Russel Metals Announces 2024 Third Quarter Results
TORONTO, Nov. 6, 2024 /PRNewswire/ - Russel Metals Inc. (TSX:RUS) announces financial results for three months ended September 30, 2024.
Revenues of $1.1 Billion, EBITDA1 of $67 Million and EPS of $0.59Generated $163 Million of Cash from Operating ActivitiesClosed the Samuel Acquisition and Reduced its Related Invested CapitalEntered into New $600 Million Credit AgreementInvested $21 Million in Capital ExpendituresRepurchased $46 Million of Shares Equaling 2% of Shares OutstandingLiquidity1 of $762 Million
Three Months Ended
Nine Months Ended
Sep 30 2024
Jun 30 2024
Sep 30 2023
Sep 30 2024
Sep 30 2023
Revenues
$ 1,089
$ 1,072
$ 1,110
$ 3,222
$ 3,486
EBITDA1
67
86
96
237
343
Net income
35
50
61
134
220
Earnings per share
0.59
0.84
0.99
2.26
3.55
All amounts are reported in millions of Canadian dollars except per share figures, which are in Canadian dollars.
Non-GAAP Measures and RatiosWe use a number of measures that are not prescribed by IFRS Accounting Standards ("IFRS" or "GAAP") and as such may not be comparable to similar measures presented by other companies. We believe these measures are commonly employed to measure performance in our industry and are used by analysts, investors, lenders and other interested parties to evaluate financial performance and our ability to incur and service debt to support our business activities. These non-GAAP measures include EBITDA and Liquidity and are defined below. Refer to Non-GAAP Measures and Ratios on page 2 of our Management Discussion and Analysis.
EBIT - represents net earnings before interest and income taxes.EBITDA - represents net earnings before interest, income taxes, depreciation and amortization.Liquidity - represents cash on hand less bank indebtedness plus excess availability under our bank credit facility.Cash (for) from working capital - represents the change in non-cash working capital.
The following table shows the reconciliation of net earnings in accordance with GAAP to EBITDA for 2024 and 2023:
Three Months Ended
Nine Months Ended
($ millions, except per share data)
Sep 30 2024
Jun 30 2024
Sep 30 2023
Sep 30 2024
Sep 30 2023
Net earnings
$ 34.5
$ 49.9
$ 60.6
$ 134.1
$ 219.5
Provision for income taxes
10.7
16.9
17.1
44.3
66.3
Interest (income) expense, net
2.4
1.4
1.6
3.7
8.2
EBIT 1
47.6
68.2
79.3
182.1
294.0
Depreciation and amortization
19.8
17.6
16.3
55.1
49.4
EBITDA 1
$ 67.4
$ 85.8
$ 95.6
$ 237.2
$ 343.4
Basic earnings per share
$ 0.59
$ 0.84
$ 0.99
$ 2.26
$ 3.55
1 Defined in Non-GAAP Measures and Ratios
Our third quarter 2024 results demonstrated the benefits to our growing and diversified business. In particular, the steel price environment that negatively impacted revenues and margins in our metal service centers segment was somewhat offset by higher revenues and steady margins in our energy field stores segment. Also, the closing of the Samuel, Son & Co., Limited ("Samuel") acquisition in the middle of the third quarter provided the starting point for additional growth, that should contribute to our profitability once we benefit from a full quarter of activity and the tapering back of the non-recurring costs associated with the acquisition. The countercyclical nature of our cash flow was also illustrated, as we generated $107 million from non-cash working capital (which included a $56 million working capital reduction related to the branches acquired as part of the Samuel acquisition).
Our earnings per share was $0.59 for the quarter ended September 30, 2024, compared to $0.84 recorded in the 2024 second quarter and $0.99 per share recorded in the third quarter of 2023. For the nine months ended September 30, 2024, our earnings per share of $2.26 compared to $3.55 for the same period in 2023. Revenues of $1.1 billion were consistent with the 2024 second quarter and the third quarter of 2023. Our gross margins of 19.7% compared to 21.0% in the 2024 second quarter and 20.2% in the same quarter of 2023.
Our EBITDA for the quarter was $67 million compared to $86 million in the second quarter of 2024 and $96 million in the same quarter of 2023. EBITDA in the third quarter of 2024 was negatively impacted by a $5 million expense related to the non-cash mark-to-market on our stock-based compensation as compared to an $8 million recovery in the second quarter of 2024.
Market ConditionsSteel prices continued to be volatile, as the average price of plate decreased by 12% in the 2024 third quarter compared to the 2024 second quarter while hot rolled coil prices were volatile over the past two quarters but averaged a similar price in the third quarter versus the previous quarter. During the 2024 third quarter, our selling price per ton decreased by 6% and our tons shipped increased by 4% respectively over the 2024 second quarter. On a same store basis, volumes at our metals service centers decreased by 5% during the 2024 third quarter compared to the 2024 second quarter but were 1% higher compared to the third quarter of 2023. The same store volumes were consistent with typical seasonal trends between the second and third quarters.
Our energy field stores continued to experience steady business activity in both Canada and the U.S.
AcquisitionsOn August 12, 2024, we closed our acquisition of seven service center locations from Samuel. With the close of the transaction, we added five service center locations in Western Canada and increased our non-ferrous product offerings and value-added processing capabilities. The two new locations in the Northeastern United States extended our geographic footprint and expanded our ability to process carbon plate for our customers in that region.
At the time that the agreement with Samuel was announced in December 2023, the expected transaction value was $225 million, but the structure included a dollar-for-dollar adjustment to the purchase price for changes in working capital in the period prior to closing. As such, our objective was to substantially reduce the invested capital in those operations. In the period leading up to, and subsequent to, the closing there was a substantial reduction in the working capital related to the former Samuel branches which resulted in a reduction of the invested capital to $167 million at September 30, 2024. We are continuing to pursue opportunities to further reduce the invested capital in the combined operations through more efficient inventory management and the consolidation of locations. As part of those initiatives, we expect to realize operational and margin improvements for the combined operations. For the period from closing to September 30, 2024, the new locations added approximately $2 million in EBITDA, which was offset by non-recurring transaction and transition costs.
Capital Investment Growth InitiativesIn the 2024 third quarter, we made capital investments of $21 million and for the nine months ended September 30, 2024, we invested $69 million. Our capital expenditures included facility modernizations and expansions for: (i) our greenfield facility in Saskatoon (Saskatchewan) that opened in the fall of 2024; and (ii) the expansions of our Texarkana (Texas), Joplin (Missouri), Little Rock (Arkansas) and Green Bay (Wisconsin) facilities. The expansions of Texarkana, Joplin, Little Rock and Green Bay are all expected to be completed in the 2024 fourth quarter.
Returning Capital to ShareholdersWe have adopted a flexible approach to returning capital to shareholders through: (i) our ongoing dividend; and (ii) share buy backs.
In the 2024 third quarter, we paid dividends of $0.42 per share for a total of $25 million. We have declared a dividend of $0.42 per share, payable on December 16, 2024, to shareholders of record at the close of business on November 27, 2024.
In August 2024, we renewed our normal course issuer bid to purchase up to approximately 5.8 million of our common shares representing 10% of our public float over a 12-month period. In the 2024 third quarter, we purchased and cancelled 1.2 million common shares, which represents approximately 2% of our shares outstanding, at an average price per share of $37.93 for total consideration of $46 million (excluding the impact of the federal tax on share repurchases). In the period since the August 2022 normal course issuer bid was established, we purchased approximately 6.2 million common shares, which represents approximately 10% of our then outstanding shares, at an average price per share of $36.62 for total consideration of $226 million (excluding the impact of the federal tax on share repurchases).
Liquidity and Capital StructureDuring the 2024 third quarter, we generated $163 million of cash from operating activities. We ended the quarter with total available liquidity of $762 million.
On July 15, 2024, we entered into a new credit facility. The new credit facility's total availability increased by $150 million to $600 million, is unsecured with no borrowing base restrictions, includes more flexible investment grade type financial covenants and extends the maturities until 2026 and 2028.
On October 1, 2024, we announced the redemption of our $150 million 5.75% senior unsecured notes at par plus accrued and unpaid interest. This redemption was completed on October 27, 2024.
The new bank structure, in combination with the May 2024 redemption of the $150 million 6% senior unsecured notes and the October 2024 redemption of the 5.75% senior unsecured notes has eliminated the legacy high yield debt structure and will provide greater financial flexibility and lower cost financing as we continue with our growth initiatives.
OutlookSteel prices were volatile in the third quarter of 2024, and they remain volatile into the early part of the fourth quarter. We expect that producers will proactively manage supply through both regular maintenance downtime and other curtailments in the fourth quarter in order to rebalance supply. As such, we expect steel prices to demonstrate ongoing uncertainty in the fourth quarter of 2024 but set the stage for a more favourable dynamic in 2025.
Our end market activity remains steady and is expected to continue into the fourth quarter, other than the impact from reduced shipping days from various seasonal holidays in North America. In the fourth quarter, we expect to benefit from higher shipment activity from a full quarter of the Samuel acquisition. Over the medium-term, we expect growth in North American steel consumption as a result of onshoring activities and infrastructure spending initiatives in both Canada and the U.S. In addition, we are positioned to gain market share through our ongoing investments in value-added equipment and facility modernizations.
Our energy field stores are expected to continue to benefit from solid energy activity in the fourth quarter and into 2025. Our energy field store segment is also expected to continue to gain market share while maintaining a solid margin profile.
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