TORONTO, Nov. 4, 2021 /PRNewswire/ - Russel Metals Inc.
(TSX: RUS) announces financial results for three months ended
September 30, 2021.
REVENUES OF $1.1
BILLION AND EBITDA OF $196
MILLION
LIQUIDITY GREATER THAN $600
MILLION
|
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. 1 Adjusted 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". A
reconciliation of net earnings to Adjusted EBITDA is included
below.
|
Our basic earnings per share of $2.10 for the quarter ended September 30, 2021 was a record and significantly
higher than the $0.29 per share
recorded in the third quarter of 2020 and higher than the previous
record of $1.88 that was set in the
second quarter of 2021. For the nine months ended September 30, 2021, our basic earnings per share
of $5.28 compared to the $0.54 for the same period in 2020. Revenues of
$1.1 billion were higher than the
$615 million experienced in third
quarter of 2020 and comparable to the $1.1
billion in the 2021 second quarter. Our gross margin
percentage improved to 29.8% compared to 19.0% in the same quarter
of 2020 and was down slightly from the 30.7% in the 2021 second
quarter.
Our EBITDA was $196 million for
the quarter compared to $47 million
in the same quarter of 2020 and $178
million for the 2021 second quarter. During the 2021
third quarter, EBITDA benefited from a reversal of $3 million related to the mark-to-market of
non-cash stock-based compensation, due to the decreased share price
during the quarter, as compared to an $8
million expense in the 2021 second quarter. Also, EBITDA for
the quarter included $3 million in
earnings from the TriMark joint venture, as it benefited from
strong demand and product pricing.
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 87% compared to the 2020
third quarter and 19% compared to the 2021 second quarter. Tons
shipped in metals service centers increased 1% from the same period
in 2020 but decreased by 12% from the 2021 second quarter, due to
the seasonally slow summer months and the Quebec construction holiday. Steel
distributors experienced an increase in demand and selling price
per ton due to continued low inventory levels in the supply chain
and product shortages. Demand in the energy products segment
continues to recover.
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 $9 million which
was a reduction of $262 million since
June 30, 2020.
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 $109 million and received consideration of: (i)
cash of $77 million; (ii) preferred
shares with a face value of $32
million and an annual dividend rate of 7%; and (iii) a 50%
common equity interest in the joint venture. In addition, we
retained our accounts receivable of approximately $32 million, the vast majority of which was
collected in the 2021 third quarter. In total, the transaction
resulted in a cash realization of $109
million.
Liquidity and Capital Structure
Improvements
During the 2021 third quarter, we generated
$106 million of cash from operating
activities and ended the quarter with total available liquidity of
$602 million.
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 $3
million in the 2021 third quarter compared to the 2020 third
quarter.
EBITDA
The following table shows the
reconciliation of net earnings to EBITDA for 2021 and Adjusted
EBITDA for 2020:
|
Three Months
Ended
September 30
|
Nine Months Ended
September 30
|
(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 $0.38 per common share payable December 15, 2021 to shareholders of record as of
November 24, 2021. We will continue
our practice of prudently reviewing our dividend and ensure that it
is supported by a strong balance sheet and cash flows.
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
September 30
|
Nine Months Ended
September 30
|
(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
September 30
|
Nine Months Ended
September 30
|
(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
2021
|
December 31
2020
|
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
September 30
|
Nine Months Ended
September 30
|
(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
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
|
(in millions of
Canadian dollars)
|
Common
Shares
|
Retained
Earnings
|
Contributed
Surplus
|
Accumulated
Other
Comprehensive
Income
|
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
|
View original
content:https://www.prnewswire.com/news-releases/russel-metals-announces-2021-third-quarter-results-301417176.html
SOURCE Russel Metals Inc.