Ryerson(US:RYI)2021-11-07 18:06Financial Data and Key Metrics Changes - Ryerson generated revenues of $1.58 billion in Q3 2021, with average selling prices up 19.6% and volume down 7.2% from Q2 2021 [38] - Gross margin expanded to a record 23.1%, compared to 18.1% for Q2 2021, with LIFO expense of $102 million [39] - Net income attributable to Ryerson was $50 million or $1.27 per diluted share, down from $113 million or $2.91 per diluted share in Q2 2021 [40] - Adjusted EBITDA including LIFO was $301 million, an increase of $104 million compared to the previous quarter [42] - Ryerson ended Q3 with $633 million of net debt, an increase from $563 million in the previous quarter, but achieved a leverage ratio of 1.0 times, down from 1.5 times in Q2 2021 [47] Business Line Data and Key Metrics Changes - The diversified metals mix with 50% of revenues from bright metals augmented gross margins in the quarter [12] - Inventory restocking increased the cash conversion cycle to 68 days, up from 55 days in Q2 2021 [31] - Days of supply increased to 78 days from 63 days in the previous quarter due to intentional inventory investment [31] Market Data and Key Metrics Changes - LME aluminum prices increased by 16% and LME nickel prices by 8% by the end of Q3 2021 compared to Q2 2021 [19] - North American industry shipments contracted nearly 5% quarter-over-quarter, attributed to ongoing supply chain bottlenecks [23] - Ryerson's North American per day shipments reflected broader industry trends, with softer customer activity in most end markets except oil and gas [24] Company Strategy and Development Direction - Ryerson's Board approved a $0.005 per share quarterly dividend increase, reflecting confidence in future earnings potential [16] - The company is focused on modernizing and building new facilities to enhance customer experience and operational efficiency [100] - Ryerson maintains a robust M&A pipeline while also focusing on organic growth and capital investments [72] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Q4 2021 business conditions, anticipating revenues of $1.5 billion to $1.6 billion [29] - The company expects fourth quarter volumes to soften due to normal seasonality and continued supply chain constraints [28] - Management noted that demand is accumulating rather than eroding, with strong backlogs reported by customers [64] Other Important Information - Ryerson repurchased approximately 39,000 shares at an average price of $22.31, returning approximately $1 million to shareholders [34] - The company completed a partial pension annuitization, reducing pension plan liability exposure and resulting in a decrease of $44 million in accounting liability [44] Q&A Session Summary Question: How much did third quarter margins benefit from import arbitrage opportunities? - Management indicated that significant quantities of imports did not contribute to margins or holding gains during the quarter [57] Question: Are there any markets seeing more pent-up demand due to deferrals? - Management noted that demand accumulation is broad-based, with no specific market being more impacted than others [60][63] Question: How should networking capital be viewed going forward? - Management expects inventory restocking to wane as service levels normalize, anticipating cash flow positivity in Q4 [65][66] Question: Can you discuss pricing declines and changes made to navigate that environment? - Management emphasized a disciplined approach to managing costs and maintaining flexibility in response to market cycles [68] Question: What is the outlook for acquisitions in the next five years? - Management expressed a positive trajectory for acquisitions, with a robust M&A pipeline and a focus on organic growth [72] Question: Can you elaborate on the decision to build new facilities? - Management explained that building new facilities supports modernization and efficiency, aligning with growth strategies [100][101]