Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Reliance Inc (RS, Financial) outperformed industry shipment levels with a 7.1% increase in tons sold compared to the third quarter of 2023.
- The company generated $463.9 million in cash flow from operations, demonstrating strong profitability and effective working capital management.
- Reliance Inc (RS) completed four acquisitions in 2024, enhancing product diversification and value-added processing capabilities.
- The company repurchased $432 million of its common stock, reducing total shares outstanding by nearly 3%.
- Reliance Inc (RS) maintained a strong balance sheet with a net debt to EBITDA ratio of less than 1, providing ample liquidity for capital allocation priorities.
Negative Points
- Metals pricing declined more than anticipated, impacting gross profit margins and earnings levels.
- The average selling price per ton sold decreased by 4.3% compared to the second quarter of 2024.
- The company anticipates a 6% to 8% decrease in tons sold for the fourth quarter due to seasonal trends and macroeconomic uncertainty.
- Non-GAAP diluted earnings per share decreased by 21.7% compared to the second quarter of 2024.
- The semiconductor industry demand remains subdued with continued excess inventories in the supply chain.
Q & A Highlights
Q: Can you discuss the temporary factors impacting Q4 and what gives you confidence in better demand next year?
A: Karla Lewis, President and CEO, explained that customer uncertainty, partly due to the upcoming Presidential election, is affecting Q4. However, long-term confidence is supported by government policies favoring manufacturing and trade, and potential lower interest rates spurring economic activity in 2025. The company expects a pickup in activity as these factors stabilize post-election.
Q: Are you seeing any slowdown in the automotive market, given your exposure through toll processing?
A: Karla Lewis noted that they have not observed a slowdown in their automotive toll processing business. Demand remains stable, particularly for SUVs and light trucks, and lower interest rates could further support consumer activity in the automotive market.
Q: Why wasn't the LIFO reserve adjusted despite lower-than-expected pricing and mix in Q3?
A: Arthur Ajemyan, CFO, explained that specialty aerospace products with long lead times are affecting LIFO income, shifting some benefits from 2024 to 2025. This unique situation is due to high-priced products with extended lead times, impacting the LIFO calculation.
Q: Do you expect Q4 to be the trough for gross margins, or was it already in Q3?
A: Arthur Ajemyan stated that Q4 gross margins are expected to stabilize and be consistent with Q3, depending on pricing trends in early 2025. If pricing improves, Q4 could be the trough.
Q: What are the current trends in the semiconductor market, and how do they affect your business?
A: Karla Lewis mentioned that while semiconductor demand remains subdued, there are signs of stabilization. The company is optimistic about long-term prospects, despite current challenges like permitting slowdowns and construction worker availability affecting infrastructure projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
