February 16, 2023 06:50 ET | Source: Reliance Steel & Aluminum Co. Reliance Steel & Aluminum Co.
Los Angeles, California, UNITED STATES
- Record annual net sales of $17.03 billion increased 20.8% - Record annual pretax income of $2.43 billion and pretax income margin of 14.3% - Record annual EPS of $29.92; non-GAAP EPS of $30.03 - Record quarterly and annual cash flow from operations of $808.7 million and $2.12 billion - Repurchased $630.3 million of common stock in 2022 - Increased quarterly dividend 14.3% to $1.00 per share (annual: $4.00)
SCOTTSDALE, Ariz., Feb. 16, 2023 (GLOBE NEWSWIRE) -- Reliance Steel & Aluminum Co. (NYSE: RS) today reported its financial results for the fourth quarter and full year ended December 31, 2022.
(in millions, except tons which are in thousands and per share amounts)
Management Commentary “We’re very pleased to have achieved record financial performance in 2022 across nearly every metric during a period of continued metal price volatility and broader economic uncertainty,” said Karla Lewis, President and Chief Executive Officer of Reliance. “Our 2022 net sales were a record $17.03 billion, driven by solid demand in the majority of our end markets along with sustained higher metals pricing. Our product and end market diversification and focus on servicing small order sizes with quick turnaround, 50.2% of which included value-added processing in 2022, supported a strong gross profit margin of 30.8% for the year, at the high end of our sustainable annual range despite declining prices for most products in the second half of 2022. As a result, we delivered record annual non-GAAP pretax income of $2.44 billion and record non-GAAP diluted earnings per share of $30.03. I applaud our team on achieving these outstanding results and for doing so safely, with 2022 marking an all-time low for our total recordable incident rate.”
Mrs. Lewis continued, “We generated record annual cash flow from operations of $2.12 billion, far surpassing our prior record of $1.30 billion in 2019, attributable to our strong profitability and effective working capital management. Our strong cash generation and liquidity enables us to continue executing our disciplined capital allocation strategy, with particular emphasis on both growth and stockholder returns. We spent a record $341.8 million on capital expenditures in 2022, the majority of which was growth-oriented. Our full year 2023 capital expenditure budget at $500 million is a new record, about two thirds of which is dedicated to organic growth initiatives. We were also pleased to return $847.4 million to our stockholders in 2022 through share repurchases and quarterly cash dividends. We finished the year with a very strong balance sheet and liquidity position that enables us to continue executing our capital allocation priorities that focus on growth and stockholder returns, no matter the operating environment.”
End Market Commentary Reliance provides a diverse range of products and processing services to a wide range of end markets, generally in small quantities on an as-needed basis. The Company’s tons sold in the fourth quarter of 2022 increased 0.8% compared to the fourth quarter of 2021. Compared to the third quarter of 2022, Reliance’s tons sold decreased 8.2%, in-line with management’s expectations of down 6.5% to 8.5%, and consistent with the typical fourth quarter seasonal slowdown that includes customer holiday-related shutdowns and fewer shipping days. The Company continues to believe underlying demand remains healthy and is stronger than its fourth quarter shipment levels reflect due to ongoing supply chain-related challenges experienced by many of its customers.
Demand in non-residential construction (including infrastructure), Reliance’s largest end market, remained at healthy levels and slightly improved from the fourth quarter of 2021. Reliance is continuing to experience a healthy backlog of new projects, including renewable energy, and remains optimistic that non-residential construction demand in the key areas in which the Company participates will remain at healthy levels in the first quarter of 2023.
Demand for the toll processing services Reliance provides to the automotive market increased from the third quarter of 2022 and fourth quarter of 2021 due to increased production rates by certain automotive manufacturers despite lingering supply chain challenges. Reliance is optimistic that demand for its toll processing services will continue to improve in the first quarter of 2023.
Demand trends across the broader manufacturing sectors Reliance serves, including industrial machinery, consumer products and heavy equipment were relatively flat compared to the fourth quarter of 2021. Reliance anticipates underlying demand for its products across the broader manufacturing sector will remain stable in the first quarter of 2023.
Semiconductor demand in the fourth quarter was well above prior year levels. Though certain areas in the market may experience softening demand in the short-term, the semiconductor market remains strong, and the Company’s long-term outlook is positive. Reliance continues to invest in increased capacity to service the significant expansion of semiconductor fabrication underway in the United States.
Demand in commercial aerospace continued to improve during the fourth quarter with significantly higher shipments compared to the fourth quarter of 2021. Reliance is cautiously optimistic that demand in commercial aerospace will continue its steady improvement in the first quarter of 2023 as build rates continue to increase. Demand in the military, defense and space portions of Reliance’s aerospace business remained strong with healthy backlogs, which is expected to continue in the first quarter of 2023.
Demand in the energy (oil and natural gas) market remained relatively stable with the fourth quarter of 2021. Reliance is cautiously optimistic demand will improve from current levels in the first quarter of 2023.
Balance Sheet & Cash Flow At December 31, 2022, Reliance had cash and cash equivalents of $1.17 billion. Total debt outstanding was $1.66 billion as of December 31, 2022 and there was no outstanding borrowing under the Company’s $1.5 billion revolving credit facility. Reliance generated record cash flow from operations of $808.7 million and $2.12 billion, respectively, in the fourth quarter and full year ended December 31, 2022.
On January 15, 2023, Reliance completed the previously announced redemption of $500 million aggregate principal amount of senior unsecured notes bearing interest at the rate of 4.50% per annum, due April 15, 2023. The notes were redeemed pursuant to the terms of an indenture, dated as of April 12, 2013, at a price equal to 100% of their principal plus accrued and unpaid interest.
Stockholder Return Activity On February 14, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $1.00 per share of common stock, an increase of 14.3%, payable on March 24, 2023 to stockholders of record as of March 10, 2023. Reliance has paid regular quarterly cash dividends for 63 consecutive years without reduction or suspension and has increased the dividend 30 times since its 1994 IPO to a current annual rate of $4.00 per share.
In the fourth quarter of 2022, the Company repurchased approximately 0.4 million shares of its common stock at an average cost of $186.51 per share, for a total of $82.6 million, under its $1 billion share repurchase plan authorized on July 26, 2022. For the full year of 2022, the Company repurchased approximately 3.5 million shares of its common stock at an average cost of $178.81 per share, for a total of $630.3 million. In the last five years, Reliance has repurchased approximately 16.0 million shares of its common stock at an average cost of $114.38 per share, for a total of $1.83 billion.
Business Outlook Reliance expects healthy demand trends to continue into the first quarter of 2023 despite prevailing macroeconomic uncertainty, along with ongoing supply chain disruptions and geopolitical matters. Accordingly, the Company estimates its tons sold will be up 11% to 13% in the first quarter of 2023 compared to the fourth quarter of 2022, which exceeds the typical seasonal recovery, and up 1% to 3% compared to the first quarter of 2022. In addition, Reliance expects its average selling price per ton sold for the first quarter of 2023 to be down 3% to 5% compared to the fourth quarter of 2022 driven by stabilizing pricing trends for many of its products compared to December levels, which represented the lowest pricing point in the fourth quarter of 2022. Based on these expectations, Reliance estimates non-GAAP earnings per diluted share in the range of $5.40 to $5.60 for the first quarter of 2023.
Conference Call Details A conference call and simultaneous webcast to discuss Reliance’s fourth quarter and full year 2022 financial results and business outlook will be held today, February 16, 2023 at 11:00 a.m. Eastern Time / 8:00 a.m. Pacific Time. To listen to the live call by telephone, please dial (877) 407-0792 (U.S. and Canada) or (201) 689-8263 (International) approximately 10 minutes prior to the start time and use conference ID: 13735727. The call will also be broadcast live over the Internet hosted on the Investors section of the Company’s website at investor.rsac.com.
For those unable to participate during the live broadcast, a replay of the call will also be available beginning today at 2:00 p.m. Eastern Time until 11:59 p.m. Eastern Time on March 2, 2023, by dialing (844) 512-2921 (U.S. and Canada) or (412) 317-6671 (International) and entering the conference ID: 13735727. The webcast will remain posted on the Investors section of Reliance’s website at investor.rsac.com for 90 days.
About Reliance Steel & Aluminum Co. Founded in 1939, Reliance Steel & Aluminum Co. (NYSE: RS) is a leading global diversified metal solutions provider and the largest metals service center company in North America. Through a network of approximately 315 locations in 40 states and 12 countries outside of the United States, Reliance provides value-added metals processing services and distributes a full-line of over 100,000 metal products to more than 125,000 customers in a broad range of industries. Reliance focuses on small orders with quick turnaround and value-added processing services. In 2022, Reliance’s average order size was $3,670, approximately 50% of orders included value-added processing and approximately 40% of orders were delivered within 24 hours. Reliance Steel & Aluminum Co.’s press releases and additional information are available on the Company’s website at rsac.com.
Forward-Looking Statements This press release contains certain statements that are, or may be deemed to be, forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may include, but are not limited to, discussions of Reliance’s industry and end markets, business strategies, acquisitions, and expectations concerning the Company’s future growth and profitability and its ability to generate industry leading returns for its stockholders, as well as future demand and metals pricing and the Company’s results of operations, margins, profitability, taxes, liquidity, macroeconomic conditions, including inflation and the possibility of an economic recession or slowdown, litigation matters and capital resources. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “preliminary,” “range,” “intend” and “continue,” the negative of these terms, and similar expressions.
These forward-looking statements are based on management’s estimates, projections and assumptions as of today’s date that may not prove to be accurate. Forward-looking statements involve known and unknown risks and uncertainties and are not guarantees of future performance. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements as a result of various important factors, including, but not limited to, actions taken by Reliance, as well as developments beyond its control, including, but not limited to, the possibility that the expected benefits of acquisitions may not materialize as expected, the impacts of labor constraints and supply chain disruptions, the continuing pandemic and changes in worldwide and U.S. political and economic conditions such as inflation and the possibility of an economic recession that could materially impact the Company, its customers and suppliers and demand for the Company’s products and services. The extent to which the continuing COVID-19 pandemic may negatively impact the Company’s operations will depend on future developments which are highly uncertain and cannot be predicted, including the duration of the pandemic, any reemergence or mutations of the virus, the actions taken to control the spread of COVID-19 or treat its impact, including the speed and effectiveness of vaccination efforts, and direct and indirect effects of the virus on worldwide and U.S. economic conditions. Deteriorations in economic conditions, as a result of inflation, economic recession, COVID-19, the conflict between Russia and Ukraine or otherwise, could lead to a further or prolonged decline in demand for the Company’s products and services and negatively impact its business, and may also impact financial markets and corporate credit markets which could adversely impact the Company’s access to financing, or the terms of any financing. The Company cannot at this time predict all of the impacts of inflation, product price fluctuations, economic recession, the COVID-19 pandemic or the Russia-Ukraine conflict and related economic effects, but these factors, individually or in any combination, could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows.
The statements contained in this press release speak only as of the date that they are made, and Reliance disclaims any and all obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason, except as may be required by law. Important risks and uncertainties about Reliance’s business can be found in “Item 1A. Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as updated in the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2022 and in other documents Reliance files or furnishes with the United States Securities and Exchange Commission.
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