Q2 2017 Highlights:
CHICAGO – August 3, 2017 – Ryerson Holding Corporation (NYSE: RYI), a leading distributor and value-added processor of industrial metals, today reported results for the second quarter ended June 30, 2017.
Eddie Lehner, Ryerson’s President and Chief Executive Officer, said, “First and always top of mind, I thank our customers for their continuing support and my Ryerson colleagues for a job well done in the quarter. Ryerson executed admirably despite conflicting and volatile factors impacting our industry, making the most of our opportunities given muted pricing power leading to margin compression. We grew market share, demonstrated better expense leverage, and further improved working capital efficiency, managing our days of supply below 70 days for the second consecutive quarter despite significant price deflation in carbon and nickel commodities. These are accomplishments and competencies that remain when the transitory impacts of volatility dissipate. Although price-driver deflation blunted pricing power in the quarter relative to rising inventory replacement costs, a better balance appears to be emerging between inventory replacement costs and selling prices moving into the third quarter, along with potentially improving carbon and stainless pricing dynamics. Ryerson continues generating and realizing self-help opportunities while improving and strengthening the business to the benefit of all Ryerson stakeholders.”
Second Quarter 2017 Financial Results
Revenues were $875.4 million for the second quarter of 2017, up 7.5 percent from the first quarter of 2017 and up 18.3 percent for the year-ago quarter. Tons sold increased by 4.2 percent in the second quarter of 2017 compared to the first quarter of 2017, and 2.6 percent compared to the year-ago period. Additionally, average selling prices per ton increased 3.1 percent in the second quarter of 2017 compared to the first quarter of 2017, and 15.4 percent compared to the second quarter of 2016.
Ryerson’s gross margin was 16.0 percent for the second quarter of 2017, compared to 19.7 percent in the first quarter of 2017 and 22.0 percent for the year-ago period. Included in cost of materials sold was LIFO expense of $14.2 million for the second quarter of 2017, compared to net LIFO income of $0.7 million for the first quarter of 2017 and net LIFO income of $7.0 million in the second quarter of 2016. Gross margin, excluding LIFO decreased to 17.7 percent for the second quarter of 2017, compared to 19.6 percent in the first quarter of 2017 and 21.1 percent in the year-ago period. Average inventory costs rose significantly faster than Ryerson’s average selling prices in the second quarter of 2017, leading to margin compression. A reconciliation of gross margin to gross margin, excluding LIFO is included below in this news release.
Warehousing, delivery, selling, general and administrative expense decreased by $0.6 million, or 0.5 percent, for the second quarter of 2017 compared to the first quarter of 2017. Compared to the year-ago period, expenses increased by $3.6 million, or 3.2 percent. Ryerson demonstrated expense leverage in the second quarter of 2017 as warehousing, delivery, selling, general and administrative expenses declined to 13.3 percent of sales compared to 14.4 percent in first quarter of 2017 and 15.3 percent in the second quarter of 2016. Erich Schnaufer, Ryerson’s Chief Financial Officer, said, “We continue to improve and effectively manage our expenses by leveraging our scale to efficiently deliver our value-added products and services while improving the customer experience.”
Net income attributable to Ryerson Holding Corporation was $0.6 million, or $0.02 per diluted share, for the second quarter of 2017, compared to net income of $14.8 million, or $0.40 per diluted share, in the first quarter of 2017, and $5.6 million, or $0.17 per diluted share, in the second quarter of 2016. Excluding a loss on the retirement of debt, and impairment charges on assets, net income attributable to Ryerson Holding Corporation in the second quarter of 2016 was $16.9 million, or $0.52 per diluted share.
Adjusted EBITDA, excluding LIFO was $51.5 million in the second quarter of 2017, compared to $54.3 million in the first quarter of 2017 and $56.0 million in the year-ago period. Reconciliations of Adjusted EBITDA, excluding LIFO and net income attributable to Ryerson Holding Corporation and earnings per share, excluding impairment charges on assets, and losses on retirement of debt to net income attributable to Ryerson Holding Corporation are included below in this news release.
Second Quarter 2017 Working Capital and Liquidity
In the second quarter of 2017, Ryerson’s inventory balance stood at 68.9 days of supply compared to 69.1 days in the first quarter of 2017 and 74.4 days in the year-ago quarter. Additionally, Ryerson maintained ample liquidity to finance growth in the second quarter of 2017. As of June 30, 2017, borrowings were $377 million on our primary revolving credit facility with additional availability of $266 million. Including cash, marketable securities, and availability from foreign sources, Ryerson’s total liquidity was $326 million compared to $302 million in the first quarter of 2017.
Third Quarter 2017 Commentary
Although the outcome of the Section 232 investigations involving steel and aluminum imports to the U.S. market are not yet known, gross margins are expected to stabilize as replacement costs that peaked in the second quarter appear to be moderating. Global supply and demand fundamentals appear to be firming; the U.S. dollar has retraced from post-election highs while imports appear to be hitting a soft pocket in the third quarter of 2017 as compared to the second quarter of 2017. Demand patterns remain generally positive for our key end markets compared to last year, and Ryerson anticipates these conditions to continue into the third quarter. If average inventory costs reset and realign with market prices over the next several quarters without negative inflections in key drivers, Ryerson expects its commercial, expense, and inventory management efforts to lead to gross margin stabilization as the third quarter progresses.
Second Quarter 2017 Business Metrics
| Second Quarter 2017 |
First Quarter 2017 |
Second Quarter 2016 | Sequential Quarter Change | Year-Over-Year Change | |
|
Tons shipped (In thousands) |
518 | 497 |
505 |
4.2% | 2.6% |
|
|
|||||
| Average selling price/ton | $1,690 | $1,639 | $1,465 | 3.1% | 15.4% |
| Average cost/ton | 1,419 | 1,316 | 1,142 | 7.8% | 24.3% |
| Average cost/ton, excluding LIFO | 1,392 | 1,317 | 1,156 | 5.7% | 20.4% |
Second Quarter 2017 Major Product Metrics
|
Tons Shipped (Tons in thousands) |
Average Selling Price per Ton Shipped |
||||||
| Second Quarter 2017 | First Quarter 2017 | Second Quarter 2016 | Sequential Quarter Change | Year-Over-Year Change | Sequential Quarter Change | Year-Over-Year Change | |
| Carbon steel | 390 | 374 | 385 | 4.3% | 1.3% | 4.4% | 18.2% |
| Aluminum | 52 | 50 | 50 | 4.0% | 4.0% | 2.6% | 3.2% |
| Stainless steel | 74 | 71 | 68 | 4.2% | 8.8% | 2.2% | 18.2% |
|
Net Sales (Dollars in millions) |
|||||
| Second Quarter 2017 | First Quarter 2017 | Second Quarter 2016 | Sequential Quarter Change | Year-Over-Year Change | |
| Carbon steel | $443 | $407 | $370 | 8.8% | 19.7% |
| Aluminum | 191 | 179 | 178 | 6.7% | 7.3% |
| Stainless steel | 229 | 215 | 178 | 6.5% | 28.7% |
Six Months Ended June 30, 2017 Business Metrics
| Six Months Ended June 30, 2017 | Six Months Ended June 30, 2016 | Year-Over-Year Change | |
| Tons shipped (In thousands) | 1,015 | 983 | 3.3% |
| Average selling price/ton | $1,665 | $1,467 | 13.5% |
| Average cost/ton | 1,368 | 1,151 | 18.9% |
| Average cost/ton, excluding LIFO | 1,355 | 1,173 | 15.5% |
Six Months Ended June 30, 2017 Major Product Metrics
| Tons Shipped (Tons in thousands) | Average Selling Price per Ton Shipped | |||
| Six Months Ended June 30, 2017 | Six Months Ended June 30, 2016 | Year-Over-Year Change | Year-Over-Year Change | |
| Carbon steel | 764 | 750 | 1.9% | 16.4% |
| Aluminum | 102 | 97 | 5.2% | 0.5% |
| Stainless steel | 145 | 131 | 10.7% | 15.3% |
| Sales (Dollars in millions) | |||
| Six Months Ended June 30, 2017 | Six Months Ended June 30, 2016 | Year-Over-Year Change | |
| Carbon steel | $850 | $717 | 18.5% |
| Aluminum | 371 | 351 | 5.7% |
| Stainless steel | 443 | 347 | 27.7% |
Earnings Call Information
Ryerson will host a conference call to discuss its second quarter 2017 results Friday, August 4, at 10 a.m. Eastern Time. Participants may access the conference call by dialing 877-201-0168 (Domestic) and 647-788-4901 (International) and using conference ID 43411640. The live online broadcast will be available on the Company’s investor relations website, ir.ryerson.com. A replay will be available at the same website for 90 days.
About Ryerson
Ryerson is a leading value-added processor and distributor of industrial metals, with operations in the United States, Canada, Mexico, and China. Founded in 1842, Ryerson employs around 3,500 employees in approximately 100 locations. Visit Ryerson at www.ryerson.com.
Safe Harbor Provision
Certain statements made in this press release and other written or oral statements made by or on behalf of the Company constitute “forward-looking statements” within the meaning of the federal securities laws, including statements regarding our future performance, as well as management’s expectations, beliefs, intentions, plans, estimates, or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy. The Company cautions that any such forward-looking statements are not guarantees of future performance and may involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. Among the factors that significantly impact the metals distribution industry and our business are: the cyclicality of our business; the highly competitive, volatile, and fragmented market in which we operate; fluctuating metal prices; our substantial indebtedness and the covenants in instruments governing such indebtedness; the integration of acquired operations; regulatory and other operational risks associated with our operations located inside and outside of the United States; work stoppages; obligations under certain employee retirement benefit plans; the ownership of a majority of our equity securities by a single investor group; currency fluctuations; and consolidation in the metals producer industry. Forward-looking statements should, therefore, be considered in light of various factors, including those set forth above, and those set forth under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2016, and in our other filings with the Securities and Exchange Commission. Moreover, we caution against placing undue reliance on these statements, which speak only as of the date they were made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events or circumstances, new information or otherwise.
For full release details see ir.ryerson.com.