TORONTO, Aug. 12, 2015 /CNW/ - Russel Metals Inc.
(RUS - TSX) today announced financial results for the 2015 second
quarter.
|
|
|
|
|
Three Months
Ended
June 30,
|
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Six Months
Ended
June 30,
|
|
|
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
761
|
|
$
|
893
|
|
$
|
1,665
|
|
$
|
1,817
|
|
|
|
|
|
|
|
|
EBIT
1
|
$
|
31
|
|
$
|
56
|
|
$
|
68
|
|
$
|
110
|
|
|
|
|
|
|
|
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Net Income
|
$
|
16
|
|
$
|
31
|
|
$
|
35
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$
|
60
|
|
|
|
|
|
|
|
|
Earnings per
Share
|
$
|
0.27
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$
|
0.50
|
|
$
|
0.57
|
|
$
|
0.97
|
|
|
|
|
|
|
|
|
Free Cash Flow
1
|
$
|
16
|
|
$
|
31
|
|
$
|
37
|
|
$
|
69
|
|
|
|
|
|
|
|
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Dividends paid
2
|
$
|
0.38
|
|
$
|
0.35
|
|
$
|
0.76
|
|
$
|
0.70
|
|
|
|
|
|
|
|
|
All amounts are
reported in millions of Canadian dollars except per share and
dividend figures, which are in Canadian dollars
|
|
1 EBIT and
Free Cash Flow are Non GAAP measures. EBIT represents earnings
before interest and taxes. Free cash flow
represents cash from
operating activities before change in working capital less capital
expenditures.
2
Dividends paid during the period.
|
Second quarter earnings were $16
million, or $0.27 per share on
revenues of $761 million. These
results compare to earnings of $31
million or $0.50 per share on
revenues of $893 million in the same
quarter last year.
Revenues of $385 million in our
metals service center segment were 8% lower than the 2014 second
quarter due to weaker demand primarily in Western Canada from customers servicing the
oil and gas industry. Tons shipped at our metals service
centers decreased by 7% but selling prices remained consistent with
the 2014 second quarter. Gross margin dollars at our metals
service centers in the 2015 second quarter were $17 million lower than the same quarter last year
reflecting lower demand. Gross margin was 18.3% compared to
20.9% for the second quarter of 2014. The 2015 second quarter
metals service center operating profits were $13 million which was 50% lower than the 2014
second quarter, mainly due to the decreased gross margin
dollars.
Second quarter 2015 revenues in our energy products segment
decreased 27% to $269 million
compared to the 2014 second quarter due to reduced drilling
activity in the energy sector. Operating profits decreased
$11 million or 41% to $16 million in the 2015 second quarter versus the
same quarter last year due to decreased revenues. During the
quarter, we completed the acquisition of the operating assets of
Western Fiberglass. The new entity, Apex Western Fiberglass,
was accretive to earnings in the quarter.
Revenues in our steel distributors segment in the 2015 second
quarter were similar to the 2014 second quarter but lower gross
margins reduced operating earnings to $6
million or 34% lower than the same period in 2014 due to
excess inventory in the industry.
We recorded financial income of $1
million or $0.01 per share due
to the change in fair value of the contingent consideration related
to our Apex Distribution and Apex Monarch acquisitions. This
income was a result of an expected reduction in future payments
related to lower activity caused by the lower oil price, offset by
imputed interest on expected future payments.
Our revenues for the six months ended June 30, 2015 were $1.7
billion down 8% from $1.8
billion for the same period in 2014. Our 2015 year to
date earnings of $35 million or
$0.57 per share compared to
$60 million or $0.97 per share for the same period in 2014.
Mr. Brian R. Hedges, President
and CEO, commented "The current downturn is affecting steel and
energy prices and their associated businesses. In our view,
oil prices will remain at these low levels for at least the balance
of 2015 due to oversupply. The distribution channel for oil
country tubular goods is over-supplied and there is considerable
margin pressure as the industry moves product at prices focused on
producing cash flow rather than profit levels.
The worldwide oversupply of steel continues, primarily generated
by Chinese production levels which represent approximately half of
the world production. The attractiveness of North America as a market equates to limited
pricing power for the domestic mills as imports continue. We
expect 2015 prices to move within a narrow band width."
Mr. Hedges further commented, "We are operating under the
assumption that these conditions will continue for the balance of
2015. We are generating the cash flow that enables the payment of a
dividend at the bottom of the cycle. Our metals service
center operations have corrected their inventory positions and
while our other operating segments have reduced inventory we expect
further inventory reductions in those segments. We have
implemented a number of strategies such as reduced work weeks,
layoffs, and other cost containment measures to reduce costs in
line with current business levels. Executive compensation is
down significantly due to a reduction in variable compensation as a
result of weaker earnings."
The Board of Directors approved a quarterly dividend of
$0.38 per common share payable
September 15, 2015 to shareholders of
record as of August 27, 2015.
The Company will be holding an Investor Conference Call on
Thursday, August 13, 2015 at
9:00 a.m. ET to review its 2015
second quarter results. The dial-in telephone numbers for the
call are 416-764-8688 (Toronto and
International callers) and 1-888-390-0546 (U.S. and Canada). Please dial in 10 minutes prior
to the call to ensure that you get a line.
A replay of the call will be available at 416-764-8677
(Toronto and International
callers) and 1-888-390-0541 (U.S. and Canada) until 9:00 a.m.
ET Friday August 28, 2015. You will be required to
enter pass code 411692 in order to access the call.
Additional supplemental financial information is available in
our investor conference call package located on our website at
www.russelmetals.com.
About Russel Metals
Russel Metals is one of the largest metals distribution
companies in North America. It carries on business in three
metals distribution segments: metals service centers, energy
products and steel distributors, under various names including
Russel Metals, A.J. Forsyth, Acier
Leroux, Acier Loubier, Alberta Industrial Metals, Apex
Distribution, Apex Monarch, Apex Remington, Apex Western
Fiberglass, Arrow Steel Processors, B&T Steel, Baldwin
International, Comco Pipe and Supply, Fedmet Tubulars, JMS Russel
Metals, Leroux Steel, McCabe Steel, Mégantic Métal, Métaux Russel,
Métaux Russel Produits Spécialisés, Milspec, Norton Metals, Pioneer
Pipe, Russel Metals Specialty Products, Russel Metals Williams
Bahcall, Siemens Laserworks, Spartan Energy Tubulars, Sunbelt
Group, Triumph Tubular & Supply, Wirth
Steel and York-Ennis.
Cautionary Statement on Forward-Looking Information
Certain statements contained in this press release constitute
forward-looking statements or information within the meaning of
applicable securities laws, including statements as to our outlook,
future events or our future performance. All statements,
other than statements of historical fact, are forward-looking
statements. Forward-looking statements are often, but not
always, identified by the use of words such as "seek",
"anticipate", "plan", "continue", "estimate", "expect", "may",
"will", "project", "predict", "potential", "targeting", "intend",
"could", "might", "should", "believe" and similar
expressions. Forward-looking statements are necessarily based
on estimates and assumptions that, while considered reasonable by
us, inherently involve known and unknown risks, uncertainties and
other factors that may cause actual results or events to differ
materially from those anticipated in such forward-looking
statements, including the factors described below.
We are subject to a number of risks and uncertainties which
could have a material adverse effect on our future profitability
and financial position, including the risks and uncertainties
listed below, which are important factors in our business and the
metals distribution industry. Such risks and uncertainties
include, but are not limited to: the current economic climate;
volatility in metal prices; volatility in oil and natural gas
prices; cyclicality of the metals industry and the industries that
purchase our products; lack of credit availability that may limit
the ability of our customers to obtain credit or expand their
businesses; significant competition that could reduce our market
share; any interruption in sources of metals supply; the
integration of future acquisitions, including successfully adapting
to a public company control environment and retaining key
acquisition management personnel; failure to renegotiate any of our
collective agreements and work stoppages; disruption in our
customer or suppliers' operations due to labour disruptions or the
existence of events or circumstances that cause a force majeure;
environmental liabilities; environmental concerns or changes in
government regulations in general, and those related to oil sands
production, shale fracking or oil distribution in particular;
changes in government regulations relating to workplace safety and
worker health; product claims from customers, currency exchange
risk, particularly between the Canadian and U.S. dollar; the
failure of our key computer-based systems, including our enterprise
resource and planning systems; the failure to implement new
technologies; cyber security breach; the loss of key individuals;
the inability to access affordable financing, capital or insurance;
interest rate risk; dilution; and change of control.
While we believe that the expectations reflected in our
forward-looking statements are reasonable, no assurance can be
given that these expectations will prove to be correct, and our
forward-looking statements included in this press release should
not be unduly relied upon. These statements speak only as of
the date of this press release and, except as required by law, we
do not assume any obligation to update our forward-looking
statements. Our actual results could differ materially from
those anticipated in our forward-looking statements including as a
result of the risk factors described above and under the heading
"Risk" in our MD&A and under the heading "Risks Related to Our
Business and the Metals Distribution Industry in our filings with
securities regulatory authorities which are available on SEDAR at
www.sedar.com.
If you would like to unsubscribe from receiving Press
Releases, you may do so by emailing info@russelmetals.com; or by
calling our Investor Relations Line: 905-816-5178.
CONDENSED
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
|
|
Quarters ended June
30
|
Six months ended June
30
|
(in millions of
Canadian dollars, except per share data)
|
2015
|
2014
|
2015
|
2014
|
Revenues
|
$
|
761.3
|
$
|
893.3
|
$
|
1,665.2
|
$
|
1,817.3
|
Cost of
materials
|
627.7
|
721.1
|
1,374.2
|
1,472.8
|
Employee
expenses
|
61.2
|
70.4
|
133.1
|
141.9
|
Other operating
expenses
|
41.3
|
45.4
|
90.2
|
92.7
|
Earnings before
interest, finance expense and
|
|
|
provision for
income taxes
|
31.1
|
56.4
|
67.7
|
109.9
|
Interest
expense
|
9.6
|
9.1
|
19.1
|
18.1
|
Other finance
(income) expense
|
(0.6)
|
3.0
|
-
|
4.8
|
Earnings before
provision for income taxes
|
22.1
|
44.3
|
48.6
|
87.0
|
Provision for income
taxes
|
5.7
|
13.8
|
13.7
|
27.5
|
Net earnings for
the period
|
$
|
16.4
|
$
|
30.5
|
$
|
34.9
|
$
|
59.5
|
Basic earnings per
common share
|
$
|
0.27
|
$
|
0.50
|
$
|
0.57
|
$
|
0.97
|
Diluted earnings
per common share
|
$
|
0.27
|
$
|
0.48
|
$
|
0.57
|
$
|
0.95
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (UNAUDITED)
|
|
Quarters ended June
30
|
Six months ended June
30
|
(in millions of
Canadian dollars)
|
2015
|
2014
|
2015
|
2014
|
Net earnings for
the period
|
$
|
16.4
|
$
|
30.5
|
$
|
34.9
|
$
|
59.5
|
Other comprehensive
(loss) income
|
|
|
|
|
|
|
|
|
Items that may be
reclassified to earnings
|
|
|
|
|
|
|
|
|
|
Unrealized foreign
exchange (losses) gains on
|
|
|
|
|
|
|
|
|
|
|
translation of
foreign operations
|
(7.8)
|
(13.5)
|
32.9
|
1.0
|
Items that may not
be reclassified to earnings
|
|
|
Actuarial gains
(losses) on pension and similar
|
|
|
|
obligations, net of
taxes
|
5.1
|
1.4
|
0.4
|
(2.7)
|
Other comprehensive
(loss) income
|
(2.7)
|
(12.1)
|
33.3
|
(1.7)
|
Total
comprehensive income
|
$
|
13.7
|
$
|
18.4
|
$
|
68.2
|
$
|
57.8
|
CONDENSED
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
|
|
June
30
|
December
31
|
(in millions of
Canadian dollars)
|
2015
|
2014
|
ASSETS
|
|
Current
|
|
|
Cash and cash
equivalents
|
$
|
27.5
|
$
|
53.4
|
|
Accounts
receivable
|
445.5
|
569.3
|
|
Inventories
|
923.6
|
930.8
|
|
Prepaid
expenses
|
12.6
|
11.6
|
|
Income taxes
receivable
|
8.4
|
2.8
|
|
1,417.6
|
1,567.9
|
|
|
Property, Plant
and Equipment
|
258.1
|
249.8
|
Deferred Income
Tax Assets
|
3.5
|
4.9
|
Financial and
Other Assets
|
5.9
|
5.9
|
Goodwill and
Intangibles
|
216.1
|
214.3
|
|
$
|
1,901.2
|
$
|
2,042.8
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
Current
|
|
|
Bank
indebtedness
|
$
|
24.6
|
$
|
24.2
|
|
Accounts payable and
accrued liabilities
|
354.3
|
500.4
|
|
Income taxes
payable
|
0.2
|
14.1
|
|
Current portion
long-term debt
|
0.5
|
0.5
|
|
379.6
|
539.2
|
|
|
Long-Term
Debt
|
463.0
|
460.5
|
Pensions and
Benefits
|
24.3
|
26.1
|
Deferred Income
Tax Liabilities
|
18.5
|
17.0
|
Provisions and
Other Non-Current Liabilities
|
28.5
|
35.0
|
|
913.9
|
1,077.8
|
Shareholders'
Equity
|
|
|
Common
shares
|
531.7
|
531.2
|
|
Retained
earnings
|
332.4
|
344.0
|
|
Contributed
surplus
|
14.6
|
14.1
|
|
Accumulated other
comprehensive income
|
80.0
|
47.1
|
|
Equity component of
convertible debentures
|
28.6
|
28.6
|
Total
Shareholders' Equity
|
987.3
|
965.0
|
Total Liabilities
and Shareholders' Equity
|
$
|
1,901.2
|
$
|
2,042.8
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
|
|
Quarters ended June
30
|
Six months ended June
30
|
(in millions of
Canadian dollars)
|
2015
|
2014
|
2015
|
2014
|
|
|
|
|
|
Operating
activities
|
|
|
|
|
|
Net earnings for the
period
|
$
|
16.4
|
$
|
30.5
|
$
|
34.9
|
$
|
59.5
|
|
Depreciation and
amortization
|
8.8
|
8.6
|
17.5
|
17.2
|
|
Deferred income
taxes
|
2.9
|
(1.3)
|
2.8
|
(0.5)
|
|
(Gain) loss on sale
of property, plant and equipment
|
(2.1)
|
-
|
(2.0)
|
1.0
|
|
Share-based
compensation
|
0.3
|
0.4
|
0.6
|
0.8
|
|
Difference between
pension expense and amount funded
|
(0.6)
|
(0.4)
|
(1.2)
|
(0.4)
|
|
Debt accretion,
amortization and other
|
1.3
|
1.2
|
2.7
|
2.4
|
|
Change in fair value
of contingent consideration
|
(0.6)
|
3.0
|
-
|
4.8
|
Cash from operating
activities before
|
|
|
non-cash working
capital
|
26.4
|
42.0
|
55.3
|
84.8
|
Changes in non-cash
working capital items
|
|
|
Accounts
receivable
|
58.1
|
34.7
|
137.7
|
(55.2)
|
|
Inventories
|
55.7
|
(95.6)
|
43.0
|
(94.4)
|
|
Accounts payable and
accrued liabilities
|
(56.8)
|
6.8
|
(141.5)
|
54.7
|
|
Income tax
receivable/payable
|
(1.9)
|
(2.9)
|
(19.2)
|
6.7
|
|
Other
|
(2.1)
|
(1.2)
|
(1.1)
|
(4.4)
|
Change in non-cash
working capital
|
53.0
|
(58.2)
|
18.9
|
(92.6)
|
Cash from (used
in) operating activities
|
79.4
|
(16.2)
|
74.2
|
(7.8)
|
Financing
activities
|
|
|
|
|
|
(Decrease) increase
in bank indebtedness
|
(7.3)
|
-
|
0.4
|
-
|
|
Issue of common
shares
|
-
|
9.6
|
0.4
|
11.3
|
|
Dividends on common
shares
|
(23.5)
|
(21.5)
|
(46.9)
|
(42.8)
|
|
Repayment of
long-term debt
|
(0.1)
|
(0.2)
|
(0.2)
|
(0.5)
|
Cash used in
financing activities
|
(30.9)
|
(12.1)
|
(46.3)
|
(32.0)
|
Investing
activities
|
|
|
|
|
|
Purchase of property,
plant and equipment
|
(10.4)
|
(10.6)
|
(18.6)
|
(15.5)
|
|
Proceeds on sale of
property, plant and equipment
|
2.4
|
0.4
|
2.8
|
0.6
|
|
Payment of contingent
consideration
|
-
|
-
|
(17.5)
|
(4.1)
|
|
Purchase of
business
|
(27.3)
|
-
|
(27.3)
|
-
|
Cash used in
investing activities
|
(35.3)
|
(10.2)
|
(60.6)
|
(19.0)
|
Effect of exchange
rates on cash and cash equivalents
|
(1.6)
|
4.4
|
6.8
|
(5.2)
|
Increase
(decrease) in cash and cash equivalents
|
11.6
|
(34.1)
|
(25.9)
|
(64.0)
|
Cash and cash
equivalents, beginning of the period
|
15.9
|
86.3
|
53.4
|
116.2
|
Cash and cash
equivalents, end of the period
|
$
|
27.5
|
$
|
52.2
|
$
|
27.5
|
$
|
52.2
|
|
|
|
|
|
Supplemental cash
flow information:
|
|
|
|
|
Income taxes
paid
|
$
|
5.1
|
$
|
17.7
|
$
|
30.5
|
$
|
21.0
|
Interest paid
(net)
|
$
|
10.7
|
$
|
9.9
|
$
|
19.4
|
$
|
18.0
|
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
|
|
|
|
|
Accumulated
|
Equity
|
|
|
|
|
|
Other
|
Component
|
|
|
Common
|
Retained
|
Contributed
|
Comprehensive
|
of
Convertible
|
|
(in millions of
Canadian dollars)
|
Shares
|
Earnings
|
Surplus
|
Income
|
Debentures
|
Total
|
Balance, January
1, 2015
|
$
|
531.2
|
$
|
344.0
|
$
|
14.1
|
$
|
47.1
|
$
|
28.6
|
$
|
965.0
|
Payment of
dividends
|
-
|
(46.9)
|
-
|
-
|
-
|
(46.9)
|
Net earnings for the
period
|
-
|
34.9
|
-
|
-
|
-
|
34.9
|
Other comprehensive
income
|
|
|
|
|
|
|
|
for the
period
|
-
|
-
|
-
|
33.3
|
-
|
33.3
|
Recognition of
share-based
|
|
|
|
|
|
|
|
compensation
|
-
|
-
|
0.6
|
-
|
-
|
0.6
|
Share options
exercised
|
0.5
|
-
|
(0.1)
|
-
|
-
|
0.4
|
Transfer of net
actuarial losses
|
|
|
|
|
|
|
|
on defined benefit
plans
|
-
|
0.4
|
-
|
(0.4)
|
-
|
-
|
Balance, June 30,
2015
|
$
|
531.7
|
$
|
332.4
|
$
|
14.6
|
$
|
80.0
|
$
|
28.6
|
$
|
987.3
|
|
|
|
|
Accumulated
|
Equity
|
|
|
|
|
|
|
Other
|
Component
|
Non-
|
|
|
Common
|
Retained
|
Contributed
|
Comprehensive
|
of
Convertible
|
Controlling
|
|
(in millions of
Canadian dollars)
|
Shares
|
Earnings
|
Surplus
|
Income
|
Debentures
|
Interest
|
Total
|
Balance, January
1, 2014
|
$
|
509.5
|
$
|
314.6
|
$
|
16.2
|
$
|
12.0
|
$
|
28.7
|
$
|
1.4
|
$
|
882.4
|
Payment of
dividends
|
-
|
(42.8)
|
-
|
-
|
-
|
-
|
(42.8)
|
Net earnings for the
period
|
-
|
59.5
|
-
|
-
|
-
|
-
|
59.5
|
Other comprehensive
income
|
|
|
for the
period
|
-
|
-
|
-
|
(1.7)
|
-
|
-
|
(1.7)
|
Recognition of
share-based
|
|
|
compensation
|
-
|
-
|
0.8
|
-
|
-
|
-
|
0.8
|
Share options
exercised
|
13.6
|
-
|
(2.3)
|
-
|
-
|
-
|
11.3
|
Transfer of net
actuarial losses
|
|
|
on defined benefit
plans
|
-
|
(2.7)
|
-
|
2.7
|
-
|
-
|
-
|
Change in
non-controlling interest
|
-
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
Balance, June 30,
2014
|
$
|
523.1
|
$
|
328.6
|
$
|
14.7
|
$
|
13.0
|
$
|
28.7
|
$
|
1.3
|
$
|
909.4
|
SOURCE Russel Metals Inc.