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Toronto, November 4, 2021/PRNewswire/-Russel Metals Inc. (TSX: RUS) announced financial results for the three months ended September 30, 2021.
US$1.1 billion in revenue and US$196 million in EBITDA liquidity exceed US$600 million
Dividends paid per common share
All amounts are reported in millions of Canadian dollars, but per share figures are in Canadian dollars. 1 Adjusted EBITDA and EBITDA are non-GAAP measures. Adjusted EBITDA represents earnings before long-term asset impairment, interest, income tax, depreciation and amortization. EBITDA stands for earnings before interest, income tax, depreciation and amortization. Our management’s discussion and analysis includes additional information about these non-GAAP measures, including reconciliations with the most directly comparable GAAP measures, titled "Non-GAAP Measures." The reconciliation of net income and adjusted EBITDA is shown below.
For the quarter ended September 30, 2021, our basic earnings per share were US$2.10, a record high, far higher than the US$0.29 per share in the third quarter of 2020 and also higher than the US$1.88 set in the second quarter of 2021 The previous record. For the nine months ended September 30, 2021, our basic earnings per share were US$5.28, compared to US$0.54 for the same period in 2020. Revenue of US$1.1 billion is higher than the US$615 million in the third quarter of 2020, and is equivalent to US$1.1 billion in the second quarter of 2021. Our gross profit margin increased from 19.0% in the same period in 2020 to 29.8%, slightly lower than the 30.7% in the second quarter of 2021.
Our EBITDA for the quarter was US$196 million, compared to US$47 million in the same period in 2020 and US$178 million in the second quarter of 2021. In the third quarter of 2021, EBITDA benefited from a $3 million reversal related to non-cash stock compensation based on market value due to the decline in stock prices during the quarter, while EBITDA was $8 million. The second quarter of 2021. In addition, EBITDA for the quarter included $3 million in earnings from the TriMark joint venture, as it benefited from strong demand and product pricing.
Compared with the same quarter of 2020 and the second quarter of 2021, each of our business units continues to generate strong operating profits. In the third quarter of 2021, our metal service center division reported near-record operating profits and returns as the division continued to maximize profit opportunities from strong market conditions and realized the benefits of our value-added processing program. Our steel distributor division continues to benefit from strong demand, higher steel prices and low inventories in the supply chain, and reports growth in revenue and operating profit. In our energy products department, the continued rebound in oil and gas prices has increased the revenue of our on-site stores and supported the profitable liquidation of US OCTG/line pipe inventories when we exited the industry.
Market conditions Steel prices continue to rise in the third quarter of 2021. The price per ton of metal service centers has increased by 87% compared to the third quarter of 2020 and 19% compared with the second quarter of 2021. The tonnage of metal service centers increased by 1% compared to the same period in 2020, but decreased by 12% compared to the second quarter of 2021, due to the seasonal slowdown in summer and Quebec construction holidays. Due to the continued low inventory levels and product shortages in the supply chain, steel distributors' demand and sales price per ton have both increased. Demand for energy products continues to recover.
OCTG/line pipe business changes In mid-2020, we began to reduce our exposure to the energy industry to reduce revenue volatility, increase profit margins, and increase our return on capital throughout the cycle. As of September 30, 2021, our OCTG/line pipe business inventory was US$9 million, a decrease of US$262 million since June 30, 2020.
On July 6, 2021, we completed the transaction to merge our Canadian OCTG/line pipe business with the business of Marubeni-Itochu Tubulars America Inc. into a new joint venture called TriMark Tubulars Ltd. ("TriMark"). We contributed net assets with a book value of US$109 million and received the following considerations: (i) US$77 million in cash; (ii) Preferred shares with a face value of US$32 million and an annual dividend rate of 7%; (iii) Joint ventures 50% of the common equity of the enterprise. In addition, we retained approximately $32 million in accounts receivable, most of which were collected in the third quarter of 2021. This transaction brought a total of 109 million US dollars in cash realization.
Liquidity and capital structure improvements In the third quarter of 2021, we generated US$106 million in cash from operating activities, and the total available liquidity at the end of the quarter was US$602 million.
The capital structure improvements we implemented at the end of 2020, together with the cash from the monetization of the OCTG/line pipe business, reduced interest expenses in the third quarter of 2021 by US$3 million compared to the third quarter of 2020.
EBITDA The following table shows the reconciliation of net income in 2021 with EBITDA and adjusted EBITDA in 2020:
Previous income, asset impairment, interest
Unearned interest, asset impairment,
Income tax, depreciation and amortization
Quarterly Dividend Statement The board of directors approved a quarterly dividend of $0.38 per common share to be paid on December 15, 2021 to shareholders of record as of November 24, 2021. We will continue to carefully review our dividend and ensure that it is backed by a strong balance sheet and cash flow.
Outlook As the steel mill recovers from the maintenance shutdown period, the steel supply volume improved slightly at the beginning of the fourth quarter, and the inventory in the supply chain increased. We expect this modest improvement to continue for the remainder of the quarter. It is expected that demand will remain strong for the rest of 2021, thus achieving a favorable balance of supply and demand. Due to the increase in average inventory costs, we expect the profit margin to decline slightly in the fourth quarter of 2021. Due to the rebound in oil and natural gas prices, energy sector activities are expected to continue to improve.
Investor Conference Call The company will hold an investor conference call on Friday, November 5, 2021, at 9 a.m. Eastern Time to review its 2021 third quarter results. The dial-in numbers for calls are 416-764-8688 (Toronto and international callers) and 1-888-390-0546 (U.S. and Canada). Please dial in 10 minutes before the call to ensure that you can receive the call.
Before midnight on Friday, November 19, 2021, you can dial 416-764-8677 (Toronto and international calls) and 1-888-390-0541 (U.S. and Canada) to replay the call. You will need to enter the pass code 195655# to access the call.
Other supplementary financial information is available in the investor conference call package on our website www.russelmetals.com.
About Russel Metals Inc. Russel Metals, one of the largest metal distribution companies in North America, is increasingly focusing on value-added processing. It operates in three parts: metal service centers, energy products, and steel distributors. Its metal service center network provides a wide range of metal products in various sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tube products, stainless steel, aluminum and other non-ferrous specialty metals. Its energy products business has a professional product line focused on the needs of customers in the energy industry. Its steel distribution business serves as the main distributor to sell large quantities of steel "as is" to other steel service centers and large equipment manufacturers.
Cautionary Statement Regarding Forward-looking Information Certain statements contained in this press release constitute forward-looking statements or information within the meaning of applicable securities laws, including information about our future capital expenditures, our prospects, the availability of future financing, and our capabilities Declare the payment of dividends. Forward-looking statements relate to future events or our future performance. Except for statements of historical facts, all statements are forward-looking statements. Forward-looking statements are usually but not always identified by the use of words such as "seek", "anticipate", "plan", "continue", "estimate", "anticipate", "may", "will", etc., "project", "Forecast", "potential", "target", "intend", "may", "may", "should", "believe" and similar expressions. Forward-looking statements must be based on estimates and assumptions. Although we believe that these estimates and assumptions are reasonable, they essentially involve known and unknown risks, uncertainties and other possible results or events that may lead to actual results or events that are different from those anticipated in such forward-looking statements. The results or events are very different factors, including the factors described below.
We face many risks and uncertainties that may have a material adverse effect on our future profitability and financial conditions, including the following risks and uncertainties, which are important factors for our business and the metal distribution industry. Such risks and uncertainties include, but are not limited to: fluctuations in metal prices; fluctuations in oil and gas prices; cyclicality in the metals industry; capital budgets in the energy industry; epidemics and epidemics; climate change; product declarations; drastic Competition; metal supply sources; factory direct sales; material substitution; credit risk; currency exchange risk; restrictive debt contracts; asset impairment; unexpected loss of key figures; decentralized operating structure; future acquisitions; our computer-based key system failures , Labor disruption; laws and government regulations; litigation environment; environmental responsibility; carbon emissions; health and safety laws and regulations; and common stock risks.
Although we believe that the expectations reflected in our forward-looking statements are reasonable, we cannot guarantee that these expectations will prove to be correct, and we should not place undue reliance on the forward-looking statements contained in this press release. These statements are only published on the date of this press release. Except as required by law, we do not undertake any obligation to update forward-looking statements. Our actual results may differ materially from the expectations in our forward-looking statements, including due to the above risk factors and under the heading "Risk" in our MD&A and under the heading "Risk Management and Risks Affecting Our Business". result. The latest annual information sheet and other information disclosed in the documents we submit to the securities regulatory authority, which are available on the SEDAR website www.sedar.com.
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Condensed comprehensive income statement (unaudited)
(In millions of Canadian dollars, except per share data)
Share of the joint venture's revenue
Profit before interest and income tax reserve
Income before income tax provision
Net income for the period
Basic earnings per common share
Diluted earnings per common share
Condensed consolidated statement of comprehensive income (unaudited)
(Millions of Canadian dollars)
Net income for the period
Items that can be reclassified as revenue
Unrealized foreign exchange gains (losses)
Items that may not be reclassified as income
Pension and similar actuarial gains (losses)
Condensed consolidated financial statements (unaudited)
(Millions of Canadian dollars)
Accounts payable and accrued liabilities
Reserves and other non-current liabilities
Total liabilities and shareholders' equity
Condensed consolidated statement of cash flow (unaudited)
(Millions of Canadian dollars)
Net income for the period
(Loss) gain on sale of property, plant and equipment
Share of the joint venture's revenue
Pension expenses and
Debt appreciation, amortization and others
Interest paid, including interest on lease obligations
Cash from previous operating activities
Changes in non-cash working capital projects
Accounts payable and accrued liabilities
Changes in non-cash working capital
Income tax (paid) refund, net
Cash used in financing activities
Purchase property, plant and equipment
Proceeds from the sale of property, plant and equipment
Cash from (used in) investment activities
The impact of exchange rates on cash
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Condensed consolidated statement of stock changes (unaudited)
(Millions of Canadian dollars)
Net income for the period
Other comprehensive income for the period
Transfer the net actuarial income of the defined benefit plan
(Millions of Canadian dollars)
Net income for the period
Other comprehensive income for the period
Transfer of net actuarial losses from defined benefit plans
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