TORONTO, Feb. 11, 2020 /CNW/ - Russel Metals Inc.
(RUS - TSX) announces financial results for the 2019 fourth quarter
and for the year ended December 31,
2019.
|
Three Months
Ended
|
Year Ended
|
December 31,
2019
|
2019
|
2018
|
2019
|
2018
|
|
|
|
|
|
Revenues
|
$
|
837
|
$
|
1,115
|
$
|
3,676
|
$
|
4,165
|
EBIT1
|
2
|
71
|
146
|
331
|
Net Income
(Loss)
|
(7)
|
46
|
77
|
219
|
Earnings (Loss) per
share
|
(0.11)
|
0.74
|
1.23
|
3.53
|
Free Cash Flow per
share1
|
0.04
|
0.98
|
2.20
|
4.84
|
Dividends Paid per
common share
|
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. 1 EBIT
and Free Cash Flow per share are non-GAAP measures. EBIT
represents earnings before interest, finance expense and
taxes. Free cash flow per share represents cash from
operating activities before change in working capital less capital
expenditures divided by average shares outstanding for the period.
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", "EBIT and EBITDA", and "Free Cash
Flow".
|
For the year ended December 31,
2019, we generated net income of $77
million or $1.23 per share on
revenues of $3.7 billion compared to
net income of $219 million or
$3.53 per share on revenues of
$4.2 billion for the year ended
December 31, 2018. For the 2019
fourth quarter we recorded a loss of $7
million or $0.11 per share on
revenues of $0.8 billion. These
results compare to net income of $46
million or $0.74 per share in
the 2018 fourth quarter.
For the quarter and year ended December
31, 2019, we recorded inventory provisions in our energy
products and steel distributor segments related to the
deterioration of the line pipe and OCTG market as a result of lower
rig counts. In addition, the 2019 fourth quarter included
charges relating to the October 1,
2019 City Pipe acquisition for fair value accounting on
inventory and acquisition expenses.
|
Three Months
Ended
|
Year Ended
|
December 31,
2019
|
2019
|
2018
|
2019
|
2018
|
|
|
|
|
|
EBIT
|
$
|
2
|
$
|
71
|
$
|
146
|
$
|
331
|
Inventory
Provision
|
18
|
-
|
24
|
-
|
City Pipe
Acquisition
|
6
|
-
|
6
|
-
|
Adjusted
EBIT2
|
26
|
71
|
176
|
331
|
Adjusted Net
Income
|
11
|
46
|
99
|
219
|
Adjusted Earnings per
share
|
0.19
|
0.74
|
1.59
|
3.53
|
All amounts are
reported in millions of Canadian dollars except per share figures,
which are in Canadian dollars. 2
Adjusted EBIT, Adjusted Net Income and Adjusted Earnings per
share are non-GAAP measures and include adjustments for
non-recurring items; inventory provisions and acquisition related
charges. 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", "Overview", and "EBIT and
EBITDA".
|
Revenues in our metals service centers decreased 21% to
$412 million for the quarter compared
to the same period in 2018 due to lower tons shipped and selling
price per ton. Tons shipped decreased 7% and average selling
price decreased 15% from the average selling price compared to the
fourth quarter of 2018. Gross margins were 18.8% compared to
20.9% for the fourth quarter of 2018. Operating profits of
$9 million were 69% lower than the
$28 million reported in the same
quarter in 2018.
Revenues in our energy products segment decreased 21% to
$343 million compared to $432 million in the 2018 fourth quarter due
to a non-recurring line pipe project in 2018 and demand
reductions. Gross margin as a percentage of revenues
decreased to 11.4% compared to 17.8% in the same quarter last year
caused in part by inventory provisions of $14 million. We recorded one-time costs of
$6 million relating to the accounting
for inventories and acquisition expenses on our City Pipe
acquisition. Excluding these costs, our City Pipe acquisition
was accretive to earnings in the fourth quarter. Our energy
products segment had an operating loss of $2
million compared to an operating profit of $33 million in the same quarter last year.
Revenues in our steel distributors segment decreased by 49% to
$81 million compared to $157 million in the 2018 fourth quarter due to
lower steel prices and reduced demand in our U.S. operation.
Gross margins as a percentage of revenues were 3.6% compared to
13.3% due to a $4 million inventory
provision in our U.S. steel distributor operation. Our steel
distributors segment reported an operating loss of $3 million compared to an operating profit of
$11 million in the 2018 fourth
quarter.
Mr. John G. Reid, President and
CEO, commented, "During 2019, our operations turned in a solid
performance, in what proved to a be a challenging year where trade
actions that had dramatically increased steel prices in 2018 were
reversed in mid-2019 leading to selling prices that were lower than
in 2017. Certain of our operations had stellar years,
particularly Wirth Steel, Comco Pipe
and Color Steels who reported stronger results than 2018.
During the year, we emphasized working capital management and
generated $250 million in cash from
operating activities. Looking forward to 2020, there has been
a modest increase in pricing and consistent demand."
Mr. Reid continued, "In the fourth quarter of 2019 we completed
the acquisition of City Pipe consistent with our strategy to grow
our oilfield store operations. City Pipe and Apex Remington
have merged to form Elite Supply Partners. We expect Elite
Supply Partners to have revenues in excess of $300 million in 2020 and look forward to the
success and growth of the combined operation."
The Board of Directors approved a quarterly dividend of
$0.38 per common share payable
March 16, 2020 to shareholders of
record as of February 28, 2020.
The Company will be holding an Investor Conference Call on
Wednesday, February 12, 2020 at
9:00 a.m. ET to review its 2019
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, Wednesday, February 26, 2020. You will be
required to enter pass code 655362# to access the call.
Additional supplemental financial information is available in
our investor conference call package located on our website at
www.russelmetals.com.
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, under various names including
Russel Metals, A.J. Forsyth, Acier Leroux, Acier Wirth, Alberta
Industrial Metals, Apex Distribution, Apex Monarch, Apex Valve
Services, Apex Western Fiberglass, Arrow Steel Processors, B&T
Steel, Baldwin International, Color Steels, Comco Pipe &
Supply, Couleur Aciers, DuBose
Steel, Elite Supply Partners, Fedmet Tubulars, JMS Russel
Metals, Leroux Steel, Mégantic
Métal, Métaux Russel, Métaux Russel Produits Spécialisés, Milspec,
Norton Metals, Pemco Steel, Pioneer Pipe, Russel Metals Processing,
Russel Metals Specialty Products, Russel Metals Williams Bahcall,
Spartan Energy Tubulars, Sunbelt Group, Triumph Tubular &
Supply, Wirth Steel and
York-Ennis.
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; decreased capital expenditures in the energy industry;
climate change; product claims; significant competition; sources of
metals supply; manufacturers selling directly; material
substitution; credit risks; currency exchange risk; restrictive
debt covenants; non-cash asset impairments; the unexpected loss of
key individuals; decentralized operating structure; future
acquisitions; the failure of our key computer-based systems, labour
disruptions; 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)
|
2019
|
2018
|
2019
|
2018
|
Revenues
|
$
|
837.4
|
$
|
1,115.4
|
$
|
3,675.9
|
$
|
4,165.0
|
Cost of
materials
|
715.4
|
905.2
|
3,035.9
|
3,280.4
|
Employee
expenses
|
70.3
|
80.1
|
295.9
|
335.1
|
Other operating
expenses
|
49.4
|
58.7
|
197.8
|
215.3
|
Asset
impairment
|
-
|
-
|
-
|
3.3
|
Earnings before
interest, finance expense
|
|
|
|
|
and provision for
income taxes
|
2.3
|
71.4
|
146.3
|
330.9
|
Interest
expense
|
9.9
|
8.4
|
40.9
|
31.6
|
Other finance
expense
|
-
|
-
|
-
|
1.2
|
Earnings (loss)
before provision for income taxes
|
(7.6)
|
63.0
|
105.4
|
298.1
|
Provision for income
taxes
|
1.0
|
16.8
|
28.8
|
79.1
|
Net earnings
(loss) for the period
|
$
|
(6.6)
|
$
|
46.2
|
$
|
76.6
|
$
|
219.0
|
Basic earnings
(loss) per common share
|
$
|
(0.11)
|
$
|
0.74
|
$
|
1.23
|
$
|
3.53
|
Diluted earnings
(loss) per common share
|
$
|
(0.11)
|
$
|
0.74
|
$
|
1.23
|
$
|
3.53
|
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
Quarters
ended
|
Years
ended
|
|
December
31
|
December
31
|
(in millions of
Canadian dollars)
|
2019
|
2018
|
2019
|
2018
|
Net earnings
(loss) for the period
|
$
|
(6.6)
|
$
|
46.2
|
$
|
76.6
|
$
|
219.0
|
Other comprehensive
income (loss)
|
|
|
|
|
Items that may be
reclassified to earnings
|
|
|
|
|
Unrealized foreign
exchange gains (losses) on
|
|
|
|
|
translation of foreign
operations
|
(10.6)
|
29.7
|
(27.8)
|
44.8
|
Items that may not
be reclassified to earnings
|
|
|
|
|
Actuarial gains
(losses) on pension and similar
|
|
|
|
|
obligations, net of
taxes
|
1.9
|
(6.1)
|
(0.1)
|
3.4
|
Other comprehensive
income (loss)
|
(8.7)
|
23.6
|
(27.9)
|
48.2
|
Total
comprehensive income (loss)
|
$
|
(15.3)
|
$
|
69.8
|
$
|
48.7
|
$
|
267.2
|
CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
|
|
|
|
|
December
31
|
December
31
|
(in millions of
Canadian dollars)
|
2019
|
2018
|
ASSETS
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
$
|
16.0
|
$
|
124.3
|
Accounts
receivable
|
458.1
|
567.5
|
Inventories
|
883.6
|
1,052.5
|
Prepaids and
other
|
18.1
|
14.1
|
Income taxes
receivable
|
18.9
|
5.2
|
|
1,394.7
|
1,763.6
|
|
|
|
Property, Plant
and Equipment
|
288.9
|
268.9
|
Right-of-use
Assets
|
90.1
|
-
|
Deferred Income
Tax Assets
|
4.8
|
4.2
|
Pension and
Benefits
|
5.4
|
3.1
|
Financial and
Other Assets
|
4.0
|
4.4
|
Goodwill and
Intangibles
|
137.0
|
86.2
|
|
$
|
1,924.9
|
$
|
2,130.4
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
|
|
|
Bank
indebtedness
|
$
|
62.1
|
$
|
128.5
|
Accounts payable
and accrued liabilities
|
326.4
|
494.7
|
Short-term lease
obligations
|
17.1
|
-
|
Income taxes
payable
|
0.3
|
21.5
|
|
405.9
|
644.7
|
|
|
|
Long-Term
Debt
|
444.8
|
443.6
|
Pensions and
Benefits
|
10.4
|
8.9
|
Deferred Income
Tax Liabilities
|
13.2
|
20.1
|
Long-term Lease
Obligations
|
94.4
|
-
|
Provisions and
Other Non-Current Liabilities
|
11.6
|
8.2
|
|
980.3
|
1,125.5
|
Shareholders'
Equity
|
|
|
Common
shares
|
543.7
|
542.1
|
Retained
earnings
|
284.5
|
318.6
|
Contributed
surplus
|
15.7
|
15.7
|
Accumulated
other comprehensive income
|
100.7
|
128.5
|
Total
Shareholders' Equity
|
944.6
|
1,004.9
|
Total Liabilities
and Shareholders' Equity
|
$
|
1,924.9
|
$
|
2,130.4
|
CONSOLIDATED
STATEMENTS OF CASH FLOW
|
|
|
|
|
Quarters
ended
|
Years
ended
|
|
December
31
|
December
31
|
(in
millions of Canadian dollars)
|
2019
|
2018
|
2019
|
2018
|
Operating
activities
|
|
|
|
|
Net earnings (loss)
for the period
|
$
|
(6.6)
|
$
|
46.2
|
$
|
76.6
|
$
|
219.0
|
Depreciation and
amortization
|
15.3
|
9.6
|
56.7
|
35.7
|
Provision for income
taxes
|
(1.0)
|
16.8
|
28.8
|
79.1
|
Interest
expense
|
9.9
|
8.4
|
40.9
|
31.6
|
(Gain) loss on sale of
property, plant and equipment
|
(0.1)
|
(0.1)
|
(0.5)
|
2.8
|
Share-based
compensation
|
0.1
|
0.1
|
0.3
|
0.5
|
Difference between
pension expense and amount funded
|
(0.2)
|
(0.3)
|
(0.9)
|
(1.6)
|
Debt accretion,
amortization and other
|
0.3
|
0.2
|
1.2
|
1.0
|
Change in fair value
of contingent consideration
|
-
|
-
|
-
|
1.2
|
Interest paid,
including interest on lease obligations
|
(4.1)
|
(10.2)
|
(31.6)
|
(27.9)
|
Cash from operating
activities before non-cash working capital
|
13.6
|
70.7
|
171.5
|
341.4
|
Changes in non-cash
working capital items
|
|
|
|
|
Accounts
receivable
|
62.2
|
99.5
|
121.1
|
(101.0)
|
Inventories
|
122.6
|
(8.4)
|
202.5
|
(195.5)
|
Accounts payable and
accrued liabilities
|
(49.2)
|
(36.0)
|
(175.7)
|
117.7
|
Other
|
(2.9)
|
(0.8)
|
(3.8)
|
3.2
|
Change in non-cash
working capital
|
132.7
|
54.3
|
144.1
|
(175.6)
|
Income tax paid,
net
|
(5.2)
|
(13.7)
|
(65.9)
|
(77.9)
|
Cash from
operating activities
|
141.1
|
111.3
|
249.7
|
87.9
|
Financing
activities
|
|
|
|
|
Decrease in bank
borrowings
|
(73.1)
|
(38.6)
|
(66.3)
|
(79.3)
|
Issue of common
shares
|
-
|
0.3
|
1.3
|
4.7
|
Dividends on common
shares
|
(23.7)
|
(23.6)
|
(94.5)
|
(94.3)
|
Issuance of long-term
debt
|
-
|
-
|
-
|
146.0
|
Lease
obligations
|
(4.3)
|
-
|
(17.2)
|
-
|
Deferred financing
costs
|
-
|
-
|
-
|
(1.1)
|
Cash used in
financing activities
|
(101.1)
|
(61.9)
|
(176.7)
|
(24.0)
|
Investing
activities
|
|
|
|
|
Purchase of property,
plant and equipment
|
(11.2)
|
(10.1)
|
(34.8)
|
(41.3)
|
Proceeds on sale of
property, plant and equipment
|
0.5
|
1.0
|
1.4
|
2.4
|
Payment of contingent
consideration
|
-
|
-
|
-
|
(4.5)
|
Purchase of
business
|
(139.4)
|
-
|
(139.4)
|
(36.8)
|
Cash used in
investing activities
|
(150.1)
|
(9.1)
|
(172.8)
|
(80.2)
|
Effect of exchange
rates on cash and cash equivalents
|
(2.5)
|
10.7
|
(8.5)
|
14.8
|
Increase
(decrease) in cash and cash equivalents
|
(112.6)
|
51.0
|
(108.3)
|
(1.5)
|
Cash and cash
equivalents, beginning of the period
|
128.6
|
73.3
|
124.3
|
125.8
|
Cash and cash
equivalents, end of the year
|
$
|
16.0
|
$
|
124.3
|
$
|
16.0
|
$
|
124.3
|
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, 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
|
|
|
|
|
Accumulated
|
|
|
|
|
|
Other
|
|
|
Common
|
Retained
|
Contributed
|
Comprehensive
|
|
(in
millions of Canadian dollars)
|
Shares
|
Earnings
|
Surplus
|
Income
|
Total
|
Balance, January 1,
2018
|
$
|
536.6
|
$
|
190.5
|
$
|
16.0
|
$
|
83.7
|
$
|
826.8
|
Payment of
dividends
|
-
|
(94.3)
|
-
|
-
|
(94.3)
|
Net income for the
year
|
-
|
219.0
|
-
|
-
|
219.0
|
Other comprehensive
income for the year
|
-
|
-
|
-
|
48.2
|
48.2
|
Recognition of
share-based compensation
|
-
|
-
|
0.5
|
-
|
0.5
|
Share options
exercised
|
5.5
|
-
|
(0.8)
|
-
|
4.7
|
Transfer of net
actuarial gains on defined benefit plans
|
-
|
3.4
|
-
|
(3.4)
|
-
|
Balance, December 31,
2018
|
$
|
542.1
|
$
|
318.6
|
$
|
15.7
|
$
|
128.5
|
$
|
1,004.9
|
View original
content:http://www.prnewswire.com/news-releases/russel-metals-announces-2019-annual--fourth-quarter-results-301003139.html
SOURCE Russel Metals Inc.