October 28, 2021 06:50 ET | Source: Reliance Steel & Aluminium Co. Reliance Steel & Aluminium Co.
- Record quarterly net sales of $3.85 billion – Record quarterly gross profit of $1.21 billion driven by strong gross margin of 31.5% – LIFO expense of $262.5 million or $3.06 per diluted share – record Record quarterly pretax income of $532.6 million and record pretax profit margin of 13.8% – record quarterly EPS of $6.15 – Repurchased $131 million of Reliance common stock
LOS ANGELES, Oct. 28, 2021 (GLOBE NEWSWIRE) — Reliance Steel & Aluminium Co. (NYSE: RS) today reported financial results for the third quarter ended September 30, 2021.
Management Comments “I continue to be inspired by the outstanding operational performance of my colleagues across the Reliance family of companies,” said Jim Hoffman, President and CEO of Reliance.”Our resilient business model, favorable metals pricing trends and excellent execution combined to deliver another quarter of record financial results. A favorable pricing environment and fundamentally strong underlying demand in many of the key end markets we serve drove the record highs. Record quarterly net sales of $3.85 billion. In addition, the stringent pricing discipline of our executives in this area helped us generate a strong gross margin of 31.5%, which, combined with our record sales, in the third quarter of 2021 Recorded a record quarterly gross profit of $1.21 billion. Supply chain disruptions and continued rise in metals pricing resulted in LIFO charges of $262.5 million in the third quarter, our record quarterly net sales and record gross profit of $262.5 million And our continued focus on expense control resulted in record quarterly pre-tax income of $532.6 million for the third consecutive quarter. As a result, our quarterly diluted EPS of $6.15 was also a record high and a record sequentially Earnings per share increased by 21.1%.”
Mr. Hoffman continued: “Our flexible and dynamic capital allocation strategy supports investing in both growth and shareholder returns. On October 1, 2021, we completed the acquisition of Merfish United, a leading US general distributor of tubular construction products. Merfish United complies with Our strategy to acquire immediate value-added companies with strong management teams and significant customer, product and geographic diversification. We expect Merfish United to help position Reliance in the broader industrial distribution segment and provide a platform for further growth in this segment, regardless of Whether organically or through future acquisitions. In the third quarter of 2021, we also invested $55.1 million in capital expenditures, including a number of innovative solutions that further strengthen our value proposition to customers, and we paid $43.7 million in dividends and the $131.0 repurchase returned $174.7 million of millions of Reliance common stock to shareholders.”
Mr. Hoffman concluded: “I am very pleased with our record third quarter financial performance and commend all my colleagues for their hard work and unwavering focus during the quarter. Despite the ongoing pandemic, an extremely tight workforce Challenges of the market and limited supply of metals, we continue to work hard to ensure that we continue to provide our valued customers with the products they need, often in 24 hours or less, while delivering on our growth strategy, generating strong earnings and Returning to our shareholders.”
End Market Reviews Reliance serves diverse end markets and offers a wide range of products and processing services, usually in small quantities when required.In the third quarter of 2021, the company’s sales tonnage decreased by 4.6% compared with the second quarter of 2021, which was basically in line with the typical seasonal decline in the third quarter, but was hindered by various factors, which was lower than Reliance’s expectation of a decline of 1% to an increase 1% economic activity, such as ongoing supply disruptions, including limited metal supplies, and labor shortages experienced by Reliance, its customers and suppliers.The company continues to believe that underlying demand is stronger than its third-quarter shipment levels, which bodes well for demand levels in 2022.
Demand in non-residential buildings, including infrastructure, in Reliance’s largest end market, remained stable after reaching pre-pandemic levels in the second quarter of 2021.Reliance is upbeat on demand for non-residential construction activity Corporate participation will continue to improve steadily through the remainder of 2021 and into 2022 based on a healthy backlog and solid offer activity, positive customer sentiment and favorable key industry metrics.
Demand for Reliance’s toll processing services to the automotive market declined slightly from the previous quarter.However, due to the continued impact of a global microchip shortage on production levels in some auto markets, the company believes underlying demand is stronger than its third-quarter trends reflected, which was partly driven by Reliance’s recent plant expansion in Indiana, Kentucky. Offset by solid performances, Michigan and Texas.Reliance is cautiously optimistic that demand for its toll processing services will improve in 2022 and maintains a positive long-term outlook for this end market.
Underlying demand for agricultural and construction equipment from heavy industry remains strong.Reliance’s third-quarter shipments declined compared to the previous quarter due to higher-than-expected seasonal shutdowns at many customers, as well as widespread customer supply chain disruptions and labor constraints.Still, the company’s third-quarter shipments exceeded pre-pandemic levels.Reliance expects strong underlying demand for heavy equipment and manufacturing to continue into 2022.
Semiconductor demand remains strong as Reliance’s third-quarter shipments were impacted by global supply chain issues, which Reliance expects to continue into 2022.
Commercial aerospace demand is subject to normal seasonality, especially in Europe.Reliance is cautiously optimistic that demand for commercial aerospace will slowly improve throughout 2022 as construction rates increase and excess inventory in the supply chain continues to decline.Demand in the military, defense and space segments of Reliance’s aerospace business remains strong with a large backlog and continues to exceed pre-pandemic levels.The company expects strong demand in the non-commercial aviation market to continue into 2022.
Demand in the energy (oil and gas) market continued to slowly improve in the third quarter due to increased activity driven by higher oil and gas prices.Reliance is cautiously optimistic that demand in this end market will continue to improve moderately through 2022.
Balance Sheet and Cash Flow As of September 30, 2021, Reliance had total outstanding debt of $1.66 billion, no borrowings outstanding under its $1.5 billion revolving credit facility, cash on hand of $638.4 million, net debt The ratio to EBITDA is 0.6 times.Reliance generated $142.2 million in cash flow from operations in the third quarter of 2021, despite a significant increase in working capital due to higher metal prices.
Shareholder Return Event On October 26, 2021, the Board of Directors declared a quarterly cash dividend of $0.6875 per common share, payable on December 3, 2021 to shareholders of record as of November 19, 2021.Reliance has paid 62 regular quarterly dividends with no suspension or reduction in consecutive years since its IPO in 1994, increasing its dividend 28 times.
During the third quarter of 2021, the company repurchased approximately 900,000 shares of common stock at an average cost of $147.89 per share, for a total of $131 million.Over the past five years, the company has repurchased 11.7 million shares of common stock at an average cost of $89.92 per share, for a total of $1.05 billion.Reliance is expected to maintain its disciplined but flexible approach to capital allocation, with a focus on growth (which remains a top priority) and shareholder return activities, including regular quarterly dividends and opportunistic share buybacks.
Acquisition of Merfish United As previously announced, effective October 1, 2021, Reliance has acquired Merfish United, a leading US master distributor of tubular construction products.Headquartered in Ipswich, Massachusetts, Merfish United sells a wide range of steel, copper, plastic, wire conduit and Related Products.Merfish United had net sales of approximately $600 million for the twelve-month period ended September 30, 2021.
Corporate Development As previously announced, effective October 5, 2021, Frank J. Dellaquila will join Reliance’s Board of Directors as an independent director.Mr. Dellaquila has been appointed to Reliance’s Audit Committee, and the Board has designated him as the Audit Committee’s financial expert.Mr. Dellaquila is Senior Executive Vice President and Chief Financial Officer of Emerson Electric Co., a technology and engineering company that provides solutions to a wide range of industries and markets.Reliance’s board now consists of 12 members, 10 of which are independent.
Reliance will relocate its corporate headquarters from Los Angeles, California to Scottsdale, Arizona in the first half of 2022.The Scottsdale office will serve as Reliance’s main executive office, where the company’s senior corporate officers will work.Reliance, a Delaware corporation with approximately 300 divisions and subsidiaries in 40 states and 13 countries outside the U.S., relocates its corporate headquarters to Scottsdale to reflect Reliance’s growth and expansion as well as its commitment to large Assessment opportunities and related operational practices for post-pandemic businesses.Reliance will maintain a presence in the greater Los Angeles area through innovative office arrangements that reflect the redefined post-COVID workplace and meet the needs of corporate executives from companies who will remain in California.
Business Outlook Reliance remains optimistic about business conditions in the current environment, with underlying demand strong or recovering in most of the end markets it serves.However, the company expects factors affecting shipments in the third quarter of 2021, such as metal supply constraints, labor shortages and supply chain disruptions, to continue in the fourth quarter of 2021.Additionally, Reliance expects demand to be impacted by factors such as normal seasonality, customer holiday-related shutdowns and fewer shipping days in the fourth quarter of 2021 compared to the third quarter of 2021.As a result, the company estimates that its tonnage sold in Q4 2021 will be 5% to 8% lower than in Q4 2021.Q3 2021.Reliance expects prices for certain stainless and aluminium products to rise in the fourth quarter, offsetting lower price trends for certain carbon products.Additionally, Reliance estimates that its average selling price per tonne in the fourth quarter of 2021 will increase by 5% to 7% as the metal price in the beginning of the fourth quarter of 2021 is higher than the average price in the third quarter of 2021.Based on these expectations, Reliance management currently expects fourth-quarter 2021 non-GAAP earnings per diluted share to be between $5.05 and $5.15.
Conference Call Details A conference call and simultaneous webcast will be held today (October 28, 2021) at 11:00 am ET / 8:00 am PT to discuss Reliance’s third quarter 2021 financial results and business outlook.To listen to the live call by phone, please dial (877) 407-0792 (US and Canada) or (201) 689-8263 (international) approximately 10 minutes before the start time and use meeting ID: 13723660.The call will also be broadcast live over the Internet hosted on the investor section of the company’s website, investor.rsac.com.
For those unable to attend during the live broadcast, there will also be a replay call at (844) 512 from 2:00pm ET to Thursday, November 11, 2021 at 11:59pm ET.-2921 (US and Canada) or (412) 317-6671 (International) and enter meeting ID: 13723660.The webcast will be available on the Investors section of the Reliance website (Investor.rsac.com) for 90 days.
About Reliance Steel & Aluminium Co. Founded in 1939 and headquartered in Los Angeles, California, Reliance Steel & Aluminium Co. (NYSE: RS) is a leading global provider of diversified metal solutions and the largest metal services provider in North America Center Company.Through a network of approximately 300 locations in 40 states and 13 countries outside the United States, Reliance provides value-added metalworking services and distributes a full line of more than 100,000 metal products to more than 125,000 customers in a variety of industries.Reliance focuses on small orders with quick turnaround and increased value-added processing.In 2020, Reliance’s average order size was $1,910, about 49% of orders included value-added processing, and about 40% of orders were delivered within 24 hours.
Press releases and other information from Reliance Steel & Aluminium Co. are available on the company’s website at rsac.com.
Forward-Looking Statements Certain statements contained in this press release are or may be deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.Forward-looking statements may include, but are not limited to, discussions of Reliance’s industries, end markets, business strategies and expectations for the company’s future growth and profitability, as well as its ability to generate industry-leading returns for shareholders, as well as future demand and metals pricing and the company’s operating performance , profit margins, profitability, impairment charges, taxes, liquidity, litigation matters and capital resources.In some cases, you can identify forward looking by terms such as “may,” “will,” “should,” “could,” “will,” “expect,” “plan,” “anticipate,” “believe,” etc. sexual statement.”estimate,” “forecast,” “potential,” “preliminary,” “scope,” “intend,” and “continue,” the negative forms of these terms, and similar expressions.
These forward-looking statements are based on management’s estimates, projections and assumptions as of today that may not be accurate.Forward-looking statements involve known and unknown risks and uncertainties and are not guarantees of future performance.Due to various important factors, including but not limited to actions taken by Reliance and developments beyond its control, including but not limited to, the expected benefits of the acquisition may not materialize as expected by Reliance, and labor constraints, supply chain disruptions, COVID-19 -19 and changes in global and U.S. economic conditions may have an impact on the company, its customers and suppliers, and the demand for the company’s products and services.The extent to which the ongoing COVID-19 pandemic may negatively impact company operations will depend on highly uncertain and unpredictable future developments, including the duration of the outbreak, any re-emergence or mutation of the virus, actions taken to contain COVID-19 The spread of -19 or the impact of its treatment, including the speed and effectiveness of vaccination efforts, and the direct and indirect effects of the virus on global and U.S. economic conditions.Deterioration of economic conditions due to COVID-19 or other causes may lead to a further or prolonged decline in demand for the company’s products and services, negatively impact its business, and may also affect financial markets and corporate credit markets, which may affect the company’s credit markets adversely affect the Company’s access to financing or any financing terms.The company cannot currently predict the magnitude of the impact and the resulting economic impact of the COVID-19 pandemic, but it could materially and adversely affect its business, financial condition, results of operations and cash flows.
The statements contained in this press release speak only as of the date of their publication, and Reliance undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or for any other reason, except as may be required by law .Important risks and uncertainties regarding Reliance’s business are set forth in “Item 1A. The Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and other documents Reliance files or provides with the Securities and Exchange Commission” “Risk Factors”.