Ryerson Reports Second Quarter 2018 Results

Second Quarter 2018 Highlights: 

• Achieved net income attributable to Ryerson Holding Corporation of $17.5 million, or $0.46 per diluted share. Generated Adjusted EBITDA, excluding LIFO of $106.6 million, compared to $62.2 million in the first quarter of 2018 and $51.5 million in the second quarter of 2017.
• Grew revenues by 20.8 percent compared to the second quarter of 2017 with 15.2 percent higher average selling prices per ton and 4.8 percent higher tons shipped. Sequentially, revenues increased 12.3 percent with 8.8 percent higher average selling prices and 3.2 percent higher tons shipped.
• Generated gross margin of 17.5 percent, consistent with the first quarter of 2018 and 150 basis points higher than the year-ago period. Second quarter gross margin, excluding LIFO expanded to 21.7 percent, or 280 basis points higher compared to the first quarter of 2018 and 400 basis points higher compared to the second quarter of 2017.
• Realized expense leverage with warehousing, delivery, selling, general, and administrative expenses as a percentage of sales declining to 13.1 percent compared to 13.8 percent in the first quarter of 2018 and 13.5 percent in the second quarter of 2017.

CHICAGO – August 1, 2018 – Ryerson Holding Corporation (NYSE: RYI), a leading value-added processor and distributor of industrial metals, today reported results for the second quarter ended June 30, 2018. 

Eddie Lehner, Ryerson’s President and Chief Executive Officer said, “Thank you to our customers and to my Ryerson teammates as the Company delivered outstanding financial results in the second quarter. Ryerson executed at a high level across the entire enterprise in our never-ending pursuit of providing great customer experiences time after time. Adjusted EBITDA, excluding LIFO, gross margins, excluding LIFO, expense management, and asset management all improved sequentially and year-over-year. Following the second quarter, we also finalized our acquisition of Central Steel & Wire, our largest acquisition in over 10 years. We welcome our new colleagues at Central Steel & Wire in offering our customers the best of both our companies as we move forward together. The Ryerson team turned in a phenomenal first half of 2018 and enters the second half of the year with optimism around the current industrial metals processing and distribution demand environment.”

Second Quarter 2018 Financial Results

Revenues were $1,057.1 million for the second quarter of 2018, up 12.3 percent compared to the first quarter of 2018 due to 8.8 percent higher average selling prices and 3.2 percent higher volume. Compared to the year-ago period, revenues increased 20.8 percent driven by an increase in average selling price per ton of 15.2 percent and higher volume of 4.8 percent.

Gross margin of 17.5 percent for the second quarter of 2018 was consistent with the first quarter of 2018, and grew 150 basis points compared to the year-ago period. Included in cost of materials sold was LIFO expense of $43.9 million for the second quarter of 2018, $13.3 million for the first quarter of 2018, and $14.2 million for the year-ago period. Gross margin, excluding LIFO was 21.7 percent for the second quarter of 2018, compared to 18.9 percent in the first quarter, and 17.7 percent in the second quarter of 2017. Erich Schnaufer, Ryerson’s Chief Financial Officer, noted, “Ryerson achieved gross margins, excluding LIFO of 21.7 percent, 280 basis points higher sequentially as we executed well in an environment of improved pricing and demand conditions, contributing to our strong quarterly earnings.” A reconciliation of gross margin to gross margin, excluding LIFO is included below in this news release.

Warehousing, delivery, selling, general, and administrative expense increased by $8.4 million, or 6.4 percent, for the second quarter of 2018 compared to the prior quarter, driven by increased shipments. Ryerson demonstrated expense leverage as warehousing, delivery, selling, general, and administrative expenses declined to 13.1 percent of sales in the second quarter of 2018 compared to 13.8 percent in the first quarter of 2018, and 13.5 percent in the second quarter of 2017.

Net income attributable to Ryerson Holding Corporation was $17.5 million, or $0.46 per diluted share, for the second quarter of 2018 compared to net income of $10.4 million, or $0.28 per diluted share, in the prior quarter and $0.6 million, or $0.02 per diluted share in the year-ago quarter. Adjusted EBITDA, excluding LIFO, was $106.6 million in the second quarter of 2018 more than double the $51.5 million of earnings in the year-ago period and over 70 percent higher than the $62.2 million achieved in first quarter of 2018. A reconciliation of Adjusted EBITDA, excluding LIFO and net income attributable to Ryerson Holding Corporation is included below in this news release.

Six Months Ended June 30, 2018, Financial Results

Revenues in the first half of 2018 were $1,998.4 million, an increase of 18.3 percent compared to the first half of 2017, as average selling prices increased 12.3 percent and tons shipped increased 5.3 percent. Year-to-date, Ryerson shipments have outpaced the industry as measured by MSCI, which grew 4.3 percent compared to Ryerson’s North America shipments which grew 5.0 percent through the first six months of 2018.

Net income attributable to Ryerson Holding Corporation was $27.9 million, or $0.74 per diluted share, in the first six months of 2018 compared to $15.4 million, or $0.41 per diluted share, for the same period of 2017. Adjusted EBITDA, excluding LIFO increased 60 percent to $168.8 million in the first six months of 2018 compared to $105.8 million in the first six months of 2017. A reconciliation of Adjusted EBITDA, excluding LIFO to net income attributable to Ryerson Holding Corporation, is included below in this news release.

Second Quarter 2018 Balance Sheet, Cash Flow, and Liquidity

Ryerson’s second quarter inventory days of supply increased by two days to 71 compared to the second quarter of 2017, well within the Company’s goal of 70 to 75 days. Additionally, Ryerson maintained ample liquidity in the second quarter of 2018. As of June 30, 2018, borrowings were $385 million on our primary revolving credit facility with additional availability of $363 million. Including cash, marketable securities, and availability from foreign sources, Ryerson’s total liquidity was $414 million as of June 30, 2018 compared to $381 million as of March 31, 2018.

Cash used in operating activities was $17.9 million for the first six months of 2018, primarily due to higher valued inventory and receivables compared to year-end. In the first six months of 2017, cash used in operating activities was $81.5 million. 

Central Steel & Wire Company Acquisition

In July 2018, Ryerson completed the acquisition of Central Steel & Wire Company (“Central Steel & Wire”). Central Steel & Wire, a metal service center with its valued brand spanning more than 100 years, offers a wide selection of products and capabilities centered on bar, tube, plate, and sheet products, and will continue to operate under its own brand name within the Ryerson network of service centers. Central Steel & Wire has approximately 900 employees and has annual revenue of approximately $600 million. The addition of Central Steel & Wire will enhance Ryerson’s combined commercial, processing, and operational strengths to provide a greater breadth of products and services for our customers.

Third Quarter 2018 Commentary
Ryerson management remains positive on demand conditions in the U.S. for the remainder of 2018, as economic indicators remain strong in the manufacturing economy. The U.S. industrial production index, as measured by the Federal Reserve, has remained elevated through June registering year-over-year monthly growth of three percent or more since February 2018. Trade actions continue to impact metal import flows, which are 10 percent lower in the first half of 2018 compared to the prior year period as reported by the U.S. Census Bureau.

Second Quarter 2018 Business Metrics