Radius Recycling(RDUS) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported an adjusted EPS loss of $0.44 per share and positive adjusted EBITDA of $8 million for Q1 2023, impacted by operational disruptions [20][29] - Average net ferrous selling prices decreased by 12% sequentially and 24% year-over-year, while ferrous sales volumes dropped by 33% sequentially and 26% year-over-year [55] - Non-ferrous sales volumes declined by 12% sequentially but were up 6% year-over-year, with major export destinations being Malaysia, China, and India [33][56] Business Line Data and Key Metrics Changes - Finished steel sales volumes were down 6% sequentially, with average selling prices decreasing by 9% sequentially but remaining 4% higher year-over-year [60] - The steel mill remained a significant contributor despite a decline in net selling prices and volumes of finished steel [30] - Non-ferrous product mix included zorba (29%), aluminum (27%), and copper (14%), with an increasing share of twitch due to advanced technology investments [57] Market Data and Key Metrics Changes - Demand and prices for both ferrous and nonferrous metals weakened throughout the quarter, influenced by slower growth and inflationary pressures [21] - Ferrous export prices strengthened post-quarter, with reported December prices around $400 per ton [13] - The domestic market saw improved ferrous prices in December, reversing seven consecutive monthly declines [13] Company Strategy and Development Direction - The company is focused on four strategic priorities: technology investments, volume growth, expansion of products and services, and productivity initiatives [26] - The acquisition of ScrapSource is intended to grow and expand the recycling services portfolio, responding to sustainability trends [50][67] - The company aims to achieve a full run rate of benefits from productivity initiatives by the second quarter of fiscal 2023 [51] Management's Comments on Operating Environment and Future Outlook - Management noted that operational disruptions have been resolved, and they anticipate significant improvement in second-quarter results [46] - The company expects ferrous volumes to increase by approximately 35% sequentially in Q2, driven by resumed operations [39] - The structural demand for recycled metals remains positive, supported by decarbonization trends and anticipated funding related to infrastructure bills [49] Other Important Information - The company achieved 100% net carbon-free electricity use for the second consecutive year and reduced greenhouse gas emissions by 24% against the 2019 baseline [11] - Capital expenditures for fiscal 2023 are expected to be in the range of $130 million to $140 million, with $48 million spent in Q1 [61][73] - The net debt increased to $354 million, reflecting operating cash outflow and the acquisition of ScrapSource [73] Q&A Session Summary Question: What is the company's appetite for further bolt-on transactions? - The company has an active pipeline for acquisitions and has made significant acquisitions in the Southeast, which is a growth region for steelmaking and manufacturing [78] Question: How should the company think about optimal leverage or net debt to EBITDA ratio? - The company noted that net debt has increased due to working capital increases and delayed shipments, but expects this to reverse in the second quarter [68][80]