Insteel Industries Reports Stronger Quarter Ahead Amid Challenging Market Conditions
Insteel Industries, a leading manufacturer of steel mill products, has reported a weaker-than-expected second quarter 2026 due to severe winter weather disruptions and project delays. Despite this, the company remains confident in its business outlook and expects a recovery in gross margin as demand improves.
According to Scot Jafroodi, Vice President, CFO, and Treasurer, Insteel's net earnings for the quarter were $5.2 million, or $0.27 per share, compared with $10.2 million or $0.52 per diluted share in the same period last year.
Shipments declined 5.9% from the prior year, but increased 6.9% sequentially from the first quarter. However, winter weather conditions were significantly more severe than usual, reducing construction activity and disrupting operating schedules for both customers and Insteel. Certain projects originally scheduled for delivery during the quarter were also deferred to later in the year.
Despite these challenges, Insteel's average selling prices (ASPs) were up 14.2% year-over-year, driven by pricing actions taken throughout fiscal 2025 and into the current year to offset higher rod costs, increased Section 232 tariffs, and rising operating expenses. Sequentially, ASPs were up 1% from the first quarter.
However, gross profit declined $8 million year-over-year to $16.5 million, and gross margin narrowed to 9.6%. The decline primarily reflects lower shipment volumes, reduced spreads between selling prices and raw material costs, and higher unit conversion costs resulting from lower production levels and weather-related operational inefficiencies.
Despite this, Insteel expects several factors to support a recovery in gross margin as the third quarter progresses. Demand is improving as the company moves into the seasonally stronger portion of the year, recent price increases are beginning to gain traction, and higher operating rates across facilities should enhance fixed cost absorption.
In an interview with analysts, H.O. Woltz III, CEO, said, "We regret that we experienced both winter weather disruptions and project delays during Q2, but we're confident that short-term weather conditions and project delays neither create nor destroy demand, and that postponed demand will be evident during the balance of fiscal 2026."
As a result, Insteel remains optimistic about its business outlook and expects to see improved performance in the coming quarters. With recent order activity trending above forecasted levels, the company is confident in its ability to navigate challenging market conditions and deliver strong results.
