Jul 28, 2022 06:50 ET | Source: Reliance Steel & Aluminium Co. Reliance Steel & Aluminium Co.
- Record quarterly sales of $4.68 billion – Record quarterly gross profit of $1.5 billion driven by strong 31.9% gross margin – Record quarterly pretax income of $762.6 million and 16.3% margin – Record quarterly EPS of $9.15 – Repurchased approximately 1.1 million shares of common stock totaling $193.9 million – Supplements existing share repurchase program to $1 billion
LOS ANGELES, July 28, 2022 (GLOBE NEWSWIRE) — Reliance Steel & Aluminium Co. (NYSE: RS) today reported financial results for the second quarter ended June 30, 2022.
Management Comments “Reliance delivered an excellent second quarter with record financial performance and excellent operational execution,” said Reliance CEO Jim Hoffman.”We delivered record quarterly net sales of $4.68 billion, coupled with a 31.9% gross margin and continued strong operating leverage, a record quarterly EPS of $9.15 and solid cash flow to drive our growth and shareholder return priorities. These results are supported by continued healthy demand in most of the end markets we serve, as well as continued price levels for most of the products we sell.”
Mr. Hoffman continued: “Our model continues to prove in a challenging macroeconomic environment, supported by our diverse products, end markets and geographies, as well as the continued support of our domestic suppliers and deep-rooted relationships with customers. is resilient. We have an extensive geographic footprint of approximately 315 service centers strategically located near our end customers, providing us with a unique competitive advantage by enabling fast turnaround, with approximately 40% of orders delivered within 24 hours Plus, our proprietary fleet of more than 1,700 trucks mitigates the impact of increased transportation costs in the current inflationary environment.”
Mr. Hoffman concluded: “Going forward, we will continue to focus on execution and continuous improvement despite macroeconomic challenges including inflation, recession fears, and labor and supply-related pressures. As we begin to deal with an environment of overall decline in metals prices , the core tenets of our model, including our value-added processing capabilities; product, end-market and geographic diversity; smaller order sizes and fast turnarounds, supported by our proprietary fleet of trucks, will collectively contribute to stability Our selling prices and profit margins. In addition, our customers tend to reduce inventories when metal prices drop and increase their reliance on us to deliver the metal they need faster and more frequently, as well as for their value-added processing Demand. Finally, I want to reiterate that Reliance remains well-positioned to navigate a challenging environment, as we have successfully done in the past, and as infrastructure needs continue to increase, we are ready to help America rebuild.”
End Market Reviews Reliance provides a wide range of products and processing services to a wide variety of end markets, usually in small quantities when required.As demand continued to be healthy throughout the quarter, the company’s second-quarter 2022 sales tonnage rose 2.7% from the first quarter of 2022, beating Reliance’s forecast of a flat-to-2.0% increase.
Demand for non-residential buildings, including infrastructure, in Reliance’s largest end market improved steadily in the second quarter.Reliance remains cautiously optimistic that demand for non-residential construction activities will remain stable in the key sectors in which the company is involved in the third quarter of 2022.
Demand for Reliance’s toll processing services to the automotive market remained stable in the second quarter despite ongoing challenges in the supply chain, including the ongoing impact of a global microchip shortage on new vehicle production levels.Reliance is cautiously optimistic that demand for its toll processing services will remain stable through the third quarter of 2022.
Demand in the broader manufacturing sector that Reliance serves, including industrial machinery and consumer goods, declined compared to the first quarter of 2022.However, demand for industrial machinery improved and remained at healthy levels compared to the same period last year.Underlying demand in heavy industry was mixed in the second quarter, with construction equipment continuing to improve at a healthy pace.Reliance expects the usual seasonal slowdown in demand for its products across the manufacturing sector in the third quarter of 2022.
Semiconductor demand remained strong in the second quarter and continued to be one of Reliance’s strongest end markets, a trend expected to continue into the third quarter of 2022.Reliance will continue to make investments to improve its ability to serve the significant expansion of semiconductor manufacturing in the United States.
Commercial aerospace demand continued to recover in the second quarter.Reliance is cautiously optimistic that demand in commercial aerospace will continue to improve steadily in the third quarter of 2022 as construction rates increase.Demand in the military, defense and space segments of Reliance’s aerospace business remains strong, with a large backlog expected to continue through the third quarter of 2022.
Demand in the energy (oil and gas) market continued to strengthen in the second quarter due to increased drilling activity due to higher oil and gas prices.Reliance is cautiously optimistic that demand will continue to recover in the third quarter of 2022.
Balance Sheet and Cash Flows Reliance had cash and cash equivalents of $504.5 million as of June 30, 2022.As of June 30, 2022, Reliance had total outstanding debt of $1.66 billion, a net debt-to-EBITDA ratio of 0.4 times, and had no outstanding borrowings under its $1.5 billion revolving credit facility.Despite more than $400 million in additional working capital requirements, Reliance generated $270.2 million in cash flow from operations in the second quarter of 2022, driven by the company’s record earnings.
Shareholder Return Event On July 26, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.875 per common share, payable on September 2, 2022 to shareholders of record as of August 19, 2022.Reliance has paid regular quarterly cash dividends for 63 consecutive years without a cut, and has increased its dividend 29 times since its 1994 IPO.
During the second quarter of 2022, the company repurchased approximately 1.1 million shares of common stock at an average cost of $178.61 per share, for a total of $193.9 million.Reliance repurchased $24 million of common stock in the second quarter of 2021.Subsequent to the end of the current quarter, as of July 26, 2022, Reliance repurchased approximately 582,000 shares of common stock at an average cost of $171.94 per share for a total of $100 million, based on the 10 authorized on July 20, 2021 The company’s total repurchases reached $598.4 million, at an average cost of $163.55 per share.
On July 26, 2022, the Board of Directors approved an amendment to Reliance’s share repurchase program, refreshing the repurchase authorization to $1 billion with no set expiration date.The company expects to maintain its flexible capital allocation approach with a focus on growth and shareholder return activities, including opportunistic repurchases of its common stock.
Corporate Development On May 19, 2022, Reliance announced the retirement of Michael P. Shanley, effective December 2022, and in accordance with the Board’s strategic executive leadership succession plan, Stephen P. Koch was promoted to Executive Vice President and Chief Operating Officer and Michael P. R. Hynes to Senior Vice President of Operations, effective July 1, 2022.Effective July 1, 2022, Mr. Shanley transitioned from his role as Senior Vice President of Operations to Special Advisor to facilitate the transition of his responsibilities and support other special projects.
Business Outlook Reliance remains cautiously optimistic about business conditions in 2022, expecting continued strong underlying demand trends in the vast majority of the major end markets it serves.The company expects shipments to be impacted by normal seasonal patterns, including lower shipments due to planned customer shutdowns and holiday arrangements.As a result, the company estimates that ton sales in the third quarter of 2022 will be 3% to 5% lower than in the second quarter of 2022.In addition, Reliance expects its average selling price per ton in the third quarter of 2022 to reach a decline of 5% to 7% compared to the second quarter of 2022, due to lower prices for many of its products, especially carbon, stainless steel and aluminum flat sheets rolled products, but was partially offset by improved demand and pricing for higher-value products sold in the aerospace, energy and semiconductor end markets.Based on these expectations, Reliance estimates third-quarter 2022 non-GAAP diluted earnings per share in the range of $6.00 to $6.20.
Conference Call Details A conference call and simultaneous webcast will be held today, July 28, 2022 at 11:00 am ET / 8:00 am PT to discuss Reliance’s second quarter 2022 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 Conference ID: 13730870.The call will also be available live on the Internet hosted on the investor section of the company’s website, investor.rsac.com.
For those unable to attend the live broadcast, the call can also be replayed by calling (844) 512-2921 (844) 512-2921 (2:00 PM ET today to 11:59 PM ET on August 11, 2022).United States and Canada) or (412) 317-6671 (International) and enter Conference ID: 13730870.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, Reliance Steel & Aluminium Co. (NYSE: RS) is a leading global provider of diversified metal solutions and the largest metal service center company in North America.Through a network of approximately 315 locations in 40 states and 12 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, providing fast turnaround and value-added processing services.In 2021, Reliance’s average order size is $3,050, with about 50% of orders including value-added processing, and about 40% of orders 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, acquisitions and expectations about the company’s future growth and profitability and 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, 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,” “predict,” “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, Reliance, the expected benefits of the acquisition may not materialize as expected, labor constraints and the impact of supply chain disruptions , ongoing pandemics, and changes in global and U.S. political and economic conditions, such as inflation and recessions, affect 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 pandemic, the re-emergence or mutation of the virus, actions taken to control 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 inflation, recession, COVID-19, conflict between Russia and Ukraine, or other reasons, could lead to a further or prolonged decline in demand for the company’s products and services and negatively affect its business, as well as May affect financial markets and corporate credit markets, thereby adversely affecting the Company’s access to financing or any financing terms.The Company cannot currently predict all the effects of inflation, economic recession, the COVID-19 pandemic or the Russia-Ukraine conflict and related economic impacts, but they could materially and adversely affect the Company’s business, financial condition, results of operations and cash flow.
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 out in “Item 1A. The Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and other documents Reliance files or provides with the Securities and Exchange Commission” “Risk Factors”.