Ryerson Holding Corporation (NYSE:RYI) expressed optimism in its third quarter 2023 earnings call, despite countercyclical headwinds affecting the stainless steel franchise. The company remains confident in stabilizing price and demand conditions and continues to invest in its operating model, focusing on long-term growth and improvement initiatives.
Key takeaways from the call:
- Ryerson reported adjusted EBITDA of $45 million and generated positive cash flow in Q3 2023.
- The company returned approximately $10 million to shareholders through dividends and share repurchases.
- Ryerson's net sales were $1.2 billion, with a gross margin of 20%.
- The company aims to achieve a value-add percentage of at least 20%, leading to higher and more durable margins.
- Ryerson expects lower volumes and average selling prices for Q4 2023 but remains focused on long-term growth initiatives.
- The company's net leverage ratio remains stable at 1.4 times, and it has robust available global liquidity of $807 million.
- Ryerson is investing in new service centers, machinery, acquisitions, software development, and ERP conversions to enhance its operating model.
Despite softer demand and easing prices, Ryerson anticipates its modernized facilities and increased capabilities will serve customers more efficiently. The acquisition of Norlen Incorporated, known for its expertise in automation and robotic manufacturing, aligns with Ryerson's strategy of acquiring high-value industrial metals processors.
Ryerson CEO Eddie Lehner, during the earnings call, highlighted the importance of transitioning to a common ERP environment across all key areas. While acknowledging the short-term challenges, Lehner emphasized the long-term benefits, such as improved e-commerce capabilities and AI development. The company's largest market is currently undergoing conversion, with smaller divisions scheduled for conversion in Q1 2024. Lehner expects to see returns on the investment starting in Q1 of 2024, which will support the company's self-help initiatives.
Ryerson's capital expenditure for Q3 was $22 million, and it continues to evaluate opportunities for future shareholder returns and capital allocation strategies. The company reported a net income of $35 million or $1 per diluted share, compared to a net income of $37.6 million and diluted earnings per share of $1.06 in the prior quarter.
The company expects a flattening of conditions in the coming months due to seasonal factors but remains optimistic about its acquisition pipeline and anticipates an increase in M&A activity. The University Park Service Center is expected to be fully operational by April 2024, positioning Ryerson well for future growth.
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