Russel Metals Announces Strong 2017 First Quarter Results

TORONTO, May 3, 2017 /CNW/ - Russel Metals Inc. (RUS - TSX) announces financial results for first quarter ended March 31, 2017.








Three Months Ended

March 31,


2017


2016







Revenues

$

804


$

662







EBIT 1

$

48


$

17







Net Income

$

30


$

8







Earnings per Share

$

0.48


$

0.13







Free Cash Flow 1

$

51


$

22







Dividends paid per share 2

$

0.38


$

0.38







All amounts are reported in millions of Canadian dollars except per share figures,
which are in Canadian dollars







1 EBIT and Free Cash Flow are non-GAAP measures. EBIT represents earnings
before interest  and taxes. Free cash flow represents cash from operating activities
before change in working capital less capital expenditures.

2 Dividends paid per common share during the period.

 

For the 2017 first quarter, we reported net income of $30 million or $0.48 per share on revenues of $804 million compared to net income of $8 million or $0.13 per share in the first quarter of 2016.  A stronger pricing environment led to higher gross margins and improved operating profits in all three of our operating segments.

First quarter revenues in our metals service centers increased 13% to $386 million compared to the same period in 2016.  Tons shipped were approximately 2% higher in the quarter as volumes increased across most regions.  The average selling price improved 11% over first quarter 2016 and 6% over 2016 fourth quarter reflecting mill price increases, higher activity levels and continued growth in value-added processing.  Gross margins were 22.4% compared to 20.7% in the same quarter last year.  Operating profits increased $12 million to $22 million and, as a percentage of revenues, profits doubled to 5.6% from 2.8% due to stronger gross margins.

First quarter 2017 revenues in our energy products segment increased 37% to $339 million compared to $248 million in the 2016 first quarter due to stronger drilling activity and higher pipe prices as oil and natural gas prices stabilized late in 2016.  Gross margins were 17.3% compared to 16.6% for the 2016 first quarter.  This segment had operating profits of $24 million compared to $7 million in the same quarter last year.  Operating profits as a percentage of revenues were 7.0% compared to 2.7% in first quarter 2016.

Revenues in our steel distributors segment increased by 7% to $78 million in the 2017 first quarter compared to $73 million in the 2016 first quarter reflecting higher steel prices than at this time last year.  Gross margins were 21.6% compared to 20.6% and operating profits as a percentage of revenues rose to 10.8% compared to 9.8% in the first quarter of 2016.  Operating profits were $8 million compared to $7 million in the same quarter last year due to the stronger gross margins.

Mr. Brian R. Hedges, CEO, commented, "Our first quarter results are significantly better this year.  Our operating teams across the business leveraged higher 2017 steel prices, which were largely the result of improvements in steel mill outlook, stronger demand and the easing of imports.  Stable oil prices resulted in increased drilling activity and, just as importantly, the inventory overhang in the North American market was substantially reduced."

Mr. John G. Reid, President and COO, continued, "We continue our disciplined approach to inventory management, efficiency gains and growth of our value-added processing.  These factors all contributed to our strong first quarter gross margins and operating profits.  The increase in revenues was encouraging as it reversed the two year trend.  Our energy products operations reduced their aged inventory position, thereby improved the quality of our working capital in the segment."

The Board of Directors approved a quarterly dividend of $0.38 per common share payable June 15, 2017 to shareholders of record as of May 26, 2017.

The Company will be holding an Investor Conference Call on Thursday, May 4, 2017 at 9:00 a.m. ET to review its 2017 first quarter results.  The dial-in telephone numbers for the call are 416-764-8688 (Toronto and International callers) and 1-888-390-0546 (U.S. and Canada).  Please dial in 10 minutes prior to the call to ensure that you get a line.

A replay of the call will be available at 416-764-8688 (Toronto and International callers) and 1-888-390-0546 (U.S. and Canada) until midnight, Thursday, May 18, 2017.  You will be required to enter pass code 245814 in order to access the call.

Additional supplemental financial information is available in our investor conference call package located on our website at www.russelmetals.com.

Russel Metals is one of the largest metals distribution companies in North America.  It carries on business in three metals distribution segments: metals service centers, energy products and steel distributors, under various names including Russel Metals, A.J. Forsyth, Acier Leroux, Acier Loubier, Alberta Industrial Metals, Apex Distribution, Apex Monarch, Apex Remington, Apex Western Fiberglass, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Fedmet Tubulars, JMS Russel Metals, Leroux Steel, McCabe Steel, Mégantic Métal, Métaux Russel, Métaux Russel Produits Spécialisés, Milspec, Norton Metals, Pioneer Pipe, Russel Metals Processing, Russel Metals Specialty Products, Russel Metals Williams Bahcall, Spartan Energy Tubulars, Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis.

Cautionary Statement on Forward-Looking Information

Certain statements contained in this press release constitute forward-looking statements or information within the meaning of applicable securities laws, including statements as to our future capital expenditures, our outlook, the availability of future financing and our ability to pay dividends.  Forward-looking statements relate to future events or our future performance.  All statements, other than statements of historical fact, are forward-looking statements.  Forward-looking statements are often, but not always, identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "expect", "may", "will", "project", "predict", "potential", "targeting", "intend", "could", "might", "should", "believe" and similar expressions.  Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us, inherently involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements, including the factors described below.

We are subject to a number of risks and uncertainties which could have a material adverse effect on our future profitability and financial position, including the risks and uncertainties listed below, which are important factors in our business and the metals distribution industry.  Such risks and uncertainties include, but are not limited to: the volatility in metal prices; volatility in oil and natural gas prices; cyclicality of the metals industry and the industries that purchase our products; decreased capital and other expenditures in the energy industry; product claims from customers; significant competition that could reduce our market share; the interruption in sources of metals supply; manufacturers selling directly to our customer base; material substitution; credit risk of our customers; lack of credit availability; change in our credit ratings; currency exchange risk; restrictive debt covenants; non-cash asset impairments; the unexpected loss of key individuals; decentralized operating structure; the availability of future acquisitions and their integration; the failure of our key computer-based systems, including our enterprise resource and planning systems, failure to renegotiate any of our collective agreements and work stoppages; litigious business environment; environmental liabilities; environmental concerns or changes in government regulations; legislation on carbon emissions; workplace health and safety laws and regulations; significant changes in laws and governmental regulations; fluctuation of our common share price; dilution; and variability of dividends.

While we believe that the expectations reflected in our forward-looking statements are reasonable, no assurance can be given that these expectations will prove to be correct, and our forward-looking statements included in this press release should not be unduly relied upon.  These statements speak only as of the date of this press release and, except as required by law, we do not assume any obligation to update our forward-looking statements.  Our actual results could differ materially from those anticipated in our forward-looking statements including as a result of the risk factors described above and under the heading "Risk" in our MD&A and under the heading "Risk Management and Risks Affecting Our Business" in our most recent Annual Information Form and as otherwise disclosed in our filings with securities regulatory authorities which are available on SEDAR at www.sedar.com.

If you would like to unsubscribe from receiving Press Releases, you may do so by emailing info@russelmetals.com; or by calling our Investor Relations Line: 905-816-5178.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)






Quarters ended March 31

(in millions of Canadian dollars, except per share data)



2017



2016

Revenues


$

803.5


$

662.1

Cost of materials



641.2



535.3

Employee expenses



66.6



64.7

Other operating expenses



47.8



45.5

Earnings before interest and provision for income taxes



47.9



16.6

Interest expense



5.0



5.4

Earnings before provision for income taxes



42.9



11.2

Provision for income taxes



13.3



3.4

Net earnings for the period


$

29.6


$

7.8

Basic earnings per common share


$

0.48


$

0.13

Diluted earnings per common share


$

0.48


$

0.13

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)




Quarters ended March 31

(in millions of Canadian dollars)


2017



2016

Net earnings for the period

$

29.6


$

7.8

Other comprehensive loss






Items that may be reclassified to earnings







Unrealized foreign exchange losses on translation of foreign operations


(4.4)



(31.7)

Items that may not be reclassified to earnings







Actuarial gains (losses) on pension and similar obligations, net of taxes


2.0



(2.9)

Other comprehensive loss


(2.4)



(34.6)

Total comprehensive income (loss)

$

27.2


$

(26.8)


 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)








March 31


December 31

(in millions of Canadian dollars)


2017


2016

ASSETS







Current








Cash and cash equivalents


$

168.8


$

181.8


Accounts receivable



466.4



359.4


Inventories



628.3



615.8


Prepaid expenses



11.8



8.5


Income taxes



0.5



6.6




1,275.8



1,172.1








Property, Plant and Equipment



237.8



239.7

Deferred Income Tax Assets



7.5



5.9

Financial and Other Assets



6.3



5.1

Goodwill and Intangibles



84.0



85.7



$

1,611.4


$

1,508.5

LIABILITIES AND SHAREHOLDERS' EQUITY







Current








Bank indebtedness


$

78.4


$

34.9


Accounts payable and accrued liabilities



359.4



313.5


Income taxes payable



15.1



5.3


Current portion long-term debt



0.1



0.1




453.0



353.8








Long-Term Debt



296.0



295.8

Pensions and Benefits



8.5



11.0

Deferred Income Tax Liabilities



14.8



14.5

Provisions and Other Non-Current Liabilities



8.8



8.1




781.1



683.2

Shareholders' Equity








Common shares



533.6



532.4


Retained earnings



170.0



161.9


Contributed surplus



16.0



15.9


Accumulated other comprehensive income



110.7



115.1

Total Shareholders' Equity



830.3



825.3

Total Liabilities and Shareholders' Equity


$

1,611.4


$

1,508.5


 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)






Quarters ended March 31

(in millions of Canadian dollars)



2017



2016

Operating activities








Net earnings for the period


$

29.6


$

7.8


Depreciation and amortization



8.5



8.9


Provision for income taxes



13.3



3.4


Interest expense



5.0



5.4


Gain on sale of property, plant and equipment



(0.1)



(0.3)


Share-based compensation



0.2



0.2


Difference between pension expense and amount funded



-



(0.4)


Debt accretion, amortization and other



0.2



0.2


Interest paid



(0.4)



(0.7)

Cash from operating activities before non-cash working capital



56.3



24.5

Changes in non-cash working capital items








Accounts receivable



(107.6)



(0.7)


Inventories



(14.3)



21.4


Accounts payable and accrued liabilities



42.8



(1.0)


Other



(3.3)



(0.1)

Change in non-cash working capital



(82.4)



19.6


Income taxes refund, net



0.7



4.9

Cash (used in) from operating activities



(25.4)



49.0

Financing activities








Increase (decrease) in bank indebtedness



43.5



(17.9)


Issue of common shares



1.1



-


Dividends on common shares



(23.5)



(23.4)


Issuance of long-term debt



-



0.2


Repayment of long-term debt



-



(0.2)

Cash from (used in) financing activities



21.1



(41.3)

Investing activities








Purchase of property, plant and equipment



(5.6)



(3.0)


Proceeds on sale of property, plant and equipment



0.2



4.7


Payment of contingent consideration



-



(0.1)

Cash (used in) from investing activities



(5.4)



1.6

Effect of exchange rates on cash and cash equivalents



(3.3)



(12.0)

Decrease in cash and cash equivalents



(13.0)



(2.7)

Cash and cash equivalents, beginning of the period



181.8



143.4

Cash and cash equivalents, end of the period


$

168.8


$

140.7


 

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)




















Accumulated











Other





Common

Retained

Contributed

Comprehensive



(in millions of Canadian dollars)


Shares

Earnings

Surplus

Income


Total

Balance, January 1, 2017


$

532.4

$

161.9

$

15.9

$

115.1

$

825.3

Payment of dividends



-


(23.5)


-


-


(23.5)

Net earnings for the period



-


29.6


-


-


29.6

Other comprehensive loss













for the period



-


-


-


(2.4)


(2.4)

Recognition of share-based













compensation



-


-


0.2


-


0.2

Share options exercised



1.2


-


(0.1)


-


1.1

Transfer of net actuarial losses













on defined benefit plans



-


2.0


-


(2.0)


-

Balance, March 31, 2017


$

533.6

$

170.0

$

16.0

$

110.7

$

830.3

































Accumulated











Other





Common

Retained

Contributed

Comprehensive



(in millions of Canadian dollars)


Shares

Earnings

Surplus

Income


Total

Balance, January 1, 2016


$

531.7

$

192.1

$

15.2

$

129.9

$

868.9

Payment of dividends



-


(23.4)


-


-


(23.4)

Net earnings for the period



-


7.8


-


-


7.8

Other comprehensive loss













for the period



-


-


-


(34.6)


(34.6)

Recognition of share-based













compensation



-


-


0.2


-


0.2

Transfer of net actuarial losses













on defined benefit plans



-


(2.9)


-


2.9


-

Balance, March 31, 2016


$

531.7

$

173.6

$

15.4

$

98.2

$

818.9

 

SOURCE Russel Metals Inc.

For further information: Marion E. Britton, CPA, CA, Executive Vice President and Chief Financial Officer, Russel Metals Inc., (905) 819-7407, E-mail: info@russelmetals.com, Website: www.russelmetals.com

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