Earnings call transcript: Russel Metals Q1 2024 beats EPS expectations

Russel Metals Inc. (RUS.TO) reported better-than-expected earnings for the first quarter of 2024, with earnings per share (EPS) reaching $0.75, surpassing the forecasted $0.642. The company also exceeded revenue expectations, posting $1.17 billion against a forecast of $1.16 billion. Following the release of these results, the stock price rose by 2.81%, closing at $41.66 in after-hours trading. According to InvestingPro data, the company maintains a healthy financial position with a "GOOD" overall health score and has consistently paid dividends for 26 consecutive years, demonstrating strong operational stability.

Key Takeaways

• EPS of $0.75 beat the forecast of $0.642.
• Revenue was $1.17 billion, slightly above expectations.
• Stock price increased by 2.81% post-earnings announcement.
• Service centers showed improved gross margins.
• Ongoing investments in technology and market expansion.

Company Performance

Russel Metals demonstrated solid financial performance in Q1 2024, with significant improvements in its service centers’ gross margins, which rose to 20.9%. Despite a year-over-year decline in revenue per ton by 8%, the company maintained steady performance across its business segments, supported by strategic investments and market expansion efforts. The company’s strong financial foundation is evidenced by its impressive current ratio of 3.13 and moderate debt levels, with a debt-to-equity ratio of just 0.12. InvestingPro subscribers have access to over 30 additional financial metrics and insights about Russel Metals, including exclusive Fair Value analysis and growth projections.

Financial Highlights

• Revenue: $1.17 billion, exceeding the forecast of $1.16 billion.
• Earnings per share: $0.75, compared to the forecast of $0.642.
• Gross margin in service centers improved to 20.9%.

Earnings vs. Forecast

Russel Metals’ EPS of $0.75 surpassed the market forecast of $0.642, marking a positive surprise of approximately 16.8%. The revenue of $1.17 billion also slightly exceeded expectations, contributing to the positive market sentiment.

Market Reaction

The company’s stock price increased by 2.81% to $41.66 in after-hours trading, reflecting investor optimism following the earnings beat. The stock remains within its 52-week range, with a high of $46.87 and a low of $34.62, suggesting room for further growth. With a market capitalization of $1.72 billion and a P/E ratio of 15.39x, InvestingPro analysis suggests the stock is currently undervalued. The company also offers an attractive dividend yield of 4.15%, making it particularly interesting for income-focused investors. For detailed valuation analysis and more insights, check out the comprehensive Pro Research Report available on InvestingPro, covering over 1,400 top stocks including Russel Metals.

Outlook & Guidance

Russel Metals is targeting a 15% return on capital deployment and continues to focus on modernization and expansion, including the integration of Samuel acquisition and entry into the Florida market through Tampa Metals. The company remains flexible in its approach to mergers and acquisitions and capital investments, positioning itself to benefit from evolving public policies.

Executive Commentary

John, an executive at Russel Metals, emphasized the company’s transactional business model, stating, "Our transactional nature of our business really benefits people that they know they can get served the next day." Marty, another executive, highlighted the company’s strategic focus, saying, "We’re trying to achieve that 15% across all the capital deployment scenarios."

Risks and Challenges

• Market volatility in the steel industry could impact pricing and margins.
• Integration challenges related to the Samuel acquisition.
• Potential impacts from tariffs and trade policies.
• Economic conditions affecting demand in the US and Canadian markets.

Q&A

During the earnings call, analysts raised questions about the impacts of tariffs and market uncertainty, pricing trends, and the progress of the Samuel acquisition integration. Executives provided insights into the company’s strategic initiatives and market opportunities, particularly in the Florida market.

Full transcript - Russel Metals Inc. (RUS) Q1 2025:

Conference Call Operator: To Mick Garagall at RBC Capital Markets. Please go ahead.

James, Analyst, RBC Capital Markets: Hey. Thanks for having me on, and congrats on the the really solid quarter there. So I wanted to ask hey. I wanted to ask on the other commentary on the outlook. You flagged, you know, some uncertainties for any trade policy, you know, that q one would potentially help out by some pull forward.

You know, it’s on one hand, we might see a bit of an air pocket, you know, in q two. But, you know, if you look at some of the commentary from your US peers, they were kind of flagging. They’re expecting volumes just to hold up pretty well into q two, which, you know, is pretty impressive given how good q one was. You know, within that context, can you just give us an update on how you’re thinking about volume trends into Q2?

Marty, Executive (likely CFO): Yes. James, that’s a fair observation, including looking at what some of the publicly traded comparables have already talked about. And I don’t think our view would be any different from that, which is there’s probably some elements of pull forward demand, but the ultimate test is how things have evolved since the tariffs came into place. And shipment levels remain at a pretty reasonable clip and steady clip. So it’s not like there was a bubble that was out there.

There was probably at the margin a little bit that was brought forward. It’s hard to quantify it. But overall, we’re now sitting here in May, and the tariffs were put in place almost two months ago and shipment levels remain at a relatively solid level. So we haven’t seen any of that big variance that could have been in place. And so the commentary that some of our competitors have come up come up with in their Q1 commentary, we probably echo some of those same views.

And then can you provide a little bit more detail what you’re seeing in The U. S. Versus in the Canadian business? And you know, any change in those trends, you know, potentially since tariffs were implemented a few few months back? Yeah.

I I’d say overall, what we’re seeing in The US versus Canada is more of the same, both pre tariffs and post tariffs, which is, you know, it’s it’s fairly straightforward that The US has had a more robust economy over the past couple years than Canada has. Our Canadian business is well positioned and does well, but the the level of performance in our US business is probably a notch higher than it has been in the Canadian business, and it characterizes that as that both a little bit free tariffs as well as post tariffs. So it’s more of the same, but there is a distinction between the performance of the Canadian economy overall and versus The US economy over the past period of time.

James, Analyst, RBC Capital Markets: Yeah. I appreciate the color, and I’ll turn the line over. Thank you.

Marty, Executive (likely CFO): Great. Thanks, James.

Conference Call Operator: Thank you. The next question comes from Devin Dodge at BMO Capital Markets. Please go ahead.

Marty, Executive (likely CFO): Yes. Thanks. Good morning. Hey, Devin. Look, I was gonna ask about the energy field stores.

Look, we saw that one of your U. S. Competitors recently sold its Canadian operations, which I’m I’m gonna guess would bring maybe a a greater focus on some of those assets under the new ownership. Just wondering if you have seen or do you expect to see a more competitive environment in Canada?

John, Executive (likely CEO): Yes. I don’t think it changes the landscape. It just changes the names on the door. And so there’s still a number of competitors that have shrink quite a bit over the last two years since they were exiting Canada quietly. And so it’s allowed us to gain some market share there.

So I don’t see really any landscape change outside of what it’s been for the last four to six months. Really more interested in in where Canada is going as a whole because I think it’s gonna really benefit us from the energy perspective out there. Mister Carney comments, I think, yesterday where he wanted to reestablish Canada as an energy superpower, which is obviously going to benefit up any of our energy business as well as our service centers.

Marty, Executive (likely CFO): Okay. Got it. Thanks for that. And just one clarification. If I look on a year over year basis, revenue per ton in service centers was down 8% or around 2%.

That’s both on a reported basis as well as a same store. I would have expected the mix shift towards nonferrous would have had a more positive benefit. Are you able to provide any color or kind of help explain that?

John, Executive (likely CEO): Yes. The nonferrous, when you look at it in totality, keep in mind our nonferrous, lot of that growth has come from our U. S. Side of the service center, some of those numbers Marty referenced, and we did grow some. But the adding of Samuels was a completely, you know, a much bigger mix in carbon, a % in The US.

And again, all all the two locations in Canada were carbon. So it did displace some of that a little bit. That should continue to grow, and you should see a change in that the future.

Marty, Executive (likely CFO): And and the thing I’d supplement to, Devin, is when we look at our publicly traded US competitors and looking at what their q one twenty twenty four versus q one twenty twenty five price realizations were on the same store basis, we actually were better on a relative basis than they were when we use those same comparison. So everybody collectively is down compared to q four ’1 this year versus ’1 last year. But the relative change, our relative change in price realizations is better than theirs were. Okay. Got it.

And then just one last one likely for you, Marty, but obviously, the balance sheet is in great shape here. We’ve seen this recognized by the rating agencies, which is great to see. Just in order to maintain that investment grade credit rating, what do you feel is the range for leverage on a go forward basis? Yeah. It’s a good question, Devin.

And I let let me answer it in an indirect way first, and then I’ll get to your very specific question. It’s more it starts with more of a philosophy of being committed to investment grade type approach. And we think there’s a tremendous benefit with the ability to execute in the Canadian investment grade market at attractive levels. So there’s a commitment to doing it. And the commitment goes beyond just what is a single metric that makes sense.

This has been a multiyear migration to get to this point, and I don’t wanna go backwards. That being said, you know, when you look at the rating agents and some of their commentary, they’ll use guides, for example, less than two times debt to EBITDA as a frame of reference, and that’s plenty fine for us given our capital structure and liquidity and types of use of capital that we might have. From a net debt to invested capital perspective, 30% or so at the high end. But again, I don’t even see anything on the horizon that gets us from where we are today, which is in the low single digits to that level. So being able to achieve and maintain that investment grade status is quite important as it relates to maintaining the low cost of capital.

Conference Call Operator: The next question comes from Fredrik Bastian at Raymond James.

Marty, Executive (likely CFO): We’ve been hearing about some project owners taking a wait and see approach to new projects, which obviously makes sense given the tariff uncertainty. But I’m wondering how this uncertainty might be impacting or shaping your potential buyers, sorry, potential sellers of scale distribution business, I. E. Your target. Are you having different discussions nowadays with these mom and pop operators?

Or just curious how the m and a landscape is looking right now.

John, Executive (likely CEO): Yeah. Thanks, Fred. Yeah. The m and a landscape is very active right now. People are looking at things through a little bit of a different lens.

We just came through a very robust period with ’21 and ’22. I think the expectations have been reset now. Obviously, there is a very volatile political landscape out there that continues to evolve on a daily basis. And so I think people are looking at this very differently. So we think there’ll be a fair amount of opportunities to look at.

We’ll see if there’s anything that comes to fruition.

Marty, Executive (likely CFO): Thanks. Marty, anything you need at or just just No. You you know what? I I it’s it’s a fair observation, and I think the other interesting thing for me is when we do a look back over the last number of years and how the m and a landscape has unfolded, there’s been years where we’ve been active, and there’s even years where we’ve been very active, but we haven’t find the right found the right opportunities that meet our criteria. So we kind of stick to our criteria of what works, what doesn’t work, and sometimes those things line up, and it just so happened that there was two m and a transactions that we were able to push across the finish line last year.

But there were also years like 2022 and 2023 where for a variety of reasons, including in some cases, vendor value expectations, we didn’t find the right opportunities. So we don’t chase for the sake of chasing. We stick to our criteria. And if we get the right opportunities at the right valuations that fit our operating criteria and our cultural criteria, we’re more than capable of moving across the finish line. And we remain very active, but it’s yet to be seen whether we find those things that line up with our criteria or not.

And if they do, terrific. And if they don’t, we bide our time and we’re patient capital. And then you did a good job over the last, I guess, several quarters telling us there’d be a there’d be a lot of heavy lifting behind the Samuel acquisition. I’m wondering how that integration is post the second proceeding right now, and and, you know, are you ahead of plan or anything that is not going to according to your expectations? Just to get get to get an update here would be appreciated.

Thank you.

John, Executive (likely CEO): You know, we’re tracking the plan, Fred. Phase one is done. We’ve got about three distinct phases. Phase two is now being implemented with some conversions from the Samuel system to our system so we can further integrate inventories, look at operating costs. And so that was done this past weekend in Canada.

Will be done the first week in June. In The U. S. Everything’s went smooth there so that allows us to move fully forward with step two. And then step three we’ll continue to look at the real estate rationalization opportunities that are out there.

And so we feel pretty comfortable that this is all going to be done within this calendar year.

Marty, Executive (likely CFO): Thanks. I’ll squeeze the last one. Your number you cited a number of factors behind the volume gains. Was just wondering if you could split those between M and A, I guess, the recent acquisitions, just market share gains and just straight good old industry demand. Well, the easiest on the m and a front, the only real change between q four and q one was a full quarter of Tampa.

And Tampa was a nice contribution from a margin and from an earnings perspective, but it isn’t a big volume operation. So it’s relatively small volume impact from Tampa Bay being in there for a full quarter. So if you look on a same store basis versus a consolidated basis, you know, it was a little bit of volume, but it really didn’t have much of an impact. So by and large, when you look at q four versus q one, most of that was really about the macro, the seasonal factor as well as just general market conditions, which were favorable in Q1.

Conference Call Operator: The next question comes from Michael Ciupholme at TD Cowen. You

James, Analyst, RBC Capital Markets: saw in Service Centers a nice quarter over quarter improvement in gross margins in Q1 with steel prices still up but leveling off lately. Wondering if you can help us think about service center gross margin performance in Q2 twenty twenty five versus the 20.9% you just delivered in the first quarter?

Marty, Executive (likely CFO): Yes. It’s a really good question, Mike, because there were a lot of moving pieces in q one and frankly into the early part of q two as well. And so we benefited by a little bit higher prices in q one as a whole, but it obviously picked up steam at the back end of the quarter. At the same time, on the cost of goods sold side, we still actually had some lower cost inventory, which actually helped us from a margin perspective. So when we look at Q1, we benefited from a little bit better top line and the cost of sold didn’t really move by a whole heck of a lot.

So we actually the margin increased. Some of that was just a function of the lag effect that worked in our benefit in q one. That continued into, you know, April and probably early May. That’ll probably normalize down a little bit, all of the things being equal as we get into June and July, I suspect. But what it probably means is we’ll still have a very good margin profile in q two as compared to q one.

James, Analyst, RBC Capital Markets: Okay. That’s that’s definitely helpful. Would the same hold true the the the same sort of higher level commentary hold true for steel distributors? Is the the dynamics there similar? Yep.

Similar, Mike. Yeah. Okay. And then back over on service centers and and, again, sticking with gross margin, sort of trying to look through some of the noise, I guess, that that can result from changing metals prices. With all of the value added investments that have been made in over time and recently, and I guess also, you know, some the acquisitions, like, how should we think about normalized steady state gross margins within service centers at this time?

Well, it’s it’s a bit of

Marty, Executive (likely CFO): a moving target in some respects. I’m I’m gonna answer it without answering it too directly because as an example, you know, one of the things on that CapEx page that I talked about is we’ve got a number of new pieces of equipment that we’re installing in real time. And so those haven’t taken effect yet. So the the goalpost keeps moving for us. That being said, you know, we directionally view the multiyear migration in margins to be probably a couple hundred basis points on an apples to apples basis.

That being said, some it’s hard to do an apples to apples when the cycle keeps moving all the time. But if we did things on a steady state basis and we look at the stuff that has been done in 2024, the stuff that is in the pipeline for 2025, it should add a couple of hundred basis points over the course of a couple of years. And we’re still at the front end of seeing some of those benefits. And again, I keep referring back to that one that one slide where I talked about the the new lasers that are going in a variety of locations. Those are impactful, but they’re just happening right now.

James, Analyst, RBC Capital Markets: Okay. That makes sense. Over on

Marty, Executive (likely CFO): field stores, energy field stores,

James, Analyst, RBC Capital Markets: can you talk about the top line outlook for that segment in 2025? I guess what I’m wondering is should we be assuming some year over year revenue growth as you move through the year? Or is what we saw in the first quarter when we saw sort of similar revenues on a year over year basis? Is that more what we should be expecting here is just sort of more consistent performance on a year over year? I realize there’s seasonality, but I’m thinking about year over year again.

Marty, Executive (likely CFO): Let me answer that in a really indirect way if I can. And in some ways, if you look back, that business for us has been fairly steady. I mean, it does move around and there’s some seasonality attached to it, but it’s been relatively steady if we look back over the past period of time. So all of the things being equal, it’s a pretty it has been and we would expect it to be a pretty steady contributor. That being said, with John’s comment that he made earlier, there is, you know, public policy that is evolving in real time.

We think we should be a net beneficiary of how some of that is evolving. We don’t know what the timing of that is gonna be, and I would have I I would hate to be too prescriptive of, you know, what quarter that impacts, let alone what year that might actually show up. But directionally, those things are all good for our business on both sides of the border, frankly, not just on the Canadian side of it. But if we kind of strip that stuff aside, it’s been a pretty steady business for us over a period of time, and it will ebb and flow a little bit. And even just as I look at q one as an example, it was a slow start to the year, but it picked up in March.

When we look at Q1 as a whole, it was an okay quarter, but it was really more March related than January and February related. But over the course of several quarters, it has been a very, very consistent performer for us, and we expect that to continue public policy aside and what’s potentially positive for the industry as a whole.

James, Analyst, RBC Capital Markets: That’s definitely helpful. Thank you for all that. And then just just in terms of energy field stores in terms of the margins, again, you know, quite consistent and and stable in the last several years and obviously much improved from what they used to be in that segment after all the changes you made.

Marty, Executive (likely CFO): A little bit of a a little bit

James, Analyst, RBC Capital Markets: of a tick down in the first quarter. Like, is that mix related? Is is there anything going on there to to explain that? And and should we expect them to kind

John, Executive (likely CEO): of go back up to the the levels we’ve seen in the last few years, or

James, Analyst, RBC Capital Markets: is is this more of a a a current run rate, the the

Marty, Executive (likely CFO): gross margin? It it was a little bit mix related, but I think part of the frame of reference is there is a bandwidth that it operates in from a gross margin perspective. And even though q one was down from a gross margin perspective, it was within the normal bandwidth. And if we look also at, you know, how the gross margins are relative to our other business segments, it continues to remain our highest gross margin business. So yes, was a down quarter from a margin perspective and that related to mix, but it was within the range, probably towards the low end of the range.

James, Analyst, RBC Capital Markets: Okay. Got it. And then just lastly, just in terms of CapEx, and I apologize if I missed this. Is the expectation that it’s similar in 2025 on a full year basis? Or how how do we think about that?

And maybe you can just also comment the the fact that you finished up a lot of the facility modernization work. I I think you said you’re you’re you’re contemplating what you next there, but how do we think about that? Is that something that could begin in the fairly near term, or is that more in the next

Marty, Executive (likely CFO): few years? It’s probably a two year frame of reference of where some of those facility modernizations become potential realities. And to deal with your first question first, last year, we spent about $90,000,000 on CapEx. Q1 was $29,000,000 so a little bit ahead on a run rate basis. But if you use the frame of reference of $100,000,000 for 2025, it’s rough words of magnitude.

That being said, we tend not to look at it on a necessarily an annual basis even though that is a structured period of time as what we have is an evergreen list of projects that runs for several years. Things are coming on. Things are coming off all the time. And that pipeline of projects is probably about $200,000,000 today. Yes.

Some of them are very, very preliminary and some are fairly advanced, but it’s a multiyear evergreen list. So that’s why we kinda we we look at the pipeline directionally and say, there’s still a fair amount of discretionary projects that are not just what was done in 2024, but on the come for 2025 and probably also on the come for 2026.

Conference Call Operator: Your next question comes from Ian Gillis with Stifel. Please go ahead.

Marty, Executive (likely CFO): Good morning, everyone. Hey, Ian. As it pertains to steel distributors, with everything going on in the global steel market, would you do the opportunities does the opportunity set there feel like this is a bit more like 2023 as a whole rather than 2024 and acknowledging everything could change in two months’ time? The last comment probably spot on. Yeah.

John, Executive (likely CEO): I was gonna say, yeah, you you if you’re looking at directional pricing for the moment for steel versus are you looking for tariffs in the next sixty days, so it it can push or pull either way. I feel like we’re in a much better place than we were ending 2023 on both sides of the border. Again the businesses operate very differently. Canada operates much more contractually back to back sales versus much more transactional in The U. S.

But we’re seeing opportunities on both sides. We think there’s probably some cooler heads going to prevail in the near future and this will revert back to a more normalized setting. But we are seeing opportunities within both countries either from domestic mills or trading partners that have quotas or opportunities to come into the country. So right now, we think it’s going to be a pretty solid year for them.

Marty, Executive (likely CFO): Understood. Going back to the greenfield project scope of $200,000,000 Marty, can you remind us how you think about those projects either whether it be from an IRR basis and or from an EBITDA payback basis, to think about the potential growth opportunities? Yes. So just one item of clarification, Ian. Though it’s not $200,000,000 worth of greenfield, it’s $200,000,000 of of of CapEx, some of which are for modernization, some of which for equipment upgrades, some of which is for, you know, just normal course CapEx.

So that that $200,000,000 is not just for modernizations. That being said, when we use when we look at projects, they have quite a a vast range of paybacks. Some of them that might relate to, frankly, more safety and good housekeeping. They don’t have great payback, but there’s there are things that we do as a matter of course. There’s some projects like equipment and some of these value added pieces that might have a two, two and a half year payback.

So it’s a whole waterfront in terms of projects, and we look at them quite holistically. Some of them are not discretionary, which we have to do as a matter of course. We may not have a payback attached to them. So from a portfolio perspective, the 15% is really the frame of reference, and that goes to both CapEx and M and A. Some are better, some are lower than target, but we’re trying to achieve that 15% across all the capital deployment scenarios, recognizing that they’re not all equal.

They have different priorities depending upon circumstances. Understood. One last one for me on the M and A side. When Tampa Metals was purchased, it was viewed as a launching point in the Florida market. Obviously, it’s still early days there.

But how would you define, I guess, your entrance into that market so far? And what are you learning about the market and potential other other, I guess, targets to grow that business over the next number of years?

John, Executive (likely CEO): So, again, I’ll let you you’re playing on words there with launching and all being in the Florida market under NASA. But it’s we have had a a really good move there. It’s only been four months. It’s a real plug and play. There’s a great team in place.

They have all the value added processing in place, very good mix of nonferrous. And so it’s allowing us to reach out further into markets that are probably outside of their coverage zone right now. It wouldn’t be long term sustainable to develop the marketplace to either go greenfield or look at acquisition. So, again, we felt like this would be literally and figuratively a beachhead for us, being in Central Florida, so we could look at going both north and south. So we see that as something that could develop quickly over the next two to three years.

Marty, Executive (likely CFO): Perfect. Thanks very much. I’ll turn the call back over. Thanks Ian.

Conference Call Operator: Your next question comes from Mattson Sytchek with National Bank Financial. Please go ahead.

Marty, Executive (likely CFO): Hi. Good morning, gentlemen. Hey, Matt. John, maybe the the first question for you, if I may. In terms of looking at at the broader trends, I mean, like, on the one hand, you read the, you know, like, resi kind of, like, under pressure, general manufacturing, people are sort of pushing decision making to the right.

Like, what what’s where maybe the the key industry drivers behind the volume improvements, know, year on year and kind of like also the positive commentary from from what it seems for for q two. Just maybe if you can, know, put it in buckets if possible. Thanks.

John, Executive (likely CEO): Yeah. And I think it’s broader than industry buckets that are out there, Mac. Just part of this is our transactional nature and the way we structure the business to be successful. When you look at a cyclical industry and if we’re cyclical throughout a period of time, only thing that’s constant is the price is always going to change. But what we’re able to do in this transaction in times of extreme volatility caused by whatever’s out there right now, obviously, the tariffs being the big point, we’re able to work with buyers of of our products because they’re trying to buy hand to mouth.

They don’t know if price feels going up. They don’t know if it’s going down. They’re very nervous. So they’re really not taking long positions on inventory. So as Marty said, it’s very difficult to quantify, but we don’t think there was a lot of pull ahead.

I just think that our transactional nature of our business really benefits people that they know they can get served the next day, get it quickly. They can move into the value add where we can help them so they don’t have to take long term positions and put themselves in volatile spot. So I think that’s where we typically in times of that transition be it up or down, we typically gain market share because it lets people protect their position. And so I think we saw that in the late first quarter and we’re seeing it in the early second quarter. And so it’s more of our business model fits volatility, which is an industry we live in.

Marty, Executive (likely CFO): And I guess that that that comment applied to the nonferrous business, like, for example, what Tampo is doing as well?

John, Executive (likely CEO): Yeah. We we are, again, nonferrous. We’re still taking the same template. This is we’re not going into the long term contractual business. We have some longer term commitments on that, but it’s not again, we’re not going into the contract type business.

So we are trying to make remain hyper transactional on that. And so as we’re easing our way into that growing that market share, we’re doing it very targeted at any transaction.

Marty, Executive (likely CFO): Okay. Okay. That’s And then one last question around EnergySource. I mean, the fact that oil pricing has contracted somewhat, and I think in the past you you mentioned that it’s more relevant from an OPEC perspective. So we should not be extrapolating the lower oil price into into kind of corresponding volume declines.

How would you, I guess, you know, qualify, quantify this relationship?

John, Executive (likely CEO): Yeah. Keep in mind again for for Apex, for Elite, for our field source, a big portion of their business is based on the maintenance and the life of wells. So those wells that are already existing. So they’re a little bit immune to oil pricing because they’ve got to maintain them for the life of that well. And that’s why again we started off slow in Q1 but you saw that steady state because they were in that maintenance mode.

When things pick up in the energy fast, we saw some projects get released in March. Some of those things, and they will push us back up over the top. But again, our steady state business is going to be on that maintenance of the life of the well that’s out there. So anytime oil is improving, we really jump up quickly.

Marty, Executive (likely CFO): Yeah. Yeah. Okay. No. That’s great.

That’s it for me. Thanks so much, Oliver. Thanks, Matt.

Conference Call Operator: Your next question comes from Devin Dodge with BMO Capital Markets.

Marty, Executive (likely CFO): Just had a couple of quick follow-up questions on pricing. So if I look at U. S. Prices for plate and sheet in Q1, I think they were up high single digit or low double digit versus Q4. It looks like Russell, I think it was 1% sequential improvement on a same store basis, more like 2% on revenue per ton with that M and A in there.

Just wondering if that reflects different pricing trends in Canada versus The U. S. Or is there something else that helps explain that sequential pricing gap versus market? Devin, just one element versus a comparison point, and this in some ways goes to the earlier discussion about relative to our competitors. What we did in on a same store basis in q one versus q four is our price realizations were up one percent.

As I look at a couple of our competitors who report similar type of data points, they were either down 1% or up 1%. So we were within the norm of the industry. And the industry, by and

John, Executive (likely CEO): large, is more US weighted than anything else. Sir, does that make sense, John? Yes. No. And and yeah.

Marty is exactly right. And there also is a timing lag. So from the minute you see the new steel pricing to purchase fully shipped. So there’ll be a timing lag. And so we saw some of that in third quarter.

We saw margins really ramp up in in Q3, but there was the effect of I’m sorry, in the in the third month of the quarter in March. And but there was that lag in January and February that were out there. So those will carry forward. But, again, based on our inventory turns, it takes two to three months to cycle through.

Marty, Executive (likely CFO): Okay. Got it. I got it. I guess maybe extending our last answer. Just if you look at the service center business how did average revenue per ton in April compared to the Q1 average?

It well, let’s put it this way. It would have it would have been comparable to March, but March was higher than the q one average. Because if we look through q one, February was higher than January, March was a lot higher than February, and April continued at a level similar to March. So that’s why April would have been higher than the Q1 average, but March was also higher than the Q1 average.

Conference Call Operator: There are no further questions at this time. Please proceed with any closing remarks.

Marty, Executive (likely CFO): Great. Thank you, operator, and thanks very much, everyone, for joining our call. If you have any questions, please feel free to reach out anytime. Otherwise, we look forward to staying in touch during the balance of the quarter. Take care, everyone.

Conference Call Operator: Ladies and gentlemen, this concludes your conference call for today. We do thank you for participating and ask that you please disconnect your lines. Have a great day.

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