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RADIUS RECYCLING, INC. (RDUS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 delivered a significant sequential improvement: revenue rose to $0.771B, adjusted EBITDA nearly doubled to $17M, and adjusted EPS improved to $(0.41), driven by higher volumes across ferrous, nonferrous, and finished steel, stronger nonferrous pricing, and full run-rate benefits from the $70M cost/productivity program .
  • GAAP EPS was $(0.56) vs. $(6.97) in Q3 (goodwill impairment in Q3), as margins remained compressed by tight scrap availability and elevated Chinese steel exports, while average inventory accounting detriment moderated to ~$1/ferrous ton from ~$3 in Q3 .
  • Finished steel volumes rose 11% sequentially; rolling mill utilization reached 97% (vs. 88% in Q3), aided by seasonal construction strength; the Board declared a $0.1875 dividend payable Nov 26, 2024 .
  • Outlook: management expects rate cuts to support scrap flows, nonresidential demand, and EAF-related ferrous demand; the 3PR services line now contributes >10% of recycled metals volumes; advanced metal recovery technology ramp remains a key 2025 earnings lever .

What Went Well and What Went Wrong

What Went Well

  • Volumes and spreads: ferrous sales volumes +12% q/q; nonferrous volumes +13% q/q and average net selling prices +4% q/q; expanded recycled metal spreads supported EBITDA improvement .
  • Productivity and costs: full quarterly run-rate benefits achieved on the $70M annual cost and productivity program; adjusted SG&A down year-over-year despite temporary legal cost pressure .
  • Steel operations: finished steel volumes +11% q/q; rolling mill utilization 97% vs. 88% in Q3, reflecting seasonal construction demand strength on the West Coast .
  • Quote: “Our results this quarter benefited from our significant cost savings and productivity improvement program and our success in increasing ferrous, nonferrous, and finished steel sales volumes.” — Tamara Lundgren, CEO .

What Went Wrong

  • Scrap tightness: tight scrap availability remained the biggest headwind, compressing margins; management has not seen loosening yet beyond seasonality .
  • Macro/trade headwinds: elevated Chinese steel exports pressured global scrap demand, especially in Asia; ferrous net selling prices were flat sequentially .
  • Legal/temporary costs: elevated costs for certain ongoing legal matters partially offset SG&A reductions in Q4; expected to recede later in FY2025 .
  • Inventory accounting: average inventory accounting detriment was ~$1/ferrous ton (vs. ~$3 in Q3), still a drag albeit smaller .

Financial Results

P&L and Profitability vs Prior Quarter and Prior Year

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Billions)$0.718 $0.674 $0.771
Gross Margin ($USD Millions)$90 $46 $52
Diluted EPS (GAAP, continuing ops)$0.92 $(6.97) $(0.56)
Adjusted Diluted EPS (continuing ops)$0.47 $(0.59) $(0.41)
Adjusted EBITDA ($USD Millions)$49 $9 $17
Cash from Operating Activities ($USD Millions)$135 $(1) $4

Notes: Q3 GAAP EPS includes a $216M goodwill impairment charge; Q4 had no insurance recoveries (vs. $7M in Q3) and a smaller inventory accounting detriment (~$1/ton vs. ~$3/ton in Q3) .

Operating KPIs

KPIQ4 2023Q3 2024Q4 2024
Ferrous Sales Volumes (LT, thousands)1,105 1,112 1,249
Avg. Net Ferrous Price ($/LT)$357 $350 $348
Nonferrous Volumes (lbs, millions)204 183 207
Avg. Nonferrous Price ($/lb)$0.94 $1.04 $1.08
Finished Steel Avg Net Price ($/ST)$861 $817 $795
Finished Steel Volumes (ST, thousands)152 126 140
Rolling Mill Utilization (%)102% 88% 97%

Balance Sheet and Cash

MetricQ4 2023 (Aug 31, 2023)Q3 2024 (May 31, 2024)Q4 2024 (Aug 31, 2024)
Total Debt ($USD Millions)$249.4 $411.2 $414.8
Cash & Equivalents ($USD Millions)$6.0 $25.2 $5.6
Net Debt ($USD Millions)$243.4 $386.1 $409.2
Capital Expenditures ($USD Millions)N/A$16 $20

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ4 2024$0.1875 (Q3) $0.1875 payable Nov 26, 2024 (record Nov 12) Maintained
CapExFY 2025N/A~$80M; ~20% for growth (recycling services, nonferrous tech); remainder maintenance/env projects Initiated
Cash taxesFY 2025N/ANot expected to be a cash taxpayer in FY2025 (availability of NOLs) Initiated
Tax rate outlookFY 2025N/APotential quarter-to-quarter volatility in tax rate due to deferred tax valuation allowance estimates Initiated
Cost/productivity savingsFY 2024 run-rate$70M annualized targeted Substantially full quarterly run-rate achieved in Q4 Achieved/maintained
Nonferrous recovery returnsPost-ramp~$10 EBITDA per ferrous ton expected when fully operational Continued expectation; ramp completion early calendar 2025 for permitted systems Maintained trajectory

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3)Current Period (Q4)Trend
Scrap supply/tightnessQ2: tight supply flows; wet weather impacted volumes ; Q3: continued tight ferrous supply flows Tight availability remains biggest headwind; no loosening beyond seasonality Unchanged (tight)
Chinese steel exportsQ2: elevated exports dampened demand ; Q3: elevated exports drove 9% decline in ferrous prices Exports at multi-year highs; ~20% YoY increase, 8-year high; pressure in Asian markets Worsening
Nonferrous demand/pricingQ2: avg price +3% seq; volumes +7% YoY ; Q3: avg price +10% seq; volumes +4% Demand strong; avg price +4% seq; volumes +13% seq Improving
Finished steel demand/West CoastQ2: seq down due to rain; YOY up 5% ; Q3: seasonally stronger; utilization 88% Volumes +11% seq; utilization 97% (vs. US avg ~78%); West Coast nonres strong Improving
Cost reduction/productivityQ2: increased target by $40M to total $70M ; Q3: ~three-quarters run-rate achieved Full quarterly run-rate benefits realized Achieved
Metal recovery tech investmentsQ2: ongoing investments ; Q3: ramp-up underway Nearly 1/4 of anticipated annual benefits achieved in FY24; completion by end CY2024; $10/ton EBITDA when fully operational Improving
3PR services businessQ2/Q3: platform expansion Now contributing >10% of recycled metals volumes Improving
Legal/regulatory costs—Elevated legal costs in Q4, expected to recede in FY2025 New headwind

Management Commentary

  • “Tight scrap availability has been our biggest headwind… declines in U.S. interest rates should benefit consumer, manufacturing, and construction activity which, in turn, should lead to improved scrap supply flows.” — Tamara Lundgren, CEO .
  • “We nearly doubled our adjusted EBITDA to $17 million… delivered substantially the full quarterly run rate benefits from our cost savings and productivity improvement program.” — Tamara Lundgren, CEO .
  • “We estimate these [metal recovery technology] investments should return over $40 million in annual EBITDA after full deployment.” — Tamara Lundgren, CEO .
  • “Net debt was $409 million… our Credit Agreement has $800 million capacity and matures August 2027; interest costs are linked to short-term market rates.” — Stefano Gaggini, CFO .
  • “We do not expect to be a cash taxpayer in fiscal ’25, given the availability of net operating loss carryforwards.” — Stefano Gaggini, CFO .

Q&A Highlights

  • Sequential EBITDA drivers: volumes contributed slightly less than half of the ~$15M sequential improvement (ex-insurance); cost savings ramp to full run-rate contributed ~one-third; remainder from higher nonferrous prices, expanded spreads, and smaller inventory accounting detriment .
  • Scrap flows: no measurable loosening beyond seasonality; domestic ferrous prices rose ~$20 in October bringing domestic/export parity; Asian sentiment mixed due to Chinese exports .
  • Ferrous shipment timing: sequential inventory reduction aided volumes; bulk cargo timing materially impacts quarterly volumes .
  • Nonferrous spreads: compressed twitch-vs-zorba premium due to subdued auto production; product optionality from recovery systems allows switching based on spreads, currently less utilized .
  • West Coast construction demand: strong nonres activity drove finished steel volumes; infrastructure fund flow benefits expected mid-2025; mill utilization at 97% .

Estimates Context

  • S&P Global consensus estimates were unavailable for RDUS due to a missing Capital IQ mapping; as a result, we cannot provide a reported vs. consensus comparison for Q4 FY2024 or prior periods at this time. Values were not retrievable from S&P Global due to mapping limitations.

Key Takeaways for Investors

  • Sequential operational rebound with adjusted EBITDA $17M and adjusted EPS $(0.41) driven by volumes, nonferrous pricing, and cost savings; the absence of insurance recoveries and smaller inventory accounting detriment clarify underlying momentum .
  • Structural headwinds persist: tight scrap availability and elevated Chinese steel exports continue to compress ferrous margins; any sustained easing in these could unlock margin upside .
  • Execution levers for FY2025: full run-rate $70M savings achieved; advanced metal recovery ramp (targeting ~$10 EBITDA/ferrous ton) and >10% volumes via 3PR services provide counter-cyclical and secular growth support .
  • Steel mill strength is a positive tell: 97% utilization and 11% higher volumes sequentially amid West Coast nonres demand; potential additive tailwind from infrastructure funds in mid-2025 .
  • Balance sheet: net debt rose to ~$409M at Q4-end; $800M credit facility capacity and rate sensitivity to Fed cuts mitigate financing costs; operating cash flow turned positive ($4M) in Q4 .
  • Near-term setup: expect typical Q1 seasonality and tax rate volatility; management refrained from quantitative Q1 guidance, suggesting caution until market factors become clearer .
  • Dividend maintained ($0.1875/share), signaling capital return stability despite cyclical pressures .