BGC Group Q4 2023 Earnings Call Transcript

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April 26, 2023

There are 9 speakers on the call.

Operator

Morning, and welcome to the AZZ, Inc. 4th Quarter and Fiscal Year 2023 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded.

Operator

I would now like to turn the conference over to Sandy Martin, 3 Part Advisors. Please go ahead.

Speaker 1

Thank you, operator. Good morning and thank you for joining us today to review AZZ's financial results for the fiscal 2023 Q4 and full year ended February 28, 2023. Joining the call today Tom Ferguson, President and Chief Executive Officer Philip Schlam, Chief Financial Officer and David Nark, Senior Vice President, Marketing, Communications and Investor Relations. After the conclusion of today's prepared remarks, we will open the call for questions. Please note there is a webcast and slide presentation for today's call, which can be found on AZZ's Investor Relations page under the latest earnings presentation atazz.com.

Speaker 1

Before we begin, I would like to remind everyone that our discussion today will include forward looking Forward looking statements by their nature are uncertain and outside of the company's control. Except for actual results, our comments containing forward looking future performance and therefore undue reliance should not be placed upon them. Actual results could differ materially from these expectations. In addition, today's call will include a discussion of non GAAP financial measures. Non GAAP financial measures should be

Speaker 2

Thank you, Sandy. Welcome to AZZ's Q4 fiscal year 2023 full year earnings call. Thank you for joining us this morning. Starting on Slide 3, I am pleased with our performance for fiscal 2023. We made tremendous progress towards our strategy to become a pure metal coatings company.

Speaker 2

I'm appreciative of the hard work of the entire AZZ team. I commend our AZZ Metal Coatings team for generating record results And our AZZ Preco Metals team for coming into AZZ and performing well. We are fully committed to building a stronger and more sustainable and focused company. On a continuing operations basis, we achieved record annual sales of $1,320,000,000 up 46% versus reported fiscal 20 22 sales of $903,000,000 while generating EBITDA and adjusted earnings per share within our previously stated guidance. We paid down debt, resulting in net leverage of 3.5x adjusted EBITDA at year end and received $2,600,000 equity from our remaining interest in AIS.

Speaker 2

As you can see here on Slide 4, we achieved Good flow through on higher sales generating over $267,000,000 of adjusted EBITDA or 20 percent of sales. These numbers reflect Metal Coatings for a full 12 months and PRECO Metals for about 42 weeks in fiscal year 2023. Net income on an adjusted basis was $86,900,000 up 55 percent resulting in adjusted EPS of $3.48 Philip will talk more about our Q4 and full year financial results shortly. Moving to Slide 5, AZZ Metal Coatings had another strong year with Sales up 21 percent to $637,000,000 with over 16% coming from organic growth. Operating income was up 21% versus prior year with an operating margin of 24.5% despite inflationary pressures, particularly as zinc cost peaked in most of our kettles.

Speaker 2

We continue to maintain our pricing discipline and focus on delivering value to our customers. Our investments in digitization continue to pay off in both productivity and customer service. Our investments in technology and innovation are focused on improving efficiencies, asset maintainability and supporting our energy efficiency and sustainability initiatives. Turning to Slide 6, Precote during its 42 weeks as part of AZZ had solid sales growth to nearly 687,000,000 and generated $120,000,000 of EBITDA. Precut sales grew by 20% on a comparable basis versus the prior year, mostly through unit volume growth and paint cost increases that were passed through.

Speaker 2

Precoats business performance was solid and within our expectations through its seasonally slower quarters where construction slows due to weather. As mentioned during our Q3 call, The management team at Precote took action in the 4th quarter to reduce the customer owned inventory that had caused bottlenecks at many locations. Additionally, the team recently finished a plant expansion project at their MMC facility that had started prior to our acquisition. This was an important expansion as this facility focuses on heavier gauge material that supports our construction and infrastructure initiatives. PreCote team is now reporting normalized inventory levels at most of their plants.

Speaker 2

Finally, I believe Pre Code has taken steps to bring its pricing curve in line with the cost curve that has experienced significant inflation. While the team still has more work to do on production efficiencies, we have realized over half of the expected synergies and still expect to identify sales synergies between Precoat and Metal Coatings. I am encouraged by the progress and expect our efforts to show up in our run rates in fiscal year 2024. And with that, I will turn it over to Philip to run through the financials. Thanks, Tom.

Speaker 3

My financial commentary will focus on the results from continuing operations. Our continuing operations include the results of our AZZ Metal Coating segment and our Precoat Metals segment from our acquisition date on May 13. Equity and earnings resulting from our non controlling interest in the Avail Infrastructure business and our corporate overhead supporting these businesses. On Slide 7, AZZ generated 4th quarter sales from continuing operations of $336,500,000 significantly above the 130 $1,000,000 recognized in the same quarter of the prior year. The significant current year quarterly increase is a direct result of the addition of AZZ Precoat Metals of $187,100,000 and our current quarter AZZ Metal Coating sales of $149,400,000 The Metal Coatings segment sales were up 14.8% in the quarter versus prior year on stronger volumes and pricing.

Speaker 3

On a comparable basis, pre cut metal sales for Q4 increased by roughly 17%. Operating profits from continued operations For the Q4 were $36,200,000 or 10.8 percent of sales. Prior year operating margins of 13.1% reflected only with the results of our Metal Coatings segment, while the current year reflects the inclusion of AZZ Precoat Metals. As we explained on our last earnings call, Brico's 4th quarter margins were compressed primarily due to normal seasonally lower volumes, coupled with inflationary headwinds. We expect this to reverse in the Q1 due to improved volumes and the pricing curve, as Tom noted, catching up to the inflated cost curve.

Speaker 3

Adjusted EBITDA in the Q4 of $57,200,000 was 112.6% higher than the As a percentage of sales was 17%, reflects a blended rate of Sorry, blended with Precoat Metals and was 3.70 basis points lower than the prior year's 4th quarter, a period in which included only our Metal Coatings segment. The combined results of the 2 businesses for the 4th quarter was in line with our expectations. We anticipate higher EBITDA margins moving forward Our full year operating profit of $173,600,000 was significantly above prior year when including precooked metals for the period under ownership. Operating margins from continuing operations of 13.1% were 200 basis points below the prior year, a period only including our Metal Coatings segments who had strong performance during the period. Adjusted EBITDA of $267,400,000 20.2% reflects the strong performance of the newly combined businesses.

Speaker 3

Both our Metal Coatings and Precoat Metal segments have worked hard at managing the inflationary market pressures and generate results in line with our expectations. Adjusted EPS from continuing operations for fiscal year 2023 was $3.48 per diluted share compared with adjusted EPS of $2.24 per share in fiscal 'twenty 2. On Slide 9, cash flows from continuing operations for the fiscal year were $91,400,000 compared with $60,600,000 in the prior year. Our fiscal year 2023 capital expenditures from continuing operations were $57,100,000 compared with $23,600,000 in the prior year. This increase was expected as part of our strategic rationale for the Pre Code acquisition.

Speaker 3

Our fiscal 2024 capital investment plan of nearly 80,000,000 includes roughly $50,000,000 in normal maintenance and growth capital spending and nearly $30,000,000 allocated to the construction of our new Precoat Greenfield facility in the St. Louis, Missouri area. We have continued to declare and pay quarterly common dividends. For the full year, we paid common dividends of $16,900,000 and made payments of $5,800,000 in preferred dividends. On Slide 10, we purchased pre cut metals on May 13, 2022 from Carlisle Sequa for $1,300,000,000 and then subsequently sold the controlling interest in our AZZ Infrastructure Solutions segment, Excluding our small oilfield tubing business for $228,000,000 in cash on September 30, 2022.

Speaker 3

During the year, we reduced our debt by $237,500,000 through proceeds from the AIS sale and from operating cash flows, reducing our acquisition date leverage of 4.25 to 3.46 as of fiscal year end. While we have a good pipeline of M and A opportunities, Particularly for galvanizing, we are focused only on highly accretive, low risk deals that exceed our targeted returns. Given our focus on growth and debt reduction, we did not buy back stock in fiscal 2023. Slide 11, we reduced our term loan B debt since the pre cut acquisition date improved our leverage to 3.5 times, A good step towards a long term target of below 3 times leverage. We continue to have more than 50% of our existing term loan Debt covered by swap agreement to reduce further interest rate exposure.

Speaker 3

We do not have any maturities under our current credit facility until 2027. I'll turn it back to Tom now for his closing comments.

Speaker 4

Thank you, Philip.

Speaker 2

Moving to Slide 13, the outlook in the Q1 for Metal Coatings as far as seasonally strong spring fabrication and construction season with many of our customers citing good backlogs as they benefit from increased infrastructure spending. Fabrication activity remains solid with many of our customers noting good backlogs. PRECO continues to see solid customer demand, particularly in growing industries that directly relate to construction container and data centers. As I mentioned earlier, customer inventories have normalized due to the actions we have taken. Our announced pricing actions inflation are beginning to show positive impact on Precoats margins.

Speaker 2

We have entered the stronger quarters of the year and quite frankly, I'm glad to have the slower 4th quarter behind us. Our corporate team will continue to focus on cash flow generation to allow rapid debt reduction, customer credit metrics, risk mitigation, prudently allocating capital That we're excited about for fiscal 2024. Our financial outlook this year reflects our expectation to directly or indirectly benefit With these leadership positions, we are bullish about our perspective opportunities related to roads, bridges and important clean energy and power transmission projects, as well as data centers, airports and other critical infrastructure. Our long term growth drivers include the shift to manufacturing reshoring with Build America, Buy America focus, as well as benefiting from the migration to pre painted aluminum and steel. In addition, there are important sustainability projects that are supporting critical material conversions.

Speaker 2

For example, the conversion from plastics to aluminum in the beverage industry. All of these secular trends create incremental opportunities for AZZ. Finally, we are progressing with our greenfield plant construction that supports aluminum coatings With a valuable dedicated customer committed to filling a majority of our capacity in this new plan. That is an exciting project for us and we will keep you updated on the progress. As you can see here on Slide 14, we are maintaining our full fiscal 2024 sales guidance of $1,400,000,000 to 1,550,000,000 Adjusted EBITDA guidance of $300,000,000 to $325,000,000 and adjusted EPS guidance of $3.85 to $4.35 While we're expecting some equity income from our minority stake in Avail, we are not ready to predict how much this will be while they are still working on their I will also note that the 1st quarter EPS is based on a more normalized tax rate than we experienced in the 4th quarter.

Speaker 2

Finally, on Slide 15, as a reminder, why we believe AZZ is a great investment. AZZ is the leading independent hot dip galvanizing and coil coating company with an irreplaceable footprint serving a broad and diverse set of markets. As a high value added tolling business, we are not directly exposed to metal commodities. Also, we have shown that we can protect margins with a long track record of to our customers emphasizing operational excellence and continuing to innovate and develop our people and technology. We're driving sales expansion through both organic and acquisition growth and are committed to improving margins and cash flow generation to fund our growth strategy.

Speaker 2

We will continue to focus on driving performance and financial results as well as maximizing long term shareholder value. Again, I want to thank all our shareholders and the Board for their support and I especially want to thank our AZZ team for their hard work and dedication during our transformational journey to become a focused metal coatings company. This is an exceptional accomplishment and I'm proud of our entire team. With that, we'll open it up for questions.

Operator

We will now begin the question and answer session. And our first question will come from John Franzreb of Sidoti and Company. Please go ahead.

Speaker 5

Good morning, guys, and thanks for taking the questions. Hey, John. I'd like to start with the 2 business segments, Surprisingly good underlying growth, roughly 15% and 17% in the 4th quarter. Could you just talk about What your growth assumptions are in the 2 segments embedded in your revenue guide of 1.41.55?

Speaker 3

Yes, John. I think on the 2 segments, when you look at the Metal Coatings segment to start with, They have continued to run a really solid business through COVID over the last 8 or 12 quarters and Yes. The back we don't have a lot of backlog, but the opportunities for some of those secular drivers that Tom was speaking to are there. When you look at the PreCoat side of the business, same thing. They've got Good opportunities in a lot of their markets are seeing slight slowdown in some of the construction, but overall a very solid business.

Speaker 2

Yes, John, let me just add. I think we don't have significant growth, top line growth embedded In our guidance, most of the uptick is going to come from having precoat for the full year. And our focus on is going to be more on value and Cash flow management and generation. So we don't have to have significant growth to hit that guidance.

Speaker 5

Okay, fair enough. And last quarter you talked about roughly 3 to 4 plants at Prequel that was taking lower margin business And this was roughly 3 to 4 quarter solution, any of you back then, probably fiscal 'twenty five to get resolved. Update us on the status of that and maybe talk about what kind of business they're taking that's lower margin?

Speaker 2

Yes, I think Some of it was more focused on just more our internal efficiency misses, if you will. So we've made some management changes at some of the at We've also made some organizational changes to help support the focus on improving efficiencies and productivity. And we have made some pricing adjustments for some lower margin customers that It just kind of been consistently it's not really a category of customers. It's just Things that have gone on for a while in the type of business. So it's not anything specific, More just a focus on a general focus on we want to deliver value, we want to perform well and the vast majority Of Preco Plants do exactly that.

Speaker 5

Got it. And just one last question, I'll get back into queue. The new aluminum coil plant, dollars 80,000,000 in CapEx this year. How does that look 2 years from now in the CapEx and maybe kind of you updated the status of the build?

Speaker 2

Yes, we had the groundbreaking ceremony with the Governor of Missouri. That was an event on a cold, drivy day. And quite frankly, the groundbreaking It was more of they were already doing quite a bit of excavation work on that site. So Official groundbreaking, but things have been going on. We've got the equipment on order And delivery is secured.

Speaker 2

We've got the long lead items under control. We've It's a really good schedule with enough float in it that we're going to hit the targets. So I feel real good about it at this point. We are going to spend about $30,000,000 this year on that facility, Which is both construction, down payments on equipment, things like that to make sure we get critical items in. That drifts off, Especially as we get into, I want to say, calendar 'twenty five, that drops Pretty significantly, we get the facility open.

Speaker 2

I'd also say that we're still having some Somewhat slightly higher than normal CapEx spend in both Metal Coatings and PreCoat that I think that normalizes back in Nicely under the $50,000,000 range. So we're doing things both for To drive some operational improvements, I mentioned in my remarks this MMC facility expansion, We had some other CapEx that's being deployed to improve controls and continue to drive digitization. And those things just Play out is helping us improve efficiencies and productivities, but the investments start to go away.

Operator

The next question comes from Adam Teltzner of Thompson Davis. Please go ahead.

Speaker 6

Hey, good morning, guys. Congrats on the solid Q4.

Speaker 4

Thanks. Thank you.

Speaker 6

You had a oh, I wanted to get your thoughts on And you commented on sequential revenue growth at Metal Coatings. What are the expectations, just because we don't have a lot of history, for sequential revenue growth at PreCoat, Q4 to Q1?

Speaker 2

It's pretty it's significant because Q4 is the by far the slowest quarter For PreCoke, it's winter months, so construction just slows up and the construction they're doing is inside when they can. We're now into spring, which better weather, more construction. Quite frankly, I'd have to check the percentage, but I'm going to say at least 10%, 15% quarter over quarter. Philip, do you have anything better?

Speaker 3

No, that's about right. Their 4th quarter is I think 12 of their 13 slowest weeks of the year. So we'll see a nice uptick in Q1.

Speaker 6

Okay. And then you had a comment in the Press release about a seasonally higher Q1, was that a sequential comment or is Q1 the highest EPS for the year?

Speaker 2

Q1 and Q2 are both strong quarters. They I think if you look historically, Particularly for Metal Coatings, sometimes it's Q1, sometimes it's Q2. But mainly, we're just we're talking about seasonality coming out of winter, Going into spring as a general seasonality thing and signaling of course now we entered 2 really good strong quarters for both construction And then Q3 in the fall somewhat more dependent on weather, but it tends to be a reasonably good quarter. And then the Q4, you just get, as Phil just said, 12 of the 13 weeks tend to be heavy winter, particularly in some of the areas that we serve as you get up north, our metal coatings business tends to do they tend to be a little stronger in Q3 because most of our facilities are in the South and Midwest, other than the things we have up in Canada.

Speaker 6

Okay. And then Philip, within the EPS guide, what are you assuming for Share count and preferred dividends. I'm trying to get to the right EPS. No. And within your range for revenue and EBITDA, but something's off on EPS.

Speaker 6

I'm just wondering if it might be share count and the preferred dividends?

Speaker 2

Yes. On

Speaker 3

the preferred dividends, there's 4,100,000 shares associated with the Blackstone preferred equity. It's 240,000,000 And the conversion price is $58.30 And the preferred will be dilutive for the year.

Speaker 6

One high level thoughts on cash flow from operations in fiscal 2024.

Speaker 3

When you look at our guidance, I think it's in line with the EBITDA less CapEx as a good barometer for our ability to generate cash flow.

Speaker 2

Yes, as we've noted, we're targeting $75,000,000 to hopefully $100,000,000 of debt pay down. Just to help us as we move on. Q1 is more of a we consume some cash or so not likely to be paying down a lot of debt Q1 just because it's 2 things, we're ramping up some inventory for the big season And this is also when we do have bonus payouts and things like that. So then we get into The quarters where you can expect to see more significant debt pay down.

Speaker 6

I'll turn it over. Thanks guys.

Speaker 3

Thanks. Thank you.

Operator

The next question comes from Jon Braatz of Kansas City Capital. Please go ahead.

Speaker 7

Good morning, everyone.

Speaker 2

Good morning, John.

Speaker 7

Tom, it seems like your let's say this year, the focus at Pre COP will be on improving productivity, margins and so on and so forth. And I guess my question is, As you complete some of those projects and so on and improve the efficiency, what kind of Improvement could we see in terms of the incremental margins once volume gets better at Precoat? How much better might those incremental margins be versus maybe where they were before? And any thoughts on that?

Speaker 2

I think there's a variety of things that particularly impacted I mean, I think we well, I know we had done this presentation to try Explain how our fiscal year at AZZ kind of hits precope pretty badly in terms of And they used to have a better spread of profit margins across their quarters. So this is Inflicted by our fiscal year. But we're still committed to getting them to the 20% EBITDA margins And I which means we've need to get improvements pretty quickly. I think Kurt and the team, they've taken some good structural actions organizationally in terms of some of the plants that we're struggling. This I can't understate the impact of That customer inventory on precoat.

Speaker 2

So most of that's gone. We've gotten rid of a lot, Almost all of the outside warehouses that had to be leased to accommodate that. And you just think about the impact on their efficiencies When you're having to go several miles down the road to an outside warehouse, move material, that creates time, cost And some quality issues, that's pretty much gone. So returning to their the 20% margins we've talked about, Obviously, there's a lot of work that goes into that, but the vast majority of the actions to do it Have been taken. So we're going to see that pretty quickly as we get into this year.

Speaker 7

Okay. Okay. And then secondly, The St. Louis facility, how quickly does that get up and going and begin to contribute to the bottom line?

Speaker 2

It gets up and going and it's but it's the construction is coinciding With the customers' demand for it as well. And I believe that's we're not going to see any measurable Impact until 2025. Okay.

Speaker 6

All right. Thank you.

Speaker 2

All right. Thanks.

Operator

The next question is a follow-up from John Franzreb of Sidoti and Company. Please go ahead.

Speaker 5

Yes, guys. I think it seems like everyone's got a kind of good feel in the metal coatings business. But as far as precoat, if we kind of separate it into a tale of 2 halves For you guys on your calendar year, how much of revenue pre CO will fall into the first half of the fiscal year versus the second half?

Speaker 3

It's about 56%. Yes. I think if you look at the seasonality charts, if you look over the 5 year history, They tend to be in our fiscal year more heavily weighted in our Q1 and Q2 than a fewer working days in Q3 And then as Tom explained earlier, the slower Q4 seasonally.

Speaker 2

Yes, I think that's about right. 56, 44, $57,000,000 and there's enough sensitivity in particularly in these days where it's harder to get skilled labor. So our tendency is to hold on to the capacity and drive through this. So you get that kind of movement in absorption levels, You get a lot of flow through pretty quickly when we get that kind of volume shift.

Speaker 5

Got it. And in the 4th quarter, The margins that Preco registered, how much was that normal seasonality impact versus the Inventory rebalancing impact in the quarter. Do you have a sense of that?

Speaker 2

Yes, I'd say it's about fifty-fifty on seasonality, because when you look at it, the revenue drop, but not materially Greater than normal in terms of the season and the rest was as I've toured the plants, The constraints created by that phenomena and this move in between outside warehouses It was just dramatic. I can't understate it. So the fact we're talking about Mostly being gone. That's why sequentially it's you're going to see a big pop quarter over quarter.

Speaker 5

Great. And one last question. It looks like zinc's turning at a 1 year low. So can you just talk about your thoughts about that and maybe why you didn't reassess your guidance in light of that?

Speaker 2

Well, we've talked about this before. We've Pretty much separated as much as we can our pricing from the cost of zinc. We're focused on delivering the value that sustains the price levels. For us, it will take another 6 months before these lower cost zinc starts to hit our Yes. So we're well into this year before we see any of the benefit of this lower cost zinc hitting our kettles.

Speaker 2

We'll take a look at that again as we get deeper into the year, but it's just that cycle of, Call it 6 months on average that in terms of the inventory in our kettles, that we've got to move first before we see the lower cost of that. And then 2, we've got to make sure we can hold our prices and continue to offer the value services to

Speaker 5

Right. And who knows what the zinc looks like in 6 months, right?

Speaker 4

Exactly. We see the move quite a

Speaker 2

bit just over just within a quarter.

Speaker 5

Yes. Okay, guys. Thanks for taking my follow ups. Appreciate

Speaker 4

it. Thanks. Thanks.

Operator

The next question comes from Bill Baldwin of Anthony Baldwin Securities. Please go ahead.

Speaker 4

Yes. Good morning, gentlemen, and thanks for taking my call. Sure, Bill.

Speaker 6

Just a

Speaker 4

quick oversight on this new plant as far as looking at it from 10,000 feet. When that gets up and running, should that be accretive in the 1st full 12 months of operation as far as accretive to Contribute to operating income?

Speaker 2

Yes, it will be in the 1st full 12 months of operation, yes, because the volumes are committed. There's a lot of testing that goes on to get it into full operation, but once that process is Then the volumes ramp up fairly quickly.

Speaker 4

And remind me, Tom, what's the scheduled Date for beginning the testing and this type of thing as far as the plant beginning to operate?

Speaker 2

It's we I'm going to say it's early next year as I'm thinking about it. I should have brought

Speaker 3

25, I believe is the current schedule for that and it ramps up because it will require some FDA approval. That's what Tom was talking about the testing. So we ramp up if we get those approvals, we'll then ramp up to a full year rate, which is accretive.

Speaker 4

And would it be reasonable to assume that you'd be operating at close to the capacity that your demand allows you to by the second half of fiscal 25? Say give you 6 months to ramp up, is that sufficient, do you think?

Speaker 3

I'd say it's going to be

Speaker 2

a little bit longer than that. There is because part of this is also depending on how the customer demand ramps up with it, but I'd say more towards the latter part of the year. Okay.

Speaker 4

Very good. Nice performance too with the

Operator

The next question comes from Brett Kearney of Gabelli Funds. Please go ahead.

Speaker 8

Hi, guys. Good morning. Thanks for taking my question.

Speaker 6

Good morning, Brett.

Speaker 3

Good morning, Brett.

Speaker 8

Tom, you mentioned some of the fiscal support we've seen from the U. S. Government, the tailwinds that provides for I guess pretty familiar and it feels like particularly on the galvanizing side, The funding sources behind that, utility CapEx budgets, we have good visibility of that from the municipal Highway and bridge activity, it feels pretty good. How about, I guess, Support, how that plays into the pre cope metal side and how you were thinking about any dislocations that could happen from financing and

Speaker 2

That's a great question. I think on the precoat side, they have been impacted by some of The slower residential activity, but some of these underlying trends to convert To pre painted aluminum and steel, I think offset some of that. On the non commercial investments, We're still seeing good activity there. And part of this is the, I guess, I'll technically, we'll call it reshoring of manufacturing of things like chips and That's all good stuff. We're seeing several factories being constructed here in Texas, particularly.

Speaker 2

All of those use a ton of prepainted sheet. So that kind of activity is continuing. I wish I had a better crystal ball how long that's going to continue With capital costs remain high, right now the outlook is fine And hopefully, we're also continuing to find new opportunities, which we talked about some of those like the heavy gauge. Expanding that facility is that's a fairly big deal for us because that focuses more on Infrastructure support, culverts and things like that. So we've been taking those steps, making those investments and Unless something dramatic happens, hopefully we continue to benefit from it at PreCoat.

Speaker 2

Excellent.

Speaker 8

And then we've talked about It's a favorable move in zinc prices, how those have probably peaked in your kettles. How are you thinking about, I guess, 2 pieces. 1, Asset, energy, labor, the other portions of your cost base. And then I guess second question kind of How's labor availability trending in a lot of the markets you're active in?

Speaker 2

Yes, just kind of the Generally, labor is still tight. So I bet we're down. I think at the peak, we probably had 400 Openings for labor on any given day, we're probably down to a couple of 100, which is that's a level we can cover with overtime and extra shifts and things like that. We just went through our merit review process for the majority of the company. It wasn't outrageous.

Speaker 2

We had made adjustments as the year went on to attract labor and retain labor. So we feel pretty good. It's not a high ramp at this point in terms of increase on increased costs on labor. We're doing we've done some things to retain labor better and manage it more efficiently. PreCoat uses more skilled Highly skilled labor, that's still tight in certain parts of the country.

Speaker 2

And but once again, we've implemented programs to attract and retain. In terms of the acid chemicals that Some of the things that really impacted preco was these additives and chemicals and things like that that were outside of paint. So that's why we kind of got behind the cost curve there towards the latter part of the year. On the Metal Coatings side, So even though costs are up on everything from wire to acid, we've been able to maintain the price Curve, at least staying even with it. So it's our focus has been on availability and Making sure we can service our customers when some of our competition can't.

Speaker 2

So, and we've been able to do all that.

Speaker 8

Excellent. That's very helpful. Thanks so much, Tom.

Speaker 2

All right. Thank you.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Tom Ferguson for any closing remarks.

Speaker 2

Well, thank you all for joining us today. I look forward to updating you on our Q1 results in just a few weeks. And I'm confident that fiscal year 2024 will result in further value creation as we capitalize on strong demand environment in AZZ's diverse markets and the investments that we've made. Thank you very much.

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