MRC (US:MRC)2025-11-05 11:46Company Overview - MRC Global is the leading global distributor of pipe, valves, fittings (PVF) and other infrastructure products, serving over 8,300 customers through approximately 200 service locations[99]. - The company has approximately 200,000 SKUs and a global network of over 7,100 suppliers, with over 2,500 employees[99]. - MRC Global's revenue is predominantly derived from the sale of PVF and infrastructure supplies to gas utility, energy, and industrial customers globally[102]. Merger and Acquisitions - The planned merger with DNOW Inc. is expected to be consummated during the fourth quarter of 2025, with MRC Global shareholders receiving 0.9489 shares of DNOW common stock for each share of MRC Global[106][107]. Financial Performance - Revenue for the three months ended September 30, 2025, decreased by $93 million, or 12%, to $678 million compared to $771 million for the same period in 2024[127]. - U.S. sales decreased by $94 million, or 15%, to $550 million for the three months ended September 30, 2025, primarily due to operational challenges from the ERP system implementation[128]. - The Gas Utilities sector accounted for 40% of total revenue for the first nine months of 2025, with a 2% increase compared to the same period in 2024[112]. - The Downstream, Industrial and Energy Transition (DIET) sector generated 29% of total revenue for the first nine months of 2025, but saw a 16% decrease compared to the same period in 2024[115]. - The Production and Transmission Infrastructure (PTI) sector represented 31% of total revenue for the first nine months of 2025, with an 8% decrease compared to the same period in 2024[117]. - Sales for the nine months ended September 30, 2025, were $2,188 million, a decrease of $159 million (7%) compared to $2,347 million in the same period of 2024, driven by declines in the DIET and PTI sectors[152]. Operational Challenges - The implementation of a new cloud-based ERP system in August 2025 faced significant challenges, adversely affecting revenue, profitability, and cash flow in the U.S. segment for Q3 2025[109]. - U.S. segment operating loss was $14 million in Q3 2025, compared to operating income of $30 million in Q3 2024, a decrease of $44 million primarily due to lower sales[135]. - The company anticipates that fluctuations in steel prices will impact the pricing and availability of its products, influencing sales and operating profitability[104]. - MRC Global's business is influenced by economic conditions, oil and natural gas demand, and inventory levels of PVF and related products[104]. Profitability Metrics - Gross profit for Q3 2025 was $125 million (18.4% of sales), down from $157 million (20.4% of sales) in Q3 2024, a decrease of $32 million primarily due to lower sales[129]. - Adjusted Gross Profit decreased to $148 million (21.8% of sales) in Q3 2025 from $162 million (21.0% of sales) in Q3 2024, a decrease of $14 million attributed to lower sales[130]. - Operating loss for Q3 2025 was $3 million, compared to operating income of $37 million in Q3 2024, a decrease of $40 million due to lower sales and ERP system implementation challenges[134]. - Net loss from continuing operations was $9 million in Q3 2025, down from net income of $29 million in Q3 2024, a decrease of $38 million due to lower sales and higher SG&A expenses[142]. Expenses and Cash Flow - SG&A expenses increased to $128 million (18.9% of sales) in Q3 2025 from $120 million (15.6% of sales) in Q3 2024, primarily due to a $6 million increase in legal and professional fees related to mergers[133]. - Interest expense increased to $10 million in Q3 2025 from $4 million in Q3 2024, an increase of $6 million due to higher average debt balances and interest rates[138]. - Net cash used in operating activities from continuing operations was $61 million for the nine months ended September 30, 2025, compared to $195 million provided in the same period of 2024[181]. - Net cash used in investing activities from continuing operations was $25 million for the nine months ended September 30, 2025, compared to $22 million in the same period of 2024[182]. - Net cash provided by financing activities was $65 million for the nine months ended September 30, 2025, compared to $242 million used in the same period of 2024[183]. Market Conditions and Future Outlook - Ongoing maintenance and upgrading of existing energy facilities and pipelines are critical drivers for business, particularly in the Gas Utilities sector[104]. - The company expects substantial growth in the energy transition portion of its business, supported by government incentives and commitments from customers to achieve net zero emissions[116]. - The average Brent crude oil price for the first nine months of 2025 was approximately $71 per barrel, while West Texas Intermediate (WTI) averaged approximately $67 per barrel[117]. Debt and Liquidity - The company had $134 million in borrowings and $477 million of Excess Availability under its Global ABL Facility as of September 30, 2025[175]. - As of September 30, 2025, the outstanding balance on the Term Loan was $342 million, with annual repayments required based on excess cash flow[176]. - Total liquidity as of September 30, 2025, was $536 million, consisting of cash on hand and amounts available under the Global ABL Facility[177]. Credit Ratings - Moody's upgraded the Company's corporate family rating to 'B1' from 'B2' in October 2024, with a stable outlook based on moderate leverage and solid operating performance[178]. - S&P affirmed the Company's issuer-credit rating of 'B' with a 'CreditWatch Positive' rating in June 2025, pending regulatory approval of the DNOW merger[178].