Reliance Steel & Aluminum (RS) 24 Oct 242024 Q3 Earnings call transcript

Ladies and gentlemen, good morning, and welcome to the Reliance Inc.

Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kim Orlando, ADDO Investor Relations. ahead. go Please

Lewis, Good Officer; for operator. Third thanks all President President Financial by to XXXX Steve Chief Executive Thank Executive and Arthur Koch, our morning, Ajemyan, conference you Vice Karla joined am joining results. Chief Reliance's and call of Chief financial Officer; Operating you, and I and President and to Officer. Quarter Vice discuss Senior

investor.reliance.com. and of Please call this be on reconciliation our will teleconference. disclosures website adjusted of of section in all issued at it earnings The the A earnings recording of non-GAAP the this part our to numbers included read the posted made statement note forward-looking release Investors included during are applies release. the reconciliations statements our this that morning in

turn now President over Reliance. to call of CEO the Karla and will Lewis, I

thank joining third Good all quarter morning, results. today our XXXX you everyone, to discuss and for us

again third smart our shipments, which continued margin market within refer once sustainable challenging to execute maintaining growth. profit while as to quarter, through Our we businesses well gross in outperforming profitable range conditions the industry

helped expansive as pricing processing turn anticipated declined more our with resilience and with inherent our resulting capabilities model, increased well volume non-GAAP metals line servicing earnings from in lower efforts end pricing share orders and markets the as level business earnings quick diverse Although of $X.XX on mitigate in of than growth value-added the impact our margin per targeted our our gross on profit guidance. of diluted

markets. strong capital by million third flow quarter, operations, cash management profitability underpinned effective the generated and $XXX.X working in In we through cyclical from

activities. in fuel capital $XXX.X strategy. allocation We all of growth majority was consistently elements million cash the in Our execution expenditures, which toward flow of to directed invested strong continues capital our

for of cash calendar to with CapEx expected $XXX $XXX Our million approximately million. remains year outlay an XXXX the million budget total $XXX

our product our and of support date acquisitions pipeline IPO, acquisitions remains expanding growth M&A capabilities. the We've completed toll August processing of have X Corporation our completed processing of strategy, diversification certain XXXX we XXXX, and Ferragon the XX acquisition our to including that division value-added Since active. FerrouSouth in assets

continue will brand standards well-managed with in and and the solid metals for possess centers service that candidates that our seek align processors We our equity immediately to are marketplace acquisition earnings. to strong reputations accretive and

repurchased repurchased million reducing stock our equity pullback During nearly our $XXX the in broader metal by we across outstanding the prices opportunistically common total space. shares quarter, of X% as shares amid we the

ongoing paid dividends, to we our our $XX.X valued in million commitment highlighting stockholders. In addition,

for will acknowledge an We some contributions to best his an X practices I'd Director him and regarding [ and [ our a deliberate from Consistent as industrial Stotler experience our will Kaminski Next, as Kamsickas Independent XXXX like Nonexecutive Chair as member, plan, our safety. XXXX. January many to on members. Board forward will with as since strategic corporate previously Independent ] Jim [ since down contributions to X, Mark January step our Nonexecutive succession to as long-term increasing Doug X, serve our Directors. October we and Board in XXXX. X, his effective manufacturing Mark XXXX. Independent ] Mark Director announced succeed continue expertise Chair look effective Chair thank ], and and updates Jim's Board We appointed of governance

I'd who past to few impacted Before acknowledge events weeks. my have the like remarks, been weather severe closing by these all

Reliance impacts families consolidated grateful minimal on had of are their personnel report Milton employees personally Hurricane our and results, Helene were safe. our to many very all impacted and Hurricane While we're that and

to for team working dedicated their increasingly and competitive challenging and our recognize their to like strong commitment market dynamics through I'd closing, at continued In Reliance safely. execution

and business contributions our our Just company last in each the family. from month, focus would as Reliance without have member XXth XX a possible daily publicly which and been traded anniversary we of not celebrated years

While our support heightened our your confidence to the contributing business near-term in positive growth you uncertainty pricing, resilient priorities. all strategic demand fourth ability view our stockholder long-range and in model our in quarter today. continue Thank return to is headwinds executing time and for and

now quarter the over pricing call I'll who third and will our turn to review Steve, demand trends.

and our and like strategy. good I'd my team to to morning, expressing operating everyone. gratitude their dedicated Thanks, to safely by begin executing commitment for Karla, our

turn third quarter our demand to and pricing now I'll trends.

sold X.X% center X.X% XXXX, service significantly a on reported basis of decrease the quarter the increased or tons X.X% by Our of as industry third the outperforming same-store compared MSCI. to

compared decreased of steel progressed. due to nonresidential XXXX, carbon the X.X% quarter down of to market X.X% X.X% beat plate While second expectations as to products shipments the structural quarter increased and we of construction tons the to our

and acquisitions. peers strategic growth of We organic model, investments MSCI in our growth are our believe by and our maintaining continued while diversified business and outperformance industry service supported customer profitability,

X%, an Aluminum also market Stainless price steel X.X% to signs ton sanctions selling of average compared abundance showed $X,XXX as of product of declined progressed. quarter the Russian of prices of corrected and the market global to impact our third to U.S. short-lived XXXX, dealt declined steel prices carbon low-priced quarter down from the declined per the stabilization. prices with imports. of anticipated quarter as than second X% the Our expectations sold exceeding more

Beginning third in turn our which predominantly significant our plate sold X products, will products industry outperforming represented construction. Carbon an within end tubing, levels. structural the All overview products. and I steel into key of growth X/X notable nonresidential year-over-year market, had shipment third are the quarter. and of to with sales trends markets nonresidential construction Next, about quarter

centers, for market, its and nonresidential acquisitions, of publicly funded construction recent areas Our projects solid data as related our to uncertainty, diversified projects, infrastructure including projects from contributions exposure despite in products the delaying the demand macroeconomic energy supported certain these market.

Shipments both in year-over-year agricultural, and products highly the across and industries, and industrial weaker equipment products, sector, manufacturing machinery, strength across demand broader represents business, industrial in machinery, Manufacturing diversified products. primarily and heavy our which sales of General equipment military, shipbuilding, total consumer Our rail roughly X/X including consumer reflecting increased household military. offsetting is heavy

industry outperformance groups diversified applications demand across general model a our business and the manufacturing environment. Our and to product uncertain shipping of benefits dynamic key highlights

our stoppage. Commercial approximately Aerospace of remains aerospace with XX% total fundamentally demand the short-term chain products associated sales. supply labor challenges comprise healthy and ongoing despite Boeing production

processing primarily the included are Our levels. defense-related stable aerospace in which our service not remained our operations, strong tons and space market at program demand automotive toll through We sold.

demand U.S. in markets and which to to capacity. compared ongoing and of investments quarter Mexican both X% business, of total to the represents the tolling in our sales the third automotive improved year XXXX due demand healthy saw Our our increase prior

signs continued demand subdued of industry supply Semiconductor with stabilization remains inventories in chain, areas. certain but in shows the excess

Our remains positive. for semiconductor outlook the long-term market

our Overall, markets. we in to experiencing Please pressures refer diversification. counterbalancing additional our other relatively release are product commentary demand end key with steady end and end on markets, for strength continued in earnings certain markets

our our We in efforts new very and continued makes our unrivaled proud win service recognize suppliers are of enabled offerings to new continues and Reliance partner of quality business Reliance's service highly customers reliability our our depth market and scale industry-leading outstanding the to which and the and mill value-added product strong breadth of to capabilities. as existing well as from attractive all performance. team's conditions. sheet us a balance

review financial now and Arthur turn the to will call I our results outlook. to over

and Steve, you, today's thank joining Thanks, everyone, call. for

primary XXXX Our of to which compared difficult third non-GAAP the per a environment, of toward end guided share pricing of came earnings range. share driver diluted second quarter the non-GAAP the was of per $X.XX in decrease earnings our our XX.X% quarter XXXX. in the low Despite diluted

Our surpassed tons across all shipment expectations, sold outperform again nearly us levels leading our products. industry to once

factors, our to our of sold evident scale where the our broad in allow and participate the strong. diverse end a in basis offerings product current industry-leading quality and economy the same-store on tons quarter. along activity expanding to with capabilities value and contributed to significant the of processing third year-over-year growth economic made markets These service in environment X.X% diversified is in us pockets as differentiating The of choppy they is

continued Our as continue decline without in with experience in prices orders margin gross margin versus capabilities to margin second moderated XX.X% processing declined less third quarter value-added the orders the gross headwinds. processing. processing our quarter significantly to profit in of contraction gross the profit pricing profit from declining value-added from XX.X% in Again, terms

LIFO Our LIFO of gross cost inventory income quarter, of for full the $XX XXXX, to our income and stability to of sales XXXX. replacement $XXX of which $XX recorded million method fourth costs. the provides valuation anticipate current million adjusting by for third million our further we of we income the LIFO to implies in year quarter LIFO continue profit guidance, our with Consistent with align margin

the to on reminder, trends Factors interim product LIFO annual quantities changes based a will inventory along year-end include mix ton our in As annual per a will LIFO quarter our as calculation. and such for true-up with levels. estimate LIFO impact inventory cost fourth

September available operating impact declines LIFO period remains the was benefit results prices. further to XX, metal generate and in of reserve which mitigating LIFO XXXX, our As million, on balance $XXX.X the of future sheet income by potential

million Same-store levels million SG&A slightly incentive inflation, of of by expenses X% non-GAAP Sequentially, lower same-store or [ than and approximately X% higher support wage same-store higher ] increased year-over-year expenses. declined general $XX less non-GAAP SG&A $X approximately shipment result Moving as to along a to expenses headcount offset or X%. compensation.

normalizes model Our down. incentives as trend rightsizing by expenses inherently profits

million of of and profitability largely release to I'll relatively operating flow $XXX The Reliance quarter generated from in capital cash cash flow working third XXXX. generated by operations. resulting now in decline quarterly $XXX.X higher balance address cash consistent our the in offset in third flat our flow. quarter was compared the sheet million

tons flow on quarter. XX also Our healthy in of rate strong contributed generation accounts turn and of to days cash inventory DSO X.Xx the based receivable third

focus our the management of margin. our impact prices declining inventory profit lessen gross helped Furthermore, on on

we $XXX a million million outstanding. in in average During $XXX.X months of we in cost at invested million approximately average per cost $XX quarter, share. shares total an dividends returned shares expenditures, of our of share worth at shares acquisition, In million $XXX.X $XX.X X an of nearly of million a the reduction to $XXX and resulting completed XXXX, $XXX capital repurchased approximately first stockholders our repurchased through cash our worth per have the X%

billion which Directors refresh our of in ongoing repurchase our will our Board $X.X a plan, announced we As of opportunistic approved repurchases. use share for release,

ratio X, providing Our executing allocation continue capital leverage a with than remains less to liquidity our priorities. net favorable position debt-to-EBITDA ample of

financial credit As mid-September, previously more into revolving restated upgraded covenants and billion favorable $X.X we unsecured reflecting and with fewer improved our X-year facility pricing restrictive and credit entered condition announced in amended an ratings.

fourth now outlook. Turning our quarter to

sold tons this of trends, due our normal fourth to our XXXX macroeconomic to heightened the political compared the will morning, X% from down half release in X% to to be X% the we in to headwinds discussed uncertainty, quarter growth. up with but fourth same-store quarter X.X% third seasonal to As X% temporary and to and attributable compared estimate quarter

non-GAAP these to average. fourth quarter in On selling to replacement is due lower expectations, quarter as X.X% of price hand the X.X% $X.XX on of stabilize average side, cost per X/X sold the to $X.XX expect across the margins entry to anticipate fourth of below point quarter the pressure alignment compared for continued quarter in quarter, declines. steel to profit Based with the costs We gross the fourth range relatively of better anticipate our fourth the inventory the expected we down reflecting third the anticipated products. quarterly pricing our pricing price we quarter per diluted as in carbon third Roughly share on decline be for well selling FIFO being ton the earnings pricing will from XXXX.

remarks. we'll This concludes questions. Operator? for our participation, the prepared and Thank your call time now open again you to and

session. be question-and-answer you. Ladies the Instructions] is question first from The [Operator will from Capital line gentlemen, of now BMO and Thank we Jancic conducting Markets. Katja a

And what you talk bit the the some XQ on temporary starting demand in confidence a about of what factors. commentary will about gives year? next is drive XQ Maybe into better Can you impact that by being temporary? impacted

at as the -- just with reach customers, We who teams for today. talked our to we seen presidential or level the are being week we election businesses call more we customer prior just bit the in uncertainty past quite a of be as seems there joining our over out close different running them thanks cited than our X, Katja, have periods, that. to the as to

of on we're go. whether seems say is, one And either areas, it's understand require at it wherever those to confident the diversified investments term though because products, and spur a of policy with expect energy that interest trepidation impact steel question help of long And manufacturing breadth there's different directions, or It I in? may would we our really have more even where policy. administration when to customers products, will the had be position rates What those in overall, of is what different seems or most will supporting if to and economic kind does The another. trade point trying lower kick our just activity. headed? solutions

We believe January related through some XXXX, not the as with in XXXX, expect trajectory to But move that. maybe X. activity pickup we in we

also So taking customers of in heard we have over holidays extended few again, the maybe QX. a shutdowns

a the think do are us, the little lot a our strong of well different XXXX. probably a products under in the of stimulus we set up factors election lower being we're interest continued us So presidential the with control. there that dollars because just unspent behind up guide industry are we there that government still rates, with can't cautious having lot tailwinds the But for QX

But And you maybe know that I that hearing exposed in auto any on tolling through market business. just are business? then quickly to or you're side. And it the slowdown the

of most and customers of those Duty stable and of and a platforms generally it some pullback. the coming. on our will trucks. the demand, In ramp-up where with the some Super a a from Even think normal for there on businesses. were we're have is lot seen seasonality lot our SUVs processing trucks the toll light not part, platforms for demand Yes, be QX automotive We we

hear lower interest consumer people with So concerned. we We could rates in the the again, are headlines. market. read Also, the help activity automotive

yet currently slowdown So activity. we a stable have experienced and expect not

Instructions] comes [Operator Markets. from of question next the KeyBanc Phil line from Capital The Gibbs

bit little and and pricing guidance to changed me anticipating with below little you help third in mix market that? completely all was the the the why understandable dynamics. wasn't But with LIFO reserve a a the try were So what quarter guess, the I reflect to bit

question, Phil. Good Yes.

last So is as but the things call, we're some some I'll we seeing spoke the to out this provide year at progressing. color as briefly play additional

interesting impact the rest this long replacement XX really products getting and really cycling that some So have the haven't lead past. seen in aerospace we times. products have through There's while we're having of the that some lower of long costs, year mix week inventory And specialty times. to lead some our these XX

going see cost benefit basically lower products the to of those we're XXXX. So of in

that is be that from what's So effectively income year years felt in LIFO happening primary the the as for really LIFO that haven't going XXXX. that's XXXX. is shifting to some some And impact why our seen of into progressed estimate because of or the you reason up realized XXXX us is

had really seen and and chunk pricing doubled our basically this unique product. add, large here of a time a that just products volume first would are like -- like I of Phil, on the they're been is those And for because that high-priced we've of XX The phenomenon. over years, the kind lower I've of the times happen of had is products, of this this type because a higher lead dollars and especially for inventory. just we've relatively never something

those So products. this we've LIFO on of and characteristics gone this learning year the is year seeing as those been unique we've through kind something impact on of the

you're Well, either. seen not never alone. it I've

you saying the that third quarter, mean So you you you we're you Or are and trough that the the quarter things gross to better quarter. fourth Does quarter? the fourth made on the to expected said fourth trough? you saw in already aligned. stabilize margins expect Question in about the be align that the

Good question, Phil.

the what quarter that could a not right? just the pricing imply does then quarter, it of be be forecasting So are what that tailwind in again, would So for if guidance in XXXX, the go that first if the pricing QX out in presumably, for some But you for clear, the yes, in we're be I the there's depends to then trough. pricing first would depending if, trough. QX. putting pricing will would But up, QX views then year be our for true, mean that on beginning does QX

saying going I quarter the just quarter, third it's you're that. appreciate to I'm the just but lower I'm saying third -- the be is are third you to relative than stabilizing? Or -- to saying quarter, going be [indiscernible]. it

It should be our -- staying on based third quarter. with the we're guidance, consistent

question side. then last Okay. semi That's on the And helpful. me for

some squishy, of chain maybe does from just that the from be seeing year-end? a infrastructure supply election What little Appreciate that deferred might it that now I context what consumables, projects after bit bit some but be some might little a do Just inventoried remember, trying feels You have some saying stabilizing. the it. Is a cycle? to of largely that over signs been been breaking not but these mean that get these that. that, semis little and of bit kind behind

we -- do infrastructure, a the last had, more see we I inventory And that to manufacturers than the customers sell through QX mentioned. of companies the the consumables. glut we the Phil, activity the picking quarters to there, Yes, up but equipment working semiconductor, some yet. in still more really one into activity our guess, selling they through did on equipment room as some see not at manufacturers, then several go seen the on little you some into had as We the and consumables, the

is different about big reasons construction that think, getting much slowdowns, lot And is, the of workers you little but better the different factors, in very a term. there how starting planned infrastructure it's all the election. hear just a numbers, a projects, I come honestly, where long a to most bit. why bullish I don't phases out timing. still the side, were build, And permitting stop headline then of We're the to on chip it's know environment wasn't of where lot are We the which projects. impacting new going of of see on them quite immediately, some it spread

[Operator conference our Instructions] are President CEO, now closing there the Lewis, comments. As I Karla and questions, no over for to hand further

and to meet to of our thank you, all conditions reiterate Baird's even just to ability suppliers who our everyone the the Thank I and and with we we'll next headwinds you all with Reliance month team in like want I QX, through hope there. confident be presenting And joined Industrials to to confidence would well to and of again in Chicago at operate in customers, today. of call our remind our Thank Conference, team stockholders everyone that also thanks and your with many into like support. we'd potential our market some moving we're XXXX. temporary you. our Global for

has Inc. The concluded. you. participation. of Reliance, Thank now you Thank your conference for

You may now disconnect your lines.