TORONTO, May 4, 2021 /PRNewswire/ - Russel Metals Inc.
(TSX: RUS) announces financial results for three months ended
March 31, 2021.
Revenues of $885
Million and EBITDA of $129
Million
Liquidity of $444 Million and Net
Debt to Invested Capital 18%
|
Three Months
Ended
|
Mar 31
2021
|
Dec 31
2020
|
Mar 31
2020
|
Revenues
|
$
885
|
$
671
|
$
815
|
EBITDA1
|
129
|
11
|
36
|
Adjusted
EBITDA1
|
129
|
41
|
39
|
Net Income
(Loss)
|
81
|
(9)
|
11
|
Earnings (Loss) per
share
|
1.29
|
(0.14)
|
0.17
|
Cash from
Operations
|
96
|
106
|
68
|
Dividends Paid per
common share
|
0.38
|
0.38
|
0.38
|
|
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", and
"Reconciliation of net earnings to Adjusted EBITDA".
|
Our basic earnings per share of $1.29 for the quarter ended March 31, 2021, was significantly higher than the
$0.17 per share recorded in the first
quarter of 2020 and the loss of $0.14
reported in the fourth quarter of 2020. Revenues of
$885 million were higher than the
$815 million experienced in first
quarter of 2020 and the $671 million
in the fourth quarter of 2020. Our gross margins improved to
28.8% compared to 18.7% in the same quarter of 2020 and 20.8% in
the fourth quarter of 2020. Our Adjusted EBITDA, which
equaled EBITDA, for the quarter was $129 million compared to Adjusted EBITDA of
$39 million in the same quarter of
2020 and $41 million in the fourth
quarter of 2020.
During the 2021 first quarter, EBITDA was reduced by
$2 million related to the
mark-to-market of non-cash stock-based compensation as compared to
$4 million in the 2020 fourth
quarter. The quarter's results include $3 million in federal government wage subsidies
as compared to $8 million in the 2020
fourth quarter.
Each of our segments generated a substantial improvement in
operating profit for the first quarter of 2021 versus the fourth
quarter of 2020. The metals service centers segment generated
a record operating profit as a result of strong market conditions,
the transactional approach to our business model and the impact
from our value-added processing initiatives. The steel
distributors segment generated an improvement in operating profit
for the quarter due to favourable conditions that allowed our U.S.
business, in particular, to benefit from market
opportunities. Our energy segment generated an improvement in
operating profit as a result of our recent initiatives that were
focused on repositioning the segment and reducing the capital
employed in OCTG and line pipe.
Market Conditions
Steel prices increased substantially in the later part of 2020 and
early 2021, due to increases in scrap and iron ore prices,
improvements in demand and low inventory levels in the supply
chain. This resulted in increased revenues and gross margins
in our metals service centers and steel distributors
segments. Metals service centers had a quarter-over-quarter
increase in tons shipped of 10%, exceeding pre-pandemic volume and
a quarter-over-quarter increase in selling price per ton of
26%. Compared to the 2020 first quarter, tons shipped
increased 4% and selling price per ton increased 28%. Demand
in energy products has also begun to recover from the low levels
experienced in 2020 but remains below pre-pandemic levels.
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
returns on capital over the cycle. Over the past three
quarters, we have reduced our OCTG and line pipe inventories by
$99 million, including $34 million in the first quarter of 2021.
In addition, on April 14, 2021, we
entered into an agreement to merge our Canadian OCTG and line pipe
operations with that of Marubeni-Itochu Tubulars America Inc.
We will contribute net assets of approximately $111 million comprised primarily of inventory and
accounts payable and receive cash consideration of approximately
$79 million, preferred shares with a
face value of approximately $32
million and a 50% common equity interest in the combined
entity. In addition, we will retain our accounts receivables,
which totaled $59 million at
March 31, 2021. This
transaction, which is subject to regulatory approval, will result
in a near term cash realization of approximately $138 million. Upon completion of this
transaction, our remaining OCTG and line pipe business will be in
the U.S., where we continue to liquidate in an orderly manner the
remaining inventory, which totaled approximately $40 million at March 31,
2021.
Liquidity and Capital Structure Improvements
During
the 2021 first quarter, we generated $96
million of cash from operating activities and ended the
quarter with total available liquidity of $444 million.
The improvements to our capital structure implemented in late
2020, contributed to an interest expense reduction of
$3 million in the 2021 first quarter
compared to the 2020 first quarter.
Declaration of Quarterly Dividends
The Board of Directors approved a quarterly dividend of
$0.38 per common share payable
June 15, 2021 to shareholders of
record as of May 27, 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
In the metals service center and steel distributors segments, we
expect the near-to-medium term market conditions to remain
strong. Demand is expected to grow across a range of North
American end markets. At the same time, product availability
remains constrained in the supply chain. The result is
expected to be a favourable operating environment in the second
quarter for our metals service centers and steel distributors
segments. In the energy segment, we typically experience a
seasonal slowdown in Canada during
the second quarter due to spring break-up conditions.
However, we are anticipating a general rebound of energy activity
in the second half of 2021, as the sector recovers from the lows
experienced in 2020.
The Company will be holding an Investor Conference Call on
Wednesday, May 5, 2021 at
9:00 a.m. ET to review its 2021 first
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, May 19, 2021. You will be
required to enter pass code 762761# 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)
|
|
|
(in millions of
Canadian dollars, except per share data)
|
Quarters ended March
31
|
2021
|
2020
|
Revenues
|
$
|
885.4
|
$
|
814.7
|
Cost of
materials
|
630.3
|
662.3
|
Employee
expenses
|
84.6
|
67.9
|
Other operating
expenses
|
56.0
|
60.9
|
Asset
impairment
|
-
|
3.7
|
Earnings before
interest and provision for income taxes
|
114.5
|
19.9
|
Interest
expense
|
6.4
|
9.4
|
Earnings before
provision for income taxes
|
108.1
|
10.5
|
Provision for income
taxes
|
27.5
|
-
|
Net earnings for the
period
|
$
|
80.6
|
$
|
10.5
|
Basic earnings per
common share
|
$
|
1.29
|
$
|
0.17
|
Diluted earnings
per common share
|
$
|
1.29
|
$
|
0.17
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
|
(in millions of
Canadian dollars)
|
Quarters ended March
31
|
2021
|
2020
|
Net earnings for
the period
|
$
|
80.6
|
$
|
10.5
|
Other comprehensive
income
|
|
|
Items that may be
reclassified to earnings
|
|
|
Unrealized foreign
exchange (losses) gains on translation of foreign
operations
|
(6.4)
|
50.1
|
Items that may not
be reclassified to earnings
|
|
|
Actuarial gains
(losses) on pension and similar obligations, net of
taxes
|
16.5
|
(1.7)
|
Other comprehensive
income
|
10.1
|
48.4
|
Total
comprehensive income
|
$
|
90.7
|
$
|
58.9
|
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
|
|
|
|
(in millions of
Canadian dollars)
|
March 31
2021
|
December 31
2020
|
ASSETS
|
|
|
Current
|
|
|
Cash and cash
equivalents
|
$
|
92.3
|
$
|
26.3
|
Accounts
receivable
|
469.1
|
344.0
|
Inventories
|
719.8
|
716.4
|
Prepaid and
other
|
16.3
|
13.6
|
Income taxes
receivable
|
13.7
|
19.8
|
|
1,311.2
|
1,120.1
|
Property, Plant
and Equipment
|
266.0
|
269.5
|
Right-of-Use
Assets
|
83.2
|
81.4
|
Deferred Income
Tax Assets
|
2.3
|
5.9
|
Pension and
Benefits
|
19.6
|
5.1
|
Financial and
Other Assets
|
4.5
|
4.7
|
Goodwill and
Intangibles
|
106.7
|
109.6
|
|
$
|
1,793.5
|
$
|
1,596.3
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
Current
|
|
|
Accounts payable and
accrued liabilities
|
$
|
415.2
|
$
|
294.6
|
Short-term lease
obligations
|
16.1
|
16.9
|
Income taxes
payable
|
15.7
|
3.7
|
|
447.0
|
315.2
|
Long-Term
Debt
|
294.0
|
293.7
|
Pensions and
Benefits
|
5.4
|
13.0
|
Deferred Income
Tax Liabilities
|
10.9
|
9.5
|
Long-term Lease
Obligations
|
91.5
|
88.8
|
Provisions and
Other Non-Current Liabilities
|
13.0
|
11.4
|
|
861.8
|
731.6
|
Shareholders'
Equity
|
|
|
Common
shares
|
546.2
|
546.2
|
Retained
earnings
|
285.9
|
212.5
|
Contributed
surplus
|
15.7
|
15.7
|
Accumulated other
comprehensive income
|
83.9
|
90.3
|
Total
Shareholders' Equity
|
931.7
|
864.7
|
Total Liabilities
and Shareholders' Equity
|
$
|
1,793.5
|
$
|
1,596.3
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
|
|
|
(in millions of
Canadian dollars)
|
Quarters ended March
31
|
2021
|
2020
|
Operating
activities
|
|
|
Net earnings for the
period
|
$
|
80.6
|
$
|
10.5
|
Depreciation and
amortization
|
14.5
|
15.6
|
Provision for income
taxes
|
27.5
|
-
|
Interest
expense
|
6.4
|
9.4
|
Gain on disposal of
property, plant and equipment
|
(0.2)
|
(0.1)
|
Asset
impairment
|
-
|
3.7
|
Share-based
compensation
|
-
|
0.1
|
Difference between
pension expense and amount funded
|
0.3
|
-
|
Debt accretion,
amortization and other
|
0.3
|
0.3
|
Interest paid,
including interest on lease obligations
|
(6.3)
|
(6.8)
|
Cash from operating
activities before non-cash working capital
|
123.1
|
32.7
|
Changes in non-cash
working capital items
|
|
|
Accounts
receivable
|
(127.7)
|
(9.6)
|
Inventories
|
(10.8)
|
(0.3)
|
Accounts payable and
accrued liabilities
|
124.6
|
46.5
|
Other
|
(2.7)
|
(0.4)
|
Change in non-cash
working capital
|
(16.6)
|
36.2
|
Income taxes paid,
net
|
(10.5)
|
(0.8)
|
Cash from
operating activities
|
96.0
|
68.1
|
Financing
activities
|
|
|
Decrease in bank
indebtedness
|
-
|
(11.4)
|
Issue of common
shares
|
-
|
0.2
|
Dividends on common
shares
|
(23.7)
|
(23.6)
|
Lease
obligations
|
(3.9)
|
(4.5)
|
Cash used in
financing activities
|
(27.6)
|
(39.3)
|
Investing
activities
|
|
|
Purchase of property,
plant and equipment
|
(5.9)
|
(7.1)
|
Proceeds on sale of
property, plant and equipment
|
0.4
|
2.5
|
Cash used in
investing activities
|
(5.5)
|
(4.6)
|
Effect of exchange
rates on cash and cash equivalents
|
3.1
|
12.2
|
Increase in cash
and cash equivalents
|
66.0
|
36.4
|
Cash and cash
equivalents, beginning of the period
|
26.3
|
16.0
|
Cash and cash
equivalents, end of the period
|
$
|
92.3
|
$
|
52.4
|
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
|
-
|
(23.7)
|
-
|
-
|
(23.7)
|
Net earnings for the
period
|
-
|
80.6
|
-
|
-
|
80.6
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
10.1
|
10.1
|
Transfer of net
actuarial gains on defined benefit plans
|
-
|
16.5
|
-
|
(16.5)
|
-
|
Balance, March 31,
2021
|
$
|
546.2
|
$
|
285.9
|
$
|
15.7
|
$
|
83.9
|
$
|
931.7
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
|
-
|
(23.6)
|
-
|
-
|
(23.6)
|
Net earnings for the
period
|
-
|
10.5
|
-
|
-
|
10.5
|
Other comprehensive
income for the period
|
-
|
-
|
-
|
48.4
|
48.4
|
Recognition of
share-based compensation
|
-
|
-
|
0.1
|
-
|
0.1
|
Share options
exercised
|
0.3
|
-
|
(0.1)
|
-
|
0.2
|
Transfer of net
actuarial losses on defined benefit plans
|
-
|
(1.7)
|
-
|
1.7
|
-
|
Balance, March 31,
2020
|
$
|
544.0
|
$
|
269.7
|
$
|
15.7
|
$
|
150.8
|
$
|
980.2
|
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SOURCE Russel Metals Inc.