TORONTO, Nov. 9, 2022
/CNW/ - Russel Metals Inc. (TSX: RUS) announces financial results
for three months ended September 30,
2022.
Revenues of $1,270
Million and EBITDA1 of $140 Million
Advancing Various Capital Investment Growth
Initiatives
Repurchased $16 Million of
Shares; Declared a Dividend of $0.38
per Share
Strong Capital Structure with Liquidity1 of $541 Million
|
Three Months
Ended
|
Nine Months
Ended
|
|
Sep 30 2022
|
Sep 30 2021
|
Jun 30 2022
|
Sep 30 2022
|
Sep 30 2021
|
Revenues
|
$ 1,270
|
$ 1,108
|
$ 1,362
|
$ 3,971
|
$ 3,062
|
EBITDA1
|
140
|
196
|
189
|
482
|
502
|
Net earnings
|
91
|
132
|
124
|
314
|
330
|
Earnings per
share
|
1.45
|
2.10
|
1.96
|
4.98
|
5.28
|
Dividends paid per
common share
|
0.38
|
0.38
|
0.38
|
1.14
|
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.
The following table shows the reconciliation of net earnings in
accordance with GAAP to EBITDA for 2022 and 2021:
|
Three Months Ended
September 30
|
Nine Months Ended
September 30
|
(millions)
|
2022
|
2021
|
2022
|
2021
|
Net earnings
|
$ 91.3
|
$ 131.6
|
$ 314.0
|
$ 330.0
|
Provision for income
taxes
|
25.5
|
42.9
|
99.5
|
109.6
|
Interest and finance
expense
|
6.6
|
6.5
|
19.9
|
19.4
|
EBIT
1
|
123.4
|
181.0
|
433.4
|
459.0
|
Depreciation and
amortization
|
16.2
|
14.5
|
48.1
|
43.3
|
EBITDA
1
|
$ 139.6
|
$ 195.5
|
$ 481.5
|
$ 502.3
|
1
|
Defined in Non-GAAP
Measures and Ratios
|
Our basic earnings per share of $1.45
for the quarter ended September 30,
2022, while lower than the record $2.10 per share recorded in the third quarter of
2021 and the $1.96 recorded in the
2022 second quarter, was a strong quarter. For the nine months
ended September 30, 2022, our basic
earnings per share of $4.98 compared
to $5.28 for the same period in 2021.
Revenues of $1.3 billion were higher
than the $1.1 billion experienced in
third quarter of 2021 and was the third highest quarterly revenue.
Our overall gross margins of 21.5% reflected the benefits from our
balanced and diversified business portfolio. Our EBITDA for the
quarter was $140 million compared to
EBITDA of $196 million in the same
quarter of 2021 and $189 million in
the second quarter of 2022. Our strong EBITDA in the third
quarter of 2022 was achieved in spite of two non-cash items that
negatively impacted the results, as we recorded an inventory
reserve increase of $6 million and
the mark-to-market on our stock-based compensation was $nil in the
2022 third quarter compared to a benefit of $3 million in the 2021 third quarter and a
benefit of $4 million in the 2022
second quarter.
Each of our business segments continued to generate strong
operating results as they navigated through volatile market
conditions. In the 2022 third quarter, our metals service centers
segment reported revenues of $865
million and operating profits of $67
million. Value-added processing initiatives and our
solid market share offset the effect of lower steel prices. Metals
service centers experienced an increase in selling price per ton of
4% compared to the 2021 third quarter but a decrease of 6% compared
to the 2022 second quarter. Tons shipped in metals service centers
increased 9% from the same period in 2021 but decreased 5% from the
2022 second quarter due to both seasonal factors and customer
destocking amidst the recent price volatility. Our steel
distributors reported comparable revenues to the second quarter of
2022 but generated lower margins due to the moderation of steel
prices, which resulted in operating profits of $13 million versus $28
million in the 2022 second quarter. In our energy field
stores, the continued recovery of energy sector activity and
customer demand led to higher revenues, strong margins and
operating profits of $30 million
compared to the $12 million reported
in the 2021 third quarter and the $29
million in the 2022 second quarter.
Market Conditions
Demand from our metals service
centers' customers, which includes industrial manufacturers and
fabricators, non-residential construction, agriculture, ship
building, infrastructure and energy, remains active relative to
their local markets. In addition, our energy field stores continue
to experience solid demand due to world-wide supply shortages and
rising rig counts. On September 30,
2022, the Canadian rig counts were 213 compared to 162 in
the 2021 third quarter and the U.S. rig counts were 765 compared to
521 on September 30, 2021.
Capital Investment Growth Initiatives
Our approach to
capital investment growth initiatives includes: (i) value-added
equipment projects; (ii) facility modernizations; and (iii)
targeted acquisitions.
We have targeted approximately $30
million per year of discretionary investments related to
value-added equipment projects. These initiatives have been
underway for several years and are expected to continue for several
more years. In the 2022 third quarter, we advanced several
value-added projects, including ones in Saskatchewan, Alberta and Quebec.
In terms of facility modernizations, we have targeted
$50-75 million of investments in the
coming years for projects focused on consolidating multi-site
regions into larger and modern facilities. These projects will
provide opportunities for growth, improve material handling
efficiencies, improve health and safety conditions, and monetize
the value related to redundant real estate at legacy locations. In
the quarter, we approved a project in Saskatoon, Saskatchewan, which will involve a
net investment of approximately $7
million. This project is targeted for completion in early
2024.
On acquisitions, the pipeline of potential opportunities remains
active, and we continue to focus on opportunities that could fit
our economic and operational criteria.
Returning Capital to Shareholders
We have recently
adopted a more balanced approach to returning excess capital to
shareholders through: (i) our ongoing dividend; and (ii) share buy
backs.
In the 2022 third quarter, we paid dividends of $24 million or $0.38 per common share. In addition, we declared
a dividend of $0.38 per share,
payable on December 15, 2022, to
shareholders of record at the close of business on November 28, 2022.
We recently 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. In the 2022
third quarter, we purchased and cancelled 582,908 shares for total
consideration of $16 million.
Liquidity and Capital Structure
During the 2022 third
quarter, we generated $41 million of
cash from operating activities and ended the quarter with total
available liquidity of $541
million.
Outlook
The broader economy is expected to encounter
general uncertainty as a result of higher inflation and increasing
interest rates. While these factors typically impact sectors such
as homebuilding and retailing more than industrial consumers of
steel products, we expect to see some cautious near-term buying
activity amongst our industrial customers in the coming months. In
addition, we typically experience a lower number of operating days
due to seasonality during the fourth quarter. By contrast, we
expect the energy sector to continue to improve as our energy field
stores have a solid backlog of business heading into the fourth
quarter.
Investor Conference Call
The Company will be holding
an Investor Conference Call on Thursday,
November 10, 2022, at 9:00 a.m.
ET to review its 2022 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 24, 2022. You will be required
to enter pass code #848758 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: 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.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.
Website: www.russelmetals.com
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)
|
2022
|
2021
|
2022
|
2021
|
Revenues
|
$ 1,269.9
|
$ 1,108.1
|
$ 3,970.8
|
$ 3,061.7
|
Cost of
materials
|
996.3
|
777.9
|
3.062.4
|
2,148.5
|
Employee
expenses
|
104.1
|
97.7
|
313.7
|
293.2
|
Other operating
expenses
|
61.0
|
54.3
|
181.9
|
163.8
|
Earnings from joint venture
|
(14.9)
|
(2.8)
|
(20.6)
|
(2.8)
|
Earnings before interest and provision for income
taxes
|
123.4
|
181.0
|
433.4
|
459.0
|
Interest
expense
|
6.6
|
6.5
|
19.9
|
19.4
|
Earnings before provision for income
taxes
|
116.8
|
174.5
|
413.5
|
439.6
|
Provision for income
taxes
|
25.5
|
42.9
|
99.5
|
109.6
|
Net earnings for the
period
|
$ 91.3
|
$ 131.6
|
$ 314.0
|
$ 330.0
|
Basic earnings per common share
|
$ 1.45
|
$ 2.10
|
$ 4.98
|
$ 5.28
|
Diluted earnings per common
share
|
$ 1.45
|
$ 2.10
|
$ 4.97
|
$ 5.27
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
Three Months
Ended
September 30
|
Nine Months Ended
September 30
|
(in millions of
Canadian dollars)
|
2022
|
2021
|
2022
|
2021
|
Net earnings for the period
|
$ 91.3
|
$ 131.6
|
$ 314.0
|
$ 330.0
|
Other comprehensive
income
|
|
|
|
|
Items that may be reclassified to
earnings
|
|
|
|
|
Unrealized foreign exchange gains
on
|
|
|
|
|
translation of foreign
operations
|
48.9
|
16.5
|
60.8
|
2.7
|
Items that may not be reclassified to earnings
|
|
|
|
|
Actuarial gains on pension and
similar
|
|
|
|
|
obligations net of
taxes
|
0.1
|
3.8
|
9.2
|
21.9
|
Other comprehensive
income
|
49.0
|
20.3
|
70.0
|
24.6
|
Total comprehensive income
|
$ 140.3
|
$ 151.9
|
$ 384.0
|
$ 354.6
|
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(in millions of
Canadian dollars)
|
September 30
2022
|
December 31
2021
|
ASSETS
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
$ 204.1
|
$ 133.1
|
Accounts receivable
|
669.6
|
554.1
|
Inventories
|
1,050.1
|
986.0
|
Prepaid and other
|
35.9
|
30.3
|
Income taxes receivable
|
10.1
|
16.1
|
|
1,969.8
|
1,719.6
|
Property, Plant and Equipment
|
311.2
|
302.4
|
Right-of-Use Assets
|
97.5
|
86.7
|
Investment in Joint Venture
|
43.8
|
37.6
|
Deferred Income Tax Assets
|
1.2
|
1.5
|
Pension and Benefits
|
40.3
|
29.5
|
Financial and Other Assets
|
4.9
|
5.0
|
Goodwill and Intangibles
|
130.2
|
132.2
|
|
$ 2,598.9
|
$ 2,314.5
|
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
Current
|
|
|
Accounts payable and accrued
liabilities
|
$ 595.3
|
$ 557.7
|
Short-term lease
obligations
|
15.2
|
15.8
|
Income taxes payable
|
3.3
|
66.7
|
|
613.8
|
640.2
|
Long-Term Debt
|
295.7
|
294.8
|
Pensions and Benefits
|
2.0
|
3.4
|
Deferred Income Tax Liabilities
|
19.5
|
19.6
|
Long-term Lease Obligations
|
106.9
|
93.7
|
Provisions and Other Non-Current
Liabilities
|
16.5
|
14.5
|
|
1,054.4
|
1,066.2
|
Shareholders' Equity
|
|
|
Common shares
|
566.2
|
571.0
|
Retained earnings
|
815.4
|
575.2
|
Contributed surplus
|
12.1
|
12.1
|
Accumulated other comprehensive
income
|
150.8
|
90.0
|
Total Shareholders' Equity
|
1,544.5
|
1,248.3
|
Total Liabilities and Shareholders'
Equity
|
$ 2,598.9
|
$ 2,314.5
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
|
Three Months
Ended
September 30
|
Nine Months Ended
September 30
|
(in millions of
Canadian dollars)
|
2022
|
2021
|
2022
|
2021
|
Operating activities
|
|
|
|
|
Net
earnings for the period
|
$ 91.3
|
$ 131.6
|
$ 314.0
|
$ 330.0
|
Depreciation and
amortization
|
16.2
|
14.5
|
48.1
|
43.3
|
Provision for income
taxes
|
25.5
|
42.9
|
99.5
|
109.6
|
Interest expense
|
6.6
|
6.5
|
19.9
|
19.4
|
(Gain) loss on sale of property,
plant and equipment
|
(0.2)
|
0.6
|
(2.7)
|
0.3
|
Earnings from joint
venture
|
(14.9)
|
(2.8)
|
(20.6)
|
(2.8)
|
Share-based compensation
|
-
|
0.1
|
0.1
|
0.2
|
Difference between pension expense
and
|
|
|
|
|
amount
funded
|
0.2
|
-
|
0.2
|
0.6
|
Debt accretion, amortization and
other
|
0.3
|
0.3
|
0.9
|
0.8
|
Interest paid, including interest
on lease obligations
|
(6.2)
|
(6.1)
|
(19.0)
|
(18.7)
|
Cash from operating
activities before
|
|
|
|
|
non-cash working capital
|
118.8
|
187.6
|
440.4
|
482.7
|
Changes in non-cash working capital
items
|
|
|
|
|
Accounts receivable
|
(0.3)
|
(16.9)
|
(104.6)
|
(206.1)
|
Inventories
|
(4.0)
|
(126.3)
|
(43.2)
|
(193.6)
|
Accounts payable and accrued
liabilities
|
(42.2)
|
79.2
|
25.7
|
281.3
|
Other
|
5.7
|
1.3
|
(5.6)
|
(3.0)
|
Change in non-cash
working capital
|
(40.8)
|
(62.7)
|
(127.7)
|
(121.4)
|
Income tax paid, net
|
(36.4)
|
(19.1)
|
(159.6)
|
(49.8)
|
Cash from operating activities
|
41.6
|
105.8
|
153.1
|
311.5
|
Financing activities
|
|
|
|
|
Issue of common shares
|
-
|
7.9
|
0.3
|
17.3
|
Repurchase of common
shares
|
(16.3)
|
-
|
(16.3)
|
-
|
Dividends on common
shares
|
(23.9)
|
(23.9)
|
(71.9)
|
(71.4)
|
Deferred financing
|
(0.1)
|
-
|
(0.2)
|
-
|
Lease obligations
|
(1.8)
|
(3.8)
|
(11.1)
|
(11.7)
|
Cash used in financing
activities
|
(42.1)
|
(19.8)
|
(99.2)
|
(65.8)
|
Investing activities
|
|
|
|
|
Purchase of property, plant and
equipment
|
(10.2)
|
(7.6)
|
(26.2)
|
(20.3)
|
Proceeds on sale of property, plant
and equipment
|
-
|
0.4
|
3.1
|
0.9
|
Dividends received from joint
venture
|
14.4
|
-
|
14.4
|
-
|
Sale of business
|
-
|
77.1
|
9.7
|
77.1
|
Cash from investing activities
|
4.2
|
69.9
|
1.0
|
57.7
|
Effect of exchange rates on
cash
|
|
|
|
|
and cash
equivalents
|
13.5
|
5.7
|
16.1
|
7.1
|
Increase in cash and
cash equivalents
|
17.2
|
161.6
|
71.0
|
310.5
|
Cash and cash
equivalents, beginning of the period
|
186.9
|
175.2
|
133.1
|
26.3
|
Cash and cash equivalents, end of the
period
|
$ 204.1
|
$ 336.8
|
$ 204.1
|
$ 336.8
|
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,
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
|
(in millions of
Canadian dollars)
|
Common
Shares
|
Retained
Earnings
|
Contributed
Surplus
|
Accumulated
Other
Comprehensive
Income
|
Total
|
Balance, January 1,
2021
|
$ 546.2
|
$ 212.5
|
$ 15.7
|
$ 90.3
|
$ 864.7
|
Payment of
dividends
|
-
|
(71.4)
|
-
|
-
|
(71.4)
|
Net earnings for the
period
|
-
|
330.0
|
-
|
-
|
330.0
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
24.6
|
24.6
|
Recognition of
share-based compensation
|
-
|
-
|
0.2
|
-
|
0.2
|
Share options
exercised
|
20.3
|
-
|
(3.0)
|
-
|
17.3
|
Transfer of net
actuarial gains on defined benefit plans
|
-
|
21.9
|
-
|
(21.9)
|
-
|
Balance, September 30, 2021
|
$ 566.5
|
$ 493.0
|
$ 12.9
|
$ 93.0
|
$ 1,165.4
|
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content:https://www.prnewswire.com/news-releases/russel-metals-announces-2022-third-quarter-results-301673498.html
SOURCE Russel Metals Inc.