Russel Metals Announces 2021 Third Quarter Results
Russel Metals reported strong financial results for Q3 2021, with revenues of $1.1 billion and record net income of $132 million, marking a significant increase from $615 million and $18 million in Q3 2020. EBITDA rose to $196 million compared to $47 million the previous year. The company generated $106 million in cash from operations and maintained liquidity over $600 million. Gross margin improved to 29.8% despite a slight decline from 30.7% in the previous quarter. A quarterly dividend of $0.38 per share was declared, supporting continued shareholder returns.
- Record net income of $132 million compared to $18 million in Q3 2020.
- EBITDA increased to $196 million from $47 million in the same quarter last year.
- Strong revenue growth to $1.1 billion, up from $615 million in Q3 2020.
- Improved gross margin at 29.8%, up from 19.0% year-over-year.
- Cash from operating activities was $106 million, enhancing liquidity.
- Tons shipped in metals service centers decreased by 12% from Q2 2021.
- Anticipated modest retreat in margins due to higher average inventory costs.
TORONTO, Nov. 4, 2021 /PRNewswire/ - Russel Metals Inc. (TSX: RUS) announces financial results for three months ended September 30, 2021.
REVENUES OF
LIQUIDITY GREATER THAN
Three Months Ended | Nine Months Ended | |||||||||
Sep 30 2021 | Sep 30 2020 | Jun 30 2021 | Sep 30 2021 | Sep 30 2020 | ||||||
Revenues | $ | 1,108 | $ | 615 | $ | 1,068 | $ | 3,062 | $ | 2,018 |
EBITDA1 | 196 | 47 | 178 | 502 | 114 | |||||
Adjusted EBITDA1 | 196 | 47 | 178 | 502 | 118 | |||||
Net Income | 132 | 18 | 118 | 330 | 33 | |||||
Earnings per share | 2.10 | 0.29 | 1.88 | 5.28 | 0.54 | |||||
Cash from Operating Activities | 106 | 81 | 110 | 312 | 265 | |||||
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. |
Our basic earnings per share of
Our EBITDA was
Each of our business segments continued to generate strong operating profit as compared to the same quarter of 2020 and the 2021 second quarter. In the 2021 third quarter, our metals service centers segment reported near record operating profits and returns, as this segment continued to maximize margin opportunities from the strong market conditions and realized the benefits from our value-added processing initiatives. Our steel distributors segment continued to benefit from strong demand, higher steel prices and low inventories in the supply chain and reported growth in both revenues and operating profit. In our energy products segment, the continued recovery of oil and natural gas prices led to improved revenues from our field stores and supported the profitable liquidation of the U.S. OCTG/line pipe inventory as we exit this segment of the industry.
Market Conditions
Steel prices continued to rise in the 2021 third quarter. Metals service centers experienced an increase in selling price per ton of
OCTG/Line Pipe Business Changes
In mid-2020, we began the process of lowering our exposure to the energy sector in order to reduce earnings volatility, improve margins and enhance our return on capital over the cycle. As of September 30, 2021, inventory at our OCTG/line pipe operations was
On July 6, 2021, we completed the transaction whereby we combined our Canadian OCTG/line pipe business with that of Marubeni-Itochu Tubulars America Inc. into a new joint venture called TriMark Tubulars Ltd. ("TriMark"). We contributed net assets with a book value of
Liquidity and Capital Structure Improvements
During the 2021 third quarter, we generated
The improvements to our capital structure that were implemented in late 2020, in combination with cash realized from the monetization of the OCTG/line pipe businesses, contributed to an interest expense reduction of
EBITDA
The following table shows the reconciliation of net earnings to EBITDA for 2021 and Adjusted EBITDA for 2020:
Three Months Ended | Nine Months Ended | |||||||
(millions) | 2021 | 2020 | 2021 | 2020 | ||||
Net earnings | $ | 131.6 | $ | 18.2 | $ | 330.0 | $ | 33.3 |
Provision for income taxes | 42.9 | 4.9 | 109.6 | 7.2 | ||||
Interest, net | 6.5 | 9.1 | 19.4 | 27.7 | ||||
Asset impairment | - | - | - | 3.7 | ||||
Earnings before, asset impairment, interest | ||||||||
and income taxes | 181.0 | 32.2 | 459.0 | 71.9 | ||||
Depreciation and amortization | 14.5 | 15.0 | 43.3 | 46.0 | ||||
Earnings before interest, asset impairment, | ||||||||
income taxes, depreciation and amortization | $ | 195.5 | $ | 47.2 | $ | 502.3 | $ | 117.9 |
Declaration of Quarterly Dividends
The Board of Directors approved a quarterly dividend of
Outlook
Steel availability has improved modestly and inventory in the supply chain has increased early in the fourth quarter, as steel mills return from their maintenance outage period. We expect this modest improvement to continue for the balance of the quarter. Demand is expected to remain strong for the remainder of 2021 and thereby result in a favourable supply and demand balance. We expect margins to retreat modestly in the fourth quarter of 2021 as a result of higher average cost of inventories. The energy sector activity is expected to continue to improve as a result of the recovery in oil and natural gas prices.
Investor Conference Call
The Company will be holding an Investor Conference Call on Friday, November 5, 2021 at 9:00 a.m. ET to review its 2021 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, Friday, November 19, 2021. You will be required to enter pass code 195655# 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 products 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 products operations 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.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||
(in millions of Canadian dollars, except per share data) | 2021 | 2020 | 2021 | 2020 | ||||
Revenues | $ | 1,108.1 | $ | 614.9 | $ | 3,061.7 | $ | 2,017.7 |
Cost of materials | 777.9 | 498.1 | 2,148.5 | 1,638.4 | ||||
Employee expenses | 92.9 | 47.4 | 280.6 | 171.0 | ||||
Other operating expenses | 59.1 | 37.2 | 176.4 | 136.4 | ||||
Share of earnings from joint venture | (2.8) | - | (2.8) | - | ||||
Asset impairment | - | - | - | 3.7 | ||||
Earnings before interest and provision for income taxes | 181.0 | 32.2 | 459.0 | 68.2 | ||||
Interest expense | 6.5 | 9.1 | 19.4 | 27.7 | ||||
Earnings before provision for income taxes | 174.5 | 23.1 | 439.6 | 40.5 | ||||
Provision for income taxes | 42.9 | 4.9 | 109.6 | 7.2 | ||||
Net earnings for the period | $ | 131.6 | $ | 18.2 | $ | 330.0 | $ | 33.3 |
Basic earnings per common share | $ | 2.10 | $ | 0.29 | $ | 5.28 | $ | 0.54 |
Diluted earnings per common share | $ | 2.10 | $ | 0.29 | $ | 5.27 | $ | 0.54 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||
(in millions of Canadian dollars) | 2021 | 2020 | 2021 | 2020 | ||||
Net earnings for the period | $ | 131.6 | $ | 18.2 | $ | 330.0 | $ | 33.3 |
Other comprehensive (loss) income | ||||||||
Items that may be reclassified to earnings | ||||||||
Unrealized foreign exchange gains (losses) on | ||||||||
translation of foreign operations | 16.5 | (12.0) | 2.7 | 14.8 | ||||
Items that may not be reclassified to earnings | ||||||||
Actuarial gains (losses) on pension and similar | ||||||||
obligations net of taxes | 3.8 | 3.8 | 21.9 | (4.8) | ||||
Other comprehensive income (loss) | 20.3 | (8.2) | 24.6 | 10.0 | ||||
Total comprehensive income | $ | 151.9 | $ | 10.0 | $ | 354.6 | $ | 43.3 |
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(in millions of Canadian dollars) | September 30 | December 31 | ||
ASSETS | ||||
Current | ||||
Cash and cash equivalents | $ | 336.8 | $ | 26.3 |
Accounts receivable | 550.0 | 344.0 | ||
Inventories | 786.8 | 716.4 | ||
Prepaid and other | 16.4 | 13.6 | ||
Income taxes receivable | 5.0 | 19.8 | ||
1,695.0 | 1,120.1 | |||
Property, Plant and Equipment | 264.5 | 269.5 | ||
Right-of-Use Assets | 83.2 | 81.4 | ||
Investment in Joint Venture | 34.3 | - | ||
Deferred Income Tax Assets | 5.5 | 5.9 | ||
Pension and Benefits | 26.2 | 5.1 | ||
Financial and Other Assets | 4.2 | 4.7 | ||
Goodwill and Intangibles | 103.2 | 109.6 | ||
$ | 2,216.1 | $ | 1,596.3 | |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
Current | ||||
Accounts payable and accrued liabilities | $ | 562.6 | $ | 294.6 |
Short-term lease obligations | 15.3 | 16.9 | ||
Income taxes payable | 54.4 | 3.7 | ||
632.3 | 315.2 | |||
Long-Term Debt | 294.5 | 293.7 | ||
Pensions and Benefits | 5.0 | 13.0 | ||
Deferred Income Tax Liabilities | 11.5 | 9.5 | ||
Long-term Lease Obligations | 92.4 | 88.8 | ||
Provisions and Other Non-Current Liabilities | 15.0 | 11.4 | ||
1,050.7 | 731.6 | |||
Shareholders' Equity | ||||
Common shares | 566.5 | 546.2 | ||
Retained earnings | 493.0 | 212.5 | ||
Contributed surplus | 12.9 | 15.7 | ||
Accumulated other comprehensive income | 93.0 | 90.3 | ||
Total Shareholders' Equity | 1,165.4 | 864.7 | ||
Total Liabilities and Shareholders' Equity | $ | 2,216.1 | $ | 1,596.3 |
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Three Months Ended | Nine Months Ended | |||||||
(in millions of Canadian dollars) | 2021 | 2020 | 2021 | 2020 | ||||
Operating activities | ||||||||
Net earnings for the period | $ | 131.6 | $ | 18.2 | $ | 330.0 | $ | 33.3 |
Depreciation and amortization | 14.5 | 15.0 | 43.3 | 46.0 | ||||
Provision for income taxes | 42.9 | 4.9 | 109.6 | 7.2 | ||||
Interest expense | 6.5 | 9.1 | 19.4 | 27.7 | ||||
(Loss) gain on sale of property, plant and equipment | 0.6 | (6.1) | 0.3 | (6.3) | ||||
Share of earnings from joint venture | (2.8) | - | (2.8) | - | ||||
Asset impairment | - | - | - | 3.7 | ||||
Share-based compensation | 0.1 | 0.1 | 0.2 | 0.3 | ||||
Difference between pension expense and | ||||||||
amount funded | - | - | 0.6 | - | ||||
Debt accretion, amortization and other | 0.3 | 0.4 | 0.8 | 1.0 | ||||
Interest paid, including interest on lease obligations | (6.1) | (6.5) | (18.7) | (24.6) | ||||
Cash from operating activities before | ||||||||
non-cash working capital | 187.6 | 35.1 | 482.7 | 88.3 | ||||
Changes in non-cash working capital items | ||||||||
Accounts receivable | (16.9) | (18.7) | (206.1) | 122.4 | ||||
Inventories | (126.3) | 67.4 | (193.6) | 101.4 | ||||
Accounts payable and accrued liabilities | 79.2 | (11.2) | 281.3 | (58.5) | ||||
Other | 1.3 | 3.1 | (3.0) | 6.7 | ||||
Change in non-cash working capital | (62.7) | 40.6 | (121.4) | 172.0 | ||||
Income tax (paid) refund, net | (19.1) | 5.5 | (49.8) | 4.6 | ||||
Cash from operating activities | 105.8 | 81.2 | 311.5 | 264.9 | ||||
Financing activities | ||||||||
Decrease in bank indebtedness | - | (11.3) | - | (62.1) | ||||
Issue of common shares | 7.9 | - | 17.3 | 0.2 | ||||
Dividends on common shares | (23.9) | (23.6) | (71.4) | (70.9) | ||||
Deferred financing | - | (1.1) | - | (1.1) | ||||
Lease obligations | (3.8) | (4.7) | (11.7) | (14.1) | ||||
Cash used in financing activities | (19.8) | (40.7) | (65.8) | (148.0) | ||||
Investing activities | ||||||||
Purchase of property, plant and equipment | (7.6) | (6.4) | (20.3) | (18.8) | ||||
Proceeds on sale of property, plant and equipment | 0.4 | 1.6 | 0.9 | 4.9 | ||||
Sale of business | 77.1 | - | 77.1 | - | ||||
Cash from (used in) investing activities | 69.9 | (4.8) | 57.7 | (13.9) | ||||
Effect of exchange rates on cash | ||||||||
and cash equivalents | 5.7 | (3.3) | 7.1 | 2.5 | ||||
Increase in cash and cash equivalents | 161.6 | 32.4 | 310.5 | 105.5 | ||||
Cash and cash equivalents, beginning of the period | 175.2 | 89.1 | 26.3 | 16.0 | ||||
Cash and cash equivalents, end of the period | $ | 336.8 | $ | 121.5 | $ | 336.8 | $ | 121.5 |
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(in millions of Canadian dollars) | Common | Retained | Contributed | Accumulated | 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 |
(in millions of Canadian dollars) | Common | Retained | Contributed | Accumulated | Total | |||||
Balance, January 1, 2020 | $ | 543.7 | $ | 284.5 | $ | 15.7 | $ | 100.7 | $ | 944.6 |
Payment of dividends | - | (70.9) | - | - | (70.9) | |||||
Net earnings for the period | - | 33.3 | - | - | 33.3 | |||||
Other comprehensive income for the period | - | - | - | 10.0 | 10.0 | |||||
Recognition of share-based compensation | - | - | 0.3 | - | 0.3 | |||||
Share options exercised | 0.3 | - | (0.1) | - | 0.2 | |||||
Transfer of net actuarial losses on defined benefit plans | - | (4.8) | - | 4.8 | - | |||||
Balance, September 30, 2020 | $ | 544.0 | $ | 242.1 | $ | 15.9 | $ | 115.5 | $ | 917.5 |
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SOURCE Russel Metals Inc.
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