Market Share Gains, Margin Expansion, Expense Management, Working Capital Efficiency, Cash Flow Generation and Debt Reduction Show Continued Strength in Planning and Execution
Ryerson Holding Corporation (NYSE: RYI), a leading distributor and processor of metals, today reported results for the first quarter of 2016.
“This was another quarter of exemplary team execution across the Ryerson enterprise. I want to thank all of my Ryerson colleagues for a job well done as self-help is the best kind,” said Ryerson’s President and Chief Executive Officer Eddie Lehner. “While we welcome supply side improvements in metals pricing that have begun to move through the value-chain and appear to have staying power, we continue to build a better Ryerson for all seasons. During the first quarter of 2016, we gained market share, effectively managed expenses and working capital, reduced debt and posted strong earnings. Ryerson is well positioned to capitalize on improvements in the pricing environment as they unfold.”
First Quarter 2016 Results
Revenues were $702.6 million for the first quarter of 2016, down 19.1 percent from the year-ago period due to a 19.4 percent decline in the average selling price per ton. Tons shipped increased 0.4 percent, compared to a decline of 8.5 percent for the industry, as measured by Metals Service Center Institute results.
Gross margin was 21.0 percent for the first quarter of 2016, compared to 17.3 percent for the year-ago period. Included in cost of materials sold was net LIFO income of $14.8 million for the first quarter of 2016 and $12.0 million for the first quarter of 2015. Gross margin, excluding LIFO was 18.9 percent for the first quarter of 2016, an expansion of 300 basis points from the first quarter of 2015. A reconciliation of gross margin, excluding LIFO to gross margin is included below in this news release.
Warehousing, delivery, selling, general and administrative expense declined 6.1 percent or $7.1 million year-over-year, to $109.3 million for the first quarter of 2016. On an annualized basis, this improvement in the cost position exceeded Ryerson’s $20 million targeted reduction.
Net income attributable to Ryerson Holding Corporation was $13.5 million, or $0.42 per share, for the first quarter of 2016, compared to a loss of $2.5 million, or a loss of $0.08 per share, for the first quarter of 2015. Excluding impairment charges on assets and a gain on the retirement of debt, net income attributable to Ryerson Holding Corporation was $8.2 million, or $0.26 per share, for the first quarter of 2016 compared to net income of $4.9 million, or $0.15 per share, for the first quarter of 2015. A reconciliation of net income attributable to Ryerson Holding Corporation and earnings per share, excluding impairment charges on assets and gain on debt retirement is included below in this news release.
Working Capital Management and Balance Sheet Improvement
In the first quarter of 2016, Ryerson improved its inventory turnover to 74.5 days of supply (DOS), compared to 82.6 days in the year-ago period. With tightly managed working capital and positive net income, Ryerson generated cash flow from operations of $47 million. “The cash flow enabled us to further improve our balance sheet with a $47 million reduction in debt, including the repurchase of $25 million in principal value of our long-term notes, in the first quarter,” stated Erich Schnaufer, Ryerson’s chief financial officer.
“We are encouraged by current trends throughout the global metals supply chain where prices are resetting to levels above the cash costs of production,” concluded Lehner. “Although there is a lag effect between mill price increases and service center price realizations, we expect higher metals prices as we move through the second quarter and for the balance of the year based upon current visibility of emergent supply side trends. Our current outlook anticipates continued gross margin expansion with well managed working capital and expense control measures that can be leveraged across higher realized revenue. Given our confidence in the Ryerson team’s ability to execute, combined with improving supply side fundamentals and favorable seasonal demand trends, we project Adjusted EBITDA, excluding LIFO of $50-$55 million for the second quarter of 2016.”
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