Ryerson Reports Second Quarter 2021 Results

CHICAGO, Aug. 4, 2021 /PRNewswire/ -- 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, 2021.

Q2 2021 Highlights:

• Generated second quarter revenues of $1.4 billion
• Generated earnings per diluted share of $2.91
• Achieved record Adjusted EBITDA, excluding LIFO of $197 million
• Reduced net debt to $563 million and achieved leverage ratio of 1.5x, within long-term target range
• Net cash conversion cycle of 55 days
• Warehousing, delivery, general, & administrative expense of 12.6% of sales
• Ended the second quarter with liquidity of $890 million
• Announced a quarterly cash dividend of $0.08 per share
• Announced the authorization of a $50 million, two-year share repurchase program

Management Commentary

Eddie Lehner, Ryerson's President and Chief Executive Officer, said, "Halfway through our 179th year in business, our future has never looked brighter because of the committed resolve and adaptiveness of each of my Ryerson teammates working together to provide great customer experiences no matter the circumstances. Given the number and magnitude of the challenges encountered over the past eighteen months, we are all witnesses and participants in bringing out the best in one another.  Looking back over the quarter and ahead, more signs are emerging that support a sustained manufacturing expansion featuring recyclable industrial metals that are at the epicenter of current and future societal needs. With supply still unable to meet current and anticipated demand, manufacturing order backlogs keep rolling over and extending, lending further support to favorable pricing dynamics. As Ryerson's overall performance and operating trajectory create step-change improvements to the balance sheet, we are pleased to announce noteworthy additions to our capital allocation plan with the establishment of an eight cent per share quarterly dividend and a $50 million share repurchase plan. This announcement affirms Ryerson's progress since our IPO and our vision for an intelligent network of interconnected industrial metals service centers providing great customer experiences at speed, scale and value-add."

End-Market Commentary

Ryerson noted sequential shipment per day improvement in our industrial equipment, food and agriculture and commercial ground transportation end-market sectors during the second quarter of 2021 and we continue to receive positive demand forecasts from these customers, despite persisting supply challenges. Consumer durable, metal fabrication and machine shop and HVAC sector end-markets saw declines relative to the first quarter of 2021 in North America on supply side constraints across labor, materials and transportation inputs.

The notable price increases in carbon steel products that began in the second half of 2020 have continued to climb as lead times remain extended. Mill capacity has been above 80% for the past several months and futures prices remain elevated through year-end. Likewise, LME aluminum gained 11% in the second quarter of 2021 and nickel prices appreciated 9%. At this point, we anticipate that prices across all three of our primary commodities will remain elevated at or near twelve-month highs through the third quarter and that price normalization will be gradual given supportive demand conditions. 

Second Quarter Results

Ryerson achieved revenues of $1.4 billion in the second quarter of 2021, an increase of 23.7% compared to $1.1 billion for the first quarter of 2021, with average selling prices 20.1% higher and tons shipped 2.9% higher. Gross margin expanded sequentially to 18.1% in the second quarter of 2021 compared to 17.2% in the first quarter of 2021. Included in the second quarter of 2021 cost of goods sold was LIFO expense of $105 million, compared to LIFO expense of $84 million in first quarter, excluding which, gross margin expanded to 25.5% from 24.6%, respectively. Ryerson achieved expense leverage in the second quarter of 2021 as warehousing, delivery, selling, general and administrative expenses as a percent of sales was 12.6% compared to 15.0% in the first quarter of 2021.

Net income attributable to Ryerson Holding Corporation for the second quarter of 2021 was $113 million, or $2.91 per diluted share, compared to net income attributable to Ryerson Holding Corporation of $25 million, or $0.66 per diluted share in the previous quarter. Included in the second quarter 2021 net income is an $87 million gain on the sale of assets related to sale-leaseback transactions. Excluding this and the associated income taxes, adjusted net income was $48 million, or $1.24 per diluted share and compares to $10 million, or $0.26, of adjusted net income and diluted earnings per share for the previous quarter. Record Adjusted EBITDA, excluding LIFO of $197 million was achieved in the second quarter of 2021, which compares to $124 million in the first quarter of 2021 and $21 million in the year-ago period.

Liquidity & Debt Management

Ryerson ended the second quarter with 63 inventory days of supply and maintained receivables and payables cycles in-line with the first quarter of 2021. This contributed to a cash conversion cycle of 55 days for the period, compared to 53 days for the first quarter of 2021 and 91 days for the year-ago period.

The company generated free cash flow of $126 million and average free cash flow yield of 23% in the second quarter. Driven by asset backed credit facility repayments and proceeds from asset sales, net debt was reduced by $135 million compared to the first quarter of 2021. This achievement, combined with Ryerson's increasing trailing twelve month Adjusted EBITDA, excluding LIFO produced a leverage ratio of 1.5x, well within the Company's long-term target of 1-2x.

In July 2021, Ryerson redeemed $100 million of its outstanding 8.5% Senior Secured Notes due 2028 (the "Notes") utilizing proceeds from property sale-leasebacks at a price of 104% and another $50 million at a price of 103%. After these partial redemptions, $300 million aggregate principal amount of the Notes remain outstanding, compared to the $500 million in original principal issued in July of 2020. This $200 million reduction in the Notes has reduced our annual interest expense by $17 million.

Ryerson's global liquidity rose to $890 million as of June 30, 2021 from $583 million as of March 31, 2021 driven by proceeds from the sale-leaseback transaction, strong earnings generation and higher working capital asset values.

Stockholder Return Activity

On August 4, 2021, the Board of Directors (the "Board") declared a quarterly cash dividend of $0.08 per share, or an anticipated $0.32 on an annualized basis, on the company's shares of common stock. Ryerson's first dividend payment will be made on September 16, 2021 to stockholders of record as of the close of business on August 16, 2021. In addition, on August 4, 2021, the Board also approved a share repurchase program authorizing the Company to purchase up to an aggregate of $50 million of the Company's common stock over the next two-year period.  

Jim Claussen, Executive Vice President & Chief Financial Officer said, "Our second quarter results reflect the success of our financial transformation as we continued to effectively manage working capital, realized expense leverage and achieved a net debt leverage ratio within our long-term target range. With Ryerson's substantially lower fixed cash commitments and its proven ability to effectively manage working capital, we are pleased to announce a return of capital to shareholders in the form of a dividend while also continuing to invest in the business to drive long-term growth."

Outlook Commentary

Ryerson is optimistic about the third quarter industry environment. Pricing across all three of Ryerson's primary product lines continues to increase while the Company expects volumes to follow normal seasonality patterns. Therefore, Ryerson anticipates third quarter 2021 revenues in the range of $1.5 billion to $1.6 billion with sequential average selling prices 10 to 12% higher and shipments flat to down 3% compared to the second quarter of 2021. LIFO expense in the third quarter is expected to be in the range of $88 to $92 million provided average inventory costs continue to rise. Therefore, Adjusted EBITDA, excluding LIFO is expected to be in the range of $208 to $212 million and earnings per diluted share is expected to be in the range of $1.63 to $1.73.  

Earnings Call Information

Ryerson will host a conference call to discuss its second quarter results Thursday, August 5, 2021 at 10 a.m. Eastern Time. Participants may access the conference call by dialing 866-248-8441 (U.S. & Canada) / 929-477-0591 (International) and using conference ID 3038781. 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 has around 3,900 employees in approximately 100 locations. Visit Ryerson at www.ryerson.com.

Safe Harbor Provision

Certain statements made in this presentation 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, objectives, or projections relating to the future. Such statements can be identified by the use of forward-looking terminology such as "objectives," "goals," "preliminary," "range," "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 our business are: the cyclicality of our business; the highly competitive, volatile, and fragmented metals industry 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; impacts and implications of adverse health events, including the COVID-19 pandemic; 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 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, 2020, 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.