Insteel's Fourth-Quarter Profit Halves as Costs Outpace Prices
Net earnings fell to $7.7 million, or $0.40 a share, as gross margin contracted to 10.0% even as sales reached $209.3 million.
Insteel Industries Inc. (IIIN), the largest U.S. manufacturer of steel wire reinforcing products for concrete construction, reported fourth-quarter net earnings of $7.7 million, or $0.40 a share, down from $14.6 million, or $0.74 a diluted share, a year earlier.
The Mount Airy, North Carolina company said results included $0.7 million of restructuring charges tied to a planned consolidation of welded wire operations, which reduced earnings per share by $0.03.
Net sales rose 17.9% to $209.3 million from $177.4 million in the year-ago quarter. Average selling prices increased 6.6% on pricing actions aimed at recovering higher raw material, freight and other operating costs. Shipments rose 10.6%, largely because of an extra week in the fiscal calendar, while a broader engineered structural mesh customer base helped sustain volumes in a soft construction market.
Gross profit fell to $21.0 million from $28.6 million a year earlier, and gross margin contracted to 10.0% from 16.1%. The company said the year-over-year decline primarily reflected higher raw material costs and inflation in freight and operating costs that outpaced the price increases.
Sequentially, average selling prices rose 3.3% and shipments increased 2.5% from the third quarter, also benefiting from the additional week.
For the full fiscal year ended October 3, 2026, net earnings were $29.5 million, or $1.51 a diluted share, compared with $41.0 million, or $2.10 a diluted share, in fiscal 2025. Fiscal 2026 included $0.8 million of restructuring charges that reduced diluted earnings by $0.03; fiscal 2025 included $2.6 million of restructuring and acquisition-related costs that reduced diluted earnings by $0.10.
Full-year net sales increased to $739.5 million from $647.7 million, primarily on an 11.5% rise in average selling prices. Shipment volumes increased 2.4%, benefiting from the extra fiscal week and the broader engineered structural mesh customer base. Gross profit decreased to $75.7 million from $93.4 million, and gross margin declined to 10.2% from 14.4%. The company said the reduction in profitability primarily reflected higher raw material costs and inflation in freight and operating costs that outpaced higher average selling prices.
Operating activities generated $18.2 million of cash in the fourth quarter, compared with using $17.0 million a year earlier, primarily due to favorable changes in net working capital, partially offset by lower earnings. Net working capital provided $4.6 million of cash in the current-year quarter compared with using $37.4 million in the prior-year quarter.
For the full year, operating activities generated $36.6 million of cash compared with $27.2 million in the prior year. Net working capital used $12.8 million of cash in fiscal 2026 compared with $37.6 million in the prior year, largely reflecting a smaller increase in inventories.
Capital expenditures for fiscal 2026 increased to $11.8 million from $8.2 million in the prior year. For fiscal 2027, capital expenditures are expected to total approximately $30.0 million, primarily to support expansion of the engineered structural mesh business, strategic investments in prestressed concrete strand operations, cost-reduction and productivity initiatives, and routine maintenance.
In the fourth quarter the company repurchased about 15,000 shares, bringing fiscal 2026 repurchases to about 114,000 shares. For the full year, Insteel returned $24.9 million to shareholders through dividends and share repurchases. It ended the year debt-free with $37.5 million in cash and cash equivalents and no borrowings outstanding under its $100.0 million revolving credit facility.
President and CEO H.O. Woltz III said domestic wire rod prices remain at historically high levels, well above global markets, with constrained availability requiring offshore purchases and the working-capital implication of elevated import volumes. He said publicly funded infrastructure activity continues to provide a solid foundation, while data-center projects constitute the bulk of private nonresidential construction activity. The company said it expects the engineered structural mesh customer-base trend to continue throughout 2027 and that the welded wire consolidation is expected to result in substantial cost reductions.
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