Russel Metals Announces 2020 Annual & Fourth Quarter Results

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Russel Metals reports Q4 and annual results for 2020, with annual revenues of $2.7 billion and Adjusted EBITDA of $159 million. In Q4, revenues totaled $671 million, reflecting steel price increases and seasonal demand. However, net income fell to $25 million from $77 million in 2019, alongside a decrease in earnings per share from $1.23 to $0.39. The company generated $371 million in cash from operations and ended with $406 million in liquidity. A dividend of $0.38 per share was approved for March 2021.

Positive

• Revenue increase in Q4 driven by steel price increases and seasonal demand.
• Acquisition of Sanborn Tube Sales for US$13 million to enhance value-added manufacturing.
• Reduction in line pipe/OCTG inventory by $73 million, improving capital efficiency.
• Strong liquidity of $406 million at year-end.

Negative

• Net income decreased from $77 million in 2019 to $25 million in 2020.
• Adjusted EBITDA declined from $203 million in 2019 to $159 million in 2020.
• Revenue decline from $3.7 billion in 2019 to $2.7 billion in 2020.

TORONTO, Feb. 10, 2021 /PRNewswire/ - Russel Metals Inc. (TSX: RUS) announces financial results for the fourth quarter and the year ended December 31, 2020.

Annual Revenues of $2.7 Billion and Adjusted EBITDA of $159 Million
Liquidity of $406 Million and Net Debt to Invested Capital of 24%

	Three Months Ended						Year Ended
	Dec 31 2020		Dec 31 2019		Sep 30 2020		Dec 31 2020		Dec 31 2019
Revenues	$	671	$	837	$	615	$	2,688	$	3,676
EBITDA1	11		18		47		125		203
Adjusted EBITDA1	41		18		47		159		203
Net Income (Loss)	(9)		(7)		18		25		77
Earnings (Loss) per share	(0.14)		(0.11)		0.29		0.39		1.23
Cash from Operations	106		141		81		371		250
Dividends Paid per common share	0.38		0.38		0.38		1.52		1.52

All amounts are reported in millions of Canadian dollars except per share figures, which are in Canadian dollars.

1Adjusted EBITDA and EBITDA are non-GAAP measures.  Adjusted EBITDA represent earnings before long-lived asset impairment, interest, income taxes, depreciation and amortization.  EBITDA represents earnings before interest, income taxes, depreciation and amortization.  Our Management's Discussion and Analysis includes additional information regarding these non-GAAP measures, including a reconciliation to the most directly comparable GAAP measures, under the headings "Non-GAAP Measures", and "Reconciliation of net earnings to Adjusted EBITDA."

Our net earnings for the year ended December 31, 2020, were $25 million or $0.39 per share compared to net earnings of $77 million or $1.23 per share for 2019.  Our adjusted net earnings (excluding the after-tax impact of non-cash asset impairment charges of $26 million related to our U.S. energy operations) for the year ended December 31, 2020 were $50 million or $0.81 per share.  Revenues for the year ended December 31, 2020 were $2.7 billion compared to $3.7 billion in 2019.  Adjusted EBITDA was $159 million compared to $203 million in 2019.

In the 2020 fourth quarter, our revenues, Adjusted EBITDA and adjusted earnings per share were $671 million, $41 million and $0.22 per share, respectively.  Revenues during the quarter benefited from multiple steel price increases and stronger seasonal demand in the metals service centers and steel distributors segments.  During the 2020 fourth quarter, items of note that negatively impacted Adjusted EBITDA included a net increase in our inventory valuation reserves of $3 million related to our line pipe/OCTG operations and non-cash stock-based compensation expense of $4 million due to our improved share price.  During the 2020 fourth quarter, we recognized $8 million in federal government wage subsidies, as compared to $20 million in the 2020 third quarter.

Mr. John G. Reid, President and CEO, commented, "The global pandemic created a new working environment causing us to adapt our operations as an essential industry and develop new health and safety protocols for our employees and other stakeholders.  I want to commend the teams in our service center and distribution operations for their tremendous efforts in successfully navigating 2020 as we emerged a stronger company. Our metals service centers and distribution operations experienced improving demand and multiple price increases in the fourth quarter which provides a springboard going into 2021." 

Mr. Reid continued, "Oil prices and rig counts continued to modestly improve in the 2020 fourth quarter.  Steel price increases have recently been reflected in rising energy product prices as the supply chain continues to rebalance.  During the fourth quarter we continued our strategy to redeploy capital from our OCTG and line pipe energy operations and 2021 offers further opportunities to advance this initiative."

The Board of Directors approved a quarterly dividend of $0.38 per common share payable March 15, 2021 to shareholders of record as of February 26, 2021.  We will continue our practice of prudently reviewing our dividend to ensure it is supported by a strong balance sheet and cash flows.

Market Conditions
The global pandemic created extraordinary market volatility in 2020, from a severe deterioration of activity in the second quarter to gradual improvement through the third quarter and a stronger pick-up towards the end of the fourth quarter in metals service centers and steel distributors.  Our operations were deemed essential and remained open throughout 2020.  In the 2020 fourth quarter, rapid increases in raw material pricing, improved demand and low inventory levels throughout the supply chain drove a substantial increase in steel prices.

Business Optimization
During 2020, we implemented a number of our value-added processing initiatives in several of our regions.  On December 30, 2020, we acquired Sanborn Tube Sales of Wisconsin, Inc. ("Sanborn "), a leader in value-added manufacturing, for US$13 million.  Sanborn operates three tube lasers from its facility located in Pewaukee, Wisconsin and will complement our existing locations in that region.  During 2020, we expanded our Trenton, Georgia facility which now includes a bar storage facility, fiber tube and flat lasers.  The rationalization of our B.C. region was completed through the closure and sale of the real estate related to our Kelowna and Kitimat service centers.  The sale of these two facilities resulted in proceeds of $10 million and a gain on sale of $6 million which was recorded in the 2020 third quarter.

In our energy products segment, we furthered our objective of reducing capital employed in our line pipe/OCTG operations.  During the year, we completed the merger of our two Canadian line pipe/OCTG operations and advanced the orderly liquidation of our U.S. line pipe/OCTG operations.  As a result, we reduced our line pipe/OCTG inventory by $73 million for the year, including $34 million in the 2020 fourth quarter.  In our field stores, we rationalized six Elite Supply Partners locations.

Liquidity and Capital Structure Improvements
During 2020, we generated $371 million of cash from operating activities and ended the year with total liquidity of $406 million.

During September 2020, we updated and improved our credit facility to provide additional borrowing base flexibility and extended its maturity.  In October 2020, we issued $150 million 5 ¾% senior unsecured notes due October 2025.  In November 2020, we redeemed our $300 million 6% senior unsecured notes due 2022.  The combination of these initiatives will reduce our interest expense and extend our debt maturities.  During the 2020 fourth quarter, our interest expense included $1.3 million in deferred financing costs related to the redemption of senior unsecured notes due 2022.

The Company will be holding an Investor Conference Call on Thursday, February 11, 2021 at 9:00 a.m. ET to review its 2020 fourth 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, February 25, 2021.  You will be required to enter pass code 972349# 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 metals distribution segments: metals service centers, energy products and steel distributors.  Its metals service centers operations carry 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 products operations carry a specialized product line focused on the needs of energy industry customers.  These operations distribute tubes, flanges, valves, fittings, oil country tubular goods ("OCTG") and line pipe through our field stores and OCTG/line pipe operations.  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; 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.

CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
	Quarters ended				Years ended
	December 31				December 31
(in millions of Canadian dollars, except per share data)		2020		2019		2020		2019
Revenues	$	670.6	$	837.4	$	2,688.3	$	3,675.9
Cost of materials		531.2		715.4		2,169.6		3,035.9
Employee expenses		60.3		70.3		231.3		295.9
Other operating expenses		52.6		49.4		189.0		197.8
Impairment of goodwill and long-lived assets		30.1		-		33.8		-
Earnings before interest and provision for income taxes		(3.6)		2.3		64.6		146.3
Interest expense		9.0		9.9		36.7		40.9
Earnings (loss) before provision for income taxes		(12.6)		(7.6)		27.9		105.4
Provision for (recovery of) income taxes		(3.8)		(1.0)		3.4		28.8
Net earnings (loss) for the period	$	(8.8)	$	(6.6)	$	24.5	$	76.6
Basic earnings (loss) per common share	$	(0.14)	$	(0.11)	$	0.39	$	1.23
Diluted earnings (loss) per common share	$	(0.14)	$	(0.11)	$	0.39	$	1.23

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
	Quarters ended				Years ended
	December 31				December 31
(in millions of Canadian dollars)		2020		2019		2020		2019
Net earnings (loss) for the period	$	(8.8)	$	(6.6)	$	24.5	$	76.6
Other comprehensive income (loss)
Items that may be reclassified to earnings
Unrealized foreign exchange losses on
translation of foreign operations		(25.2)		(10.6)		(10.4)		(27.8)
Items that may not be reclassified to earnings
Actuarial gains (losses) on pension and similar
obligations, net of taxes		2.8		1.9		(2.0)		(0.1)
Other comprehensive income (loss)		(22.4)		(8.7)		(12.4)		(27.9)
Total comprehensive income (loss)	$	(31.2)	$	(15.3)	$	12.1	$	48.7

 

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
	December 31		December 31
(in millions of Canadian dollars)	2020		2019
ASSETS
Current
Cash and cash equivalents	$	26.3	$	16.0
Accounts receivable		344.0		458.1
Inventories		716.4		883.6
Prepaids and other		13.6		18.1
Income taxes receivable		19.8		18.9
		1,120.1		1,394.7
Property, Plant and Equipment		269.5		288.9
Right-of-use Assets		81.4		90.1
Deferred Income Tax Assets		5.9		4.8
Pension and Benefits		5.1		5.4
Financial and Other Assets		4.7		4.0
Goodwill and Intangibles		109.6		137.0
	$	1,596.3	$	1,924.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness	$	-	$	62.1
Accounts payable and accrued liabilities		294.6		326.4
Short-term lease obligations		16.9		17.1
Income taxes payable		3.7		0.3
		315.2		405.9
Long-Term Debt		293.7		444.8
Pensions and Benefits		13.0		10.4
Deferred Income Tax Liabilities		9.5		13.2
Long-term Lease Obligations		88.8		94.4
Provisions and Other Non-Current Liabilities		11.4		11.6
		731.6		980.3
Shareholders' Equity
Common shares		546.2		543.7
Retained earnings		212.5		284.5
Contributed surplus		15.7		15.7
Accumulated other comprehensive income		90.3		100.7
Total Shareholders' Equity		864.7		944.6
Total Liabilities and Shareholders' Equity	$	1,596.3	$	1,924.9

 

CONSOLIDATED STATEMENTS OF CASH FLOW
	Quarters ended				Years ended
	December 31				December 31
(in millions of Canadian dollars)	2020		2019		2020		2019
Operating activities
Net earnings (loss) for the period	$	(8.8)	$	(6.6)	$	24.5	$	76.6
Depreciation and amortization		14.6		15.3		60.6		56.7
Provision for (recovery of) income taxes		(3.8)		(1.0)		3.4		28.8
Interest expense		9.0		9.9		36.7		40.9
Impairment of goodwill and long-lived assets		30.1		-		33.8		-
Gain on sale of property, plant and equipment		(0.2)		(0.1)		(6.5)		(0.5)
Share-based compensation		-		0.1		0.3		0.3
Difference between pension expense and amount funded		0.3		(0.2)		0.3		(0.9)
Debt accretion, amortization and other		1.5		0.3		2.5		1.2
Interest paid, including interest on lease obligations		(11.8)		(4.1)		(36.4)		(31.6)
Cash from operating activities before non-cash working capital		30.9		13.6		119.2		171.5
Changes in non-cash working capital items
Accounts receivable		(7.6)		62.2		114.8		121.1
Inventories		67.6		122.6		169.0		202.5
Accounts payable and accrued liabilities		27.2		(49.2)		(31.3)		(175.7)
Other		(2.1)		(2.9)		4.6		(3.8)
Change in non-cash working capital		85.1		132.7		257.1		144.1
Income tax refund (paid), net		(9.9)		(5.2)		(5.3)		(65.9)
Cash from operating activities		106.1		141.1		371.0		249.7
Financing activities
Decrease in bank borrowings		-		(73.1)		(62.1)		(66.3)
Issue of common shares		2.0		-		2.2		1.3
Dividends on common shares		(23.6)		(23.7)		(94.5)		(94.5)
Issuance of long-term debt		146.4		-		146.4		-
Repayment of long-term debt		(300.0)		-		(300.0)		-
Deferred financing costs		(0.1)		-		(1.2)		-
Lease obligations		(3.8)		(4.3)		(17.9)		(17.2)
Cash used in financing activities		(179.1)		(101.1)		(327.1)		(176.7)
Investing activities
Purchase of property, plant and equipment		(6.1)		(11.2)		(24.9)		(34.8)
Proceeds on sale of property, plant and equipment		9.5		0.5		14.4		1.4
Purchase of business		(16.8)		(139.4)		(16.8)		(139.4)
Cash used in investing activities		(13.4)		(150.1)		(27.3)		(172.8)
Effect of exchange rates on cash and cash equivalents		(8.8)		(2.5)		(6.3)		(8.5)
Increase (decrease) in cash and cash equivalents		(95.2)		(112.6)		10.3		(108.3)
Cash and cash equivalents, beginning of the period		121.5		128.6		16.0		124.3
Cash and cash equivalents, end of the year	$	26.3	$	16.0	$	26.3	$	16.0

 

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
							Accumulated
							Other
	Common		Retained		Contributed		Comprehensive
(in millions of Canadian dollars)	Shares		Earnings		Surplus		Income		Total
Balance, January 1, 2020	$	543.7	$	284.5	$	15.7	$	100.7	$	944.6
Payment of dividends		-		(94.5)		-		-		(94.5)
Net income for the year		-		24.5		-		-		24.5
Other comprehensive loss for the year		-		-		-		(12.4)		(12.4)
Recognition of share-based compensation		-		-		0.3		-		0.3
Share options exercised		2.5		-		(0.3)		-		2.2
Transfer of net actuarial losses on defined benefit plans		-		(2.0)		-		2.0		-
Balance, December 31, 2020	$	546.2	$	212.5	$	15.7	$	90.3	$	864.7
							Accumulated
							Other
	Common		Retained		Contributed		Comprehensive
(in millions of Canadian dollars)	Shares		Earnings		Surplus		Income		Total
Balance, January 1, 2019	$	542.1	$	318.6	$	15.7	$	128.5	$	1,004.9
Payment of dividends		-		(94.5)		-		-		(94.5)
Change in accounting policy		-		(16.1)		-		-		(16.1)
Net income for the year		-		76.6		-		-		76.6
Other comprehensive loss for the year		-		-		-		(27.9)		(27.9)
Recognition of share-based compensation		-		-		0.3		-		0.3
Share options exercised		1.6		-		(0.3)		-		1.3
Transfer of net actuarial losses on defined benefit plans		-		(0.1)		-		0.1		-
Balance, December 31, 2019	$	543.7	$	284.5	$	15.7	$	100.7	$	944.6

 

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SOURCE Russel Metals Inc.

FAQ

What were Russel Metals' Q4 2020 revenues and earnings?

In Q4 2020, Russel Metals reported revenues of $671 million and a net loss of $9 million.

How did Russel Metals' annual revenue change in 2020?

Russel Metals' annual revenues decreased from $3.7 billion in 2019 to $2.7 billion in 2020.

What was the adjusted EBITDA for Russel Metals in 2020?

Russel Metals' adjusted EBITDA for the year ended December 31, 2020 was $159 million.

What dividend has Russel Metals announced for March 2021?

Russel Metals has approved a dividend of $0.38 per common share payable on March 15, 2021.

What is the impact of steel price increases on Russel Metals' performance?

Steel price increases contributed to improved demand and revenues in Q4 2020, supporting the company's financial performance.