Reliance (NYSE:RS) FY Conference Transcript

Summary of Reliance (NYSE:RS) FY Conference Call - November 13, 2025 Industry Overview - Reliance operates primarily in the metal service center industry, focusing on a diversified product mix to mitigate volatility in earnings due to fluctuating metal prices [1][2] - The company has a significant presence in the U.S. market, with operations also in Canada and Mexico, targeting specialty products in various end markets [2] Core Business Insights - Reliance reported $15 billion in sales with an average order size of $3,000, emphasizing a transactional business model with 40% of orders delivered the next day [3] - The company has increased its gross profit margin target from 25%-27% to 29%-31% by enhancing value-added processing, which is less susceptible to metal price fluctuations [5] - Currently, 50% of orders involve some level of value-added processing, up from 40% a decade ago, indicating a strategic focus on improving service and profitability [5] Market Dynamics - The company has seen a 6% increase in tons sold year-to-date, while the industry overall has experienced a 3% decline, showcasing Reliance's ability to gain market share [7] - Key end markets include infrastructure, data centers, and energy, with data centers identified as a particularly strong growth area [11][12] - The company anticipates continued growth in data center infrastructure spending, suggesting that the current cycle is still in its early stages [18] Financial Performance - Reliance has maintained a strong financial position with countercyclical cash flows, managing working capital effectively to sustain profitability [9] - The company has a history of paying dividends for 66 years and aims to increase dividends annually while also considering share repurchases [10] Strategic Growth and Acquisitions - Reliance has completed 76 acquisitions since going public in 1994, with a focus on opportunistic growth rather than setting specific targets [9] - In 2024, the company made four acquisitions, including an energy company and a flat roll company, which are performing well [42] - The company remains open to future acquisitions but emphasizes the importance of finding the right fit for its business model [43] Challenges and Considerations - The company has faced challenges related to tariffs and pricing strategies, particularly following the implementation of Section 232 tariffs in 2018, which initially created a favorable pricing environment [20][21] - Recent market conditions have led to a pinch in margins due to decreased demand and increased inventory levels, impacting the ability to pass through higher costs [22][23] Conclusion - Reliance's diversified approach, focus on value-added processing, and strategic market positioning have allowed it to outperform competitors in the metal service center industry [7][9] - The company is well-positioned for future growth, particularly in high-demand sectors like data centers and infrastructure, while maintaining a flexible approach to capital allocation and acquisitions [18][40]