TORONTO, Aug. 5, 2021 /PRNewswire/ - Russel Metals Inc.
(TSX: RUS) announces financial results for three months ended
June 30, 2021.
Revenues of $1,068 Million and
Record EBITDA of $178 Million
Liquidity of $514 Million and Net
Debt to Invested Capital 10%
|
Three Months
Ended
|
Six Months
Ended
|
|
Jun 30
2021
|
Jun 30
2020
|
Mar 31
2021
|
Jun 30
2021
|
Jun 30
2020
|
Revenues
|
$
|
1,068
|
$
|
588
|
$
|
885
|
$
|
1,954
|
$
|
1,403
|
EBITDA1
|
178
|
32
|
129
|
307
|
67
|
Adjusted
EBITDA1
|
178
|
32
|
129
|
307
|
71
|
Net Income
|
118
|
5
|
81
|
198
|
15
|
Earnings per
share
|
1.88
|
0.07
|
1.29
|
3.18
|
0.24
|
Cash from Operating
Activities
|
110
|
116
|
96
|
206
|
184
|
Dividends Paid per
common share
|
0.38
|
0.38
|
0.38
|
0.76
|
0.76
|
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", "Reconciliation
of net earnings to Adjusted EBITDA".
|
Our basic earnings per share of $1.88 for the quarter ended June 30, 2021 was a record and significantly
higher than the $0.07 per share
recorded in the second quarter of 2020 and the $1.29 recorded in the 2021 first quarter.
For the six months ended June 30,
2021, our basic earnings per share of $3.18 compared to $0.24 for the same period in 2020. Revenues
of $1.1 billion were higher than the
$588 million experienced in second
quarter of 2020. Our gross margins improved to 30.7% compared
to 18.7% in the same quarter of 2020 and 28.8% in the 2021 first
quarter.
Our EBITDA was $178 million for
the quarter compared to $32 million
in the same quarter of 2020 and $129
million for the 2021 first quarter. During the 2021
second quarter, EBITDA was reduced by $8
million related to the mark-to-market of non-cash
stock-based compensation due to the increased share price during
the quarter as compared to $2 million
for the 2021 first quarter.
Each of our business segments generated a substantial
improvement in operating profit as compared to the same quarter of
2020 and the 2021 first quarter. In the 2021 second quarter,
our metals service centers segment reported record operating
profits and return on net assets, as this segment continued to
maximize margin opportunities from the strong market conditions and
realize the benefits from our value-added processing
initiatives. Our steel distributors segment benefited from
improved demand, higher steel prices and low inventories in the
supply chain, and reported strong growth in both revenues and
operating profit. In our energy products segment, the
recovery of oil and natural gas prices and the relatively mild
spring break up in Canada led to
improved operating profit in what is typically a seasonally slow
second quarter.
Market Conditions
Steel prices continued to
rise in the 2021 second quarter. Metals service centers
experienced an increase in selling price per ton of 53% compared to
the 2020 second quarter and 19% compared to the 2021 first
quarter. Tons shipped in metals service centers increased 25%
from the same period in 2020 and 3% compared to the 2021 first
quarter. The 2021 second quarter volumes were above the
pre-pandemic level due to increased demand. Steel
distributors also experienced an increase in demand and selling
price per ton due to low inventory levels in the supply chain and
product shortages. Demand in the energy products segments
continues to recover, albeit at a slow pace.
OCTG and Line Pipe Business Changes
In
mid-2020, we stated a goal of reducing the capital deployed in our
OCTG and line pipe businesses by $100
million by the end of 2021. The rationale of lowering
our exposure to the energy sector was to reduce earnings volatility
and enhance our return on capital over the cycle. As of
June 30, 2021, inventory at our OCTG
and line pipe operations was $143
million which was a reduction of $129
million over the past year, including a $30 million reduction in the second quarter of
2021.
On July 6, 2021, we completed the
transaction whereby we combined our Canadian OCTG and 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 approximately
$110 million, primarily comprised of
inventories less accounts payable. As consideration, we
received: (i) cash of $78 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 accounts receivable of approximately
$32 million. In total, the
transaction will result in a near term cash realization of
approximately $110 million.
Our remaining OCTG and line pipe businesses are in the U.S.,
where we continue to liquidate the remaining inventory, which
totaled approximately $23 million at
June 30, 2021 compared to
$40 million at March 31, 2021.
Liquidity and Capital Structure
Improvements
During the 2021 second quarter, we
generated $110 million of cash from
operating activities and ended the quarter with total available
liquidity of $514 million.
The improvements to our capital structure implemented in late
2020, contributed to an interest expense reduction of $3 million in the 2021 second quarter compared to
the 2020 second quarter. On June 16,
2021, Moody's Investors Service upgraded our corporate
credit rating from Ba3 to Ba2.
EBITDA
The following table shows the
reconciliation of net earnings to EBITDA for 2021 and Adjusted
EBITDA for 2020:
|
Three Months Ended
June 30
|
Six Months Ended June
30
|
(millions)
|
2021
|
2020
|
2021
|
2020
|
Net
earnings
|
$
|
117.8
|
$
|
4.6
|
$
|
198.4
|
$
|
15.1
|
Provision for income
taxes
|
39.2
|
2.3
|
66.7
|
2.3
|
Interest,
net
|
6.5
|
9.2
|
12.9
|
18.6
|
Asset
impairment
|
-
|
-
|
-
|
3.7
|
Earnings before,
asset impairment interest
|
|
|
|
|
and
income taxes
|
163.5
|
16.1
|
278.0
|
39.7
|
Depreciation and
amortization
|
14.3
|
15.4
|
28.8
|
31.0
|
Earnings before
interest, asset impairment,
|
|
|
|
|
income taxes, depreciation and
amortization
|
$
|
177.8
|
$
|
31.5
|
$
|
306.8
|
$
|
70.7
|
Declaration of Quarterly Dividends
The Board of
Directors approved a quarterly dividend of $0.38 per common share payable September 15, 2021 to shareholders of record as
of August 26, 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
Overall demand remains solid with
strong backlogs, limited inventory in the supply chain and extended
lead times expected to continue over the near term. The
positive momentum of steel prices continues into the 2021 third
quarter, however, gross margins are expected to moderate due to the
rising cost of inventory. For metals service centers and
steel distributors there is typically a seasonal slowdown in July
and August due to a reduction in the number of operating days, but
overall demand is expected to remain steady. Energy products
continues to recover, consistent with rising energy demand.
The Company will be holding an Investor Conference Call on
Friday, August 6, 2021 at
9:00 a.m. ET to review its 2021
second 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, August 20, 2021. You will be
required to enter pass code 418427# 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 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
June 30
|
Six Months Ended June
30
|
(in millions of
Canadian dollars, except per share data)
|
2021
|
2020
|
2021
|
2020
|
Revenues
|
$
|
1,068.2
|
$
|
588.1
|
$
|
1,953.6
|
$
|
1,402.8
|
Cost of
materials
|
740.3
|
478.0
|
1,370.6
|
1,140.3
|
Employee
expenses
|
103.1
|
55.7
|
187.7
|
123.6
|
Other operating
expenses
|
61.3
|
38.3
|
117.3
|
99.2
|
Asset
impairment
|
-
|
-
|
-
|
3.7
|
Earnings before
interest and
|
|
|
|
|
provision for income
taxes
|
163.5
|
16.1
|
278.0
|
36.0
|
Interest
expense
|
6.5
|
9.2
|
12.9
|
18.6
|
Earnings before
provision for income taxes
|
157.0
|
6.9
|
265.1
|
17.4
|
Provision for income
taxes
|
39.2
|
2.3
|
66.7
|
2.3
|
Net earnings for the
period
|
$
|
117.8
|
$
|
4.6
|
$
|
198.4
|
$
|
15.1
|
Basic earnings per
common share
|
$
|
1.88
|
$
|
0.07
|
$
|
3.18
|
$
|
0.24
|
Diluted earnings
per common share
|
$
|
1.88
|
$
|
0.07
|
$
|
3.18
|
$
|
0.24
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
Three Months Ended
June 30
|
Six Months Ended June
30
|
(in millions of
Canadian dollars)
|
2021
|
2020
|
2021
|
2020
|
Net earnings for
the period
|
$
|
117.8
|
$
|
4.6
|
$
|
198.4
|
$
|
15.1
|
Other comprehensive
(loss) income
|
|
|
|
|
Items that may be
reclassified to earnings
|
|
|
|
|
Unrealized foreign exchange
(losses) gains on
|
|
|
|
|
translation of foreign
operations
|
(7.4)
|
(23.3)
|
(13.8)
|
26.8
|
Items that may not
be reclassified to earnings
|
|
|
|
|
Actuarial gains (losses) on pension
and similar
|
|
|
|
|
obligations, net of
taxes
|
1.6
|
(6.9)
|
18.1
|
(8.6)
|
Other comprehensive
(loss) income
|
(5.8)
|
(30.2)
|
4.3
|
18.2
|
Total
comprehensive income (loss)
|
$
|
112.0
|
$
|
(25.6)
|
$
|
202.7
|
$
|
33.3
|
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
(in millions of
Canadian dollars)
|
June 30
2021
|
December 31
2020
|
ASSETS
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
$
|
175.2
|
$
|
26.3
|
Accounts receivable
|
529.5
|
344.0
|
Inventories
|
772.7
|
716.4
|
Prepaid and other
|
18.0
|
13.6
|
Income taxes receivable
|
10.0
|
19.8
|
|
1,505.4
|
1,120.1
|
Property, Plant
and Equipment
|
263.6
|
269.5
|
Right-of-Use
Assets
|
85.8
|
81.4
|
Deferred Income
Tax Assets
|
3.2
|
5.9
|
Pension and
Benefits
|
21.6
|
5.1
|
Financial and
Other Assets
|
4.3
|
4.7
|
Goodwill and
Intangibles
|
104.0
|
109.6
|
|
$
|
1,987.9
|
$
|
1,596.3
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
|
|
|
Accounts payable and accrued
liabilities
|
$
|
489.4
|
$
|
294.6
|
Short-term lease
obligations
|
15.7
|
16.9
|
Income taxes payable
|
33.6
|
3.7
|
|
538.7
|
315.2
|
Long-Term
Debt
|
294.2
|
293.7
|
Pensions and
Benefits
|
5.6
|
13.0
|
Deferred Income
Tax Liabilities
|
10.1
|
9.5
|
Long-term Lease
Obligations
|
94.5
|
88.8
|
Provisions and
Other Non-Current Liabilities
|
15.4
|
11.4
|
|
958.5
|
731.6
|
Shareholders'
Equity
|
|
|
Common shares
|
557.3
|
546.2
|
Retained earnings
|
381.5
|
212.5
|
Contributed surplus
|
14.1
|
15.7
|
Accumulated other comprehensive
income
|
76.5
|
90.3
|
Total
Shareholders' Equity
|
1,029.4
|
864.7
|
Total Liabilities
and Shareholders' Equity
|
$
|
1,987.9
|
$
|
1,596.3
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
|
Three Months Ended
June 30
|
Six Months Ended June
30
|
(in millions of
Canadian dollars)
|
2021
|
2020
|
2021
|
2020
|
Operating
activities
|
|
|
|
|
Net
earnings for the period
|
$
|
117.8
|
$
|
4.6
|
$
|
198.4
|
$
|
15.1
|
Depreciation and
amortization
|
14.3
|
15.4
|
28.8
|
31.0
|
Provision for income
taxes
|
39.2
|
2.3
|
66.7
|
2.3
|
Interest expense
|
6.5
|
9.2
|
12.9
|
18.6
|
Gain on sale of property, plant and
equipment
|
(0.1)
|
(0.1)
|
(0.3)
|
(0.2)
|
Asset impairment
|
-
|
-
|
-
|
3.7
|
Share-based compensation
|
0.1
|
0.1
|
0.1
|
0.2
|
Difference between pension expense
and
|
|
|
|
|
amount
funded
|
0.3
|
-
|
0.6
|
-
|
Debt accretion, amortization and
other
|
0.2
|
0.3
|
0.5
|
0.6
|
Interest paid, including interest
on lease obligations
|
(6.3)
|
(11.3)
|
(12.6)
|
(18.1)
|
Cash from operating
activities before
|
|
|
|
|
non-cash working capital
|
172.0
|
20.5
|
295.1
|
53.2
|
Changes in
non-cash working capital items
|
|
|
|
|
Accounts receivable
|
(61.5)
|
150.7
|
(189.2)
|
141.1
|
Inventories
|
(56.5)
|
34.3
|
(67.3)
|
34.0
|
Accounts payable and accrued
liabilities
|
77.5
|
(93.8)
|
202.1
|
(47.3)
|
Other
|
(1.6)
|
4.0
|
(4.3)
|
3.6
|
Change in non-cash
working capital
|
(42.1)
|
95.2
|
(58.7)
|
131.4
|
Income tax paid, net
|
(20.2)
|
(0.1)
|
(30.7)
|
(0.9)
|
Cash from
operating activities
|
109.7
|
115.6
|
205.7
|
183.7
|
Financing
activities
|
|
|
|
|
Decrease in bank
indebtedness
|
-
|
(39.4)
|
-
|
(50.8)
|
Issue of common shares
|
9.4
|
-
|
9.4
|
0.2
|
Dividends on common
shares
|
(23.8)
|
(23.7)
|
(47.5)
|
(47.3)
|
Lease obligations
|
(4.0)
|
(4.9)
|
(7.9)
|
(9.4)
|
Cash used in
financing activities
|
(18.4)
|
(68.0)
|
(46.0)
|
(107.3)
|
Investing
activities
|
|
|
|
|
Purchase of property, plant and
equipment
|
(6.8)
|
(5.3)
|
(12.7)
|
(12.4)
|
Proceeds on sale of property, plant
and equipment
|
0.1
|
0.8
|
0.5
|
3.3
|
Cash used in
investing activities
|
(6.7)
|
(4.5)
|
(12.2)
|
(9.1)
|
Effect of exchange
rates on cash and cash equivalents
|
(1.7)
|
(6.4)
|
1.4
|
5.8
|
Increase in cash
and cash equivalents
|
82.9
|
36.7
|
148.9
|
73.1
|
Cash and cash
equivalents, beginning of the period
|
92.3
|
52.4
|
26.3
|
16.0
|
Cash and cash
equivalents, end of the period
|
$
|
175.2
|
$
|
89.1
|
$
|
175.2
|
$
|
89.1
|
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
|
-
|
(47.5)
|
-
|
-
|
(47.5)
|
Net earnings for the
period
|
-
|
198.4
|
-
|
-
|
198.4
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
4.3
|
4.3
|
Recognition of
share-based compensation
|
-
|
-
|
0.1
|
-
|
0.1
|
Share options
exercised
|
11.1
|
-
|
(1.7)
|
-
|
9.4
|
Transfer of net
actuarial gains on defined benefit plans
|
-
|
18.1
|
-
|
(18.1)
|
-
|
Balance, June 30,
2021
|
$
|
557.3
|
$
|
381.5
|
$
|
14.1
|
$
|
76.5
|
$
|
1,029.4
|
|
|
|
|
|
|
(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
|
-
|
(47.3)
|
-
|
-
|
(47.3)
|
Net earnings for the
period
|
-
|
15.1
|
-
|
-
|
15.1
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
18.2
|
18.2
|
Recognition of
share-based compensation
|
-
|
-
|
0.2
|
-
|
0.2
|
Share options
exercised
|
0.3
|
-
|
(0.1)
|
-
|
0.2
|
Transfer of net
actuarial losses on defined benefit plans
|
-
|
(8.6)
|
-
|
8.6
|
-
|
Balance, June 30,
2020
|
$
|
544.0
|
$
|
243.7
|
$
|
15.8
|
$
|
127.5
|
$
|
931.0
|
View original
content:https://www.prnewswire.com/news-releases/russel-metals-announces-2021-second-quarter-results-301349718.html
SOURCE Russel Metals Inc.