RS - Earnings call transcript Q1 2024 | Reliance Steel & Aluminum Co.

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Operator

Greetings, and welcome to Reliance Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Kim Orlando with Addo Investor Relations. Thank you, Ms. Orlando.

begin. may You

Kimberly Orlando

of Vice will Steve Lewis, Chief Good at Operating for operator. included first it and thanks reconciliations during Officer; all included by the and website to and XXXX Thank issued Officer; our investor.reliance.com. over morning, of our posted numbers section made A Officer. forward-looking recording conference Ajemyan, call . Please you Executive The Karla reconciliation joined am and joining that adjusted call statement to President Karla results. in are Vice the Lewis, this on of will Investors Arthur of in turn read disclosures be applies now Senior Chief Reliance's and Reliance. President call Executive note the Koch, of President Financial Chief release statements teleconference. financial release. the to all our non-GAAP you, I and I and President CEO earnings of this morning, part to our this quarter the discuss earnings

Karla Lewis

Good first morning, XXXX thank everyone, joining quarter results. to discuss all us for today and our you

model, our collectively of pricing to and share growth which and a once quarter discipline first challenging products, per of profitable contributed gross levels the notably markets strong and margin, we broader continue in end environment, pricing maintain geography business industry of surpassing profit diversity quarter. smart all resilient non-GAAP again Our performance $X.XX. most strong shipment a delivered our the Despite diluted drive first to earnings

margin gross to continue capabilities throughout processing our value-added in investments market cycles. significant profit Our bolster

enable consistent continue and to our capital ability Our core allocating us priorities. profitable generate across to cash operations

nearly offerings, acquisitions results. million XXXX, We $XXX XXXX and to processing in adding collectively date product in have and sales annualized on geographic completed based reach capabilities our expanding X

capabilities. into that $XXX.X capacity invested processing million back growth opportunities capital our increase targeted and predominantly through towards value-added also business We expenditures,

the includes calendar cash for million, budget which an prior CapEx expected is of carryover $XXX years. certain with from year Our million XXXX outlay projects $XXX total approximately

As projects. our of X/X previously spend for growth used noted, we will expect be approximately CapEx

returned valued in stockholders to $XX.X also We dividends. million our

On the Midwest we our in as American February through specialty American to M&A new Alloy on X well Cooksey X, U.S. month, of completed acquiring center this carbon addition Alloy locations steel Steel capabilities acquisitions earlier as in service X Materials. product side, to and fabrication the addition brings portfolio the plate

our and servicing Ohio Midwest flat-rolled Materials in around presence primarily increases American OEMs. North

accretive, strategy our companies fit with of well-run teams. strong immediately acquiring transactions All these management of acquisition

completed now potential We wide IPO, XXXX have we XX opportunities. to a continue of pipeline acquisitions since strong as and future evaluate our M&A the remains array

first results American do X, please of or materials, include include And both on note Midwest quarter our not Cooksey contributions acquired April but February was closed which on that that from Alloy X.

the position inflation the in and Act we CHIPS the Before exceptional activity to robust like Reduction I Reliance growth and Act, of commitment made bill, year with the infrastructure Reliance markets our reshoring continue the underway end importantly, to team to the we from medium the for through business currently make under service, opportunities and several benefit to in commitment customer most term, the have along growth and investments to near-shoring service. the thank their In marked believe profitable start strong to safety. their close, long to entire I'd a we

review to and trends. for Thank turn quarter your our who call pricing demand you first the will now Steve, I'll all today. time over

Stephen Koch

materials. Midwest turn teams the to to family warm at Alloy a and year at like great Karla, our Further, continued the Reliance companies, my and start Reliance and a everyone. good first to of Thanks, the quarter express to to safety. commitment team now extend I'd Cooksey, also I'll gratitude trends. the pricing our morning, like demand and to to welcome strong for I'd American

up down X.X%, sold seasonal both of tons Compared by is and as the year but our the XX% increased of with tons and were center X.X% continued We reported to below XX.X% strategic sold still Our organic well service compared to by prior MSCI industry the growth X% peers trends. XXXX, MSCI. in of to fourth the of our typical acquisitions. quarter, believe expectations our supported quarter our line decrease outperformance both

volumes quarter quarter the impacted day first also by in XXXX X less XXXX. were First of shipping

the on products to below and progressed. Pressure $X,XXX contributed of orders during to X%. decline steel Our March product first pricing declined expectations quarter experienced fourth some XXXX anticipation average We up selling a carbon ton X% of customers in of lower-than-anticipated to lower at across by as our sold the shipment compared delayed pricing quarter carbon per quarter price as steel prices. in activity temporary stainless X%

the into X% they in steel down. quarter. to quarter increased but prices compared second heading and were the fourth X.X% quarter, the to While Stainless compared fourth quarter nonetheless stabilized second down trending prices carbon the steel

will of outperformed in these compared key saw volume to overview markets. our sales. quarter represented I steel growth within levels experienced XXXX. turn to end first and X/X quarter industry products Carbon first our products Next, structurals shipment an All of we of about tubing, the trends plate solid

softening During activity structural strong declining prices. products the quarter XXXX, healthy stainless products sales. just represented demand nonresidential over late carbon Aluminum tubing our construction and supported demand for due of quarter first of to with XX% steel first

product shipment levels stainless While both trends than volume more shows outperformed favorable year-over-year. we aluminum, groups industry across

demand X% market aerospace sold. which in tons automotive toll our about are not reflected stable the comprise our through service sales primarily processing and year-over-year. total We operations products remained of Aerospace our

fueled the first Our investments tolling X.X% continuing our business processed market than and strong in demand in significant to XXXX from increase the by tons more year, quarter automotive the prior capacity. of

Shipments products, by weakness has across highly industrial manufacturing business, by the declined down manufacturing shipments machinery consumer demand. is products market of Demand in Equipment our remained and includes military. general driven military diversified Agricultural and offset partially Our sales year-over-year. machinery, roughly X/X year-over-year stabilized, industry supported and in industrial Consumer but semiconductor by Products, equipment which is stronger total heavy

Our States, semiconductor the CHIPS remains in long-term outlook we fabrication the continue to semiconductor and United positive reinforced expansion in by capacity. underway and Act market for the significant invest semiconductor

our our the Overall, results markets to our across commentary to the serve markets in we we review see the and release additional demand XXXX. strong product Please turn quarter end diversification. will for refer earnings to remaining I on of and Arthur stable financial now end second over call to outlook.

Arthur Ajemyan

everyone. Thanks, Steve, and morning, good

earnings outperformed share guided were $X.XX low the tons pricing products, but environment. per of as the we sold our more nearly quarter levels improved, end our at softened shipment of across challenging anticipated. first deliver pricing industry our successfully despite all Our which non-GAAP bolstered quarterly We than range XXXX earnings seasonally

was replacement quarter stability gross million. first the in costs higher-than-anticipated . We of quarter to compared profit benefit processing margin in and million of our profit the gross to $XX Our for LIFO, from income recorded of our $XX XX% value-added first guidance margin hand alignment capabilities. attributable better part on and costs LIFO

currently from we As income of XXXX approximately increased $XX second quarter we $XX expect have LIFO of our million. to prices we Accordingly, income XXXX. more declined million record in million estimate LIFO anticipated, to $XXX than the annual

day-to-day LIFO excludes effect how On is basis, we operating our our of a method. valuation performance, and which the monitor FIFO inventory which

began Our reverse replacement roughly quarter. gross basis XX to quarter to costs. hand to inventory profit trend improved has as points prior XX.X% in in of margin improved This alignment with the second compared saw by on we and continued March cost the

prices product replacement second as costs. hand continue pressures per stabilize began carbon to short-term gross get of costs alignment April, we'll profit quarter with to see most While throughout in margin on the we

operating the impact the on reserve further in potential results which and was first LIFO benefit prices. generate income of sheet future of As end to will the mitigate declines balance LIFO our of $XXX metal the million, quarter, period

Moving incentive-based was or from the compensation to along primarily SG&A non-GAAP year-over-year head profitability. due which resulting On X.X%, organic same-store increased lower expenses. growth, increased to partially to offset million accommodate a count by lower $X.X expenses basis,

reminder, expenses our profits rightsizing incentives down. by a As as model normalizes trend

sheet I'll and now cash on flow. to discuss balance move

$XXX.X operating the fund of expenditures, For our an and return stockholders million which for flow, the capital acquisition first $XX.X through in to million quarter, million we helps generated $XX.X cash in million dividends. $XXX.X

While $X.XX billion have we XXXX, did under repurchases. not remaining have any of share repurchases authorization share we in first and the repurchase for our quarter opportunistic liquidity ample

of now to second the seasonal Turning macroeconomic our uncertainty prevailing a Overall, despite recovery expect XXXX demand we better-than-normal and matters. in quarter geopolitical second quarter in outlook.

X.X% shipping coming also from approximately to sequential We increase in of completed acquisitions. recently second sequentially volumes X.X% growth the with expect to X% quarter the

these pressure to X% as price per the non-GAAP gross higher which side, some on profit first we through be second will diluted pricing to of share $X.XX our of expectations, margin Based for work the the down $X.XX the we hand. X% the in inventory to expect we On second for ton anticipate on earnings quarter compared average generate short-term selling range cost XXXX. per on quarter, quarter sold to our

prepared you the And participation. questions. This Thank this at concludes remarks. Operator? open to up our your call time, for now we'll

Operator

Phil first The question Gibbs Capital comes with the line from Instructions] of KeyBanc [Operator Markets.

Philip Gibbs

that should the generally pressures out have the the of -- level we in quarter. improve that sell assuming that the are product second to for cost you'll begin in mentioned margin inventory let quarter margins you prices gross short-term to or some third that expecting You gross will the higher from you FIFO expect,

Karla Lewis

Yes.

in business, of for to but a the So products, part our than some different business we in quarter, the as anticipated in more decades first through were center in we hikes. do. been quarter there price manage we the early and service has Prices have deteriorated pricing it's certain fluctuations, little what consistent for

So we selling material. decline. we to have work higher as just through the lag prices to with normal And priced receive continue the if

bit correction, just little expect that for takes temporary, you so be as but stated. it do a we to And a

impacted some price. out, profit base expansion. are As see margin margins, prices gross level we with they certainly metal should the Also then by our

and processing cushion customers, We for taking maintain fluctuations. we the there base consistent just make in it's of more to value-added margins However, little we price as do stable do margin can we not that increase continue the a processing our little the amount -- to a more portion. have on a by perform have value-added our

Philip Gibbs

understand expenses, labor a what than every they at do when Or renegotiations I were -- have something were Okay. to is more along in are contractual you of of new form do which operating up resets just quite more revenue little that of have then talked that. you lines? contributing picking the you plans, you we have the -- higher relative fact bit anticipating. infrastructure where January this do the those Or insurance yet. about to X? I'm the quarter, trying is look Do you to or there it fourth that same And some not or

Karla Lewis

Yes.

year. probably different we more half of about probably is timing our broad-based. on at a wages So have increased that throughout kind time. But little increases the It's of GMX companies wage

comes warehouse expenses, various Our volumes were volume just trucking, delivering so up, increased supplies, expense along more packaging with more.

don't have some expansions greenfields particular, So a little anything that to it too, a little it your right is where before. up. was Phil, I and think ramp some but in process there do we commented in point does was take time broad-based. We

expense the could heavy. little load a So be

a is bit of So little that. there

and that a last workforce training, so to to little Safety especially have us #X takes longer and of carry able probably also, onboard get more and commented properly in takes priority, our think, that employees I quarter them be lot it today's trained. with to you world a We the to is

Arthur Ajemyan

just a X%. year-over-year is this that on I'll add up same-store basis, Phil, only And we're Arthur.

our and expenses. kind pay about we moderates incentive structure -- So talk of that

up So is but then a head count is little comp incentive bit, down.

year-over-year, So same-store only up we're net-net, basis, a X%. on

Philip Gibbs

at I incremental greenfield mean, when through of guess, might I it absorbed? this guess, be some at not you're that million incremental expense $XX may overcome to upwards not of about? operating be exclude you same-store then that under the point what, this I talking be these revenue completely, $XX out, million that may that the And is from is point

Karla Lewis

though. be that much No. It wouldn't

Philip Gibbs

then to Is XXX look and then at level? some as you lease Okay. CapEx XXX X/X XXX lastly, about And cash. you CapEx, growth -- you based what some on guys on carryover talked getting maintenance the the to number the it

Karla Lewis

growth related. I'd Yes. or And of CapEx years, least, X the last, say, at been The our probably is that's consistent. majority X spend pretty

Operator

Next question Martin Englert comes Seaport from Partners. the line with of Search

Martin Englert

same-store What in reported think volumes were last them XQ year? and XQ the this again quarter. you of I

reported or reported it I from of have think tons didn't a it the might differ wasn't sold. couple perhaps quarters gone they where

Arthur Ajemyan

Martin, handy. probably story-changing to only had don't you'll that ones it. same-store at year [indiscernible] public sort completed last of the number affect least you that would the so if and numbers, they're But another small acquisition one X relatively see not I filings, and -- have numbers. our go one

Karla Lewis

Yes. reported if Arthur filings, SEC -- talk the I in if mean as it's don't a mean, indicated. yes, it's necessarily reported about not it always we if difference but I we -- meaningful we there's

Martin Englert

Okay.

So volumes were look what close to you guide. of at that the reported. pretty pretty the -- volume something midpoint were the When

I including contraction XQ. of implied acquisitions at that around X% year-on-year think the it Is level, X% for growth negative versus the right? group

Arthur Ajemyan

Yes.

in you're correct. right think I the ballpark. That's

Karla Lewis

stock difficult pretty thought about being strong we've a our pretty certainly, quarter, that this our break, standpoint kind we acquisitions the the we of little from something go vacation. on of buyers we that. can calendar, maybe industry. by anticipated. They were a back month things for more will obviously, weeks in a saw flat in had is you're broader Martin, from really, of the seemed good the the rolled it price anticipated. QX, year, we're shipment it shipment second we March March, we in good like understood on actually down, that. felt if a than we of a . From side, others just a March. on -- shipment fell heard little at carbon And one we to looked surprised we but more focusing in shipped I March. they we of the levels. for last March probably bit. pricing Yes. typically of falloff saw And at pulled add saw little And morning, a spring absent industry our waiting like couple industrials, in a us standpoint, had and But in that Friday to Good our prices and surprised this half had especially kind Easter, a tons of we which, look those were the first We

than why news quarter good April into anticipating pushes second quarter, and is, which The in year. right, more seasonal we ship feel are [indiscernible] second we that the that improvement is this our

Arthur Ajemyan

second typically, And the somewhat flat first quarter the is with quarter.

uptick same-store sequential and our So guidance some implies tons in a on basis, shipped.

Martin Englert

I growth then think, that still quarterly uptick percent, growth you're at positive, from couple that tons what like it which and or like pivots the a Is with same-store aligns acquisition X% look for from When basis, a purposes? you acquisition on implies number? a the on expecting quarter, modeling seeing with think the rate, the it's I XX,XXX which, something a sequential reasonable

Arthur Ajemyan

unreasonable not That's Yes. .

Martin Englert

other pipeline? acquisition in the the because provide repurchases was any mostly quarter For -- the can this of no due the opportunities and acquisition on color repurchase you

Karla Lewis

Yes.

Martin. So I think in in kind that of question, there X things

acquired complete didn't acquisitions some acquisitions repurchase that we our shares. the we quarter our a fact from we impact opportunistically So activity. that repurchase first market monitor in to and repurchase standpoint, The continue the did

enough balance years, our that the time. Our to last we're allocation at of for buckets we've X strong is said on . as same execute capital the sheet of able all couple

We and So were we will to in to market the very we Midwest Again, on, American what to repurchase on not repurchases have but acquisition welcome just we're the for Reliance in of -- our Cooksey, irrespective the side. opportunistically going we shares. QX, family. happy Alloy continue materials

we've year far seen So good activity. this in XXXX,

see acquisition We opportunities market. there out continue good in activity to the

there continue to to well. as expect active we So be

Martin Englert

end and of some back maybe at I and some on last pushed. of was the demand was one quarter March there maybe of the come delay in it with one expectation wanted to the

you historically far in that order April date far, instead your improvement how some ask your seeing way you So order because another in that volumes. Are to of Q-on-Q, do of anticipate maybe as seeing activity flattish dynamic. intake you expect guess is, maybe I here you and to are as so entry

Karla Lewis

a because today, that's point tomorrow. the orders, Martin, remember, we've of And good customer calls XX% delivered Yes. us our

talk of have they backlog companies, that little more don't Certain visibility. things sell a markets on backlogs depending people may the our end into, we have other about. they and So

bump So levels. in March April we have seen a from little

I the quarter. lot across is our general pretty coming think sentiment a positive FOCs into of second

Martin Englert

nice gross appreciate it FIFO the that. Okay. I margins And was the managing job quarter. . a on

Karla Lewis

Martin. Thanks, Appreciate that.

Operator

[Operator Instructions] line the with Next Wolfe question from Timna comes of Tanners . Research.

Timna Tanners

kind follow the end of low ask drives the to wanted I versus outlook end and second with the guidance. quarter at how of you're high up the looking what

Karla Lewis

our pricing Timna, anticipate never it's orders. do business Yes. generally and with our mix, I product to general, with think, in know And model, both we best we our kind we broad of our and mean, dynamics. next-day volumes

of range pressure a How EPS getting much that range really margins. is it's of shipments, line Margin that within So the within well driver, just there combination on as is pricing. pricing. that to of big as down

So to different for we in little those variables. room give just try a there

Timna Tanners

Okay.

as some futures In that dollar least the volatility you temper you your that on think terms for of the . to And you do some imports? mentioned, the about manage consider changing of trying of variation, do either to flat-rolled at carbon of ever stronger kind appetite side? market

Stephen Koch

Timna, it's Steve.

you sourced. domestically we purchase As material least is our XX% at of that know,

inventory so. We kind lead that's hedge. of because great been job like a that last doing pricing or year received times think in our natural the they're which of we So there's over management leaders challenges feel lot our the the our a by we field,

on market, think, that [indiscernible]. of we I in field So type think that thrive the this in I people a

Arthur Ajemyan

look you point, certainly being where buyer, But lot And of products terms the visibility -- there's to those domestic forecast you of in and a Timna, have a pricing their of then lot Steve's pricing. market. you of kind futures product at -- Yes. to a

for be then So out. especially there's said, with could -- quarter volatility unexpected. that always a that But there's

So where to pricing this but little. we was be going that like happens. thought up we had ended And we just little up down bit, quarter a a

I we that on decisions based we with the demand and the products the then that and information different what geographies and So times again, informed all -- consider but see and yes, some make mean, with we have. lead

of all factored gets forecast. into that So our

Karla Lewis

that's price consider also fixed we're in just would market. spot that, have that's our of need you hedging just and which, contracts, model, add if but I the selling probably lot do sale to to more, primarily We not don't And a buying longer-term your model.

Timna Tanners

And it enough. thought hear more Fair if the comp I to for Okay. could. and just touch on I market. one it you incentive talk I be would was interesting labor adjust interesting how you about thought that. to

that market but softer do labor the Given a period lower hiring you challenges market also the how retaining incentive is people. of in a profitability, less comp, manage or tighter, of and

Karla Lewis

all challenge Yes. the out mean, it's to I more last have been deal over with certainly, our people had of Tim, the in one years. field few

we them we more provide We think in. people fairly. treat we retaining bringing with fairly, people seen have Good to in, them to not interested want sexiest but people seeing opportunities. once the a as more out candidates, the of always do we're good the industry pay have have labor improve far job people some We in looking But people. at of benefits, them more a as been good market them when bit successful jobs, we they're there

our business, but and also get the pretty that years years more some we've their a processing take on. we've where done a the things also when more and couple growing focused workforce may doing less been our well, which profitability bringing had of incentives little have really the tougher, they they value-added for stability good last be provides home, little home, too Certainly, people may

are But not seen any around but easy reaction I there to ways that. So to know it's those these days, don't manage we've significant that factors.

Operator

Phil Next Capital question Markets. line Gibbs comes of KeyBanc the from with

Philip Gibbs

side. both within your on the My know based mix what seeing aerospace Yes. a you've you're balanced and I portfolio. defense was in got follow-up of kind largely

but defense I through volatility trying market. aerospace headlines think to recognize we're strength also all the the to with in the the parse Boeing, trying on commercial

your forward you're some just seeing? well. curious what of your know in are, -- So serving you're programs what I terms what expectations specific as

curious. just So

Karla Lewis

QX space. Yes, that. of commercial, on Aerospace the about and about X% defense sales, half represented aerospace our Phil, that of half side, About

programs, The increased there, On Space smaller, Defence little X%. the not but the in aerospace and whether and business U.S. We're on see to up where a that is but they're picking and seeing internationally, activity continues be order included defense X% we're specifically the key space both strong side, in it's strong. we demand, participating growing. our and several

see commercial we in strength manufacturers, lot our number. missiles, And which companies that airplane we'll like the servicing the targets Europe, see build of and the what less the in we to and into And unfortunate in A are is continued circumstances continues have that picked on that around munitions, much right all strong, announced we area. be know companies U.S. you get is then the world sell doesn't now. that what the side, both some and up today, than with rates actual demand

see the little starting for do in whole chain supply has the we really supply pressure the build a chain as actual are. commercial to correct So kind rates side what of the buildup, some on

pressure near-term do we side. commercial aerospace the on anticipate some So

a we're bullish programs. participating for the pretty expect on are just long on of And the pressure lot there near term, term. there. aerospace, long However, much orders We're little a term out but in still all

Philip Gibbs

on you but that you said budget there's hundreds or year. maybe year projects development. the started me, CapEx in commercial the could some of of maybe in this either stages you And last they're know solid And this ones you've the maturation they or in are for in if there, call then where out one of larger that process for year? just more either or past this have I that of the

Karla Lewis

actual later capacity. got which big this have plants some the of aware, I is couple and slight add that, probably of there maybe a Texas. more Yes. we've stops. they've year, semiconductor We've probably mean on delays down a had talked the big one because as themselves, we've starts to okay ones in kind had That back about semiconductor you're and pulled build

And so bullish bit a still long that. term, we've so on -- slowed but there, little very

Atlanta service they kind center long significantly companies that in We their a have, our specially to area. of about for increase business They're product one ready moving capacity up of newer ramp building. the into

our of On a added U.S., products like started recently. the area. a still stages tolling have operations tolling any. They're added in of the down for that's We've our couple ramping and in lines also carbon businesses. in some that equipment we've still our up Mexico the Steve, heavier early got little greenfield there. a Atlanta some down We've

Stephen Koch

we it's I but would material be just that and cut of greenfield, important do our lot Phil, big really upgrades. some upgrade It in have [indiscernible] of Indiana. not to a the we'll [indiscernible] a doesn't we're but doing add, headliner Alabama Decatur, [indiscernible]

seeing production a was in X those and we're a quarter, the facilities. back bit for bounce that nice in So first in little key offline

Operator

reached gentlemen, now closing comments. and we of question-and-answer turn to floor like the for the Lewis Thank Karla end Ladies you. over would have to I session.

Karla Lewis

and to Thank Reliance in family you, thanks to quarter, we're I'd first you a in did. KeyBanc many thanks and And managing presenting presenting Global would very continued Conference, tell the there. environment And the and Mining proud And you Miami, again at like we think BofA to Reliance. through again, you of and of tough call Materials Basic we'll at hope be what guys Metals, Conference a support our really that and for we today. for that the remind to everyone Boston month, see good job our everyone your like joining in everyone, also Steel of did I next

Operator

teleconference. concludes today's you. Thank This

You your your participation. disconnect this lines at time. Thank for you may

Reliance Steel & Aluminum (RS) 25 Apr 242024 Q1 Earnings call transcript