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RH

Ryerson Holding Corp (RYI)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered revenue of $1.23B, diluted EPS of $0.29, and adjusted EBITDA (ex-LIFO) of $42.6M; shipments rose to 508k tons while ASP fell 3.2%, driving margin compression ex-LIFO to 17.4% .
  • EPS exceeded guidance due to a $10M LIFO income swing (vs prior guidance for ~$1M LIFO expense), while revenue came in below expectations on late-quarter pricing weakness across carbon, aluminum, and stainless .
  • Management raised annualized cost savings from ~$40M to ~$60M and cut operating expenses by $17.8M QoQ; buyback authorization was increased by $50M and extended to April 2026 .
  • Q3 2024 outlook calls for softer volumes and pricing: revenue of $1.12–$1.16B, ASP down 3%–5%, adjusted EBITDA (ex-LIFO) $21–$25M, diluted EPS $0.01–$0.10; LIFO income expected ~$12M .
  • Near-term stock narrative catalysts: accelerated cost actions ($60M annualized), buyback capacity increase, and optimization benefits from ERP and facility modernization amid a cyclical bottoming backdrop highlighted by management .

What Went Well and What Went Wrong

What Went Well

  • Shipments rose QoQ and YoY to 508k tons (+2.2% QoQ, +2.4% YoY), with Ryerson outpacing MSCI industry shipment trends in North America (+1.7% vs industry -0.2%) .
  • Cost actions exceeded targets; operating expenses fell $17.8M QoQ, and annualized savings were raised to ~$60M from $40M: “we now believe we can annualize our cost savings to around $60 million” .
  • EPS beat guidance on LIFO tailwind: “we exceeded our EPS guidance…driven by $10 million in LIFO income” .

What Went Wrong

  • Revenue below expectations: $1.23B vs internal expectations, as ASP fell 3.2% QoQ across carbon (-0.9%), aluminum (-4.9%), and stainless (-1.9%) .
  • Margin compression ex-LIFO: gross margin ex-LIFO slipped to 17.4% (down 20 bps QoQ and 130 bps YoY); adjusted EBITDA margin ex-LIFO narrowed to 3.5% .
  • Leverage above target: net leverage rose to 3.2x (target 0.5x–2.0x) as net debt increased to $497M and global liquidity fell to $585M .

Financial Results

Core P&L and Operating Metrics (chronological order: oldest → newest)

MetricQ2 2023Q1 2024Q2 2024
Revenue ($MM)$1,343.5 $1,239.2 $1,225.5
Tons Shipped (000s)496 497 508
ASP ($/ton)$2,709 $2,493 $2,412
Gross Margin (%)19.4% 17.6% 18.2%
Gross Margin ex-LIFO (%)18.7% 17.6% 17.4%
OpEx ($MM)$202.6 $216.8 $199.0
Net Income ($MM)$37.6 $(7.6) $9.9
Diluted EPS ($)$1.06 $(0.22) $0.29
Adjusted Diluted EPS ($)$1.06 $(0.18) $0.33
Adj. EBITDA ex-LIFO ($MM)$70.1 $40.2 $42.6
Adj. EBITDA ex-LIFO Margin (%)5.2% 3.2% 3.5%

Changes vs Prior Quarter and Prior Year

MetricQoQ Change (Q2’24 vs Q1’24)YoY Change (Q2’24 vs Q2’23)
Revenue(1.1)% (8.8)%
ASP(3.2)% (11.0)%
Gross Margin+60 bps (120) bps
Gross Margin ex-LIFO(20) bps (130) bps
Diluted EPS+$0.51 $(0.77)
Adj. EBITDA ex-LIFO+6.0% (39.2)%
Adj. EBITDA ex-LIFO Margin+30 bps (170) bps

Segment/Product Breakdown

ProductNet Sales ($MM) Q2 2023Net Sales ($MM) Q1 2024Net Sales ($MM) Q2 2024Tons (000s) Q2 2023Tons (000s) Q1 2024Tons (000s) Q2 2024ASP ($/ton) Q2 2023ASP ($/ton) Q1 2024ASP ($/ton) Q2 2024
Carbon Steel$683 $645 $656 384 385 395 $1,779 $1,675 $1,661
Aluminum$297 $276 $273 51 50 52 $5,824 $5,520 $5,250
Stainless Steel$338 $297 $277 59 61 58 $5,729 $4,869 $4,776

KPIs and Balance Sheet (chronological order: oldest → newest)

KPIQ4 2023Q1 2024Q2 2024
Net Debt ($MM)$382.2 $455.4 $497.4
Total Debt ($MM)$436.5 $497.3 $525.4
Cash & Equivalents ($MM)$54.3 $41.9 $28.0
Global Liquidity ($MM)$656 $684 $585
Net Leverage (Net Debt/LTM Adj. EBITDA ex-LIFO, x)1.7x 2.5x 3.2x
Operating Cash Flow ($MM)$90.1 $(47.8) $25.9
Capex ($MM)$25.4 $21.8 $22.7
LIFO (income)/expense ($MM)$(59.3) $1.0 $(10.0)
Dividend per share ($)$0.1850 $0.1875 $0.1875

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)Q3 2024—$1.12–$1.16 New
Avg Selling Price (%)Q3 2024—Down 3%–5% QoQ New
Shipments (%)Q3 2024—Down 2%–4% QoQ New
Adj. EBITDA ex-LIFO ($MM)Q3 2024—$21–$25 New
Diluted EPS ($)Q3 2024—$0.01–$0.10 New
LIFO income ($MM)Q3 2024—~$12 New
Cost Savings (annualized)2H 2024 onward~$40M (Q1 call) ~$60M (Q2 update) Raised
Dividend per share ($)Q3 2024$0.1875 (Q2 announced) $0.1875 Maintained
Share Repurchase AuthorizationAs of 7/30/24$100M through Apr-2025 +$50M; extended to Apr-2026 Increased/Extended
Q2 2024 Revenue ($B)Q2 2024$1.25–$1.29 (5/1 guide) Actual: $1.226 Miss vs guide
Q2 2024 Adj. EBITDA ex-LIFO ($MM)Q2 2024$47–$53 (5/1 guide) Actual: $42.6 Below guide
Q2 2024 Diluted EPS ($)Q2 2024$0.15–$0.25 (5/1 guide) Actual: $0.29 (LIFO tailwind) Above guide

Earnings Call Themes & Trends

TopicPrior Two Quarters (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Commodity prices & macroNickel down >40%; stainless volumes corrected; macro contraction; pricing easing; margin ex-LIFO compressed CRU HRC down ~14% QoQ; ASP down across carbon/aluminum/stainless; margin pressure; cautious macro (PMI contraction) Still contractionary, bottoming bias
Cost savings & optimizationInitiated ~$40M annualized cost reduction; sequential benefits ramping in 2H’24 Annualized target raised to ~$60M; $17.8M OpEx cut QoQ; logistics/material handling optimization post ERP Accelerating
ERP conversion & network modernization17 service centers converted; significant lift; optimization to follow Southern network assimilation; e-commerce relaunch; University Park start-up; Shelbyville modernization targeted Q1’25 Execution progressing
Demand & shipmentsQ1 seasonal pickup; Ryerson outperformed industry shipments Q2 shipments +2.2% QoQ; Ryerson NA shipments +1.7% vs MSCI -0.2%; selective end-market restocking Relative share gains
Leverage & liquidityNet leverage 1.7x (Q4); above 2x expected during investment cycle Net leverage 3.2x; liquidity $585M; plan to generate cash and lower ABL draw as cycle completes Higher near term; focus on delevering
Capital returnsDividends raised to $0.1875; buybacks continued $14M buybacks; authorization +$50M; dividend maintained; opportunistic repurchases below book value highlighted Ongoing
Mix & product strategyValue-add investments, underweight carbon vs industry; bright metals weakness Expect carbon volumes to outpace stainless/aluminum near term despite margin compression; long-term bullish on bright metals Carbon volumes up; bright metals cyclical weakness

Management Commentary

  • CEO on cycle and positioning: “Counter cycles don’t last forever…we continue to build operating leverage and a better customer experience as more of our recent investments come online” .
  • CFO on Q2 EPS beat vs guidance: “Our beat on EPS expectations was driven by $10 million in LIFO income…revenue…was lower than anticipated…price declines led to margin compression” .
  • COO on pricing: “Average selling price per ton was down 3.2% QoQ…CRU hot-rolled coil prices decreased by 14%” .
  • CEO on optimization benefits: “We redesigned e-commerce, repurchased 647,330 shares below book value, and exceeded our cost reduction targets for the quarter” .

Q&A Highlights

  • Cost savings mix and sustainability: Majority of $18M OpEx reduction attributable to the $60M program; ~$4M YoY reduction from variable comp not included; further network optimization (logistics, fewer material touches) expected to drive incremental savings .
  • Leverage and cash allocation: Near term focus on generating operating cash flow and lowering debt; opportunistic share repurchases below book value remain compelling .
  • Inventory destocking: Industry months-on-hand remain elevated in stainless (3.1) and aluminum (2.7) vs carbon (~2.0), implying ongoing destocking in bright metals; Ryerson reducing elevated stainless/aluminum inventories while maintaining A-item service levels .
  • Mix outlook: Expect carbon volumes to outpace stainless/aluminum in 2H’24 despite spot margin compression from HRC declines; July slower than prior six months .

Estimates Context

  • Wall Street consensus via S&P Global for Q2 2024 and surrounding periods was unavailable at the time of this analysis due to access limits; as a result, we cannot provide a quantitative comparison vs consensus for revenue/EPS/EBITDA.*
  • Directionally, internal guidance comparison indicates Q2 EPS above guide (LIFO tailwind) while revenue and adjusted EBITDA ex-LIFO were below guide; Q3 guidance implies continued pressure on pricing and volumes .
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Near-term headwinds are driven by price compression across carbon, aluminum, and stainless, with gross margin ex-LIFO trending lower; expect continued pressure into Q3 per guidance .
  • Execution on optimization (ERP, logistics, facility upgrades) is translating to tangible cost reductions; annualized savings raised to ~$60M and further network efficiencies likely as modernization completes .
  • Leverage elevated at 3.2x and liquidity down QoQ; management intends to generate cash and reduce ABL draws as investment cycle winds down, with Shelbyville modernization slated to start up in Q1 2025 .
  • Product mix tilt: carbon volumes likely to outpace stainless/aluminum near term despite thinner carbon margins, while management remains long-term bullish on bright metals franchises .
  • Capital returns remain active: $14M buybacks in Q2, authorization increased by $50M to April 2026, and dividend maintained at $0.1875—supporting downside and offering potential tactical support during cyclical bottoming .
  • Tactical implication: Near-term results likely constrained by ASP/margin dynamics; monitor cost-savings flow-through, inventory normalization in bright metals, and sequential demand stabilization to time the cyclical turn .
  • Medium-term thesis: As modernization benefits ramp and cycle normalizes, Ryerson’s operating leverage and value-add capabilities should expand through-the-cycle earnings with less volatility, positioning for improved ROIC and deleveraging .