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Russel Metals Announces 2020 Second Quarter Results

TORONTO, Aug. 6, 2020 /CNW/ – Russel Metals Inc. (TSX: RUS) announces financial results for three months ended June 30, 2020.

Revenues of $588 Million and EBITDA of $32 Million
Liquidity of $478 Million and Net Debt to Invested Capital 28%

Three Months Ended

Six Months Ended

Jun 30 2020

Jun 30 2019

Mar 31 2020

Jun 30 2020

Jun 30 2019

Revenues

$

588

$

937

$

815

$

1,403

$

1,969

EBITDA1

32

65

36

67

137

EBIT1

16

51

20

36

109

Net Income

5

31

11

15

65

Earnings per share

0.07

0.50

0.17

0.24

1.05

Free Cash Flow per share1

0.25

0.71

0.41

0.66

1.65

Cash from Operations

116

50

68

184

44

Shareholders’ Equity

931

980

980

931

980

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.

1EBITDA, EBIT and Free Cash Flow per share are non-GAAP measures.  EBITDA represent earnings before interest, income taxes and depreciation.  EBIT represents earnings before interest, and income taxes.  Free cash flow per share represents cash from operating activities before change in working capital less capital expenditures divided by average shares outstanding for the period. 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”, “EBIT and EBITDA”, and “Free Cash Flow”.

$5 million or $0.07 per share on revenues of $588 million.  These results compare to net income of $31 million or $0.50 per share on revenues of $937 million in the 2019 second quarter.

$116 million in cash from operations, as our business realized the benefits of continued strong cash flows from working capital reductions. At June 30, 2020, our liquidity remained strong with cash on hand and availability from the undrawn portion of our committed credit facility of $478 million.

John G. Reid, President and CEO, commented, “During the second quarter, the pandemic along with low energy prices created intense business conditions.  Demand at our service center and distribution operations appeared to bottom out in April followed by a modest, yet steady, increase throughout the balance of the quarter.   I want to commend our service centers for their performance as the segment generated higher earnings from operations in the 2020 second quarter than the comparable period last year.  In addition, the service center segment continued to gain market share when compared to the Metal Service Center Institute’s statistics.”

$95 million which supports our dividend. I also want to commend all of our employees for their continued efforts in adhering to our safety protocols in response to the pandemic as we remain committed to putting the health and safety of our employee group first and foremost.”

$0.38 per common share payable September 15, 2020 to shareholders of record as of August 27, 2020.  We will continue our practice of prudently reviewing our dividend and ensure that it is supported by a strong balance sheet and cash flows.

$373 million for the quarter compared to $535 million in the same quarter in 2019.  The average selling price declined 14% over the second quarter of 2019 and was consistent with the 2020 first quarter.  Tons shipped were approximately 19% lower than the 2019 second quarter and 14% lower than the 2020 first quarter.  Due to the pandemic most jurisdictions where we operate had restrictions for non-essential businesses which resulted in certain customer plant closures.  Gross margins as a percentage of revenues for the 2020 second quarter were 20.9% compared to 18.7% in the same period of 2019 and 21.3% in the first quarter of 2020.  Operating profits were $25 million compared to $23 million in the 2019 second quarter and $18 million in the first quarter of 2020, as expense reductions and government wage support programs offset the reduction in gross margin dollars.

$149 million compared to $298 million in the 2019 second quarter.  Historically low North American rig counts, and the wet Western Canadian spring impacted demand.  Gross margins as a percentage of revenues of 15.4% were lower than the comparative 19.5% for the 2019 second quarter.  An inventory valuation provision of $5 million was included in the 2020 second quarter results primarily due to our line pipe and OCTG operations.  Operating losses were $4 million in the energy products segment compared to operating profits of $24 million in the second quarter of 2019 with our Comco Pipe and field store operations collectively generated operating income of $4 million in the quarter.

$64 million compared to $100 million in the 2019 second quarter due to lower demand and steel prices.  Gross margins as a percentage of revenues for the 2020 second quarter were 10.3% compared to 13.5% in the same period 2019.  Operating profits of $2 million for the quarter compared to $7 million in the 2019 second quarter.

Friday, August 7, 2020 at 9:00 a.m. ET to review its 2020 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.

Toronto and International callers) and 1-888-390-0541 (U.S. and Canada) until midnight, Friday, August 21, 2020.  You will be required to enter pass code 164828# to access the call.

www.russelmetals.com.” data-reactid=”35″>Additional supplemental financial information is available in our investor conference call package located on our website at www.russelmetals.com.

www.sedar.com.” data-reactid=”39″>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.

[email protected]; or by calling our Investor Relations Line: 905-816-5178.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)

Quarters ended June 30

Six months ended June 30

(in millions of Canadian dollars, except per share data)

2020

2019

2020

2019

Revenues

$

588.1

$

936.7

$

1,402.8

$

1,969.3

Cost of materials

478.0

761.0

1,140.3

1,603.1

Employee expense

55.7

76.7

123.6

156.1

Other operating expenses

38.3

48.1

99.2

101.0

Asset impairment

3.7

Earnings before interest and

provision for income taxes

16.1

50.9

36.0

109.1

Interest expense

9.2

9.9

18.6

21.0

Earnings before provision for income taxes

6.9

41.0

17.4

88.1

Provision for income taxes

2.3

10.2

2.3

23.0

Net earnings for the period

$

4.6

$

30.8

$

15.1

$

65.1

Basic earnings per common share

$

0.07

$

0.50

$

0.24

$

1.05

Diluted earnings per common share

$

0.07

$

0.50

$

0.24

$

1.05

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

Quarters ended June 30

Six months ended June 30

(in millions of Canadian dollars)

2020

2019

2020

2019

Net earnings for the period

$

4.6

$

30.8

$

15.1

$

65.1

Other comprehensive (loss) income

Items that may be reclassified to earnings

Unrealized foreign exchange (losses) gains on

translation of foreign operations

(23.3)

(12.0)

26.8

(24.0)

Items that may not be reclassified to earnings

Actuarial losses on pension and similar

obligations net of taxes

(6.9)

(2.7)

(8.6)

(2.7)

Other comprehensive (loss) income

(30.2)

(14.7)

18.2

(26.7)

Total comprehensive (loss) income

$

(25.6)

$

16.1

$

33.3

$

38.4

 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

June 30

December 31

(in millions of Canadian dollars)

2020

2019

ASSETS

Current

Cash and cash equivalents

$

89.1

$

16.0

Accounts receivable

320.5

458.1

Inventories

861.9

883.6

Prepaid and other

14.4

18.1

Income taxes receivable

23.7

18.9

1,309.6

1,394.7

Property, Plant and Equipment

285.7

288.9

Right-of-Use Assets

86.0

90.1

Deferred Income Tax Assets

3.6

4.8

Pension and Benefits

5.4

Financial and Other Assets

4.0

4.0

Goodwill and Intangibles

135.6

137.0

$

1,824.5

$

1,924.9

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current

Bank indebtedness

$

11.3

$

62.1

Accounts payable and accrued liabilities

283.1

326.4

Short-term lease obligations

18.2

17.1

Income taxes payable

0.7

0.3

313.3

405.9

Long-Term Debt

445.4

444.8

Pensions and Benefits

16.6

10.4

Deferred Income Tax Liabilities

14.5

13.2

Long-term Lease Obligations

92.7

94.4

Provisions and Other Non-Current Liabilities

11.0

11.6

893.5

980.3

Shareholders’ Equity

Common shares

544.0

543.7

Retained earnings

243.7

284.5

Contributed surplus

15.8

15.7

Accumulated other comprehensive income

127.5

100.7

Total Shareholders’ Equity

931.0

944.6

Total Liabilities and Shareholders’ Equity

$

1,824.5

$

1,924.9

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) 

Quarters ended June 30

Six months ended June 30

(in millions of Canadian dollars)

2020

2019

2020

2019

Operating activities

Net earnings for the period

$

4.6

$

30.8

$

15.1

$

65.1

Depreciation and amortization

15.4

13.9

31.0

27.6

Provision for income taxes

2.3

10.2

2.3

23.0

Interest expense

9.2

9.9

18.6

21.0

Gain on sale of property, plant and equipment

(0.1)

(0.1)

(0.2)

(0.3)

Asset impairment

3.7

Share-based compensation

0.1

0.2

0.1

Difference between pension expense and

amount funded

(0.4)

(0.7)

Debt accretion, amortization and other

0.3

0.3

0.6

0.6

Interest paid, including interest on lease obligations

(11.3)

(11.8)

(18.1)

(20.2)

Cash from operating activities before

non-cash working capital

20.5

52.8

53.2

116.2

Changes in non-cash working capital items

Accounts receivable

150.7

55.1

141.1

31.2

Inventories

34.3

17.4

34.0

32.7

Accounts payable and accrued liabilities

(93.8)

(54.9)

(47.3)

(81.1)

Other

4.0

(3.4)

3.6

(4.6)

Change in non-cash working capital

95.2

14.2

131.4

(21.8)

Income tax paid, net

(0.1)

(17.2)

(0.9)

(50.7)

Cash from operating activities

115.6

49.8

183.7

43.7

Financing activities

(Decrease) increase in bank indebtedness

(39.4)

(18.7)

(50.8)

7.0

Issue of common shares

0.2

0.1

Dividends on common shares

(23.7)

(23.6)

(47.3)

(47.2)

Lease obligations

(4.9)

(4.3)

(9.4)

(8.7)

Cash used in financing activities

(68.0)

(46.6)

(107.3)

(48.8)

Investing activities

Purchase of property, plant and equipment

(5.3)

(8.7)

(12.4)

(13.9)

Proceeds on sale of property, plant and equipment

0.8

0.3

3.3

0.7

Cash used in investing activities

(4.5)

(8.4)

(9.1)

(13.2)

Effect of exchange rates on cash

and cash equivalents

(6.4)

(3.6)

5.8

(7.9)

Increase (decrease) in cash and cash equivalents

36.7

(8.8)

73.1

(26.2)

Cash and cash equivalents, beginning of the period

52.4

106.9

16.0

124.3

Cash and cash equivalents, end of the period

$

89.1

$

98.1

$

89.1

$

98.1

 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

Accumulated

Other

Common

Retained

Contributed

Comprehensive

(in millions of Canadian dollars)

Shares

Earnings

Surplus

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

Accumulated

Other

Common

Retained

Contributed

Comprehensive

(in millions of Canadian dollars)

Shares

Earnings

Surplus

Income

Total

Balance, January 1, 2019

$

542.1

$

318.6

$

15.7

$

128.5

$

1,004.9

Payment of dividends

(47.2)

(47.2)

Change in accounting policy

(16.1)

(16.1)

Net earnings for the period

65.1

65.1

Other comprehensive loss for the period

(26.7)

(26.7)

Recognition of share-based compensation

0.1

0.1

Share options exercised

0.1

0.1

Transfer of net actuarial losses on defined benefit plans

(2.7)

2.7

Balance, June 30, 2019

$

542.2

$

317.7

$

15.8

$

104.5

$

980.2

 

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SOURCE Russel Metals Inc.

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