Reliance Steel & Aluminum Co. announced its third-quarter 2023 financial results, demonstrating resilience despite a slight drop in tons sold. The company reported non-GAAP earnings per share of $5 and generated a robust operating cash flow of $466 million. The firm plans to invest in growth, with a record capital expenditure budget of $520 million for the year, focusing on enhancing value-added processing capabilities and market expansion.
Key takeaways from the call:
- Despite a decline in tons sold, the company outperformed industry trends and reported year-over-year growth.
- The average selling price declined but was counterbalanced by pricing discipline and value-added processing capabilities, leading to stable gross profit margins.
- Reliance Steel & Aluminum Co. returned $185.1 million to stockholders through dividends and share repurchases in the third quarter.
- The company has a robust pipeline for acquisitions and will pursue opportunities meeting its criteria.
- Reliance expects the underlying end market demand to remain healthy in the fourth quarter, with a sequential decline in tons sold consistent with seasonal trends.
- The company expects non-GAAP earnings per diluted share of between $3.70 and $3.90 for the fourth quarter of 2023.
Reliance Steel & Aluminum Co. also reported $705 million in share repurchases as of October, out of their $1 billion authorization. The company anticipates a 4% to 6% decrease in average selling price per ton sold in Q4 compared to Q3 due to declining metal prices. However, they expect a 3.5% to 5.5% growth in tons sold in Q4 2023 compared to Q4 2022, in line with seasonal trends.
Karla Lewis, a representative from Reliance, highlighted the company's processing capabilities in maintaining gross profit margins, especially during periods of declining prices. She noted that the company is currently working on its 2024 budget and expects it to be elevated due to opportunities in the market and the company's desire to invest in growth. Lewis also mentioned a solid acquisition pipeline and expressed a belief that sellers are becoming more reasonable with their valuation expectations.
The company is set to present at the Goldman Sachs (NYSE:GS) Metals and Mining Conference in mid-November. Despite the expected downward pressure on gross profit margin and average selling price, the firm expressed confidence in its business model and strong balance sheet, planning to continue pursuing profitable growth and capital return activities.
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