July 28, 2022 06:50 ET | Source: Reliance Steel & Aluminum Co. Reliance Steel & Aluminum Co.
Los Angeles, California, UNITED STATES
- Record quarterly sales of $4.68 billion - Record quarterly gross profit of $1.50 billion driven by strong gross profit margin of 31.9% - Record quarterly pretax income of $762.6 million and margin of 16.3% - Record quarterly EPS of $9.15 - Repurchased ~1.1 million common shares for a total of $193.9 million - Replenished existing share repurchase program to $1 billion
LOS ANGELES, July 28, 2022 (GLOBE NEWSWIRE) -- Reliance Steel & Aluminum Co. (NYSE: RS) today reported its financial results for the second quarter ended June 30, 2022.
Management Commentary “Reliance delivered an exceptional second quarter with record-setting financial performance and outstanding operational execution,” said Jim Hoffman, Chief Executive Officer of Reliance. “We achieved all-time high quarterly net sales of $4.68 billion, which, when combined with an enhanced gross profit margin of 31.9% and continued strong operating leverage, resulted in record quarterly earnings per share of $9.15 as well as significant cash flow to fuel our growth and stockholder return priorities. These results were supported by ongoing healthy demand in most of the end markets we serve and continued elevated pricing levels for the majority of the products we sell.”
Mr. Hoffman continued, “Our model continues to prove resilient amidst challenging macroeconomic circumstances bolstered by our diverse array of products, end markets and geographies, as well as consistent support from our domestic suppliers and deep-rooted relationships with our customers. Our broad geographic footprint of approximately 315 service centers strategically located in close proximity to our end customers provides us a unique competitive advantage by enabling quick turnaround with approximately 40% of our orders delivered within 24 hours. In addition, our proprietary fleet of over 1,700 trucks mitigates the impacts of increased transportation costs in the current inflationary environment.”
Mr. Hoffman concluded, “Looking ahead, we will maintain our focus on execution and continuous improvement, despite macroeconomic challenges including inflation, recessionary concerns and labor and supply-related pressures. As we begin to navigate an environment with overall declining metal prices, the core tenets of our model, including our value-added processing capabilities; product, end market and geographic diversity; and smaller order sizes with quick turnaround supported by our proprietary fleet of trucks, will collectively help provide a stabilizing effect to our selling prices and margins. In addition, our customers tend to hold less inventory in times of declining metal prices and increase their reliance on us to provide the metal they need quickly and more frequently, as well as to fulfill their value-added processing needs. Finally, I’d like to reiterate that Reliance remains well positioned to navigate challenging environments, as we have done so successfully in the past, and we are prepared to help America rebuild as ever-increasing infrastructure needs continue.”
End Market Commentary Reliance provides a wide range of products and processing services to broad and diverse end markets, generally in small quantities on a when-needed basis. The Company’s tons sold in the second quarter of 2022 increased 2.7% compared to the first quarter of 2022, surpassing Reliance’s expectations of flat to up 2.0%, due to continued healthy demand throughout the quarter.
Demand in non-residential construction (including infrastructure), Reliance’s largest end market, improved steadily in the second quarter. Reliance remains cautiously optimistic that demand for non-residential construction activity in the key areas in which the Company participates will remain steady into the third quarter of 2022.
Demand for the toll processing services Reliance provides to the automotive market remained steady during the second quarter despite ongoing supply chain challenges, including the continued impact of the global microchip shortage on new vehicle production levels. Reliance is cautiously optimistic that demand for its toll processing services will remain solid into the third quarter of 2022.
Demand across the broader manufacturing sectors Reliance serves, including industrial machinery and consumer products, declined compared to the first quarter of 2022. On a year-over-year basis, however, demand for industrial machinery improved and remains at healthy levels. Underlying demand in heavy industry was mixed in the second quarter with construction equipment continuing to improve at a healthy rate. Reliance anticipates that demand for its products across the broader manufacturing sector will experience a customary seasonal slowdown in the third quarter of 2022.
Semiconductor demand remained robust during the second quarter and continues to be one of Reliance’s strongest end markets, which is expected to continue throughout the third quarter of 2022. Reliance will continue to make investments to increase its capacity to service significant expansion of semiconductor fabrication in the United States.
Demand in commercial aerospace continued to recover during the second quarter. Reliance is cautiously optimistic that demand in commercial aerospace will continue to steadily improve in the third quarter of 2022 as build rates increase. Demand in the military, defense and space portions of Reliance’s aerospace business remained strong with solid backlogs, which is expected to continue throughout the third quarter of 2022.
Demand in the energy (oil and natural gas) market experienced continued strength in the second quarter due to increased drilling activity resulting from higher oil and natural gas prices. Reliance is cautiously optimistic demand will continue to recover throughout the third quarter of 2022.
Balance Sheet & Cash Flow At June 30, 2022, Reliance had cash and cash equivalents of $504.5 million. Reliance’s total debt outstanding was $1.66 billion as of June 30, 2022, with a net debt-to-EBITDA ratio of 0.4x and no outstanding borrowings under its $1.5 billion revolving credit facility. Reliance generated cash flow from operations of $270.2 million in the second quarter of 2022, driven by the Company’s record earnings, despite over $400 million in additional working capital requirements.
Stockholder Return Activity On July 26, 2022, the Company’s Board of Directors declared a quarterly cash dividend of $0.875 per share of common stock, payable on September 2, 2022 to stockholders of record as of August 19, 2022. Reliance has paid regular quarterly cash dividends for 63 consecutive years without reduction or suspension and has increased the dividend 29 times since its 1994 IPO.
In the second quarter of 2022, the Company repurchased approximately 1.1 million shares of its common stock at an average cost of $178.61 per share, for a total of $193.9 million. Reliance repurchased $24.0 million of its common stock during the second quarter of 2021. Subsequent to the end of the quarter, as of July 26, 2022, Reliance repurchased approximately 582 thousand shares of its common stock at an average cost of $171.94 per share, for a total of $100.0 million, bringing total repurchases by the Company to $598.4 million at an average cost of $163.55 per share under its $1 billion share repurchase plan authorized on July 20, 2021.
On July 26, 2022, the Board of Directors approved an amendment of Reliance’s share repurchase plan, refreshing the repurchase authorization to $1 billion without a set expiration date. The Company expects to maintain its flexible approach to capital allocation, focusing on both growth and stockholder return activities, including opportunistic repurchases of its common stock.
Corporate Developments On May 19, 2022, Reliance announced the retirement of Michael P. Shanley effective December 2022 and, consistent with the Board’s strategic executive leadership succession plan, the promotions of Stephen P. Koch to Executive Vice President and Chief Operating Officer and Michael R. Hynes to Senior Vice President, Operations, each effective July 1, 2022. As of July 1, 2022, Mr. Shanley transitioned from his role as Senior Vice President, Operations, to Special Advisor to facilitate the transition of his responsibilities and to support other special projects.
Business Outlook Reliance remains cautiously optimistic about business conditions in 2022 with solid underlying demand trends expected to continue across the vast majority of the key end markets it serves. The Company expects shipment levels to be impacted by normal seasonal patterns, which include a decline in shipping volumes due to planned customer shutdowns and vacation schedules. As a result, the Company estimates tons sold will be down 3% to 5% in the third quarter of 2022 compared to the second quarter of 2022. In addition, Reliance expects its average selling price per ton sold for the third quarter of 2022 to be down 5% to 7% compared to the second quarter of 2022 driven by declines in pricing for many of its products, notably for carbon, stainless and aluminum flat-rolled products, partially offset by improving demand and pricing for higher value products sold into the aerospace, energy and semiconductor end markets. Based on these expectations, Reliance estimates non-GAAP earnings per diluted share in the range of $6.00 to $6.20 for the third quarter of 2022.
Conference Call Details A conference call and simultaneous webcast to discuss Reliance’s second quarter 2022 financial results and business outlook will be held today, July 28, 2022 at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. To listen to the live call by telephone, please dial (877) 407-0792 (U.S. and Canada) or (201) 689-8263 (International) approximately 10 minutes prior to the start time and use conference ID: 13730870. The call will also be broadcast live over the Internet hosted on the Investors section of the Company's website at investor.rsac.com.
For those unable to participate during the live broadcast, a replay of the call will also be available beginning today at 2:00 p.m. Eastern Time until 11:59 p.m. Eastern Time on August 11, 2022, by dialing (844) 512-2921 (U.S. and Canada) or (412) 317-6671 (International) and entering the conference ID: 13730870. The webcast will remain posted on the Investors section of Reliance’s website at investor.rsac.com for 90 days.
About Reliance Steel & Aluminum Co. Founded in 1939, Reliance Steel & Aluminum Co. (NYSE: RS) is a leading global diversified metal solutions provider and the largest metals service center company in North America. Through a network of approximately 315 locations in 40 states and 12 countries outside of the United States, Reliance provides value-added metals processing services and distributes a full-line of over 100,000 metal products to more than 125,000 customers in a broad range of industries. Reliance focuses on small orders with quick turnaround and value-added processing services. In 2021, Reliance’s average order size was $3,050, approximately 50% of orders included value-added processing and approximately 40% of orders were delivered within 24 hours. Reliance Steel & Aluminum Co.’s press releases and additional information are available on the Company’s website at rsac.com.
Forward-Looking Statements This press release contains certain statements that 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 industry, end markets, business strategies, acquisitions, and expectations concerning the Company’s future growth and profitability and its ability to generate industry leading returns for its stockholders, as well as future demand and metals pricing and the Company’s results of operations, margins, profitability, taxes, liquidity, litigation matters and capital resources. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “preliminary,” “range,” “intend” and “continue,” the negative of these terms, and similar expressions.
These forward-looking statements are based on management's estimates, projections and assumptions as of today’s date that may not prove to be accurate. Forward-looking statements involve known and unknown risks and uncertainties and are not guarantees of future performance. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements as a result of various important factors, including, but not limited to, actions taken by Reliance, as well as developments beyond its control, including, but not limited to, the possibility that the expected benefits of acquisitions may not materialize as expected, the impacts of labor constraints and supply chain disruptions, the continuing pandemic and changes in worldwide and U.S. political and economic conditions such as inflation and economic recession that could materially impact the Company, its customers and suppliers and demand for the Company’s products and services. The extent to which the continuing COVID-19 pandemic may negatively impact the Company’s operations will depend on future developments which are highly uncertain and cannot be predicted, including the duration of the pandemic, any reemergence or mutations of the virus, the actions taken to control the spread of COVID-19 or treat its impact, including the speed and effectiveness of vaccination efforts, and direct and indirect effects of the virus on worldwide and U.S. economic conditions. Deteriorations in economic conditions, as a result of inflation, economic recession, COVID-19, the conflict between Russian and Ukraine or otherwise, could lead to a further or prolonged decline in demand for the Company’s products and services and negatively impact its business, and may also impact financial markets and corporate credit markets which could adversely impact the Company’s access to financing, or the terms of any financing. The Company cannot at this time predict all of the impacts of inflation, economic recession, the COVID-19 pandemic or the Russia-Ukraine conflict and related economic effects, but they could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.
The statements contained in this press release speak only as of the date that they are made, and Reliance disclaims any and all obligation to publicly update or revise any forward-looking statements, 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 about Reliance’s business can be found in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and in other documents Reliance files or furnishes with the United States Securities and Exchange Commission.
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