services.

Management’s Discussion and Analysis (MD&A)

Management attributes the decrease in net sales to declining metals prices. They highlight the positive impact of recent acquisitions on gross profit margins. The MD&A emphasizes the company’s focus on operational efficiencies, strategic growth, and customer service.

Risk and Opportunity Assessment

Risks:

Metals Price Volatility: Fluctuations in metals prices can significantly impact sales, gross profits, and inventory values.
Supply Chain Disruptions: Disruptions in the supply of raw materials can affect production and customer deliveries.
Labor Costs: Increased labor costs and potential labor disruptions could negatively impact profitability.
Integration Risks: Failure to successfully integrate recent acquisitions could hinder growth and profitability.
Cybersecurity Threats: Cybersecurity incidents could disrupt operations and compromise sensitive data.

Opportunities:

Acquisition Synergies: Continued integration of recent acquisitions can drive revenue growth and cost savings.
Value-Added Services: Expanding value-added processing capabilities can attract new customers and increase margins.
Strategic Investments: Investments in automation and technology can improve efficiency and reduce labor costs.
Strong Customer Relationships: Maintaining strong customer relationships can ensure stable demand and recurring revenue.

Uncommon Metrics

The filing does not explicitly highlight uncommon metrics. However, the emphasis on LIFO adjustments and the detailed breakdown of segment performance provide valuable insights into the company’s inventory management and operational efficiency.

Debt and Liquidity

The company has a $625 million ABL Credit Facility, which matures on June 16, 2026. As of December 31, 2024, the company had approximately $192.8 million of availability under the ABL Credit Facility. The company’s debt is primarily at variable interest rates, exposing it to interest rate risk. The company entered into an interest rate swap to mitigate this risk.

Conclusion and Actionable Insights

Olympic Steel Inc. faces challenges related to metals price volatility and integration of acquisitions. However, the company’s focus on operational efficiencies, strategic investments, and customer service positions it for long-term growth. Investors should monitor metals prices, integration progress, and labor costs. A HOLD rating is recommended, pending further stabilization of the metals market and successful integration of recent acquisitions.

Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

Ratio/Metric: 2024: $451,181 / $1,941,672 = 23.2%, 2023: $473,500 / $2,158,163 = 21.9%
Trend: Increased from 21.9% to 23.2%, a 6.0% increase.
Industry: The metals service center industry typically has gross profit margins ranging from 15% to 25%. Olympic Steel’s 23.2% is within this range.

Operating Profit Margin

Ratio/Metric: 2024: $47,859 / $1,941,672 = 2.5%, 2023: $77,671 / $2,158,163 = 3.6%
Trend: Decreased from 3.6% to 2.5%, a -30.6% decrease.
Industry: Operating profit margins for metals service centers are typically in the low to mid-single digits (2-6%). Olympic Steel’s 2.5% is on the lower end of this range.

Net Profit Margin

Ratio/Metric: 2024: $22,980 / $1,941,672 = 1.2%, 2023: $44,529 / $2,158,163 = 2.1%
Trend: Decreased from 2.1% to 1.2%, a -42.9% decrease.
Industry: Net profit margins for metals service centers are typically in the low single digits (1-4%). Olympic Steel’s 1.2% is on the lower end of this range.

Return on Assets (ROA)

Ratio/Metric: 2024: $22,980 / $1,044,496 = 2.2%, 2023: $44,529 / $984,835 = 4.5%
Trend: Decreased from 4.5% to 2.2%, a -51.1% decrease.
Industry: ROA for metals service centers typically ranges from 3% to 7%. Olympic Steel’s 2.2% is below this range.

Return on Equity (ROE)

Ratio/Metric: 2024: $22,980 / $573,924 = 4.0%, 2023: $44,529 / $555,478 = 8.0%
Trend: Decreased from 8.0% to 4.0%, a -50.0% decrease.
Industry: ROE for metals service centers typically ranges from 8% to 15%. Olympic Steel’s 4.0% is below this range.

Earnings Per Share (EPS) – Basic and Diluted

Ratio/Metric: Basic and Diluted EPS: 2024: $1.97, 2023: $3.85
Trend: Decreased from $3.85 to $1.97, a -48.8% decrease.
Industry: EPS varies widely based on company performance and market conditions.

Liquidity

Current Ratio

Ratio/Metric: 2024: $580,591 / $132,638 = 4.4, 2023: $603,169 / $180,237 = 3.3
Trend: Increased from 3.3 to 4.4, a 33.3% increase.
Industry: A current ratio of 1.5 to 2.5 is generally considered healthy. Olympic Steel’s 4.4 is high, suggesting strong liquidity.

Quick Ratio (Acid-Test Ratio)

Ratio/Metric: 2024: ($580,591 – $390,626) / $132,638 = 1.4, 2023: ($603,169 – $386,535) / $180,237 = 1.2
Trend: Increased from 1.2 to 1.4, a 16.7% increase.
Industry: A quick ratio of 1 or greater is generally considered healthy. Olympic Steel’s 1.4 indicates good short-term liquidity.

Cash Ratio

Ratio/Metric: 2024: $11,912 / $132,638 = 0.09, 2023: $13,224 / $180,237 = 0.07
Trend: Increased from 0.07 to 0.09, a 28.6% increase.
Industry: The cash ratio is typically low for metals service centers. Olympic Steel’s 0.09 is typical, indicating reliance on other current assets for liquidity.

Solvency/Leverage

Debt-to-Equity Ratio

Ratio/Metric: 2024: $272,456 / $573,924 = 0.48, 2023: $190,198 / $555,478 = 0.34
Trend: Increased from 0.34 to 0.48, a 41.2% increase.
Industry: Debt-to-equity ratios for metals service centers can vary, but a ratio below 1 is generally considered reasonable. Olympic Steel’s 0.48 is within a healthy range.

Debt-to-Assets Ratio

Ratio/Metric: 2024: $272,456 / $1,044,496 = 0.26, 2023: $190,198 / $984,835 = 0.19
Trend: Increased from 0.19 to 0.26, a 36.8% increase.
Industry: A debt-to-assets ratio below 0.5 is generally considered acceptable. Olympic Steel’s 0.26 indicates moderate leverage.

Interest Coverage Ratio (Times Interest Earned)

Ratio/Metric: 2024: $47,766 / $16,461 = 2.9, 2023: $77,593 / $16,006 = 4.8
Trend: Decreased from 4.8 to 2.9, a -39.6% decrease.
Industry: An interest coverage ratio above 2 is generally considered healthy. Olympic Steel’s 2.9 indicates they can comfortably cover their interest expenses, but it has decreased.

Activity/Efficiency

Inventory Turnover

Ratio/Metric: 2024: $1,490,491 / $390,626 = 3.8, 2023: $1,684,663 / $386,535 = 4.4
Trend: Decreased from 4.4 to 3.8, a -13.6% decrease.
Industry: Inventory turnover for metals service centers typically ranges from 3 to 6. Olympic Steel’s 3.8 is within this range, but trending lower.

Days Sales Outstanding (DSO)

Ratio/Metric: 2024: ($166,149 / $1,941,672) * 365 = 31.2, 2023: ($191,149 / $2,158,163) * 365 = 32.2
Trend: Decreased from 32.2 to 31.2, a -3.1% decrease.
Industry: DSO for metals service centers typically ranges from 30 to 45 days. Olympic Steel’s 31.2 is good, indicating efficient collection of receivables.

Days Payable Outstanding (DPO)

Ratio/Metric: 2024: ($80,743 / $1,490,491) * 365 = 19.8, 2023: ($119,718 / $1,684,663) * 365 = 25.9
Trend: Decreased from 25.9 to 19.8, a -23.5% decrease.
Industry: DPO varies, but Olympic Steel’s 19.8 suggests they pay their suppliers relatively quickly.

Asset Turnover

Ratio/Metric: 2024: $1,941,672 / $1,044,496 = 1.9, 2023: $2,158,163 / $984,835 = 2.2
Trend: Decreased from 2.2 to 1.9, a -13.6% decrease.
Industry: Asset turnover for metals service centers typically ranges from 1.5 to 2.5. Olympic Steel’s 1.9 is within this range, but trending lower.

Valuation

Price-to-Earnings Ratio (P/E)

Ratio/Metric: $37.88 / $1.97 = 19.2
Industry: The P/E ratio for the industry is around 10-20. Olympic Steel’s 19.2 is in line with the industry average.

Price-to-Book Ratio (P/B)

Ratio/Metric: ($37.88 * 11,135,890) / $573,924,000 = 0.74
Industry: The P/B ratio for the industry is around 1-2. Olympic Steel’s 0.74 is below the industry average.

Price-to-Sales Ratio (P/S)

Ratio/Metric: ($37.88 * 11,135,890) / $1,941,672,000 = 0.22
Industry: The P/S ratio for the industry is around 0.2-0.4. Olympic Steel’s 0.22 is in line with the industry average.

Enterprise Value to EBITDA (EV/EBITDA)

Ratio/Metric: Market Cap = $37.88 * 11,135,890 = $421,814,613. EBITDA = $22,980 (Net Income) + $8,325 (Income Taxes) + $16,461 (Interest Expense) + $30,913 (Depreciation & Amortization) = $78,679. EV = $421,814,613 + $272,456 (Debt) – $11,912 (Cash) = $682,358,613. EV/EBITDA = $682,358,613 / $78,679 = 8.7
Industry: The EV/EBITDA ratio for the industry is around 8-12. Olympic Steel’s 8.7 is in line with the industry average.

Growth Rates

Revenue Growth

Ratio/Metric: ($1,941,672 – $2,158,163) / $2,158,163 = -10.0%
Trend: Revenue decreased by 10.0%.

Net Income Growth

Ratio/Metric: ($22,980 – $44,529) / $44,529 = -48.4%
Trend: Net income decreased by 48.4%.

EPS Growth

Ratio/Metric: ($1.97 – $3.85) / $3.85 = -48.8%
Trend: EPS decreased by 48.8%.

Other Relevant Metrics

Segment Information

The company reports segment information for Specialty Metals Flat Products, Carbon Flat Products, and Tubular and Pipe Products.
Net sales for 2024 were $496.9 million, $1,109.1 million, and $335.7 million, respectively.
Operating income for 2024 was $19.7 million, $16.4 million, and $28.8 million, respectively.

Acquisitions

The company completed the acquisition of Metal Works on November 11, 2024, for $80.0 million.

Commentary

Olympic Steel’s financial performance in 2024 shows a mixed picture. While the company maintains strong liquidity, profitability metrics such as operating profit margin, net profit margin, ROA, ROE, and EPS have declined significantly compared to the previous year. Revenue also decreased by 10%. The company’s debt-to-equity ratio increased, indicating higher leverage. The acquisition of Metal Works could potentially contribute to future growth, but its immediate impact on profitability is not yet evident.