Russel Metals Inc. (TSX:RUS) today announced first quarter 2013
earnings of $22 million, or $0.36 per share on revenues of $822
million. These results compare to the earnings of $33 million or
$0.55 per share on revenues of $803 million in the same quarter
last year and are above the fourth quarter 2012 earnings of $0.34
per share.
Revenues in our metals service center segment decreased 16% to
$359 million in the first quarter of 2013 compared to the 2012
first quarter due to lower demand levels. Gross margins at metals
service centers improved from the 2012 fourth quarter and were
slightly lower than the same quarter last year reflecting the
levelling off of steel prices. Operating profit as a percentage of
revenues was consistent with the fourth quarter last year at
5.0%.
Revenues in our energy products segment for the first quarter of
2013 increased 42% or $114 million to $389 million compared to the
2012 first quarter, aided by the Apex Distribution revenues which
were $118 million in the first quarter. Gross margins at energy
products improved from both the 2012 fourth and first quarters to
15.3% from 13.1% and 13.7% respectively due to stronger operating
margins at Apex Distribution. Operating profit as a percentage of
revenues was 6.3%.
Revenues in our steel distributors segment decreased by 26% to
$74 million in the 2013 first quarter compared to the 2012 first
quarter due to lower demand levels. Operating profits for the first
quarter of 2012 decreased to $5 million from $10 million for the
2012 first quarter.
Brian R. Hedges, President and CEO, commented, "The volume
decline experienced throughout the service center industry was also
felt by Russel Metals. The decline in volume in the first quarter
impacted most sectors and was exacerbated by fewer working days in
2013 due to the timing of the Easter holidays and inclement weather
following the relatively mild weather experienced in 2012. The drop
in Canada was more severe than the US and reflects the impact on
the Canadian economy of the energy slowdown in Alberta for both the
oil sands and conventional gas drilling activities. The gross
margins in service center are stabilizing, which is positive. In
the energy sector, excluding Apex Distribution, pricing pressures
continue and gross margins on pipe products declined further in the
first quarter. We do not see any meaningful improvement in volumes
at this time and the energy sector will improve should the XL
pipeline to the Gulf be approved."
Mr. Hedges further commented, "The performance of Apex
Distribution was the bright spot in the first quarter and validated
our strategic acquisition of this operation. Apex Distribution has
maintained a more stable earnings pattern despite the slowdown in
the Western Canada energy sector. One of our goals in acquiring
Apex Distribution was to reduce the volatility of our energy
products segment and this was demonstrated in the first
quarter."
The Board of Directors approved a quarterly dividend of $0.35
per common share payable June 14, 2013 to shareholders of record as
of May 24, 2013.
The Company will be holding an Investor Conference Call on
Friday, May 3, 2013 at 10:00 a.m. ET to review its 2013 first
quarter results. The dial-in telephone numbers for the call are
416-340-2216 (Toronto and International callers) and 1-866-226-1792
(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 905-694-9451 (Toronto
and International callers) and 1-800-408-3053 (U.S. and Canada)
until midnight, Friday, May 17, 2013. You will be required to enter
pass code 7908038 in order 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 Loubier, Acier Richler, Alberta
Industrial Metals, Apex Distribution, Apex Remington, Arrow Steel
Processors, B&T Steel, Baldwin International, Comco Pipe and
Supply, Fedmet Tubulars, JMS Russel Metals, Leroux Steel, McCabe
Steel, Megantic Metal, Metaux Russel, Metaux Russel Produits
Specialises, Milspec, Norton Metals, Pioneer Pipe, Russel Metals
Specialty Products, Russel Metals Williams Bahcall, Siemens
Laserworks, Spartan Energy Tubulars, Sunbelt Group, Triumph Tubular
& Supply, Wirth Steel and York-Ennis.
Statements contained in this press release or on the related
conference call that relate to Russel Metals' beliefs or
expectations as to certain future events are not statements of
historical fact and are forward-looking statements. Russel Metals
cautions readers that there are important factors, risks and
uncertainties, including but not limited to economic, competitive
and governmental factors affecting Russel Metals' operations,
markets, products, services and prices that could cause its actual
results, performance or achievements to be materially different
from those forecasted or anticipated in such forward-looking
statements.
The forward-looking statements in this document reflect
management's current beliefs and are based on information currently
available to management. The material assumptions applied in making
the forward-looking statements in this document include the
following: demand from the manufacturing, resource and construction
segments of the Canadian economy remains at current levels and
these conditions will continue in the foreseeable future; and oil
and gas prices, the price of steel and the value of the Canadian
dollar relative to the U.S. dollar will be at similar levels with
what we experienced during the latter half of 2012 and the first
quarter of 2013. Although the forward-looking statements contained
in this document are based upon what management believes to be
reasonable estimates and assumptions, Russel Metals cannot ensure
that actual results will not be materially different from those
expressed or implied by these forward-looking statements and does
not intend to update any forward-looking statement other than
required by law.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
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Quarters ended March 31
2013 2012
(in millions of Canadian dollars, except per (restated)
share data)
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Revenues $ 821.8 $ 802.9
Cost of materials 677.9 659.0
Employee expenses 62.5 58.2
Other operating expenses 39.9 32.9
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Earnings before interest, finance and provision
for income taxes 41.5 52.8
Interest expense 8.8 6.7
Interest income (0.1) (0.4)
Other finance expense 1.6 0.4
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Earnings before provision for income taxes 31.2 46.1
Provision for income taxes 9.5 13.2
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Net earnings for the period $ 21.7 $ 32.9
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Net earnings attributed to:
Equity holders $ 21.6 $ 32.9
Non-controlling interest 0.1 -
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$ 21.7 $ 32.9
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Basic earnings per common share $ 0.36 $ 0.55
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Diluted earnings per common share $ 0.36 $ 0.53
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
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Quarters ended March 31
2013 2012
(in millions of Canadian dollars) (restated)
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Net earnings for the period $ 21.7 $ 32.9
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Other comprehensive income (loss), net of tax
Items that may be reclassified to earnings
Unrealized foreign exchange gains (losses) on
translation of foreign operations 6.9 (6.7)
Unrealized gains on items designated as net
investment hedges - 2.1
Losses on derivatives designated as cash flow
hedges transferred to net earnings in the
current period - 0.3
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Total items that may be reclassified to earnings 6.9 (4.3)
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Items that may not be reclassified to earnings
Actuarial gains (losses) on pension and
similar obligations 0.5 (2.0)
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Other comprehensive income (loss) 7.4 (6.3)
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Total comprehensive income $ 29.1 $ 26.6
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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
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March 31 December 31
2013 2012
(in millions of Canadian dollars) (restated)
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ASSETS
Current
Cash $ 137.8 $ 115.1
Accounts receivable 472.4 456.2
Inventories 772.3 764.0
Prepaid expenses 8.7 7.1
Income taxes receivable 9.4 7.7
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1,400.6 1,350.1
Property, Plant and Equipment 241.7 241.8
Deferred Income Tax Assets 3.9 4.6
Financial and Other Assets 6.5 6.5
Goodwill and Intangibles 191.8 192.1
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$ 1,844.5 $ 1,795.1
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness $ 24.8 $ 14.3
Accounts payable and accrued liabilities 409.3 396.5
Income taxes payable 1.3 -
Current portion long-term debt 2.1 2.2
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437.5 413.0
Long-Term Debt 454.5 453.6
Pensions and Benefits 38.0 38.7
Deferred Income Tax Liabilities 20.1 20.5
Provisions and Other Non-Current Liabilities 41.1 39.9
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991.2 965.7
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Shareholders' Equity
Common shares 506.4 487.9
Retained earnings 306.1 305.3
Contributed surplus 14.9 17.3
Accumulated other comprehensive loss (4.3) (11.2)
Equity component of convertible debenture 28.7 28.7
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Total Shareholders' Equity Attributable to
Equity Holders 851.8 828.0
Non-controlling interest 1.5 1.4
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Total Shareholders' Equity 853.3 829.4
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Total Liabilities and Shareholders' Equity $ 1,844.5 $ 1,795.1
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CONDENSED CONSOLIDATED STATEMENTS OF CASHFLOW (UNAUDITED)
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Quarters ended March 31
2013 2012
(in millions of Canadian dollars) (restated)
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Operating activities
Net earnings for the period $ 21.7 $ 32.9
Depreciation and amortization 8.2 5.7
Deferred income taxes (0.6) 0.6
Gain on sale of property, plant and equipment (0.2) -
Stock-based compensation 0.6 0.5
Difference between pension expense and amount
funded 0.1 (0.2)
Debt accretion, amortization and other 2.6 1.4
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Cash from operating activities before non-cash
working capital 32.4 40.9
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Changes in non-cash working capital items
Accounts receivable (14.1) (71.0)
Inventories (3.8) (49.7)
Accounts payable and accrued liabilities 11.1 13.5
Income tax receivable/payable 0.3 (11.5)
Other (1.1) 0.1
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Change in non-cash working capital (7.6) (118.6)
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Cash from (used in) operating activities 24.8 (77.7)
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Financing activities
Increase in bank borrowings 10.0 -
Issue of common shares 15.5 0.5
Dividends on common shares (21.3) (18.0)
Repayment of long-term debt (0.3) (0.3)
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Cash from (used in) financing activities 3.9 (17.8)
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Investing activities
Purchase of property, plant and equipment (6.6) (11.9)
Proceeds on sale of property, plant and
equipment 0.4 -
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Cash used in investing activities (6.2) (11.9)
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Effect of exchange rates on cash and cash
equivalents 0.2 (3.0)
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Increase (decrease) in cash and cash equivalents 22.7 (110.4)
Cash and cash equivalents, beginning of the
period 115.1 270.7
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Cash and cash equivalents, end of the period $ 137.8 $ 160.3
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Supplemental cash flow information:
Income taxes paid $ 10.5 $ 26.4
Interest paid (net) $ 1.1 $ 5.0
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
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------------------------------------------------------------------ -
Accumulated
Other
(in millions of Common Retained Contributed Comprehensive
Canadian dollars) Shares Earnings Surplus Loss
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Balance, January
1, 2013 $ 487.9 $ 305.3 $ 17.3 $ (11.2)
Payment of
dividends - (21.3) - -
Net earnings for
the period - 21.6 - -
Other
comprehensive
income (loss) for
the period - - - 7.4
Recognition of
stock-based
compensation - - (2.4) -
Stock options
exercised 18.5 - - -
Transfer of net
actuarial gains
(losses) on
defined benefit
plans - 0.5 - (0.5)
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Balance, March 31,
2013 $ 506.4 $ 306.1 $ 14.9 $ (4.3)
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Equity
Component Non-
(in millions of of Convertible Controlling
Canadian dollars) Debentures Interest Total
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Balance, January
1, 2013 $ 28.7 $ 1.4 $ 829.4
Payment of
dividends - - (21.3)
Net earnings for
the period - 0.1 21.7
Other
comprehensive
income (loss) for
the period - - 7.4
Recognition of
stock-based
compensation - - (2.4)
Stock options
exercised - - 18.5
Transfer of net
actuarial gains
(losses) on
defined benefit
plans - - -
--------------------------------------------------------------
Balance, March 31,
2013 $ 28.7 $ 1.5 $ 853.3
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Accumulated
Other
Retained Comprehensive
Common Earnings Contributed Loss
(in millions of Shares (restated) Surplus (restated)
Canadian dollars)
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Balance, January 1,
2012 $ 485.4 $ 306.7 $ 15.7 $ (17.1)
Payment of dividends - (18.0) - -
Net earnings for the
period - 32.9 - -
Other comprehensive
income (loss) for
the period - - - (6.3)
Recognition of
stock-based
compensation - - 0.4 -
Stock options
exercised 0.6 - - -
Transfer of net
actuarial gains
(losses) on defined
benefit plans - (2.0) - 2.0
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Balance, March 31,
2012 $ 486.0 $ 319.6 $ 16.1 $ (21.4)
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Equity
Component Non-
of Convertible Controlling Total
(in millions of Debentures Interest (restated)
Canadian dollars)
---------------------------------------------------------------
Balance, January 1,
2012 $ 28.7 $ - $ 819.4
Payment of dividends - - (18.0)
Net earnings for the
period - - 32.9
Other comprehensive
income (loss) for
the period - - (6.3)
Recognition of
stock-based
compensation - - 0.4
Stock options
exercised - - 0.6
Transfer of net
actuarial gains
(losses) on defined
benefit plans - - -
---------------------------------------------------------------
Balance, March 31,
2012 $ 28.7 $ - $ 829.0
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Accumulated
Other
Retained Comprehensive
Common Earnings Contributed Loss
(in millions of Shares (restated) Surplus (restated)
Canadian dollars)
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Balance, January
1, 2012 $ 485.4 $ 306.7 $ 15.7 $ (17.1)
Acquired during
the period - - - -
Payment of
dividends - (81.2) - -
Net earnings for
the period - 97.9 - -
Other
comprehensive
income (loss) for
the period - - - (12.2)
Recognition of
stock-based
compensation - - 1.6 -
Stock options
exercised 2.5 - - -
Transfer of net
actuarial gains
(losses) on
defined benefit
plans - (18.1) 18.1
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Balance, December
31, 2012 $ 487.9 $ 305.3 $ 17.3 $ (11.2)
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Equity
Component Non-
of Convertible Controlling Total
(in millions of Debentures Interest (restated)
Canadian dollars)
--------------------------------------------------------------
Balance, January
1, 2012 $ 28.7 $ - $ 819.4
Acquired during
the period - 1.4 1.4
Payment of
dividends - - (81.2)
Net earnings for
the period - - 97.9
Other
comprehensive
income (loss) for
the period - - (12.2)
Recognition of
stock-based
compensation - - 1.6
Stock options
exercised - - 2.5
Transfer of net
actuarial gains
(losses) on
defined benefit
plans - - -
--------------------------------------------------------------
Balance, December
31, 2012 $ 28.7 $ 1.4 $ 829.4
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Contacts: Russel Metals Inc. Marion E. Britton, C.A. Vice
President and Chief Financial Officer (905)
819-7407info@russelmetals.com www.russelmetals.com
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