10-Q: Reliance, Inc. Reports Q3 2024 Results: Sales Down Amidst Lower Metal Prices, Acquisitions Contribute to Growth

Reliance, Inc. experienced a decrease in net sales and earnings in Q3 2024 compared to Q3 2023, primarily due to lower metal prices, despite an increase in tons sold and contributions from recent acquisitions.

Summary

• Reliance, Inc. reported a net sales decrease of 5.6% to $3,420.3 million for the third quarter of 2024, compared to $3,623.0 million in the same period of 2023.
• The company's net income attributable to Reliance was $199.2 million, down from $295.0 million in the third quarter of 2023.
• Earnings per diluted share decreased to $3.61 from $4.99 year-over-year.
• The decrease in sales was primarily due to an 11.4% decline in average selling price per ton, although tons sold increased by 3.7% on a same-store basis.
• For the nine months ended September 30, 2024, net sales were $10,708.4 million, a 6.6% decrease compared to $11,468.6 million in the same period of 2023.
• The company completed four acquisitions in 2024, which contributed $203.9 million to net sales for the nine months ended September 30, 2024.
• Cash flow from operations decreased to $956.5 million for the nine months ended September 30, 2024, from $1.15 billion in the same period of 2023.
• The company returned $1.14 billion to stockholders through share repurchases of $951.3 million and dividends of $188.5 million in the nine months ended September 30, 2024.
• Capital expenditures for the nine months ended September 30, 2024 were $319.7 million.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative. While the company is growing through acquisitions and returning capital to shareholders, the core business is facing headwinds from lower metal prices, resulting in decreased sales and earnings. The company is managing its operations well, but the external market conditions are impacting results.

Positives

• Tons sold increased by 3.7% on a same-store basis in Q3 2024, indicating healthy demand.
• The company completed four acquisitions in 2024, expanding its product breadth and geographic reach.
• Reliance returned $1.14 billion to stockholders through share repurchases and dividends.
• The company established a new $1.5 billion unsecured credit facility, enhancing its financial flexibility.
• The company's gross profit margins remained strong despite declines in metal prices.
• The company's inventory turnover rate remained consistent year-over-year at 2.6 months on hand.

Negatives

• Net sales decreased by 5.6% in Q3 2024 compared to Q3 2023.
• Net income attributable to Reliance decreased to $199.2 million in Q3 2024, down from $295.0 million in Q3 2023.
• Diluted earnings per share decreased to $3.61 in Q3 2024, compared to $4.99 in Q3 2023.
• The average selling price per ton decreased by 11.4% on a same-store basis in Q3 2024.
• Cash flow from operations decreased to $956.5 million for the nine months ended September 30, 2024, from $1.15 billion in the same period of 2023.
• Operating income declined for the third quarter and nine months ended September 30, 2024 as compared to the same periods in 2023.

Risks

• Fluctuations in metal prices significantly impact the company's average selling price per ton and profitability.
• Economic conditions, including inflation and interest rates, could negatively impact demand for the company's products and services.
• The company is exposed to risks related to labor constraints and supply chain disruptions.
• The company is subject to legal and environmental risks, including an ongoing environmental remediation project.
• The company's goodwill and intangible assets are subject to impairment tests, which could result in write-downs.

Future Outlook

The company believes its primary sources of liquidity will be sufficient to satisfy its cash requirements and stockholder return activities over the next 12 months and beyond. The company expects to continue to be able to access the capital markets to raise funds, if desired.

Management Comments

• Management believes the company's outperformance of industry peers is supported by its organic growth activities along with its service levels.
• Management believes the declines in metals pricing was mitigated by effective inventory management, the company's focus on orders with quick turnaround and value-added processing.

Industry Context

The company's performance is compared to the Metals Service Center Institute's reported 1.2% decline in industry shipments, with Reliance outperforming the industry with a 3.7% increase in same-store tons sold. This suggests Reliance is gaining market share or is more resilient to market downturns than its peers.

Comparison to Industry Standards

• Reliance's same-store tons sold increased by 3.7% in Q3 2024, while the Metals Service Center Institute reported a 1.2% decline in industry shipments, indicating Reliance is performing better than the industry average.
• Reliance's gross profit margin of 29.4% in Q3 2024 is a key metric to compare against other metal service centers, though specific competitor data is not provided in the document.
• The company's focus on value-added processing and quick turnaround times is a strategy that differentiates it from competitors who may focus solely on basic distribution.
• The company's acquisition strategy is a common growth strategy in the industry, but the specific impact of these acquisitions on Reliance's performance should be compared to similar acquisitions by competitors.

Legal Proceedings

• The company is involved in an environmental remediation project related to former manufacturing operations of Earle M. Jorgensen Company.
• The company is subject to routine litigation incidental to the business.

Stakeholder Impact

• Shareholders are impacted by the decrease in earnings and share price, but also benefit from share repurchases and dividends.
• Employees are impacted by wage inflation and changes in headcount.
• Customers are impacted by changes in metal prices and the company's service levels.
• Suppliers are impacted by the company's purchasing decisions and payment terms.
• Creditors are impacted by the company's debt levels and ability to repay its obligations.

Next Steps

• The company will continue to integrate its recent acquisitions.
• The company will continue to monitor market conditions and adjust its operations accordingly.
• The company will continue to execute its share repurchase program.
• The company will pay the 2024 fourth quarter cash dividend on December 6, 2024.

Key Dates

Keywords

metals service center, steel, aluminum, acquisitions, metal prices, share repurchases, dividends, financial results, earnings, net sales