TSE:RUS Russel Metals Q1 2024 Earnings Report C$42.09 -0.04 (-0.09%) As of 11:37 AM Eastern ProfileEarnings HistoryForecast Russel Metals EPS ResultsActual EPSC$0.82Consensus EPS C$0.80Beat/MissBeat by +C$0.02One Year Ago EPSN/ARussel Metals Revenue ResultsActual Revenue$1.06 billionExpected Revenue$1.16 billionBeat/MissMissed by -$94.40 millionYoY Revenue GrowthN/ARussel Metals Announcement DetailsQuarterQ1 2024Date5/1/2024TimeN/AConference Call DateThursday, May 2, 2024Conference Call Time9:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Russel Metals Q1 2024 Earnings Call TranscriptProvided by QuartrMay 2, 2024 ShareLink copied to clipboard.There are 6 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to our 2024 First Quarter Results Call for Russell Metals. Today's call will be hosted by Marty Jurafsky, Executive Vice President and Chief Financial Officer and John Reed, President and Chief Executive Officer of Russell Metals, Inc. I'll now turn the meeting over to Marty Jurafsky. Please go ahead. Speaker 100:00:28Great. Thank you, operator, and good morning, everyone. I plan on providing an overview of the Q1 twenty twenty four results. And if you want to follow along, I'll be referencing the PowerPoint slides that are on our Web site. Just go into the Investor Relations section and it's located in the Conference Call submenu. Speaker 100:00:46If you go to Page 3, you can read our cautionary statement on forward looking information. So let me start with a little perspective on Q1. And I think about the quarter, it kind of highlights 2 key things. First, how we performed during periods of steel price volatility. Over the past couple of quarters, the benchmarks for sheet and plate have swung up and down by a fair amount, probably around 20%, give or take. Speaker 100:01:13And not only have we generated solid margins, earnings and returns over the past few quarters, but has been with relatively low volatility as compared to the underlying steel price environment. In the past, steel price volatility has occasionally led to significant inventory impairments and margin compression. And I think we are starting to see the benefits of our business changes with more of those opportunities on to come. 2nd, there have been a lot of behind the scenes initiatives that provide us with the springboard for the balance of 2024 and beyond. 1, we have a series of our equipment upgrade and facility modernizations that are starting to come to fruition in Q2, Q3, Q4 and beyond. Speaker 100:01:552, we've set the stage for further enhancements to our debt structure that should lead to more flexibility and a lower cost capital structure and 3, we are continuing to look at new potential acquisition opportunities in addition to the extensive planning that is being done for the Samuels acquisition. So let me now go through some of the materials and let's start with market conditions on Page 5. As said earlier, we've seen the underlying steel prices exhibit a fair amount of volatility over the past while. That said, our hot rolled sheet prices appear to have somewhat stabilized after hitting a trough in late March. The other interesting observation is that when we look at the trough price points that have been experienced over the past 18 months, HRC prices have bottomed at levels that are well above historical troughs. Speaker 100:02:50This speaks to the steel producers demonstrating some degree of discipline at the same time that demand is reasonable. For plate, we have seen prices taper off over the past several quarters. If we look back a few quarters ago, the spread between plate and sheet was well outside of the historical norm. As we look at the prevailing environment, the spread has come back to a level that makes more sense given the industry cost curves. Taking all that together, we are looking at price levels today that are relatively healthy by historical comparisons. Speaker 100:03:26On supply chain inventories, they have bounced around a bit, but remain in check. And last and more most importantly, demand is reasonably solid across our business. If we go to Page 6, we have a snapshot of our historical results. The start for 2024 was very similar to the end of 2023. We generated significant cash flow from operations and continue to have a very strong balance sheet and that gives us flexibility to pursue a range of opportunities. Speaker 100:03:57If we look across the various charts going from top left, revenues for the quarter were $1,100,000,000 which was up from $1,000,000,000 in Q4. EBITDA was $84,000,000 EBITDA margin was 8%, earnings per share were $0.82 All these were up slightly from Q4. Our annualized return on invested capital came in at 19% and remains above our minimum target return over a cycle and we continue to be 1st quartile within our industry. Lastly, in terms of capital structure, which you see in the bottom right, we have net cash position of $277,000,000 versus net debt of almost $500,000,000 at the end of 2019, and we have a multidimensional approach to using that dry powder perdiciously over time. Going to our more detailed financial results on Page 7. Speaker 100:04:53From an income statement perspective, I covered several of the high level items on the previous page, but a few other items to note. Revenues of $1,100,000,000 was up 4% from Q4. Some of this was the impact of the volume recovery in Q1 versus Q4 as that normally evolves from a seasonal perspective. On gross margins, all segments were up a little bit, and I'll discuss these in more detail in a minute. Interest expense came down to 0 as we are generating interest income on our growing cash reserve. Speaker 100:05:27Our Q1 results were impacted by a few non operating type items. Stock based comp was nil for the quarter versus $7,000,000 expense in Q4. We had a $3,000,000 reversal in our NRV inventory, NRV reserves. Again, the proactive inventory management has reduced much of the NRV risks that we have experienced in the past. From a cash flow perspective, in Q1, we used $66,000,000 for working capital, which was mostly the seasonal pickup in accounts receivable and the decline in accounts payable as a result of the timing of our annual variable compensation that gets paid out in Q1. Speaker 100:06:10No major changes in inventory for the quarter. CapEx of $24,000,000 was in line with our tracking to be greater than $100,000,000 for this year as our key discretionary projects continue to advance. In the quarter, there were no big projects, but rather a series of projects, including the installation of new lasers in Winnipeg, the near completion of our greenfield location in Saskatoon as well as the commencement of a project to expand our Texarkana facility. From a balance sheet perspective, we are net cash position $277,000,000 which I said earlier. As a result of our strong position, we'll be completing the redemption of our $150,000,000 6 percent notes today. Speaker 100:06:57There are other debt structure enhancements that are in the works that should unfold in the coming quarters. As we said in the past, we manage the company with a conservative investment grade type credit bias and this approach should give us better financial flexibility and reduce our capital cost on a go forward basis. Our liquidity is near $1,000,000,000 While one item to note is that the Canadian dollar did weaken in the quarter, which did have an impact on our OCI account in translating our U. S.-based financial results into Canadian dollars. In the quarter, we picked up 339,000 shares under our NCIB, which brings the total to 3,500,000 shares since we put the program in place in August of 2022 and our average purchase price cumulatively to date is $35.56 per share. Speaker 100:07:47Our book value per share continued to go up and is almost $20 per share, notwithstanding our share buybacks Speaker 200:07:55in the Speaker 100:07:55quarter. Lastly, we have declared a 5% increase in our quarterly dividend to $0.42 per share, and I'll discuss that in more detail a little bit later on. On Page 8, we show our EBITDA variance analysis between last quarter and this quarter. Looking at service centers, the volumes were a positive pickup from Q4 and our margins were also up. There was a $13,000,000 increase in operating expenses, which was a bit out of the norm as it was a combination of variable compensation tied to financial results, the implications from FX movements and some non recurring costs related to the Samuels acquisition. Speaker 100:08:35Energy field stores was up $3,000,000 as it continued to benefit from a solid energy environment. Steel distributors was down $2,000,000 There was also a $5,000,000 unfavorable variance in other and it was a number of all relatively modest items. We had a favorable impact from the lower mark to market on our stock based comp, but it was more than offset by normal seasonal decline in our Thunder Bay Terminal operations, Samuel acquisition costs and a few other small items. On Page 9, we have our segmented P and L information. And for service centers, revenues were up and this was mostly driven by higher volumes, but we also saw slightly higher price realizations as well as better margins. Speaker 100:09:15I'll go through the more detailed metrics for our service centers on the next page, but our overall results were pretty good in a quarter that experienced a fair amount of price volatility. In Energy Field Stores, we are continuing to see solid performance. Q1 revenues and earnings were up as a result of good market conditions. Distributors revenues and earnings were down due to some delays with inbound shipments and more conservative procurement due to those market conditions. That said, our margins did improve, albeit on lower revenue. Speaker 100:09:47On Page 10, we are showing a deeper dive on some of the metrics for metal service center business. Top right graph is past 5 years for tonne shipped. The Q1 2024 volumes were up 4% versus Q4, up but down 6% versus this time last year. The Q1 2023 comparison point did benefit from very strong demand and unusually good period last quarter, whereas Q1 2024 was solid, but it was also impacted early on in the quarter by some weather related shipping constraints that did occur in January. On the bottom left graph, we have the revenue and cost of goods sold per tonne. Speaker 100:10:28Revenue per tonne or price realizations increased by $52 versus a $7 increase in our cost of goods sold, which resulted in a $44 per tonne pickup in margin that is shown in the bottom right graph. For Q1, our gross margin was 4.87 dollars per tonne, which remains higher than our historical average of closer to $300 As we've said many times in the past, our investment initiatives should lead to higher average margins and lower volatility associated with those margins over the cycle. On Page 11, we have illustrated our inventory turns. This chart shows the inventory turns by quarter for each segment, energy in red, service centers in green and steel distributors in yellow. In addition, the black line is the average for the entire company. Speaker 100:11:16Overall, our inventory turns improved from 3.8 turns at December 31 to 3.9 for this quarter. By sector, our service centers improved to 4.6 turns. Our energy field stores came up to 3.2, while our steel distributors declined a little bit to 2.4. On Page 12, we have the impact of inventory turns on inventory dollars. Overall for the quarter, there wasn't a big change. Speaker 100:11:43It was very comparable at March 31 versus December 31. In service centers, tonnage was slightly lower and cost per tenant was slightly higher than at year end. On Page 13, the overall impact on capital utilization and returns. Our capital deployment moved up to about $1,400,000,000 because of an increase in working capital and an increase in PPE as a result of our incremental spending on a variety of projects. More importantly, our returns continue to be industry leading with last 12 months return on invested capital at 23%. Speaker 100:12:21If we go to Page 14, I have an update of our capital structure. The continuation of our strong free cash flow and disciplined approach to utilization gives us a lot of flexibility. On the left table, our cash position was $575,000,000 at March 31, which is up $174,000,000 from this time last year. Our equity based increased to $1,700,000,000 in spite of our share buybacks. The chart on the right shows our book value per share, which is almost $20 per share, which is a little over $2 increase since this time last year. Speaker 100:12:58On Page 15, we have an update on our capital allocation priorities. Given our strong balance sheet, we continue to have this multipronged approach. As we've always said for investment purposes, we're trying to seek average returns greater than 15% over the cycle. As already discussed, we've delivered well above that target for extended period of time. The ongoing initiatives are threefold. Speaker 100:13:21The identification and pursuit of value added projects, we have over 40 projects on the go right now. And as every day, as every week goes by, we're identifying more and more interesting opportunities. Facility modernizations, we have 5 on the go that are tracking at various times in late this year and early next year. As I mentioned earlier, Saskatoon is probably the first one on the come and we're very excited about all those initiatives. In total, our CapEx project pipeline is greater than $200,000,000 It's as large as it's ever been. Speaker 100:13:53And the key thing for us is it continues to advance the opportunity for high return, high margin, low volatility type projects that serve our customers and serve our communities in which we operate. In terms of acquisitions, we are continuing to work on the Samuel deal. As we've said publicly, we are continuing our dialogue with the Competition Bureau to resolve their concerns related to a narrow segment of product in a specific geography. As much as I would like to go into more detail, it's not appropriate to be more specific at this time. In addition, we are actively looking at other acquisition opportunities that are coming available and are interesting complements to our existing platform. Speaker 100:14:36In terms of returning capital to shareholders, we have adopted a flexible approach over the last few years. For dividends, we are announcing a 5% increase in our quarterly dividend to take it to $0.42 per share, which will be payable on June 14 this year. We believe the increase makes sense as we have a strong capital structure as well as continued strong earnings and cash flow. For the NCIB, we acquired 339 shares last quarter. As I said earlier, since we put this in place in August of 2022, we have acquired 3,500,000 shares at an average price of 35.56 dollars per share and we expect to continue to utilize the NCIB on an opportunistic basis. Speaker 100:15:19If we compare our last 12 months activity of our NCIB versus our new dividend run rate, they are each plus or minus about $100,000,000 So we are close to a balance between the two forms of capital repatriation. I've said in the past, and that 50%, 50% is not a hardwired target, but it's a good litmus test for us of trying to be somewhat more balanced in terms of returning capital to shareholders. On Page 16, I want to provide a longer term context around returning capital to shareholders. On the top left graph, you see our historical dividend profile With the just announced increase of $0.42 per share per quarter from the $0.40 level, which was an increase from $0.38 at this time last year, we are showing that if we can successfully grow the underlying business, which we think we have, that could and should lead to a cadence for dividend growth. On the bottom left, you see our quarterly NCIB activity since we put in place in middle of 2022. Speaker 100:16:21This illustrates that we don't have a fixed approach to the program on a daily or weekly or quarterly basis, but we view it as an opportunistic way to buy shares at a discount to our view of intrinsic value, and we have been more aggressive at certain price points than others. We look at the bottom right chart, the impact of the NCIB has been a gradual reduction of our share counts over the past couple of years. And on the top right chart, the aggregation of the dividends versus the NCIB shows that over the past couple of years, there's been that more balanced approach that I mentioned earlier. In closing, I want to use the graphical illustration on part Page 17 to discuss some approaches that we've changed to our business over the last couple of years. The left chart is where we have been in the past in terms of delivering results. Speaker 100:17:13And there has been a very conscious effort to reengineer our earnings profile. We operate a mature business that encounters some element of cyclicality. However, over the last several years, we've consistently said that one of the outcomes of our portfolio changes should be to raise the cycle floor, raise the ceiling, reduce the volatility through the cycle as well as grow the business. In many ways, Q1 illustrates this objective as we navigated through large swings in steel prices and managed to generate really good results in spite of that steel price volatility backdrop. In addition, with the ongoing initiatives to both reinvest internally and grow externally, we will continue down this path that's illustrated on that right hand chart. Speaker 100:18:01In closing, on behalf of John and other members of the management team, I would like to express our appreciation to everyone within the Russell family for your contributions to our performance and future success. That concludes my introductory remarks. So operator, please feel free to open the line for questions. Speaker 300:18:29Thank Operator00:18:48Your first question comes from Michael Tupholme, TD Securities. Michael, please go ahead. Speaker 300:18:54Thanks. Good morning. Speaker 100:18:55Hey, Mike. Good morning. Speaker 300:18:57Good morning. So I just want to start with the Service Centers segment and a question about the gross margins there. You did see quarter over quarter improvement in service centers gross margins in Q1. Just given the way steel prices progressed through Q1 and the way they've traded through the 1st part of Q2, wondering if you can provide some commentary on your expectations for Q2 twenty 24 Service Centers gross margins? Speaker 100:19:26Yes. Well, it's a fair question, Mike, because you're right. Q1 was higher than Q4 on average. But in some ways, when it appears through the quarter, obviously, there was some steel price volatility as we got into February March. So some of the dynamic unfolded that the margins did come off during the quarter compared to where they were at the beginning of the quarter. Speaker 100:19:49And depending obviously what happens on steel prices in the rest of Q2 and Q3 and Q4 that will flow through in terms of timing. There is the lag effect that we have talked about in the past in terms of what happens in the steel market and how that flows through our margins. But for purposes of looking at the exit point of Q1 and the entry point of Q2, margins were a little lower at the end of the quarter than at the beginning of the quarter. Speaker 300:20:18Okay. That's helpful. Thank you. Then if we look at volumes in service centers, I know saw some improvement sequentially. On a year over year basis though, if we're looking at it from that perspective, tons shipped in the Q1 were down, wondering how we should think about that on a year over year basis in the Q2? Speaker 100:20:42Yes. So one of the interesting things, Mike, is if we look in some ways it's similar to your question on margins. We obviously have more granular information when we look internally and see what's going on in the market more than on a quarterly basis, when we look stuff monthly or weekly for that matter. We had a really, really strong March of 2020 3. That was very unusual, well above the norm in it, but it was an outlier. Speaker 100:21:09So if we remove the March 2023 dynamic, we're pretty much tracking where we would have been on any other month over month comparison comparing a month in 2024 to a month in 2023. So if you look at Q1 as a reference point, that's a pretty good reference point in terms of volume leading into Q2. Speaker 400:21:31Yes, Mike, just to add on to that as well. Marty mentioned it earlier, but we really had some odd weather dynamics that were excessive in Q1. So we lost a lot of shipping days across a lot of locations as well. So if you go back to days we actually ship, the volumes are really nice, pretty steady there. Speaker 300:21:49Okay, that's helpful. Thank you. And then maybe just on the Steel Distributors segment, the reference to overseas shipping delays that you saw. Can you elaborate on that situation? And maybe as a follow on to just better understanding what was happening there, can you talk about whether the situation has been resolved and what the implications are, if any, for the impact on the Q2? Speaker 100:22:15Yes. So this really ties into all the geopolitical events that are happening in the Middle East and product coming through the Suez Canal and through sensitive political areas, there has been delays. And so that reference was to part of the business that brings in product from export markets and might have to re navigate its roots coming into North America. So that was just a reflection of some of those issues that everybody is encountering for product coming in through that part of the world. Speaker 300:22:54Okay. And I mean, I realize there's still a geopolitical issue. So my earlier question about whether it's resolved, in that sense, there are still issues in the world. But I guess, presumably, as routes readjust themselves, things would normalize. Just wondering if that has happened yet as far as the flow of product coming in and if we do see any impact in Q2 or is this sort of back to normal now that perhaps things have adjusted? Speaker 400:23:23Mike, I think we've normalized now that we rerouted and so there's a sequential coming behind it now and so you have a pattern to it. So the rerouting again threw it off for 3 weeks to 4 weeks or so and now I think we're back on track. So I don't think you'll see that carry into Q2. Speaker 300:23:37Okay, got it. I will get back in the queue. Thank you. Speaker 100:23:41Great. Thanks, Mike. Operator00:23:42Thank you. Your next question comes from Jonathan Lemers, Laurentian Bank. Jonathan, please go ahead. Speaker 500:24:03Thank you. Just a follow-up on the gross margin per tonne. So nice improvement from Q4 to Q1 despite lower market plate prices. My question is, were there any specific value add projects that started to contribute positively to the margin in Q1 versus Q4? And was there some benefit from just smart tactical moves in the operation? Speaker 500:24:35Should you just tell us a little bit more about what happened sequentially? Speaker 400:24:39Yes, Jonathan, so there was not one specific project in value add, but we had multiple projects coming online in Q4 that really ramped up in Q1. So we started to see that additional pull there plus things that they had been working on where they had the equipment, we added additional shifts. So we started to see that pull across as well. So it allowed us to expand that margin during the quarter. And so we were real pleased with that and we continue to see that growing. Speaker 400:25:04And so we think that's something we'll see into the future as well. Speaker 500:25:11Okay. Thank you. And for the value add projects you do have planned for the balance of 2024. Can you provide us a sense of how those are weighted across your business divisions? Are they primarily in the MSCs or any for the Energy Products business? Speaker 400:25:30It's almost all of it's in the metal service center side. Speaker 100:25:34And probably fair to say too, John, in terms of our geographic mix, there was some projects that were done in Canada this year, but there's probably more of a skewing to U. S.-based service centers where some of that is undertaking over the next little bit. That's right. Speaker 500:25:52Okay. And Marty, during your prepared remarks, you reiterated that on the balance sheet, you're looking at other enhancements. Are you able to provide us with any hints as to what you're working on there? Speaker 100:26:06Sure. So Jonathan, as I mentioned, we have the one series of notes that are callable that were callable in March. And so that transaction in terms of the par call is happening today. We have another series of legacy high yield notes that are par callable in October, and it wouldn't be unreasonable to think that given our financial position that those also get cleansed out of our system. And in conjunction with a legacy high yield capital structure evolving to a more traditional investment grade capital structure, some of that will go into what is our new bank debt arrangement look like in terms of having a more traditional investment grade type structure at all parts of our capital structure. Speaker 100:26:56So part of it is kind of cleaning out some of the legacy stuff in terms of the term notes in our capital structure and then restarting again with a more traditional, more flexible, covenant light approach and frankly lower cost that goes with that. Speaker 500:27:17Okay. One more question. In the notes to the financial statements on the Samuel acquisition, There is a note that Russell has made a timing commitment to the Bureau. Are you able to explain what that timing commitment is? Speaker 100:27:34Well, what we've effectively done with that timing commitment is we've undertaken to keep the dialogue going with them as we try and address their issues and concerns. And that goes back to why we made our disclosure that it wasn't going to close in Q2, which was our original target. And so it won't close in Q2. So we've made that timing commitment to the competition bureau that we'll continue to work with them. We can't be more specific because we don't know exactly what the timing is going to look like other than we have flexibility to work with them in as cooperative a manner as we can. Speaker 500:28:14Past the line. Thanks for your comments. Operator00:28:20Your next question comes from Michael Tupholme, TD Securities. Michael, please go ahead. Speaker 300:28:25Thanks for taking the follow ups. So just on the energy field stores segment, you talked about opening some new sites in Q1. Can you talk about where those are located and also talk about any plans for additional energy field stores over the rest of the year? Speaker 400:28:45Yes, predominantly Western Canada and it was through our CommCo division where we've taken on some new business and a new contract there. And then through the rest of the year, we're consistently looking to grow in the field stores against a low cost of entry, fairly short term leases when we do those. And so we're consistently looking at both the U. S. And Canada at those. Speaker 400:29:07And then if there is any viable acquisition opportunities in the energy field store, we'll look at those as well. Speaker 300:29:13Okay. Maybe that feeds into the next question just about acquisitions. I think Marty, you mentioned a couple of times that beyond working to complete the Samuel acquisition, you're looking at other things. Can you provide a little bit more detail around the types of things you'd be looking at? I mean, John just mentioned energy field source as a possibility. Speaker 300:29:33So, gather it's both service centers and energy field source, maybe you can comment on that. And the kinds of characteristics and size and whatnot, anything you can offer up would be helpful? Speaker 100:29:45Yes. It's a good question, Mike. And I'd say that it's pretty robust, the stuff that is becoming available again. The characterization of it's as John said, there's some stuff on our energy field stores that are interesting. There's some stuff that is within our metal service centers that are interesting. Speaker 100:30:07And frankly, there's 1 or 2 adjacencies that are popping up as well. And all those things are under consideration. None of them are what I characterize as huge in and of themselves, but they're all incrementally interesting and in aggregation are things that we would that we're spending some time thinking our way through and looking at very carefully. And that's sort of in some ways, it's sort of it represents our ideal profiles. I've joked somewhat in the past, we always use the baseball analogy of where we are on our value added initiatives being the 4th inning of a 9 inning ballgame. Speaker 100:30:47Well, in some ways, the other baseball analogy on acquisitions is these are singles or doubles, the types of things that we're looking at, easily fit within what we're doing complementary to what we're doing adjacencies that are might be in different product mixes or different target customers, but very similar to what we're doing right now where they could be standalone segments. So and that's both on the energy field stores as well as the service center side. Does that get to your question, Mike? Speaker 300:31:18Yes. No, definitely. That's very helpful. I appreciate it. And then I will leave it there. Speaker 100:31:23Thanks, Mike. Operator00:31:24Thank you. Your next question comes from Kevin Hsieh, Stifel. Kevin, please go ahead. Speaker 200:31:36Thanks. Good morning, everyone. Speaker 100:31:38Good morning. Hey, Kevin. And Speaker 200:31:40just a quick one for me. I'm just curious to hear about your thoughts on the recently published weekly steel prices by both Nucor and Cliffs. I'm wondering if you have seen any impacts at that front. I know it's still early days. And if not, what are your thoughts on what the potential impact could be on the woodpeay prices? Speaker 200:32:05Thanks. Speaker 400:32:08Thanks, Thanks, Kevin. And this is going to be interesting to watch it unfold. As you said, it is the early days. It does give some validity to the indexes that are out there with the CRU, the trends that are moving out there that are public indexes with Nucor and others now having it published price. They do this in other products and it's been very successful whether it be in their long products and they've done it for years. Speaker 400:32:32So they're obviously that sets kind of the bar for what the market is doing trend wise and so it has proven very effective in other products. We'll see in flat roll how effective it becomes and if it holds water, but thus far, it seems to again add some credibility and validity to the indexes that are published out there. So thus far it seems to be working. We'll watch it closely, but it is something that I've never seen done in my 30 plus years in the business effectively in flat roll. So but again, I think it's a I think it's something that's necessary and needed for the industry. Speaker 400:33:05So if this works well, I think it will help stabilize some of the ambiguity around pricing. Operator00:33:19Thank you. There are no further questions at this time. Please proceed. Speaker 100:33:23Great. Thank you, operator, and appreciate everyone very much for joining our call. If you have any questions, please feel free to reach out at any time. Otherwise, we look forward to staying in touch during the balance of the quarter. Thanks, everyone. Operator00:33:37Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by Key Takeaways Q1 2024 financial results: Revenues rose to $1.1 billion (up 4% sequentially), EBITDA was $84 million (8% margin), EPS $0.82, and annualized ROIC hit 19%—first quartile in the industry—with a net cash position of $277 million. Stable margins amid steel price volatility: Despite ~20% swings in sheet and plate benchmarks, proactive inventory management and portfolio adjustments delivered solid margins, minimal impairments and low earnings volatility. Accelerated capital investments: Over $100 million of CapEx planned for 2024—including new lasers in Winnipeg, a greenfield Saskatoon site and a Texarkana expansion—with a $200 million+ project pipeline targeting high-return, low-volatility growth. Stronger capital structure: Redeemed $150 million of 6% notes and preparing further legacy note repayments to transition toward covenant-light, investment-grade debt, boosting liquidity to nearly $1 billion. Balanced shareholder returns: Increased the quarterly dividend by 5% to $0.42 per share and bought back 3.5 million shares at an average $35.56 via NCIB, maintaining an opportunistic buyback alongside dividend growth. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallRussel Metals Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckInterim report Russel Metals Earnings HeadlinesAnalysts Have Conflicting Sentiments on These Industrial Goods Companies: Ametek (AME), Alaska Air (ALK) and Russel Metals (OtherRUSMF)May 10, 2025 | theglobeandmail.comRussel Metals First Quarter 2025 Earnings: Beats ExpectationsMay 9, 2025 | finance.yahoo.comTrump Quietly Planning $15 Trillion Crypto ShockerMost investors are still unaware, but I believe a new White House action may have quietly opened the floodgates for a $15 trillion crypto surge. My latest crypto playbook reveals the coin I’m most bullish on—including the name, ticker, and why I’m investing personal capital into it.May 28, 2025 | Paradigm Press (Ad)Raymond James Sticks to Its Buy Rating for Russel Metals (RUSMF)April 3, 2025 | markets.businessinsider.comStifel Nicolaus Keeps Their Buy Rating on Russel Metals (RUSMF)March 31, 2025 | markets.businessinsider.comRussel Metals price target raised to C$52 from C$50 at TD SecuritiesFebruary 18, 2025 | markets.businessinsider.comSee More Russel Metals Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Russel Metals? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Russel Metals and other key companies, straight to your email. Email Address About Russel MetalsRussel Metals (TSE:RUS) Inc is a Canada-based metal distribution company. The company conducts business primarily through three metals distribution segments: metals service centers; energy products; and steel distributors. The metal service centers provide processing and distribution services to a broad base of end-users. The energy products segment distributes oil country tubular goods, line pipe, tubes, valves, and fittings, primarily to the energy industry in Western Canada and the U.S. The steel distributors segment acts as master distributors selling steel in large volumes to other steel service centers and equipment manufacturers mainly on an as is basis. The company generates all of its revenue from the North American market.View Russel Metals ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Bullish NVIDIA Market Set to Surge 50% Ahead of Q1 EarningsAdvance Auto Parts: Did Earnings Defuse Tariff Concerns?Booz Allen Hamilton Earnings: 3 Bullish Signals for BAH StockAdvance Auto Parts Jumps on Surprise Earnings BeatAlibaba's Earnings Just Changed Everything for the StockCisco Stock Eyes New Highs in 2025 on AI, Earnings, UpgradesSymbotic Gets Big Earnings Lift: Is the Stock Investable Again? 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There are 6 speakers on the call. Operator00:00:00Good morning, ladies and gentlemen, and welcome to our 2024 First Quarter Results Call for Russell Metals. Today's call will be hosted by Marty Jurafsky, Executive Vice President and Chief Financial Officer and John Reed, President and Chief Executive Officer of Russell Metals, Inc. I'll now turn the meeting over to Marty Jurafsky. Please go ahead. Speaker 100:00:28Great. Thank you, operator, and good morning, everyone. I plan on providing an overview of the Q1 twenty twenty four results. And if you want to follow along, I'll be referencing the PowerPoint slides that are on our Web site. Just go into the Investor Relations section and it's located in the Conference Call submenu. Speaker 100:00:46If you go to Page 3, you can read our cautionary statement on forward looking information. So let me start with a little perspective on Q1. And I think about the quarter, it kind of highlights 2 key things. First, how we performed during periods of steel price volatility. Over the past couple of quarters, the benchmarks for sheet and plate have swung up and down by a fair amount, probably around 20%, give or take. Speaker 100:01:13And not only have we generated solid margins, earnings and returns over the past few quarters, but has been with relatively low volatility as compared to the underlying steel price environment. In the past, steel price volatility has occasionally led to significant inventory impairments and margin compression. And I think we are starting to see the benefits of our business changes with more of those opportunities on to come. 2nd, there have been a lot of behind the scenes initiatives that provide us with the springboard for the balance of 2024 and beyond. 1, we have a series of our equipment upgrade and facility modernizations that are starting to come to fruition in Q2, Q3, Q4 and beyond. Speaker 100:01:552, we've set the stage for further enhancements to our debt structure that should lead to more flexibility and a lower cost capital structure and 3, we are continuing to look at new potential acquisition opportunities in addition to the extensive planning that is being done for the Samuels acquisition. So let me now go through some of the materials and let's start with market conditions on Page 5. As said earlier, we've seen the underlying steel prices exhibit a fair amount of volatility over the past while. That said, our hot rolled sheet prices appear to have somewhat stabilized after hitting a trough in late March. The other interesting observation is that when we look at the trough price points that have been experienced over the past 18 months, HRC prices have bottomed at levels that are well above historical troughs. Speaker 100:02:50This speaks to the steel producers demonstrating some degree of discipline at the same time that demand is reasonable. For plate, we have seen prices taper off over the past several quarters. If we look back a few quarters ago, the spread between plate and sheet was well outside of the historical norm. As we look at the prevailing environment, the spread has come back to a level that makes more sense given the industry cost curves. Taking all that together, we are looking at price levels today that are relatively healthy by historical comparisons. Speaker 100:03:26On supply chain inventories, they have bounced around a bit, but remain in check. And last and more most importantly, demand is reasonably solid across our business. If we go to Page 6, we have a snapshot of our historical results. The start for 2024 was very similar to the end of 2023. We generated significant cash flow from operations and continue to have a very strong balance sheet and that gives us flexibility to pursue a range of opportunities. Speaker 100:03:57If we look across the various charts going from top left, revenues for the quarter were $1,100,000,000 which was up from $1,000,000,000 in Q4. EBITDA was $84,000,000 EBITDA margin was 8%, earnings per share were $0.82 All these were up slightly from Q4. Our annualized return on invested capital came in at 19% and remains above our minimum target return over a cycle and we continue to be 1st quartile within our industry. Lastly, in terms of capital structure, which you see in the bottom right, we have net cash position of $277,000,000 versus net debt of almost $500,000,000 at the end of 2019, and we have a multidimensional approach to using that dry powder perdiciously over time. Going to our more detailed financial results on Page 7. Speaker 100:04:53From an income statement perspective, I covered several of the high level items on the previous page, but a few other items to note. Revenues of $1,100,000,000 was up 4% from Q4. Some of this was the impact of the volume recovery in Q1 versus Q4 as that normally evolves from a seasonal perspective. On gross margins, all segments were up a little bit, and I'll discuss these in more detail in a minute. Interest expense came down to 0 as we are generating interest income on our growing cash reserve. Speaker 100:05:27Our Q1 results were impacted by a few non operating type items. Stock based comp was nil for the quarter versus $7,000,000 expense in Q4. We had a $3,000,000 reversal in our NRV inventory, NRV reserves. Again, the proactive inventory management has reduced much of the NRV risks that we have experienced in the past. From a cash flow perspective, in Q1, we used $66,000,000 for working capital, which was mostly the seasonal pickup in accounts receivable and the decline in accounts payable as a result of the timing of our annual variable compensation that gets paid out in Q1. Speaker 100:06:10No major changes in inventory for the quarter. CapEx of $24,000,000 was in line with our tracking to be greater than $100,000,000 for this year as our key discretionary projects continue to advance. In the quarter, there were no big projects, but rather a series of projects, including the installation of new lasers in Winnipeg, the near completion of our greenfield location in Saskatoon as well as the commencement of a project to expand our Texarkana facility. From a balance sheet perspective, we are net cash position $277,000,000 which I said earlier. As a result of our strong position, we'll be completing the redemption of our $150,000,000 6 percent notes today. Speaker 100:06:57There are other debt structure enhancements that are in the works that should unfold in the coming quarters. As we said in the past, we manage the company with a conservative investment grade type credit bias and this approach should give us better financial flexibility and reduce our capital cost on a go forward basis. Our liquidity is near $1,000,000,000 While one item to note is that the Canadian dollar did weaken in the quarter, which did have an impact on our OCI account in translating our U. S.-based financial results into Canadian dollars. In the quarter, we picked up 339,000 shares under our NCIB, which brings the total to 3,500,000 shares since we put the program in place in August of 2022 and our average purchase price cumulatively to date is $35.56 per share. Speaker 100:07:47Our book value per share continued to go up and is almost $20 per share, notwithstanding our share buybacks Speaker 200:07:55in the Speaker 100:07:55quarter. Lastly, we have declared a 5% increase in our quarterly dividend to $0.42 per share, and I'll discuss that in more detail a little bit later on. On Page 8, we show our EBITDA variance analysis between last quarter and this quarter. Looking at service centers, the volumes were a positive pickup from Q4 and our margins were also up. There was a $13,000,000 increase in operating expenses, which was a bit out of the norm as it was a combination of variable compensation tied to financial results, the implications from FX movements and some non recurring costs related to the Samuels acquisition. Speaker 100:08:35Energy field stores was up $3,000,000 as it continued to benefit from a solid energy environment. Steel distributors was down $2,000,000 There was also a $5,000,000 unfavorable variance in other and it was a number of all relatively modest items. We had a favorable impact from the lower mark to market on our stock based comp, but it was more than offset by normal seasonal decline in our Thunder Bay Terminal operations, Samuel acquisition costs and a few other small items. On Page 9, we have our segmented P and L information. And for service centers, revenues were up and this was mostly driven by higher volumes, but we also saw slightly higher price realizations as well as better margins. Speaker 100:09:15I'll go through the more detailed metrics for our service centers on the next page, but our overall results were pretty good in a quarter that experienced a fair amount of price volatility. In Energy Field Stores, we are continuing to see solid performance. Q1 revenues and earnings were up as a result of good market conditions. Distributors revenues and earnings were down due to some delays with inbound shipments and more conservative procurement due to those market conditions. That said, our margins did improve, albeit on lower revenue. Speaker 100:09:47On Page 10, we are showing a deeper dive on some of the metrics for metal service center business. Top right graph is past 5 years for tonne shipped. The Q1 2024 volumes were up 4% versus Q4, up but down 6% versus this time last year. The Q1 2023 comparison point did benefit from very strong demand and unusually good period last quarter, whereas Q1 2024 was solid, but it was also impacted early on in the quarter by some weather related shipping constraints that did occur in January. On the bottom left graph, we have the revenue and cost of goods sold per tonne. Speaker 100:10:28Revenue per tonne or price realizations increased by $52 versus a $7 increase in our cost of goods sold, which resulted in a $44 per tonne pickup in margin that is shown in the bottom right graph. For Q1, our gross margin was 4.87 dollars per tonne, which remains higher than our historical average of closer to $300 As we've said many times in the past, our investment initiatives should lead to higher average margins and lower volatility associated with those margins over the cycle. On Page 11, we have illustrated our inventory turns. This chart shows the inventory turns by quarter for each segment, energy in red, service centers in green and steel distributors in yellow. In addition, the black line is the average for the entire company. Speaker 100:11:16Overall, our inventory turns improved from 3.8 turns at December 31 to 3.9 for this quarter. By sector, our service centers improved to 4.6 turns. Our energy field stores came up to 3.2, while our steel distributors declined a little bit to 2.4. On Page 12, we have the impact of inventory turns on inventory dollars. Overall for the quarter, there wasn't a big change. Speaker 100:11:43It was very comparable at March 31 versus December 31. In service centers, tonnage was slightly lower and cost per tenant was slightly higher than at year end. On Page 13, the overall impact on capital utilization and returns. Our capital deployment moved up to about $1,400,000,000 because of an increase in working capital and an increase in PPE as a result of our incremental spending on a variety of projects. More importantly, our returns continue to be industry leading with last 12 months return on invested capital at 23%. Speaker 100:12:21If we go to Page 14, I have an update of our capital structure. The continuation of our strong free cash flow and disciplined approach to utilization gives us a lot of flexibility. On the left table, our cash position was $575,000,000 at March 31, which is up $174,000,000 from this time last year. Our equity based increased to $1,700,000,000 in spite of our share buybacks. The chart on the right shows our book value per share, which is almost $20 per share, which is a little over $2 increase since this time last year. Speaker 100:12:58On Page 15, we have an update on our capital allocation priorities. Given our strong balance sheet, we continue to have this multipronged approach. As we've always said for investment purposes, we're trying to seek average returns greater than 15% over the cycle. As already discussed, we've delivered well above that target for extended period of time. The ongoing initiatives are threefold. Speaker 100:13:21The identification and pursuit of value added projects, we have over 40 projects on the go right now. And as every day, as every week goes by, we're identifying more and more interesting opportunities. Facility modernizations, we have 5 on the go that are tracking at various times in late this year and early next year. As I mentioned earlier, Saskatoon is probably the first one on the come and we're very excited about all those initiatives. In total, our CapEx project pipeline is greater than $200,000,000 It's as large as it's ever been. Speaker 100:13:53And the key thing for us is it continues to advance the opportunity for high return, high margin, low volatility type projects that serve our customers and serve our communities in which we operate. In terms of acquisitions, we are continuing to work on the Samuel deal. As we've said publicly, we are continuing our dialogue with the Competition Bureau to resolve their concerns related to a narrow segment of product in a specific geography. As much as I would like to go into more detail, it's not appropriate to be more specific at this time. In addition, we are actively looking at other acquisition opportunities that are coming available and are interesting complements to our existing platform. Speaker 100:14:36In terms of returning capital to shareholders, we have adopted a flexible approach over the last few years. For dividends, we are announcing a 5% increase in our quarterly dividend to take it to $0.42 per share, which will be payable on June 14 this year. We believe the increase makes sense as we have a strong capital structure as well as continued strong earnings and cash flow. For the NCIB, we acquired 339 shares last quarter. As I said earlier, since we put this in place in August of 2022, we have acquired 3,500,000 shares at an average price of 35.56 dollars per share and we expect to continue to utilize the NCIB on an opportunistic basis. Speaker 100:15:19If we compare our last 12 months activity of our NCIB versus our new dividend run rate, they are each plus or minus about $100,000,000 So we are close to a balance between the two forms of capital repatriation. I've said in the past, and that 50%, 50% is not a hardwired target, but it's a good litmus test for us of trying to be somewhat more balanced in terms of returning capital to shareholders. On Page 16, I want to provide a longer term context around returning capital to shareholders. On the top left graph, you see our historical dividend profile With the just announced increase of $0.42 per share per quarter from the $0.40 level, which was an increase from $0.38 at this time last year, we are showing that if we can successfully grow the underlying business, which we think we have, that could and should lead to a cadence for dividend growth. On the bottom left, you see our quarterly NCIB activity since we put in place in middle of 2022. Speaker 100:16:21This illustrates that we don't have a fixed approach to the program on a daily or weekly or quarterly basis, but we view it as an opportunistic way to buy shares at a discount to our view of intrinsic value, and we have been more aggressive at certain price points than others. We look at the bottom right chart, the impact of the NCIB has been a gradual reduction of our share counts over the past couple of years. And on the top right chart, the aggregation of the dividends versus the NCIB shows that over the past couple of years, there's been that more balanced approach that I mentioned earlier. In closing, I want to use the graphical illustration on part Page 17 to discuss some approaches that we've changed to our business over the last couple of years. The left chart is where we have been in the past in terms of delivering results. Speaker 100:17:13And there has been a very conscious effort to reengineer our earnings profile. We operate a mature business that encounters some element of cyclicality. However, over the last several years, we've consistently said that one of the outcomes of our portfolio changes should be to raise the cycle floor, raise the ceiling, reduce the volatility through the cycle as well as grow the business. In many ways, Q1 illustrates this objective as we navigated through large swings in steel prices and managed to generate really good results in spite of that steel price volatility backdrop. In addition, with the ongoing initiatives to both reinvest internally and grow externally, we will continue down this path that's illustrated on that right hand chart. Speaker 100:18:01In closing, on behalf of John and other members of the management team, I would like to express our appreciation to everyone within the Russell family for your contributions to our performance and future success. That concludes my introductory remarks. So operator, please feel free to open the line for questions. Speaker 300:18:29Thank Operator00:18:48Your first question comes from Michael Tupholme, TD Securities. Michael, please go ahead. Speaker 300:18:54Thanks. Good morning. Speaker 100:18:55Hey, Mike. Good morning. Speaker 300:18:57Good morning. So I just want to start with the Service Centers segment and a question about the gross margins there. You did see quarter over quarter improvement in service centers gross margins in Q1. Just given the way steel prices progressed through Q1 and the way they've traded through the 1st part of Q2, wondering if you can provide some commentary on your expectations for Q2 twenty 24 Service Centers gross margins? Speaker 100:19:26Yes. Well, it's a fair question, Mike, because you're right. Q1 was higher than Q4 on average. But in some ways, when it appears through the quarter, obviously, there was some steel price volatility as we got into February March. So some of the dynamic unfolded that the margins did come off during the quarter compared to where they were at the beginning of the quarter. Speaker 100:19:49And depending obviously what happens on steel prices in the rest of Q2 and Q3 and Q4 that will flow through in terms of timing. There is the lag effect that we have talked about in the past in terms of what happens in the steel market and how that flows through our margins. But for purposes of looking at the exit point of Q1 and the entry point of Q2, margins were a little lower at the end of the quarter than at the beginning of the quarter. Speaker 300:20:18Okay. That's helpful. Thank you. Then if we look at volumes in service centers, I know saw some improvement sequentially. On a year over year basis though, if we're looking at it from that perspective, tons shipped in the Q1 were down, wondering how we should think about that on a year over year basis in the Q2? Speaker 100:20:42Yes. So one of the interesting things, Mike, is if we look in some ways it's similar to your question on margins. We obviously have more granular information when we look internally and see what's going on in the market more than on a quarterly basis, when we look stuff monthly or weekly for that matter. We had a really, really strong March of 2020 3. That was very unusual, well above the norm in it, but it was an outlier. Speaker 100:21:09So if we remove the March 2023 dynamic, we're pretty much tracking where we would have been on any other month over month comparison comparing a month in 2024 to a month in 2023. So if you look at Q1 as a reference point, that's a pretty good reference point in terms of volume leading into Q2. Speaker 400:21:31Yes, Mike, just to add on to that as well. Marty mentioned it earlier, but we really had some odd weather dynamics that were excessive in Q1. So we lost a lot of shipping days across a lot of locations as well. So if you go back to days we actually ship, the volumes are really nice, pretty steady there. Speaker 300:21:49Okay, that's helpful. Thank you. And then maybe just on the Steel Distributors segment, the reference to overseas shipping delays that you saw. Can you elaborate on that situation? And maybe as a follow on to just better understanding what was happening there, can you talk about whether the situation has been resolved and what the implications are, if any, for the impact on the Q2? Speaker 100:22:15Yes. So this really ties into all the geopolitical events that are happening in the Middle East and product coming through the Suez Canal and through sensitive political areas, there has been delays. And so that reference was to part of the business that brings in product from export markets and might have to re navigate its roots coming into North America. So that was just a reflection of some of those issues that everybody is encountering for product coming in through that part of the world. Speaker 300:22:54Okay. And I mean, I realize there's still a geopolitical issue. So my earlier question about whether it's resolved, in that sense, there are still issues in the world. But I guess, presumably, as routes readjust themselves, things would normalize. Just wondering if that has happened yet as far as the flow of product coming in and if we do see any impact in Q2 or is this sort of back to normal now that perhaps things have adjusted? Speaker 400:23:23Mike, I think we've normalized now that we rerouted and so there's a sequential coming behind it now and so you have a pattern to it. So the rerouting again threw it off for 3 weeks to 4 weeks or so and now I think we're back on track. So I don't think you'll see that carry into Q2. Speaker 300:23:37Okay, got it. I will get back in the queue. Thank you. Speaker 100:23:41Great. Thanks, Mike. Operator00:23:42Thank you. Your next question comes from Jonathan Lemers, Laurentian Bank. Jonathan, please go ahead. Speaker 500:24:03Thank you. Just a follow-up on the gross margin per tonne. So nice improvement from Q4 to Q1 despite lower market plate prices. My question is, were there any specific value add projects that started to contribute positively to the margin in Q1 versus Q4? And was there some benefit from just smart tactical moves in the operation? Speaker 500:24:35Should you just tell us a little bit more about what happened sequentially? Speaker 400:24:39Yes, Jonathan, so there was not one specific project in value add, but we had multiple projects coming online in Q4 that really ramped up in Q1. So we started to see that additional pull there plus things that they had been working on where they had the equipment, we added additional shifts. So we started to see that pull across as well. So it allowed us to expand that margin during the quarter. And so we were real pleased with that and we continue to see that growing. Speaker 400:25:04And so we think that's something we'll see into the future as well. Speaker 500:25:11Okay. Thank you. And for the value add projects you do have planned for the balance of 2024. Can you provide us a sense of how those are weighted across your business divisions? Are they primarily in the MSCs or any for the Energy Products business? Speaker 400:25:30It's almost all of it's in the metal service center side. Speaker 100:25:34And probably fair to say too, John, in terms of our geographic mix, there was some projects that were done in Canada this year, but there's probably more of a skewing to U. S.-based service centers where some of that is undertaking over the next little bit. That's right. Speaker 500:25:52Okay. And Marty, during your prepared remarks, you reiterated that on the balance sheet, you're looking at other enhancements. Are you able to provide us with any hints as to what you're working on there? Speaker 100:26:06Sure. So Jonathan, as I mentioned, we have the one series of notes that are callable that were callable in March. And so that transaction in terms of the par call is happening today. We have another series of legacy high yield notes that are par callable in October, and it wouldn't be unreasonable to think that given our financial position that those also get cleansed out of our system. And in conjunction with a legacy high yield capital structure evolving to a more traditional investment grade capital structure, some of that will go into what is our new bank debt arrangement look like in terms of having a more traditional investment grade type structure at all parts of our capital structure. Speaker 100:26:56So part of it is kind of cleaning out some of the legacy stuff in terms of the term notes in our capital structure and then restarting again with a more traditional, more flexible, covenant light approach and frankly lower cost that goes with that. Speaker 500:27:17Okay. One more question. In the notes to the financial statements on the Samuel acquisition, There is a note that Russell has made a timing commitment to the Bureau. Are you able to explain what that timing commitment is? Speaker 100:27:34Well, what we've effectively done with that timing commitment is we've undertaken to keep the dialogue going with them as we try and address their issues and concerns. And that goes back to why we made our disclosure that it wasn't going to close in Q2, which was our original target. And so it won't close in Q2. So we've made that timing commitment to the competition bureau that we'll continue to work with them. We can't be more specific because we don't know exactly what the timing is going to look like other than we have flexibility to work with them in as cooperative a manner as we can. Speaker 500:28:14Past the line. Thanks for your comments. Operator00:28:20Your next question comes from Michael Tupholme, TD Securities. Michael, please go ahead. Speaker 300:28:25Thanks for taking the follow ups. So just on the energy field stores segment, you talked about opening some new sites in Q1. Can you talk about where those are located and also talk about any plans for additional energy field stores over the rest of the year? Speaker 400:28:45Yes, predominantly Western Canada and it was through our CommCo division where we've taken on some new business and a new contract there. And then through the rest of the year, we're consistently looking to grow in the field stores against a low cost of entry, fairly short term leases when we do those. And so we're consistently looking at both the U. S. And Canada at those. Speaker 400:29:07And then if there is any viable acquisition opportunities in the energy field store, we'll look at those as well. Speaker 300:29:13Okay. Maybe that feeds into the next question just about acquisitions. I think Marty, you mentioned a couple of times that beyond working to complete the Samuel acquisition, you're looking at other things. Can you provide a little bit more detail around the types of things you'd be looking at? I mean, John just mentioned energy field source as a possibility. Speaker 300:29:33So, gather it's both service centers and energy field source, maybe you can comment on that. And the kinds of characteristics and size and whatnot, anything you can offer up would be helpful? Speaker 100:29:45Yes. It's a good question, Mike. And I'd say that it's pretty robust, the stuff that is becoming available again. The characterization of it's as John said, there's some stuff on our energy field stores that are interesting. There's some stuff that is within our metal service centers that are interesting. Speaker 100:30:07And frankly, there's 1 or 2 adjacencies that are popping up as well. And all those things are under consideration. None of them are what I characterize as huge in and of themselves, but they're all incrementally interesting and in aggregation are things that we would that we're spending some time thinking our way through and looking at very carefully. And that's sort of in some ways, it's sort of it represents our ideal profiles. I've joked somewhat in the past, we always use the baseball analogy of where we are on our value added initiatives being the 4th inning of a 9 inning ballgame. Speaker 100:30:47Well, in some ways, the other baseball analogy on acquisitions is these are singles or doubles, the types of things that we're looking at, easily fit within what we're doing complementary to what we're doing adjacencies that are might be in different product mixes or different target customers, but very similar to what we're doing right now where they could be standalone segments. So and that's both on the energy field stores as well as the service center side. Does that get to your question, Mike? Speaker 300:31:18Yes. No, definitely. That's very helpful. I appreciate it. And then I will leave it there. Speaker 100:31:23Thanks, Mike. Operator00:31:24Thank you. Your next question comes from Kevin Hsieh, Stifel. Kevin, please go ahead. Speaker 200:31:36Thanks. Good morning, everyone. Speaker 100:31:38Good morning. Hey, Kevin. And Speaker 200:31:40just a quick one for me. I'm just curious to hear about your thoughts on the recently published weekly steel prices by both Nucor and Cliffs. I'm wondering if you have seen any impacts at that front. I know it's still early days. And if not, what are your thoughts on what the potential impact could be on the woodpeay prices? Speaker 200:32:05Thanks. Speaker 400:32:08Thanks, Thanks, Kevin. And this is going to be interesting to watch it unfold. As you said, it is the early days. It does give some validity to the indexes that are out there with the CRU, the trends that are moving out there that are public indexes with Nucor and others now having it published price. They do this in other products and it's been very successful whether it be in their long products and they've done it for years. Speaker 400:32:32So they're obviously that sets kind of the bar for what the market is doing trend wise and so it has proven very effective in other products. We'll see in flat roll how effective it becomes and if it holds water, but thus far, it seems to again add some credibility and validity to the indexes that are published out there. So thus far it seems to be working. We'll watch it closely, but it is something that I've never seen done in my 30 plus years in the business effectively in flat roll. So but again, I think it's a I think it's something that's necessary and needed for the industry. Speaker 400:33:05So if this works well, I think it will help stabilize some of the ambiguity around pricing. Operator00:33:19Thank you. There are no further questions at this time. Please proceed. Speaker 100:33:23Great. Thank you, operator, and appreciate everyone very much for joining our call. If you have any questions, please feel free to reach out at any time. Otherwise, we look forward to staying in touch during the balance of the quarter. Thanks, everyone. Operator00:33:37Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.Read morePowered by