TORONTO, Nov. 8, 2023
/PRNewswire/ - Russel Metals Inc. (TSX: RUS) announces financial
results for three months ended September 30,
2023.
Revenues of $1.1
Billion and EBITDA1 of $96
Million
Cash Generated from Operating
Activities of $115
Million
Completed the Divestiture of our
TriMark Equity Interest for $60
Million
Returned $45
Million to Shareholders Through Dividends and Share
Buybacks
Liquidity1 of $965 Million
|
Three Months
Ended
|
Nine Months
Ended
|
|
Sep 30 2023
|
Jun 30 2023
|
Sep 30 2022
|
Sep 30 2023
|
Sep 30 2022
|
Revenues
|
$ 1,110
|
$ 1,189
|
$ 1,270
|
$ 3,486
|
$ 3,971
|
EBITDA1
|
96
|
131
|
140
|
343
|
482
|
Net income
|
61
|
85
|
91
|
220
|
314
|
Earnings per
share
|
0.99
|
1.37
|
1.45
|
3.55
|
4.98
|
Cash from (used in)
working capital 1
|
58
|
27
|
(41)
|
64
|
(128)
|
Dividends paid per
common share
|
0.40
|
0.40
|
0.38
|
1.18
|
1.14
|
All amounts are
reported in millions of Canadian dollars except per share figures,
which are in Canadian dollars.
|
Non-GAAP Measures and Ratios
We use a number of
measures that are not prescribed by International Financial
Reporting 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.
Free Cash Flow – represents cash from operating activities before
changes in non-cash working capital less capital expenditures.
The following table shows the reconciliation of net earnings in
accordance with GAAP to EBITDA for 2023 and 2022:
|
Three Months
Ended
|
Nine Months
Ended
|
(millions)
|
Sep 30 2023
|
Jun 30 2023
|
Sep 30 2022
|
Sep 30 2023
|
Sep 30 2022
|
Net earnings
|
$ 60.6
|
$ 85.0
|
$ 91.3
|
$ 219.5
|
$ 314.0
|
Provision for income
taxes
|
17.1
|
26.9
|
25.5
|
66.3
|
99.5
|
Interest and finance
expense
|
1.6
|
2.8
|
6.6
|
8.2
|
19.9
|
EBIT
1
|
79.3
|
114.7
|
123.4
|
294.0
|
433.4
|
Depreciation and
amortization
|
16.3
|
16.7
|
16.2
|
49.4
|
48.1
|
EBITDA
1
|
$ 95.6
|
$ 131.4
|
$ 139.6
|
$ 343.4
|
$ 481.5
|
Net earnings per
share
|
$ 0.99
|
$ 1.37
|
$ 1.45
|
$ 3.55
|
$ 4.98
|
1
Defined in Non-GAAP Measures and Ratios
|
Our basic earnings per share of $0.99 for the quarter ended September 30, 2023, was lower than the
$1.45 per share recorded in the third
quarter of 2022 and the $1.37
recorded in the 2023 second quarter. For the nine months
ended September 30, 2023, our basic
earnings per share of $3.55 compared
to $4.98 for the same period in
2022. Revenues of $1.1 billion
were lower than the $1.3 billion
experienced in the third quarter of 2022 and the $1.2 billion in the second quarter of 2023.
Our gross margins of 20.2% compared to 21.5% in the same quarter of
2022 and 23.1% in the 2023 second quarter.
Our third quarter 2023 results reflected the resiliency of our
business model in volatile steel market conditions, as we generated
strong free cash flow and increased our cash position by
$119 million. In the quarter,
we generated $96 million of EBITDA,
$58 million in cash from a reduction
in working capital, including a $72
million reduction in our inventories, as well as
$60 million from the sale of our
retained interest in TriMark. In the quarter, we returned
$45 million in capital to our
shareholders through a combination of dividends and share buy
backs.
EBITDA in the third quarter of 2023 was impacted by a
$1 million non-cash expense for the
mark-to-market on stock-based compensation compared to $2 million in the 2023 second quarter and $nil in
the 2022 third quarter. In addition, the third quarter 2023
EBITDA benefited from the $10 million
gain on sale of our investment in the TriMark joint venture.
Our metals service centers and steel distributors navigated
through volatile market conditions in the 2023 third quarter and
remained disciplined on inventory management. Quarter over
quarter selling prices in our metals service centers decreased 5%
compared to the 2023 second quarter and were 14% lower than the
same quarter in 2022. Tons shipped in our metals service
centers were 7% lower than the 2023 second quarter due to the
typical summer holiday impacts and was comparable with our
shipments in the same quarter in 2022. In our energy field
store segment, our growing market position and the continuation of
solid industry conditions led to revenues growing by 7% compared to
the 2023 second quarter and 6% compared to the 2022 third
quarter.
Market Conditions
Steel prices declined in the 2023
third quarter due to a variety of macro-economic factors including
the uncertainty caused by automotive labour disruptions.
However, producers have moderated their operating rates and
distributor inventories are below historical averages. Our
energy field stores continue to benefit from the recovery of the
energy sector.
Capital Investment Growth Initiatives
For the nine
months ended September 30, 2023, we
invested $45 million in capital
expenditures, that included a series of value-added equipment and
facility modernization initiatives in both Canada and the U.S. In addition, we are
continuing to advance other projects that should be implemented in
the balance of 2023, 2024 and beyond. We are also continuing
to actively evaluate acquisition opportunities to grow our business
and deploy capital at attractive returns. On October 2, 2023, we acquired Alliance Supply Ltd.
("Alliance") for approximately $8
million in cash. The Alliance locations have been
integrated into our Canadian energy field store network.
TriMark Joint Venture
On September 1, 2023, we sold our equity interest in
TriMark to our venture partner for $60
million, which included a $10
million gain. The transaction was the final step in
our staged exit from the OCTG/ line pipe business. Over the
last three years we repatriated approximately $375 million in capital from the OCTG/line pipe
business.
Returning Capital to Shareholders
We have adopted a
flexible approach to returning capital to shareholders through: (i)
our ongoing dividend; and (ii) share buy backs.
In May 2023, we announced a 5%
increase on our quarterly dividend from $0.38 per share to $0.40 per share. In the third quarter, we
paid dividends of $25 million or
$0.40 per share. We have
declared a dividend of $0.40 per
share, payable on December 15, 2023,
to shareholders of record at the close of business on November 29, 2023.
In August 2023, we renewed our
normal course issuer bid to purchase for cancellation up to 6.1
million of our common shares over 12 months. In the 2023
third quarter, we purchased and cancelled 0.5 million shares for
total consideration of $20
million. During 2023, 1.8 million shares were
purchased for total consideration of $65
million. In the period since the August 2022 normal course issuer bid was
established, 2.8 million shares at an average price per share of
$33.43 were purchased for total
consideration of $93 million.
Liquidity and Capital Structure
During the 2023 third
quarter, we generated $115 million of
cash from operating activities and ended the quarter with total
available liquidity of $965
million. As a result, we remain well positioned to
continue to pursue both internal and external opportunities to
deploy capital.
Outlook
Steel prices declined over the past several
months but remain above the long-term historical averages.
Going forward, prices are expected to stabilize over the near
term, depending on the evolution of various macro conditions,
including the continuation of steel producer discipline in managing
supply. 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 investment
initiatives. Our energy field stores are expected to continue
to benefit from solid energy activity in the 2023 fourth quarter
and 2024.
Investor Conference Call
The Company will be holding
an Investor Conference Call on Thursday,
November 9, 2023, at 9:00 a.m.
ET to review its 2023 third quarter results. The
dial-in telephone numbers for the call are 416-764-8688
(Toronto and International
callers) and 1-888-390-0546 (U.S. and Canada). Please dial in 10 minutes prior
to the call to ensure that you get a line.
A replay of the call will be available at 416-764-8677
(Toronto and International
callers) and 1-888-390-0541 (U.S. and Canada) until midnight, Thursday, November 23, 2023. You will be
required to enter pass code #197003 to access the call.
Additional supplemental financial information is available in
our investor conference call package located on our website at
www.russelmetals.com.
About Russel Metals Inc.
Russel Metals is one of the largest metals distribution
companies in North America with a
growing focus on value-added processing. It carries on
business in three segments: metals service centers, energy field
stores and steel distributors. Its network of metals service
centers carries an extensive line of metal products in a wide range
of sizes, shapes and specifications, including carbon hot rolled
and cold finished steel, pipe and tubular products, stainless
steel, aluminum and other non-ferrous specialty metals. Its
energy field stores carry a specialized product line focused on the
needs of energy industry customers. Its steel distributors
operations act as master distributors selling steel in large
volumes to other steel service centers and large equipment
manufacturers mainly on an "as is" basis.
Cautionary Statement on
Forward-Looking Information
Certain statements contained in this press release constitute
forward-looking statements or information within the meaning of
applicable securities laws, including statements as to our future
capital expenditures, our outlook, the availability of future
financing and our ability to pay dividends. Forward-looking
statements relate to future events or our future performance.
All statements, other than statements of historical fact, are
forward-looking statements. Forward-looking statements are
often, but not always, identified by the use of words such as
"seek", "anticipate", "plan", "continue", "estimate", "expect",
"may", "will", "project", "predict", "potential", "targeting",
"intend", "could", "might", "should", "believe" and similar
expressions. Forward-looking statements are necessarily based
on estimates and assumptions that, while considered reasonable by
us, inherently involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements, including the factors described below.
We are subject to a number of risks and uncertainties which
could have a material adverse effect on our future profitability
and financial position, including the risks and uncertainties
listed below, which are important factors in our business and the
metals distribution industry. Such risks and uncertainties
include, but are not limited to: the volatility in metal prices;
volatility in oil and natural gas prices; cyclicality of the metals
industry; capital budgets in the energy industry; pandemics and
epidemics; climate change; product claims; significant competition;
sources of metals supply; manufacturers selling directly; material
substitution; credit risk; currency exchange risk; restrictive debt
covenants; asset impairments; the unexpected loss of key
individuals; decentralized operating structure; future
acquisitions; the failure of our key computer-based systems, labour
interruptions; laws and governmental regulations; litigious
environment; environmental liabilities; carbon emissions; health
and safety laws and regulations; and common share risks.
While we believe that the expectations reflected in our
forward-looking statements are reasonable, no assurance can be
given that these expectations will prove to be correct, and our
forward-looking statements included in this press release should
not be unduly relied upon. These statements speak only as of
the date of this press release and, except as required by law, we
do not assume any obligation to update our forward-looking
statements. Our actual results could differ materially from
those anticipated in our forward-looking statements including as a
result of the risk factors described above and under the heading
"Risk" in our MD&A and under the heading "Risk Management and
Risks Affecting Our Business" in our most recent Annual Information
Form and as otherwise disclosed in our filings with securities
regulatory authorities which are available on SEDAR at
www.sedarplus.ca.
If you would like to unsubscribe from receiving Press Releases,
you may do so by emailing subscriber@russelmetals.com; or by
calling our Investor Relations Line: 905-816-5178.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
|
Three Months
Ended
September 30
|
Nine Months Ended
September 30
|
(in millions of
Canadian dollars, except per share data)
|
2023
|
2022
|
2023
|
2022
|
Revenues
|
$ 1,109.5
|
$ 1,269.9
|
$ 3,485.8
|
$ 3,970.8
|
Cost of
materials
|
885.1
|
996.3
|
2,725.7
|
3,062.4
|
Employee
expenses
|
96.7
|
104.1
|
303.0
|
313.7
|
Other operating
expenses
|
60.1
|
61.0
|
190.2
|
181.9
|
Gain on sale of
investment in joint venture
|
(9.8)
|
-
|
(9.8)
|
-
|
Earnings from joint venture
|
(1.9)
|
(14.9)
|
(17.3)
|
(20.6)
|
Earnings before interest and provision for income
taxes
|
79.3
|
123.4
|
294.0
|
433.4
|
Interest expense,
net
|
1.6
|
6.6
|
8.2
|
19.9
|
Earnings before provision for income
taxes
|
77.7
|
116.8
|
285.8
|
413.5
|
Provision for income
taxes
|
17.1
|
25.5
|
66.3
|
99.5
|
Net earnings for the
period
|
$ 60.6
|
$ 91.3
|
$ 219.5
|
$ 314.0
|
Basic earnings per common share
|
$ 0.99
|
$ 1.45
|
$ 3.55
|
$ 4.98
|
Diluted earnings per common
share
|
$ 0.99
|
$ 1.45
|
$ 3.55
|
$ 4.97
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
Three Months
Ended
September 30
|
Nine Months Ended
September 30
|
(in millions of
Canadian dollars)
|
2023
|
2022
|
2023
|
2022
|
Net earnings for the period
|
$ 60.6
|
$ 91.3
|
$ 219.5
|
$ 314.0
|
Other comprehensive
(loss) income
|
|
|
|
|
Items that may be reclassified to
earnings
|
|
|
|
|
Unrealized foreign exchange gains
(losses) on
|
|
|
|
|
translation of foreign
operations
|
18.5
|
48.9
|
(1.2)
|
60.8
|
Items that may not be reclassified to
earnings
|
|
|
|
|
Actuarial gains on pension and
similar
|
|
|
|
|
Obligations, net of
taxes
|
6.7
|
0.1
|
8.0
|
9.2
|
Other comprehensive
income
|
25.2
|
49.0
|
6.8
|
70.0
|
Total comprehensive income
|
$ 85.8
|
$ 140.3
|
$ 226.3
|
$ 384.0
|
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(in millions of
Canadian dollars)
|
September 30
2023
|
December 31
2022
|
ASSETS
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
$ 569.0
|
$ 363.0
|
Accounts receivable
|
556.6
|
497.9
|
Inventories
|
883.2
|
956.5
|
Prepaid and other
|
17.3
|
35.8
|
Income taxes receivable
|
4.5
|
16.3
|
|
2,030.6
|
1,869.5
|
Property, Plant and Equipment
|
327.4
|
313.8
|
Right-of-Use Assets
|
97.9
|
102.7
|
Investment in Joint Venture
|
-
|
46.6
|
Deferred Income Tax Assets
|
1.3
|
1.2
|
Pension and Benefits
|
51.5
|
42.0
|
Financial and Other Assets
|
4.1
|
4.6
|
Goodwill and Intangibles
|
119.6
|
126.5
|
Total
Assets
|
$ 2,632.4
|
$ 2,506.9
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
Current
|
|
|
Accounts payable and accrued
liabilities
|
$ 501.0
|
$ 482.0
|
Short-term lease
obligations
|
14.8
|
14.7
|
Income taxes payable
|
1.0
|
4.8
|
|
516.8
|
501.5
|
Long-Term Debt
|
296.9
|
296.0
|
Pensions and Benefits
|
1.4
|
1.5
|
Deferred Income Tax Liabilities
|
17.3
|
18.4
|
Long-term Lease Obligations
|
108.1
|
112.2
|
Provisions and Other Non-Current
Liabilities
|
32.0
|
18.0
|
|
972.5
|
947.6
|
Shareholders' Equity
|
|
|
Common shares
|
559.9
|
562.4
|
Retained earnings
|
950.8
|
844.6
|
Contributed surplus
|
10.3
|
12.2
|
Accumulated other comprehensive
income
|
138.9
|
140.1
|
Total Shareholders' Equity
|
1,659.9
|
1,559.3
|
Total Liabilities
and Shareholders' Equity
|
$ 2,632.4
|
$ 2,506.9
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
|
Three Months
Ended
September 30
|
Nine Months Ended
September 30
|
(in millions of
Canadian dollars)
|
2023
|
2022
|
2023
|
2022
|
Operating activities
|
|
|
|
|
Net
earnings for the period
|
$ 60.6
|
$ 91.3
|
$ 219.5
|
$ 314.0
|
Depreciation and
amortization
|
16.3
|
16.2
|
49.4
|
48.1
|
Provision for income
taxes
|
17.1
|
25.5
|
66.3
|
99.5
|
Interest expense, (net)
|
1.6
|
6.6
|
8.2
|
19.9
|
Gain on sale of property, plant and
equipment
|
(0.1)
|
(0.2)
|
(0.6)
|
(2.7)
|
Gain on sale of investment in joint
venture
|
(9.8)
|
-
|
(9.8)
|
-
|
Earnings from joint
venture
|
(1.9)
|
(14.9)
|
(17.3)
|
(20.6)
|
Share-based compensation
|
-
|
-
|
-
|
0.1
|
Difference between pension expense
and amount funded
|
0.5
|
0.2
|
1.3
|
0.2
|
Debt accretion, amortization and
other
|
0.3
|
0.3
|
0.9
|
0.9
|
Interest paid net, including
interest on lease obligations
|
(1.3)
|
(6.2)
|
(7.3)
|
(19.0)
|
Cash from operating
activities before
|
|
|
|
|
non-cash working capital
|
83.3
|
118.8
|
310.6
|
440.4
|
Changes in non-cash working capital
items
|
|
|
|
|
Accounts receivable
|
29.1
|
(0.3)
|
(58.8)
|
(104.6)
|
Inventories
|
71.5
|
(4.0)
|
72.5
|
(43.2)
|
Accounts payable and accrued
liabilities
|
(51.8)
|
(42.2)
|
32.1
|
25.7
|
Other
|
9.5
|
5.7
|
18.5
|
(5.6)
|
Change in non-cash
working capital
|
58.3
|
(40.8)
|
64.3
|
(127.7)
|
Income tax paid, net
|
(27.1)
|
(36.4)
|
(62.4)
|
(159.6)
|
Cash from operating activities
|
114.5
|
41.6
|
312.5
|
153.1
|
Financing activities
|
|
|
|
|
Issue of common shares
|
-
|
-
|
11.8
|
0.3
|
Repurchase of common
shares
|
(20.4)
|
(16.3)
|
(64.6)
|
(16.3)
|
Dividends on common
shares
|
(24.5)
|
(23.9)
|
(72.9)
|
(71.9)
|
Deferred financing
|
-
|
(0.1)
|
-
|
(0.2)
|
Lease obligations
|
(4.1)
|
(1.8)
|
(12.4)
|
(11.1)
|
Cash used in financing
activities
|
(49.0)
|
(42.1)
|
(138.1)
|
(99.2)
|
Investing activities
|
|
|
|
|
Purchase of property, plant and
equipment
|
(15.1)
|
(10.2)
|
(44.7)
|
(26.2)
|
Proceeds on sale of property, plant
and equipment
|
0.4
|
-
|
1.0
|
3.1
|
Proceeds on sale of joint
venture
|
60.0
|
-
|
60.0
|
-
|
Dividends received from joint
venture
|
-
|
14.4
|
13.7
|
14.4
|
Sale of business
|
-
|
-
|
-
|
9.7
|
Cash from investing activities
|
45.3
|
4.2
|
30.0
|
1.0
|
Effect of exchange rates on
cash
|
|
|
|
|
and cash
equivalents
|
8.1
|
13.5
|
1.6
|
16.1
|
Increase in cash and
cash equivalents
|
118.9
|
17.2
|
206.0
|
71.0
|
Cash and cash
equivalents, beginning of the period
|
450.1
|
186.9
|
363.0
|
133.1
|
Cash and cash
equivalents, end of the period
|
$ 569.0
|
$ 204.1
|
$ 569.0
|
$ 204.1
|
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
(in millions of
Canadian dollars)
|
Common
Shares
|
Retained
Earnings
|
Contributed
Surplus
|
Accumulated
Other
Comprehensive
Income
|
Total
|
Balance, January 1,
2023
|
$ 562.4
|
$ 844.6
|
$ 12.2
|
$ 140.1
|
$ 1,559.3
|
Payment of
dividends
|
-
|
(72.9)
|
-
|
-
|
(72.9)
|
Net earnings for the
period
|
-
|
219.5
|
-
|
-
|
219.5
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
6.8
|
6.8
|
Share options
exercised
|
13.7
|
-
|
(1.9)
|
-
|
11.8
|
Shares
repurchased
|
(16.2)
|
(48.4)
|
-
|
-
|
(64.6)
|
Transfer of net
actuarial gains on defined benefit plans
|
-
|
8.0
|
-
|
(8.0)
|
-
|
Balance, September 30, 2023
|
$ 559.9
|
$ 950.8
|
$ 10.3
|
$ 138.9
|
$ 1,659.9
|
(in millions of
Canadian dollars)
|
Common
Shares
|
Retained
Earnings
|
Contributed
Surplus
|
Accumulated
Other
Comprehensive
Income
|
Total
|
Balance, January 1,
2022
|
$ 571.0
|
$ 575.2
|
$ 12.1
|
$ 90.0
|
$ 1,248.3
|
Payment of
dividends
|
-
|
(71.9)
|
-
|
-
|
(71.9)
|
Net earnings for the
period
|
-
|
314.0
|
-
|
-
|
314.0
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
70.0
|
70.0
|
Recognition of
share-based compensation
|
-
|
-
|
0.1
|
-
|
0.1
|
Share options
exercised
|
0.4
|
-
|
(0.1)
|
-
|
0.3
|
Shares
repurchased
|
(5.2)
|
(11.1)
|
-
|
-
|
(16.3)
|
Transfer of net
actuarial gains on defined benefit plans
|
-
|
9.2
|
-
|
(9.2)
|
-
|
Balance, September
30, 2022
|
$ 566.2
|
$ 815.4
|
$ 12.1
|
$ 150.8
|
$ 1,544.5
|
View original
content:https://www.prnewswire.com/news-releases/russel-metals-announces-2023-third-quarter-results-301982046.html
SOURCE Russel Metals Inc.