Russel Metals Announces 2023 Annual & Fourth Quarter Results

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TORONTO, Feb. 8, 2024 /CNW/ – Russel Metals Inc. (TSX: RUS) announces financial results for the fourth quarter and the year ended December 31, 2023.

Revenues of $4.5 Billion in 2023 and $1.0 Billion in Q4 2023
EBITDA1 of $426 Million in 2023 and $82 Million in Q4 2023
Generated $146 Million of Cash from Working Capital1 in 2023 and $82 Million in Q4 2023
Advancing Capital Investment Growth Initiatives
Repurchased $82 Million of Shares in 2023; Declared a Quarterly Dividend of $0.40 per Share
Strong Capital Structure with Liquidity1 of $1.0 Billion

Three Months Ended

Year Ended

Dec 31 2023

Sep 30 2023

Dec 31 2022

Dec 31 2023

Dec 31 2022

Revenues

$  1,019

$  1,110

$  1,100

$  4,505

$  5,071

EBITDA1

82

96

97

426

579

Net Income

47

61

58

267

372

Earnings per share

0.78

0.99

0.93

4.33

5.91

Cash from working capital1

82

58

146

146

18

Dividends paid per common share

0.40

0.40

0.38

1.58

1.52

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.

Cash from Working Capital – represents cash generated from changes in non-cash working capital.
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 provides a reconciliation of net earnings EBITDA for 2023 and 2022:

Three Months Ended

Year Ended

(millions)

Dec 31 2023

Sep 30 2023

Dec 31 2022

Dec 31 2023

Dec 31 2022

Net earnings

$       47.2

$       60.6

$       57.9

$     266.7

$     371.9

Provision for income taxes

15.7

17.1

16.1

82.0

115.6

Interest and finance expense

0.7

1.6

5.4

8.9

25.3

EBIT 1

63.6

79.3

79.4

357.6

512.8

Depreciation and amortization

18.6

16.3

18.0

68.0

66.1

EBITDA 1

$       82.2

$       95.6

$       97.4

$     425.6

$     578.9

Net earnings per share

$       0.78

$       0.99

$       0.93

$       4.33

$       5.91

1 Defined in Non-GAAP Measures and Ratios

Our net earnings for the year ended December 31, 2023, were $267 million or $4.33 per share compared to net earnings of $372 million or $5.91 per share for 2022.  Revenues for the year ended December 31, 2023, were $4.5 billion compared to $5.1 billion in 2022.  EBITDA was $426 million compared to $579 million in 2022.

In the 2023 fourth quarter, our revenues, EBITDA and net earnings per share were $1.0 billion, $82 million and $0.78 per share, respectively compared to $1.1 billion, $97 million and $0.93 per share in the fourth quarter of 2022 and $1.1 billion, $96 million and $0.99 per share in the third quarter of 2023.  During the 2023 fourth quarter, operating days and related shipment volumes were negatively impacted by normal seasonal factors as compared to the third quarter, but service center shipments were higher than the comparable fourth quarter of 2022 as we continued to focus on market share opportunities.  In addition, we realized an improvement in gross margins in each of our three operating segments in the fourth quarter of 2023 versus the third quarter of 2023, as a result of our value-added investment initiatives and strong cost controls.  EBITDA was negatively impacted by the mark-to-market on stock-based compensation of $7 million for the fourth quarter and $15 million for the year, due to the increase in our share price.  In addition, the third quarter of 2023 benefited from the income and gain related to our interest in the TriMark joint venture that was sold in the third quarter and therefore did not contribute to earnings in the fourth quarter.

Our working capital management practices allowed us to generate $146 million of cash from working capital during 2023, including $82 million in the fourth quarter.  This was driven by a $112 million reduction in inventories during 2023, including $39 million in the fourth quarter.

Market Conditions
The average steel prices in 2023 were lower than the 2022 averages, but prices began to recover late in the fourth quarter, which has continued into the first quarter of 2024.

Our energy field stores continued to benefit from favourable dynamics in the energy sector with ongoing capital spending activities.

Capital Investment Growth Initiatives
We invested $73 million in capital expenditures in 2023, including $28 million in the fourth quarter, that included a series of value-added equipment and facility modernization initiatives in both Canada and the U.S.  We expect our 2024 capital expenditure level to be greater than $100 million, as a result of additional projects.

We continued to actively evaluate acquisition opportunities to grow our business and deploy capital at attractive returns.  On October 2, 2023, we completed the acquisition of Alliance Supply Ltd. (“Alliance”) for approximately $7 million in cash.  The two Alliance locations have been integrated into our Canadian energy field store network.

On December 4, 2023, we announced that we had entered into an agreement to acquire seven service center locations from Samuel, Son & Co., Limited (“Samuel”), for approximately $225 million.  The acquisition is very complementary from both geographic and product mix perspectives.  In Western Canada, Samuel’s five locations will be a strong fit with our current footprint, including providing new opportunities to benefit from Samuel’s focus on non-ferrous products and our focus on value-added processing.  In the U.S. Northeast, the two locations will provide an eastern extension of our existing operations in the U.S. Midwest.  In addition, we believe there will be opportunities to achieve operating efficiencies by more effectively managing the combined footprint, including enhanced inventory management, procurement, location integration/rationalization, and systems.  These reorganization initiatives are expected to be implemented over a two-year period. This acquisition is subject to Canadian regulatory clearance and is expected to close in the 2024 second quarter.

TriMark Joint Venture
In the third quarter of 2023, we sold our equity interest in TriMark to our venture partner for $60 million, which included a $10 million gain.  The transaction was the final step in our exit from the OCTG/line pipe business.  Over the last three years we repatriated approximately $375 million in capital from the OCTG/line pipe business.

Returning Capital to Shareholders
We have adopted a more balanced and flexible approach to returning excess capital to shareholders through: (i) our ongoing dividend; and (ii) share buy backs.

In the second quarter of 2023, we announced a 5% increase on our quarterly dividend from $0.38 per share to $0.40 per share.  In 2023, we paid dividends of $97 million or $1.58 per share.  In addition, we have declared a dividend of $0.40 per share, payable on March 15, 2024, to shareholders of record at the close of business on February 29, 2024.

During 2023, we purchased for cancellation 2,159,656 shares for $82 million, including 390,300 shares for $17 million in the fourth quarter.  Since the beginning of our normal course issuer bid in August 2022, we have purchased for cancellation 3,159,656 shares at an average price per share of $34.65 for total consideration of $109 million.

Liquidity and Capital Structure
During 2023, we generated $462 million of cash from operating activities and ended the year with total available liquidity of over $1 billion.

Outlook
Steel prices and our margins recovered towards the end of 2023 and through the early part of 2024.  We expect steel prices to remain relatively stable over the near term as a result of the solid market activity.  Shipment volumes are expected to improve in the first quarter of 2024 as compared to the fourth quarter of 2023, due to the normal seasonal pick-up in operating days and customer demand.  However, weather-related factors may impact shipments in certain of our operating regions.  Over the medium term, we expect growth in North American steel consumption as a result of onshoring activities and infrastructure spending initiatives in both Canada and the U.S.  In addition, we are positioned to gain market share through our ongoing investment initiatives.  Our energy field stores are expected to continue to benefit from solid energy activity in 2024.

Investor Conference Call
The Company will be holding an Investor Conference Call on Friday, February 9, 2024, at 9:00 a.m. ET to review its 2023 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, Friday, February 23, 2024.  …

Full story available on Benzinga.com


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