TORONTO, May 8, 2023
/CNW/ - Russel Metals Inc. (TSX: RUS) announces financial
results for three months ended March 31,
2023.
Revenues of $1.2
Billion and EBITDA1 of $116 Million
Sequential Increase in Revenues, EBITDA1, Margins
and EPS
Strong Capital Structure with Liquidity1 of
$792 Million
Dividend Increase to $0.40 per
Share
|
Three Months
Ended
|
|
Mar 31 2023
|
Dec 31 2022
|
Mar 31 2022
|
Revenues
|
$ 1,187
|
$ 1,100
|
$ 1,339
|
EBITDA
1
|
116
|
97
|
153
|
Net Income
|
74
|
58
|
99
|
Earnings per
share
|
1.19
|
0.93
|
1.56
|
Cash from working
capital 1
|
(18)
|
146
|
(15)
|
Dividends paid per
common share
|
0.38
|
0.38
|
0.38
|
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.
Cash 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 the three months ended
March 31, 2023, December 31, 2022 and March 31, 2022:
|
Three Months
Ended
|
(millions)
|
Mar 31 2023
|
Dec 31 2022
|
Mar 31 2022
|
Net earnings
|
$ 73.9
|
$ 57.9
|
$ 98.7
|
Provision for income
taxes
|
22.3
|
16.1
|
31.9
|
Interest and finance
expense
|
3.8
|
5.4
|
6.7
|
EBIT
1
|
100.0
|
79.4
|
137.3
|
Depreciation and
amortization
|
16.4
|
18.0
|
15.8
|
EBITDA
1
|
$ 116.4
|
$ 97.4
|
$ 153.1
|
Our basic earnings per share of $1.19 for the quarter ended March 31, 2023, was lower than the $1.56 per share recorded in the first quarter of
2022 but higher than the $0.93
reported in the fourth quarter of 2022. Revenues of
$1,187 million were lower than the
$1,339 million experienced in the
first quarter of 2022 and higher than the $1,100 million in the fourth quarter of
2022. Our gross margins were 21.9% for the first quarter of
2023, higher than the 21.7% in the same quarter of 2022 and the
19.8% in the fourth quarter of 2022.
Our EBITDA in the 2023 first quarter was $116 million compared to $153 million in the 2022 first quarter and
$97 million in the 2022 fourth
quarter. Our 2023 first quarter EBITDA was negatively
impacted by a non-cash charge of $4
million related to the mark-to-market on share-based
compensation and was positively impacted by a $3 million decrease in our inventory reserves due
to more favourable steel prices.
On a consolidated basis, we generated higher revenues, EBITDA
and net income in the 2023 first quarter than in the 2022 fourth
quarter, due to a pick-up in demand and margins. At the same
time that we generated improved and balanced operating results, we
remained disciplined on working capital management, which resulted
in a strong annualized return on invested capital of 27% in the
2023 first quarter.
Our 2023 first quarter results reflected a sequential
improvement across our businesses, as each of our metals service
centers, energy field stores and steel distributors segments
generated improved operating profits for the 2023 first quarter as
compared to the 2022 fourth quarter. Our metals service
centers generated 2023 first quarter revenues of $807 million, a gross margin of 20% and operating
profit of $58 million, which were all
improvements versus the 2022 fourth quarter. In particular,
we realized a 16% improvement in tons shipped that reflected the
seasonal rebound from the 2022 fourth quarter. Our energy
field stores generated 2023 first quarter revenues of $252 million, a gross margin of 27% and operating
profit of $29 million, which
reflected the positive impact from pent up demand for capital
spending in the energy sector. Our steel distributors
generated 2023 first quarter revenues of $127 million, a gross margin of 22% and operating
profit of $18 million. The
revenues declined on a quarter-over-quarter basis, but the segment
realized much higher quarterly margins due to the favourable market
conditions, which translated into an improvement in operating
profit.
Market Conditions
The steel price increases that were
experienced in late 2022 continued throughout the 2023 first
quarter as a result of modest inventory in the supply chain and an
improvement in industrial-based demand from our customers in a
range of sectors including manufacturing, fabrication, agriculture,
ship building, non-residential construction, energy and alternative
energy. Our energy field stores benefited from increased
energy sector activity with average Canadian rig counts of 212 in
the first quarter of 2023 compared to 190 in the 2022 first quarter
and 197 in the 2022 fourth quarter. Average U.S. rig counts
were 762 in the first quarter of 2023 compared to 629 in the 2022
first quarter and 775 in the 2022 fourth quarter.
Capital Investment Growth Initiatives
In the 2023
first quarter, we invested $14
million for capital expenditures, as we focused spending on
our facilities modernization initiative and value-added processing
equipment projects. As part of our facilities modernization
initiative, we recently approved an expansion at our Little Rock, Arkansas location and advanced
our Saskatoon, Saskatchewan
modernization project. During the 2023 first quarter, we
advanced a series of value-added processing projects in both
Canada and the U.S., with several
of those projects expected to come on line in the coming
quarters.
Over the course of the past quarter, we evaluated a number of
potential acquisitions, and we continue to explore opportunities to
grow our business in ways that would be financially attractive and
operationally complementary with our existing business
segments.
Returning Capital to Shareholders
We have adopted a
flexible approach to returning excess capital to shareholders
through: (i) our ongoing dividend; and (ii) share buy backs.
In the 2023 first quarter, we paid dividends of $24 million or $0.38 per share. Over the five-year period
of 2018 to 2022, we generated cumulative earnings per share of
$17.96 and paid total dividends of
$7.60 per share, which equated to a
payout ratio of 42%. As a result of our strong earnings
profile, reduced cash flow volatility and strong capital structure,
we have declared an increase in our quarterly dividend to
$0.40 per share, payable on
June 15, 2023, to shareholders of
record at the close of business on May
30, 2023. This represents a 5% increase from the prior
dividend and equates to an annualized dividend of $1.60 per share. Going forward, we plan to
periodically review our dividend level for potential future
modifications, by taking into account the prevailing market
conditions, as well as our earnings profile, capital structure and
alternative uses of capital.
In August 2022, we initiated a
normal course issuer bid to purchase for cancellation up to 3.2
million of our common shares over 12 months, representing 5% of our
issued and outstanding shares. To date, we purchased and
cancelled 1.0 million shares and have availability for an
additional 2.2 million shares.
Liquidity and Capital Structure
During the 2023 first
quarter, we generated $67 million of
cash from operating activities and ended the quarter with total
available liquidity of $792
million.
Outlook
The favourable demand trends and steel price
increases that were experienced late in the 2023 first quarter are
being maintained into the 2023 second quarter. These dynamics
are expected to benefit our metals service centers and steel
distributor segments over the near term. For energy field
stores, the second quarter is traditionally slower due to spring
breakup in Canada, but we expect a
continuation of improving demand trends on a seasonally adjusted
basis.
Investor Conference Call
The Company will be holding
an Investor Conference Call on Tuesday, May
9, 2023, at 9:00 a.m. ET to
review its 2023 first 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, Tuesday, May 23, 2023. You will be required
to enter pass code 315919# 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. 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: volatility in metal prices;
cyclicality of metals industry; volatility in oil and natural gas
prices; capital budgets in the energy industry; 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 risk.
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.sedar.com.
If you would like to unsubscribe from receiving Press
Releases, you may do so by emailing info@russelmetals.com; or by
calling our Investor Relations Line: 905-816-5178.
___________
|
1 Defined in
Non-GAAP Measures and Ratios
|
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
|
Three Months
Ended
March 31
|
(in millions of
Canadian dollars, except per share data)
|
2023
|
2022
|
Revenues
|
$ 1,186.7
|
$ 1,338.6
|
Cost of
materials
|
926.4
|
1,048.3
|
Employee
expenses
|
100.9
|
101.0
|
Other operating
expenses
|
68.3
|
58.0
|
(Earnings) from joint
venture
|
(8.9)
|
(6.0)
|
Earnings before interest and provision for income
taxes
|
100.0
|
137.3
|
Interest expense,
net
|
3.8
|
6.7
|
Earnings before provision for income
taxes
|
96.2
|
130.6
|
Provision for income
taxes
|
22.3
|
31.9
|
Net earnings for the
period
|
$ 73.9
|
$ 98.7
|
Basic earnings per common share
|
$ 1.19
|
$ 1.56
|
Diluted earnings per common
share
|
$ 1.19
|
$ 1.56
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
Three Months
Ended
March 31
|
(in millions of
Canadian dollars)
|
2023
|
2022
|
Net earnings for the period
|
$ 73.9
|
$ 98.7
|
Other comprehensive
loss
|
|
|
Items that may be reclassified to
earnings
|
|
|
Unrealized foreign exchange losses
on translation of foreign operations
|
(0.7)
|
(10.0)
|
Items that may not be reclassified to
earnings
|
|
|
Actuarial (losses) gains on pension
and similar obligations, net of taxes
|
(0.3)
|
8.8
|
Other comprehensive
loss
|
(1.0)
|
(1.2)
|
Total comprehensive income
|
$ 72.9
|
$ 97.5
|
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(in millions of
Canadian dollars)
|
March 31
2023
|
December 31
2022
|
ASSETS
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
$ 401.1
|
$ 363.0
|
Accounts receivable
|
603.8
|
497.9
|
Inventories
|
941.1
|
956.5
|
Prepaids and other
|
33.2
|
35.8
|
Income taxes receivable
|
9.1
|
16.3
|
|
1,988.3
|
1,869.5
|
Property, Plant and Equipment
|
318.2
|
313.8
|
Right-of-Use Assets
|
100.8
|
102.7
|
Investment in Joint Venture
|
51.6
|
46.6
|
Deferred Income Tax Assets
|
1.1
|
1.2
|
Pension and Benefits
|
42.1
|
42.0
|
Financial and Other Assets
|
4.5
|
4.6
|
Goodwill and Intangibles
|
124.2
|
126.5
|
|
$ 2,630.8
|
$ 2,506.9
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
Current
|
|
|
Accounts payable and accrued
liabilities
|
$ 542.9
|
$ 482.0
|
Short-term lease
obligations
|
14.8
|
14.7
|
Income taxes payable
|
5.6
|
4.8
|
|
563.3
|
501.5
|
Long-Term Debt
|
296.3
|
296.0
|
Pensions and Benefits
|
2.0
|
1.5
|
Deferred Income Tax Liabilities
|
16.9
|
18.4
|
Long-term Lease Obligations
|
110.5
|
112.2
|
Provisions and Other Non-Current
Liabilities
|
24.7
|
18.0
|
|
1,013.7
|
947.6
|
Shareholders' Equity
|
|
|
Common shares
|
572.5
|
562.4
|
Retained earnings
|
894.5
|
844.6
|
Contributed surplus
|
10.7
|
12.2
|
Accumulated other comprehensive
income
|
139.4
|
140.1
|
Total Shareholders' Equity
|
1,617.1
|
1,559.3
|
Total Liabilities and Shareholders'
Equity
|
$ 2,630.8
|
$ 2,506.9
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
|
Three Months
Ended
March 31
|
(in millions of
Canadian dollars)
|
2023
|
2022
|
Operating activities
|
|
|
Net
earnings for the period
|
$ 73.9
|
$ 98.7
|
Depreciation and
amortization
|
16.4
|
15.8
|
Provision for income
taxes
|
22.3
|
31.9
|
Interest expense
|
3.8
|
6.7
|
Gain on disposal of property, plant
and equipment
|
(0.2)
|
(0.2)
|
Earnings from joint
venture
|
(8.9)
|
(6.0)
|
Share-based compensation
|
-
|
0.1
|
Debt accretion, amortization and
other
|
0.3
|
0.3
|
Interest paid, including interest
on lease obligations
|
(6.7)
|
(6.4)
|
Cash from operating
activities before non-cash working capital
|
100.9
|
140.9
|
Changes in non-cash working capital
items
|
|
|
Accounts receivable
|
(105.9)
|
(115.0)
|
Inventories
|
15.2
|
81.3
|
Accounts payable and accrued
liabilities
|
70.5
|
18.9
|
Other
|
2.5
|
(0.6)
|
Change in non-cash
working capital
|
(17.7)
|
(15.4)
|
Income taxes paid, net
|
(15.9)
|
(82.9)
|
Cash from operating activities
|
67.3
|
42.6
|
Financing activities
|
|
|
Issue of common shares
|
8.6
|
0.3
|
Dividends on common
shares
|
(23.7)
|
(24.0)
|
Deferred financing
|
-
|
(0.1)
|
Lease obligations
|
(3.9)
|
(5.6)
|
Cash used in financing
activities
|
(19.0)
|
(29.4)
|
Investing activities
|
|
|
Purchase of property, plant and
equipment
|
(14.2)
|
(8.2)
|
Proceeds on sale of property, plant
and equipment
|
0.3
|
0.5
|
Dividends received from joint
venture
|
3.9
|
-
|
Sale of business
|
-
|
9.7
|
Cash (used in) from investing
activities
|
(10.0)
|
2.0
|
Effect of exchange rates on cash and cash
equivalents
|
(0.2)
|
(2.1)
|
Increase in cash and
cash equivalents
|
38.1
|
13.1
|
Cash and cash
equivalents, beginning of the period
|
363.0
|
133.1
|
Cash and cash equivalents, end of the
period
|
$ 401.1
|
$ 146.2
|
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
|
-
|
(23.7)
|
-
|
-
|
(23.7)
|
Net earnings for the
period
|
-
|
73.9
|
-
|
-
|
73.9
|
Other comprehensive
loss for the period
|
-
|
-
|
-
|
(1.0)
|
(1.0)
|
Share options
exercised
|
10.1
|
-
|
(1.5)
|
-
|
8.6
|
Transfer of net
actuarial losses on defined benefit plans
|
-
|
(0.3)
|
-
|
0.3
|
-
|
Balance, March 31, 2023
|
$ 572.5
|
$ 894.5
|
$ 10.7
|
$ 139.4
|
$ 1,617.1
|
(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
|
-
|
(24.0)
|
-
|
-
|
(24.0)
|
Net earnings for the
period
|
-
|
98.7
|
-
|
-
|
98.7
|
Other comprehensive
loss for the period
|
-
|
-
|
-
|
(1.2)
|
(1.2)
|
Recognition of
share-based compensation
|
-
|
-
|
0.1
|
-
|
0.1
|
Share options
exercised
|
0.4
|
-
|
(0.1)
|
-
|
0.3
|
Transfer of net
actuarial gains on defined benefit plans
|
-
|
8.8
|
-
|
(8.8)
|
-
|
Balance, March 31,
2022
|
$ 571.4
|
$ 658.7
|
$ 12.1
|
$ 80.0
|
$ 1,322.2
|
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SOURCE Russel Metals Inc.