Earnings call transcript: Russel Metals Q2 2025 shows EPS beat, stock dips

Russel Metals Inc. reported its Q2 2025 earnings, revealing an EPS of $1.07, surpassing the forecast of $1.03, marking a 3.88% positive surprise. Revenue fell short of expectations, coming in at $1.21 billion against a forecast of $1.25 billion, a 3.2% miss. The company maintains strong financial health, earning a "GOOD" rating from InvestingPro, with a notable 26-year track record of consistent dividend payments. Despite the EPS beat, the stock dropped by 2.18% in after-hours trading, reflecting investor concerns over revenue shortfall and broader market conditions.

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Key Takeaways

• EPS exceeded expectations by 3.88%.
• Revenue missed forecasts by 3.2%.
• Stock declined by 2.18% post-earnings.
• Strong performance in non-ferrous metals, now 11% of revenues.
• U.S. market expansion continues, now 44% of year-to-date revenues.

Company Performance

Russel Metals demonstrated robust performance in Q2 2025, achieving its highest quarterly revenue in over two years at $1.2 billion. This represents a 3% increase quarter-over-quarter. The company’s EBITDA reached $108 million, the highest since early 2023, indicating effective cost management and operational efficiency. Gross margins improved by 180 basis points, while EBITDA margins rose by 160 basis points, showcasing enhanced profitability.

Financial Highlights

• Revenue: $1.2 billion, up 3% quarter-over-quarter.
• Earnings per share: $1.07, a surprise of 3.88% above forecast.
• EBITDA: $108 million, highest since early 2023.
• Gross margins increased by 180 basis points.
• Return on invested capital: 20% annualized.

Earnings vs. Forecast

Russel Metals reported an EPS of $1.07, exceeding the forecast of $1.03, resulting in a positive surprise of 3.88%. However, the revenue of $1.21 billion fell short of the expected $1.25 billion, marking a 3.2% miss. This mixed performance reflects both operational efficiency and challenges in meeting revenue targets.

Market Reaction

Despite the EPS beat, Russel Metals’ stock fell by 2.18% in after-hours trading, closing at $42.72. This decline can be attributed to the revenue miss and broader market trends, as the stock remains within its 52-week range of $34.62 to $46.87. According to InvestingPro analysis, the stock appears undervalued based on its comprehensive Fair Value model, suggesting potential upside opportunity. The market’s reaction indicates cautious investor sentiment amid concerns over revenue growth.

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Outlook & Guidance

Looking ahead, Russel Metals projects stable demand in Q3 2025, with continued exploration of mergers and acquisitions. The company anticipates potential capital optimization of $30-50 million from the Samuels acquisition and remains focused on expanding its non-ferrous metals portfolio. Guidance for future quarters includes EPS forecasts ranging from $0.55 to $0.70 and revenue projections between $817.47 million and $914.78 million.

Executive Commentary

• Marty Djarowski emphasized the company’s adaptability in sourcing materials, stating, "We’re pretty adaptable of where we’re sourcing from and how we’re sourcing material."
• John Reed highlighted the need for clarity in the industry, saying, "What we’re looking for and what our industry needs is really some certainty and some clarity."
• Djarowski also pointed out the company’s strategic flexibility, noting, "We have lots of dry powder to do things opportunistically."

Risks and Challenges

• Supply chain disruptions could impact material availability and costs.
• Tariff uncertainties may affect sourcing and pricing strategies.
• Seasonal slowdowns in Q3 could impact revenue growth.
• Agricultural sector struggles may affect demand for related products.
• Macroeconomic pressures could influence overall market conditions.

Q&A

During the earnings call, analysts inquired about the company’s response to tariff uncertainties and its M&A pipeline. Executives confirmed a strong pipeline and explained margin dynamics, highlighting the company’s flexibility in sourcing and pricing strategies.

Full transcript - Russel Metals Inc. (RUS) Q2 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to our twenty twenty five Second Quarter Results for Russell Metals. Today’s call will be hosted by Mr. Marty Djarowski, Executive Vice President and Chief Financial Officer and Mr. John Reed, President and Chief Executive Officer of Russell Metals. Today’s presentation will be followed by the question and answer period.

I would now like to turn the meeting over to Mr. Marty Durevski. Please go ahead.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Great. Thank you, operator, and good morning to everyone. I’ll be providing an overview of the Q2 twenty twenty five results. And if you want to follow along, I’ll be using the slides that are on our website. They can be found in the Investor Relations section, and it’s located in the conference call submenu.

If you go to Page three, you can read our cautionary statement on forward looking information. So let me start with Page five to provide a little bit of a perspective on the quarter. In Q2, we generated sequential improvement in most key metrics, And we look at the past two quarters, Q1 and Q2, both individually and together, we had a very solid improvement. We had an improvement between Q4 into Q1 and an even more impactful improvement between Q1 and Q2 as we took advantage of some interesting market opportunities. It was nice to see the sequential pickup between Q1 and Q2 in absolute terms, but it also reflected a relative outperformance versus our publicly traded U.

S. Comparables. Specifically, we generated near record shipments. Revenue was up 3% versus Q1. EBITDA was up 26% versus Q1.

Earnings per share was up 43% versus q one, and cash from operating activities was up 29% versus q one. If you look at the middle row on that diagram on that page, discretionary CapEx, the left box, we are active on the investing front in early twenty twenty five. Our Q2 level of $60,000,000 was down from the $29,000,000 level in Q1, but we continue to explore and advance new projects. In particular, we’re moving forward on a series of interesting initiatives in Western Canada related to business improvement opportunities across the Formal, Samuel and Russell operations that should result in some capital realignment. Capital deployed remained over $1,700,000,000 and our capital grew from what was 1,300,000,000.0 at the 2023 to 1,600,000,000.0 at the 2024 to just over 1,700,000,000.0 on June 30.

And given the potential M and A landscape, I suspect we’ll be able to further deploy additional capital at attractive returns. Generate strong return on invested capital. Our return on capital has averaged over 20% per year for the past several years. And in Q2, we generated an annualized level of 20%, which is an improvement from the Q1 level and continues to be above the performance of our publicly traded U. S.

Comparables. Growth in strategic ways. Our U. S. Platform is 44% of year to date revenues compared to 30% in 2019.

And if we roll the clock forward, I expect that our U. S. Platform will be over 50% of total revenues over the near term. We also have 11% of our revenues as specialty metals, such as stainless and aluminum, as that’s the key focus item for us going forward. On the last row of diagram, returning capital to shareholders, we have a balanced approach, and I’ll talk more about this later on.

In Q2, we returned $23,000,000 by share buybacks and $24,000,000 by dividends for a total of $47,000,000 of capital returned to shareholders. Last item, bottom right hand box, maintaining a strong capital structure is critical as we operate in the cyclical industry. At the beginning of the quarter, we extended our bank facility. And as a result, our liquidity is strong. We have flexible bank covenants.

We have no financial covenants in our term debt, and our maturities are twenty twenty nine for the bank debt and 2,030 for our term debt. So let’s go to market conditions, which is on Page six. We saw in the top graph sheet and plate prices exhibit a strong upswing in the early part of the year because of the tariff dynamic. Prices have been stabilized, and the outlook will be driven in part by the evolving tariff dynamic. That being said, metal prices remain at favorable levels compared to historical price points that we have seen in the past.

Our shipment levels have remained solid in spite of volatile price environment, but we will experience a seasonal slowdown in Q3 as is normal due to holiday related schedules in July and August. To talk about tariffs for a moment. Our adaptable business strategy has proven to be successful as the industry navigates through this evolving tariff dynamic. And for us, we are a transactional business with a lot of flexibility to quickly change as the market changes. We focus on inventory management, so we don’t speculate on things like tariffs or other market dynamics that are beyond our scope.

As the past few years have demonstrated, we have generated strong cash flow in both the up and down markets as our operating people have done a really nice job of navigating through the market volatility. On the bottom chart, we’ve shown aluminum and stainless prices as though are now a more meaningful part of our products mix. And as you can see from the chart, those products don’t exhibit as much volatility as carbon based products as they have different supply and demand dynamics. On the right chart, supply chain inventories in both Canada in the top right and U. S.

In the bottom right have moved up a little bit over the past few months, but they remain within a normal range. On Page seven, we have a snapshot of the trend of our historical results. And if we look across the various charts going from top left, revenues were up versus Q1 due to the favorable business conditions. Revenues of over $1,200,000,000 was the highest level in over two years on a quarterly basis. EBITDA of $108,000,000 was the highest level achieved since early twenty twenty three.

Margins increased about 180 basis points for gross margins and 160 basis points for EBITDA margins. This improvement in margins is a noticeable outperformance to some of our public competitors who had relatively flat margins on a quarter over quarter basis. EPS was 1 point dollars 0 which is the highest quarterly level since early twenty twenty three. And as we said earlier, our Q2 annualized return on invested capital came in at 20%, which is a nice pickup from Q1. Also, as discussed earlier, I’ll go in a little bit more detail later on in relation to our capital structure, we’re in really good shape.

Our net debt to invested capital is only 6%. So we have lots of dry powder to do things opportunistically. Going to more detail on financial results, page eight. From an income statement perspective, I covered several of the high level items on the previous page, but a few other items to note. Revenue is up 3% from Q1, and I’ll talk more about volumes later, but it was a strong shipping quarter in spite of some weather related issues that impacted a lot of the regions across North America.

Gross margins and EBITDA margins, I said already, were up on a quarter over quarter basis. And our Q2 results were pretty good in spite of two very specific items. The mark to market on our stock based comp was $5,000,000 of expense in Q2 versus a $3,000,000 recovery in Q1. Also, as most people have experienced, the Canadian dollar strengthening did have a negative impact on our P and L from the translation of our U. S.

Operating income into Canadian dollars. The P and L impact was about $2,000,000 negative of pretax income due to that strengthening Canadian dollar dynamic. From a cash flow perspective, in Q2, we used about $43,000,000 from working capital due to the positive business activity. Share buybacks were $22,000,000 before tax and cumulative share buybacks since August ’2, a little over 12% of our shares outstanding for $288,000,000 or $37.61 per share has been the average buy in price. Quarterly dividend was $0.43 per share paid in June.

We have just declared a 43% share dividend that will be payable in September. As I mentioned earlier, CapEx of 16,000,000 was down a bit from Q1, but we still have a nice pipeline of projects ahead of us. And we should average in the 90,000,000 to $100,000,000 per year zone for a few years, but it will ebb and flow on a quarterly basis. Balance sheet perspective, we remain in strong position with only $104,000,000 of net debt. And lastly, our book value per share remains near $29 per share in spite of the recent FX impact that impacted our OCI account and the shareholders’ equity balance.

On Page nine, we have a graph that shows EBITDA variance on a quarter over quarter basis. And going from left to right, if we start with the service centers, the volumes were down a small amount compared to Q1, but the pickup in margins had a large positive impact on our service center EBITDA. And in total, our service center EBITDA was up $19,000,000 versus Q1. Energy field stores were up $4,000,000 versus Q1 as the cement segment recovered from a relatively slow start to the year. Steel distributors had a nice solid quarter and was fairly comparable with Q1 as it benefited from the favorable environment that occurred in the early part of Q2.

In the other bucket, there was a negative impact from the mark to market on our share based compensation, which I mentioned earlier, and it was offset by the seasonal recovery of our Thunder Bay terminal operations. On Page 10, a little bit more detail on our segmented P and L information, Service Centers. Very positive results, as I said earlier, for Q2, and I’ll go through some of the specifics in more detail on the next page. Energy field stores, we’re continuing to see solid performance after the slow start to the year with revenues, margins, EBIT all up versus Q1. And steel distributors revenue and EBIT were comparable in Q2 versus Q1.

Page 11, a bit of a deeper dive on the metrics related to the metal service center segment. Top right graph is time shift. Q2 was a near record. We were really happy with our team’s efforts to move volume in a volatile market, and it reflected a continuation of our market share gains at attractive margins. Going into Q3, as I said earlier, we expect to see our volumes come down from Q2 levels as is typical seasonal activity.

You can see that some of the other Q3 versus Q2 trends on that same chart. On the bottom left graph, we have revenues and cost of goods sold per tonne. Our price realizations per tonne were up more than our increase in cost of goods sold per tonne, which led to a very nice pickup in gross margins. Our gross margins were $487 ton, which was up $57 per ton versus Q1, and EBITDA per ton came in at $200 which was a $52 per ton pickup versus Q1. These shifts are noticeable versus our competitors reflection of benefits from our value added initiatives and our team’s ability to quickly adapt to market conditions.

That said, some of the improvements in the quarter was related to the lag effect benefit from lower cost inventory going into cost of goods sold, And this benefit is likely to reverse somewhat in Q3 as we expect Q3 average margins to be lower than the Q2 average. On Page 12, we’ve illustrated our inventory turns. It is a focus item that we always do talk about and is a huge focus item internally to be efficient in adjusting to market conditions. This chart shows inventory turns by quarter for each segment, energy in red, service centers in green, steel distributors in yellow. The black line is the average for the entire company.

And overall, our inventory turns remain relatively flat at 3.7 as the three business segments each had similar results in Q2 and Q1. Our team has done a phenomenal job in continuing to manage inventory through these volatile times. Hats off to them. On page 13, we have the impact of the inventory turns on inventory dollars. Total inventory in dollars was up a small amount compared to March 31, and this was mostly related to higher prices that were somewhat offset by lower tonnage as the operating team, as I said earlier, has done a really nice job of keeping tonnage in check.

Page 14. We have the overall impact on capitalization and returns. As said earlier, our capital deployed is a little over $1,700,000,000 which is up from where we were at the 2024 and earlier years. On a return basis, our three year average return on invested capital for the last couple of years was 24%. Page 15, update on our capital structure.

As I said earlier, liquidity is strong, which gives us a lot of flexibility. Maturities have been extended for our bank lines to 2029, and we’ve got 2,030 maturities on our term debt. And our equity base per share continues to grow despite the share buybacks and dividends over the past quarter as well as the FX impact on our OCI accounts, we’ve grown our book value per share, and it’s $0.47 per share higher than this time last year. Page sixteen, first standard chart on capital allocation priorities and continues to remain the focus item for us. It’s a multipronged approach.

On the left hand part of the page, our investment opportunities seeking returns over the cycle greater than 15%. This past quarter, the past few years has been a good indicator that we’ve achieved more than that on a steady state basis, and we continue to see some interesting opportunities going forward. And the interesting opportunities are across the transom. It is on additional value added equipment, additional facility modernizations. In terms of acquisition, we’re actively looking at M and A opportunities and the types of acquisitions that are being considered are similar in nature and scope to what we’ve done over the past few years.

For returning capital to shareholders, we’ve adopted a fairly flexible approach. And if we look back over the past twelve months, we have returned about $107,000,000 to shareholders via the NCIB, and the current annual run rate for our dividends is around $96,000,000 On Page 17, a little bit more context to our reinvestment program. Over the last twelve months, we’ve invested $87,000,000 in CapEx. And as I said earlier, it does ebb and flow a little bit by quarters as some projects come on and some projects come off. And in Q2, we are down a little bit as some projects were completed, and we’re still scoping some potential new projects across our platform.

Page 18, a little bit of a deeper dive on returning capital to shareholders. Top left graph is the longer term dividend profile. And with the dividend increase that we had last quarter, it’s continuing to be $0.43 per share, which was a lift where it was at this time last year. And we’ll continue to regularly revisit the appropriate dividend level to consider our capital structure, earnings profile and other capital alternative deployment opportunities as it was done when we lifted the dividend in May 2023, May 2024, and most recently in May 2025. Bottom left chart, we show our quarterly NCIB activity that was put in place originally in August 2022.

We don’t have a fixed approach to the program, and we view it as opportunistic way to buy back shares, and we’ve been more aggressive at certain price points than others. In the past quarter, we bought back about 500,000.0 shares at an average price of a little over $42 a share. Bottom right chart is the impact of the NCIB. There’s been a gradual reduction of our share count, and the net result is about a 12% reduction in our shares outstanding over the last couple of years. And the top right chart is the aggregation of dividends versus NCIB over the past two years.

And again, it ebbs and flows by quarter, but it’s been fairly balanced in totality as we look over the last year or two. In closing, on behalf of John and other members of the management team, again, I’d like to really express our appreciation to everyone within the Russell family for their contributions. We’re really pleased with the 2025 and look forward to realizing on a series of interesting opportunities that are on the near term horizon. So operator, that concludes my introductory remarks, and you can now open the line for any questions, please.

Conference Operator: Thank you. Ladies and gentlemen, we’ll now begin the question and answer session. If you have a question, please press the star followed by the one on your touch tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press the star followed by the two.

Again, if you are using a speakerphone, please lift the handset before pressing any key. One moment, please, for your first question. Your first question comes from James McGarry from RBC Capital Markets. Please go ahead.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Congrats on the strong Q2 there. So just if I can add just some of the commentary, you flagged some margin pressure in Q3 and then some of your peers flagged some demand pressure into the third quarter. So within that backdrop, can you just give us an update on how you’re thinking about volume trends in the next quarter, particularly in light of some of weak PMI readings that we’ve seen come out of Canada in The U. S? Yes.

Thanks, James. I appreciate your your comment as well. Let let me deal with the the margin topic, and then John can deal with some of the other the latter dynamic that you’re talking about on the demand side. So I wouldn’t surprise it so much as margin pressure as it is. Sometimes it’s just it’s that lag effect that naturally happens.

But for all intents purposes, prices have gone sideways for the last little bit. So what we saw in q two was the benefits of the lag effect. And in q three, it’ll just be the reversal of it. So I wouldn’t necessarily characterize it margin pressure. It’s just a natural evolution of the timing delay between what we did on the pricing side and the time flow of when prices affect inventory and then ultimately flow to cost of goods sold and then margin.

That being said, John, on

John Reed, President and Chief Executive Officer, Russell Metals: Yeah. Hey, James. Yeah. On demand, again, we thought we’re going to be fairly stable on demand with just the normal seasonal dynamics that Marty mentioned. You’ve got, obviously, construction holidays in Quebec.

And then again, the the holidays for kids return to school would go through this time of year. But overall, on demand, you know, nonresidential construction is is still doing fairly well even though you look at the architectural billing index is a little light. You you get a strong, strong backlog in data centers and infrastructure that’s really carrying that for several quarters to come. Oil and gas is very steady. It’s gonna benefit from these data centers down the road, and they’re gonna just have a massive need for power generation coming out of them or solar.

But we won’t have enough power to support all of that potentially in North America. Ag is struggling and continues to struggle, but we’ve also been encouraged by heavy equipment. We’ve seen heavy equipment kind of coming out of their low and starting to develop pretty nice backlog. CAP was one that that shows that as well. So I think that, again, bodes well for what’s going on in construction.

And so overall, we feel like demand is gonna be pretty stable in the quarter.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Hey. I appreciate the color. And then just on the the annual the the systems integration is complete. You know, can you just give us an overall update on where you are at in the integration? And just on the back of that, that systems integration, can you just kind of give us some color on how we should be thinking about the impact to sequential earnings trends, given the potential rationalization of the Western Canadian footprint?

And after that, I can turn the line over. Thank you.

John Reed, President and Chief Executive Officer, Russell Metals: Yes. Thanks, James. And you’re exactly right. We went through May and June. We integrated into our computer systems, brought those over.

Things went fairly well there. And so now we can see inventories. Now we can improve on the inventory turns. We can improve on the efficiencies. There’s opportunities to maximize equipment utilization rates that are out there, look at facilities and make sure we have the right inventory in the right facilities also allows lower cost.

So that’s really step two or three that we’ve got going. We’ll continue on that through the end of the year, and we’ll move forward with the third step of fully integrating everything. Marty, do you wanna touch on

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Yeah. Like and, James, your your question is a really good one as it relates to what the earnings profile should look like, what the margin profile should look like going forward. And I think one of the things that you’ll notice in terms of the near term impact is it’s gonna be more noticeable on the capital deployed side of it, the balance sheet side of it. And, yeah, there’s gonna be some improvement in terms of margin realization that we’ll see over the next little bit. But just as a reminder, when we announced the Samuels acquisition, what seemed like a really long time ago, at the time, the headline number for capital deployed was about $225,000,000 and that was about 80% of that was working capital.

By the time we got to closing, which was in August 2024, that $225,000,000 sticker number on announcement was closer to $170,000,000 because with the passage of time, there was some of that capital reduction that naturally took place over that period, and that benefited us with that reduction in the purchase price by the time we got to closing. With some of the initiatives that are now underway, that $170,000,000 of capital deployed at closing is going to come down even further. And I wouldn’t be a bit surprised if we’re able to pull out another 30,000,000 to $50,000,000 in various forms over the next little bit. And when you put that all together, what start off is a February sticker acquisition when the dust settles, might be $100,000,000 lower than that by the time we get to the finish line on these capital reallocation initiatives. And

Conference Operator: your next question comes from Frederic Bastien from Raymond James.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Good morning, guys. Hey, Brett. I know you highlighted your expectations for volumes to be to be down modestly given the seasonality, but just wondering if you could speak to what your expectations for steel prices will be. Not you know, assuming they stay intact through September, can we expect Russell’s average selling price for the quarter to be up or down from from Q2? Yeah.

Let’s let’s put it this way. It probably the the the price the field prices that the price realizations, excuse me, at the end of the quarter were down slightly from the beginning of the quarter, but they’ve kind of drifted sideways. So all things being equal, and this market has a tendency not to be equal and not to go sideways. But what we have seen is it really moving sideways over the last little while, and our net realizations have gone sideways over the last little while, but they were slightly lower at the end of the quarter than the beginning of the quarter. Okay.

That’s helpful. And speaking of things that are hard to predict and unstable, can you discuss the latest move by the Canadian government around the tariffs and quotas. Just wanted to get sort of an update of what is how it stands as of today. Again, that may change, but just curious what your thoughts are on that.

John Reed, President and Chief Executive Officer, Russell Metals: Yeah. No. Thanks, Fred. And, yeah, you’re right. It it will change.

But, frankly, I don’t envy the position that Connie and his team were in. This is there’s so many moving pieces at light speed with, as you well know, with decades of policy to navigate very quickly in the first few months on the job. So this this has been a lot to navigate. But what we’re looking for and what our industry needs is really some certainty and some clarity, and we think it could really unleash some pent up demand that’s out there in Canada as well as The US. But the current stance, to your question, is ambiguous, I would say, at best.

And and what I mean by that is it feels like an effort just to maintain status quo. They went back to the you get one of your free trade partner, which almost everyone is with Canada. You get a 100% of last year, and then there’s a quota for more than midway through the year. What does that mean? There’s a lot of things that rules that weren’t filled in on this one.

Did it start? When did it end? And so I I think that was my intention. Again, it’s obviously a very fluid situation, and I think as they try to negotiate with Washington and get to a point of of having something that is more concise and is more clearly defined. I don’t think they don’t wanna disrupt anything that’s out there right now.

So really with a lot, you know, again, very ambiguous that that happened. It’s just not a lot of change on anything that’s out there. And so I think I think it’s best to just buy them some time to see if they can negotiate.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: K. Thanks. My last question is around M and A activity and and your your pipeline. I know I know we often ask you that every other quarter, but do you how do you feel today about your ability to potentially close in something in the next six to twelve months versus how you felt six to twelve months ago? Good is the short answer.

That being said, things aren’t done till they’re done, but there is a fair amount of activity and good activity. It does take a while to get things to the finish line, and there are sometimes left turns and right turns and impediments that do get in the way. But, collectively, when we look at the landscape of things that are out there, we’re optimistic. Also, it’s business as usual. There you go.

Conference Operator: Thank you. Your next question comes from Michael Tupholme from TD Cowen. Please go ahead.

Michael Tupholme, Analyst, TD Cowen: Thank you. Good morning.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Hey, Mike.

Michael Tupholme, Analyst, TD Cowen: First question is just around the volumes in service centers. Tonnes shipped were up 22% year over year. Obviously, know, that was helped by the Samuel and Tampa Bay acquisitions. Just wondering if you can provide, if I didn’t miss it, but if you can provide a breakdown of that year over year tonnage growth, how much of that would have been from the acquisitions versus what the organic piece sort of looked like?

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Yeah. Like, it it’s it’s it it’s kinda flattish on a same store basis. And so the growth that you saw is probably from Samuels. The Tampa Bay acquisition, it brings a nice bottom line, but it’s not a huge tonnage business. So most of the increase well, virtually all the increase year over year, so if we’re comparing 2025 to 2024, most of the increase was related to acquisitions, and the vast majority of the increase related to acquisitions was Samuels, if you’re looking at tonnage.

It’s a bit of a different equation if you’re looking at the bottom line. And as I said earlier, the Tampa Bay acquisition, it’s not a big tonnage operation, but it is a nice bottom line operation because they now have value added they do.

Michael Tupholme, Analyst, TD Cowen: Okay. That’s helpful. And then so just to tie that together with what I think was suggested earlier on the organic piece, likely sort of similar types of volume trends barring or until we get some certainty that on the on the trade front, which Sean sort of alluded to, could could free up some pent demand. Is that sort of the way to maybe frame things up at this point?

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Yeah. More of the same. K.

Michael Tupholme, Analyst, TD Cowen: And then just as far as you’ve already commented on this First

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: of my apologies, Mike. Notwithstanding the seasonal dynamic.

Michael Tupholme, Analyst, TD Cowen: Yeah. Sorry. I meant year over year, putting seasonality aside. Okay. Perfect.

And then you’ve already talked a little bit about the the expectation for the sequential moderation in service center gross margins and but I guess just to maybe get a little bit more specific if possible, is is the idea here that I mean, there was a bit of a a bit of a benefit in q two. Whatever moderation you’d see in in q three kinda gets you back to your sort of normal range, which I know you I think if you sort of alluded us earlier in the call, like, things don’t tend to stay in one place for too long. But, like, is that the idea that maybe getting back to sort of a historically normal range in q three and then maybe that carries on again assuming no no major swings here in steel prices?

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: You know, I I actually appreciate the way you asked the question, mate, because I don’t view normal as a as a single number given the volatility of any cyclical industry. It’s kind of a range. And if you look at q one and q two as two data points, that’s not a bad range given, okay, q one things were soft at the front end and they picked up at the end. And in q two, it picked up at the front end of q two and then softened at the back end because of that lag effect dynamic that I talked about. But those provide interesting data points in terms of a range over the and, again, it’s only two quarters, but that’s that’s those are good frames of reference of not a bad range.

Michael Tupholme, Analyst, TD Cowen: K. That’s that’s helpful. Thank you. And then having talked about steel distributors here on the call, there was a suggestion in the the MD and A that that tariffs are having some impact on that segment’s performance as a result of cautious cautious business conditions, particularly in Canada. I guess I’m wondering if you can speak in a little bit more detail to what you’re seeing there and how we should think about that segment’s performance going forward over coming quarters.

Is it sort of is the expectation again absent some sort of change that provides some certainty to the idea that the level of revenue you saw in the second quarter, we should expect something similar kind of going forward for that segment?

John Reed, President and Chief Executive Officer, Russell Metals: I think you’re going to see more of the same until we do get some some certainty there, especially on the Canadian side. On The US side, there are certain to be trade deals, so there are certain avenues starting to open up. So we may see some changes there in that market. We’ll watch. But I think you can, again, for the near term being the next quarter, I think you would see more of the same.

Michael Tupholme, Analyst, TD Cowen: Okay. So it’s not getting any worse. It’s just there’s been some pressure because of the the the backdrop and that that now kind of takes you along at a similar level barring some some change.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Yeah. With with one qualifier, Mike, from a business activity, yes, but from a margin perspective, no. So, again, just like our service centers benefited in q two from a margin pickup because of the timing the time lag, to a certain degree, our steel distributors did the same. So in Q2, if you try to talk about volumes, business activity volumes more of the same, but the margin dynamic that impacted the service centers Q2 versus what we expect in Q3, I’d apply that to the steel distributors as well. Okay.

That’s helpful. I will leave it there. Get back in the queue. Thank you. Great.

Thanks, Mike.

Conference Operator: Thank you. And your next question comes from Ian Gill from Stifel. Please go ahead.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Good morning, everyone. Hey, Ian. In the prepared remarks, you mentioned getting the fiftyfifty revenue split between Canada and The U. S. You you are getting close, but do you believe you can fund that sort of m and a to get to that metric through what’s currently available to you, which I think was roughly 560,000,000 at quarter end?

Oh, yeah. Yeah. Like, first off, it it wouldn’t take $500,000,000 to get to 50%. So, yeah, short answer is yes. And the $500,000,000 gives us lots of dry powder to continue to do the types of things that we’ve been doing.

And, you know, if you take just, for example, a Samuels type acquisition, if that was just The US business, that same size, that gets us through 50%. Yeah. Understood. We would have still to get through 50%, we wouldn’t be using anywhere close to all of our dry powder. Yeah.

Understood. You mentioned another 30 to 50,000,000 related to Samuel. And I know some of that was gonna be real estate. I’m just curious. Do you have anything up for sale yet in Western Canada from a real estate perspective that’s redundant, or is that still on the come?

I’m just trying to figure out timing of when we could potentially see proceeds. Yeah. We’re we’re working through a few of the moving pieces on that front. So when I talked about the 30 to 50, that’s both a function of real estate that is redundant as well as working capital management. So it was a function of both.

But we’re looking at a variety of scenarios. So it isn’t just conceptual. We’re actively looking at some scenarios. Understood. Last one for me, and it’s bit of a tricky one.

But when I think about the step up in profitability and business performance in this tariff environment, it hasn’t been quite as robust as what we’ve seen in 2018 in a prior tariff environment. And so, like, I’m just curious if you could maybe walk through some of the dynamics of what’s been different this time. And obviously, there’s been a lot and what happened last time and just out of curiosity.

John Reed, President and Chief Executive Officer, Russell Metals: Thanks. It it it kinda goes back to my opening comments, you know, the certainty and the clarity. The first time we went through tariffs, here’s the number, here’s what happens, here’s the clarity, certainty, everybody knows how to react in the industry. Supply chain free navigate, and off we go. This time, it’s tariffs in, tariffs out, tariff changes, you know, I’m in a bad mood.

So it there’s just no certainty and no clarity until we start to get some trade deals put in place. It’s also wildly affecting what’s going on with interest rates in both countries. And so it’s been a much longer slug test to get stability. It says this is what the rules are, now we can go play the game. And so it’s been a it’s been a much bigger challenge there to navigate that, and I think that’s the biggest difference you’re seeing.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: That’s helpful. Thanks very much. I’ll turn it back over. Thanks, Ian.

Conference Operator: Thank you. As a reminder, if you wish to ask a question, please press star one. And your next question comes from Maxim Sytchev from National Bank Financial. Please go ahead.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Hi. Good morning. Hey, Max. A quick question for you in HRC because when we listen to some of the users talking about sort of imbalance in Canada, the bigger discount, etcetera, do you mind maybe delving a little bit why in this in in your, you know yeah. Any color that would be.

So your premise is right as a starting point. There is a made in Canada price versus a made in The US price. And that it got goes back to the tariff dynamic, and there’s artificial constraints across borders right now. And so there is and I I use the word carefully. There is product that is being dumped into Canada that has a domestic price in Canada that is different than a domestic price in The US if you’re a steel producer.

That being said, we’re not a steel producer. So we can navigate through that dynamic differently than a producer does because we have a very flexible approach to how we do things. And so it really is a different impact on how that pricing dynamic of a made in Canada price versus a made in The U. S. Price, or frankly, internationally price, works for a producer versus how it works for us.

So we’re pretty adaptable of where we’re sourcing from and how we’re sourcing material, and that gives us a lot of flexibility within our operations on both sides of the border. So Max, I don’t know if that answers your question, but I think it really gets to why isn’t an equivalent adjustment in all regions, in all parts of the supply chain. Does that answer your question? Yeah. Yeah.

No. 100%. Yes. Super helpful. Absolutely.

And then your your comments around, quote, unquote, interesting opportunities, does that relate to organic and organic? And maybe if you don’t mind separating those things kind of in your interest in nonferrous versus ferrous, you know, opportunities. Thank you. It’s all the above, really. It’s organic.

It’s through CapEx opportunities. It’s through acquisitions. It’s carbon. It’s nonferrous. It’s it’s the full menu right now of situations that we’re pursuing.

And frankly, some ways, it’s sort of the same playbook as we had in 2024, which is that we look at all the initiatives that were done in 2024. It’s organic market share gains. It benefits from some of the spending that we did. It’s the acquisitions. And with the acquisitions, we got some value add ins.

We got some nonferrous that came with it. And then nonferrous growth feeds on itself when it comes through acquisitions of what you can do organically as well. So that same playbook is that we used in 2024. It’s still the same playbook in 2025. We’re just only halfway through the year.

So there’s more things on the come. For sure. And then in terms of m and a, again, like, mean, obviously, there is uncertainty, quote unquote, sort of everywhere. And just a question for you because you your base there is kind of the the number of kind of inbound, I think, right now is actually driven by that that uncertainty or how how would you qualify that? Thanks.

John Reed, President and Chief Executive Officer, Russell Metals: Yes. Thanks, Max. I I don’t know that it’s driven necessarily about uncertainty that’s out there right now, but we’ve seen a lot of m and a. Just there’s timing issues that are out there. I think people are are going through the market.

You’re seeing generational changes in some family businesses. You’re seeing other businesses go refocus on what they wanna do well, and there may be opportunities to to separate some businesses. So but I wouldn’t say it’s really based on the uncertainty that’s out there. Although, to Marty’s earlier point, we’ve now built a balance sheet that gives us ultimate flexibility so we can take advantage of opportunities as they present themselves. So if there is some uncertainty or if there is somebody that’s in a volatile situation, we’re in a position to do something quickly.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Okay. Excellent. That that’s it for me.

Michael Tupholme, Analyst, TD Cowen: Thank you

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: so much. Thanks, Matt.

Conference Operator: Thank you. And your last question comes from Michael Topol from TD Cowen. Please go ahead.

Michael Tupholme, Analyst, TD Cowen: Thank you. Just maybe a bit of a follow-up on some of the last discussion around M and A. I guess, you sounded earlier in the call like you’re quite relatively sort of upbeat on the prospect of of some potential M and A. I guess my question is really, are you seeing sort of a an elevated level of of deal flow and and opportunities? Is that sort of what gives you the the confidence to make these comments?

Or is it more around line of sight on on some more specific opportunities that that you feel pretty

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: good about versus sort of the the breadth of opportunities out there? I I I’d say it’s yes and yes. And there’s also a third bucket, which is the quality and the fit that we’re seeing just is more interesting. I mean, there were times, like, in 2022 and 2023 where the volume of inbound was off the charts. But as a reminder, we didn’t do a single acquisition of consequence in 2022 or 2023 because they just weren’t that interesting or the value didn’t make sense or there was some red flag somewhere or another.

So we looked at an enormous number of opportunities. It was more so it was there’s been times where we’ve seen deal flow more than there is today, but the quality just wasn’t there. And by quality, I mean, quality as it relates to our criteria and fit with us. So I think that’s probably more of the latter category that we’re thinking about today is there’s always been activity. There’s always been deal flow.

Sometimes it’s even more robust in past years, and we didn’t do anything. But there’s just more intrigue of what we’re looking for and how opportunities fit with what we’re looking for.

Michael Tupholme, Analyst, TD Cowen: K. That’s helpful. And then I think you also suggested that, you know, in terms of thinking about the the the kind of opportunities that and you described it as having opportunities that have similar nature and scope to what we’ve seen in the past. I guess just to be clear, would it be right to think about that that is meaning opportunities would look more like a Tampa Bay Tampa Bay type acquisition versus Samuel, which I think was somewhat unique in the in the sense that it

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: was more of a turnaround situation? No. Both were interesting frames of reference, and the deal flows that we are seeing look like variations of both of those. So I think 2024 and with having closed both of those transactions in 2024 gives kind of a frame of reference of we look at the Waterfront. Sometimes there’s some cleanup.

Sometimes it’s plug and play. Sometimes there’s a lot of value add. And if I kinda go back in history too, when we did the Boyd acquisition in late twenty twenty one, it’s a really well positioned business in the right geography. They didn’t do a lot of value add. They did a lot of nonferrous, but they didn’t do a lot of value add.

So I contrast that with Tampa Bay that both does a lot of nonferrous and value add and is more plug and play. So the variations change around the criteria, but in the Boyd one, and I I point that out as an example, some of the things that we have done since acquiring Boyd and what intrigued us when we bought Boyd is there were opportunities to deploy incremental capital within those operations. So I’m trying to remember back, but so at the time, there was five branches within Boyd, and we have reinvested pretty actively in three of the five branches. So, you know, back to your question, Michael, you know, is it more like this or like that? If you look at Boyd, if you look at Tampa Bay, if you look at Samuels, those are the variations that make sense to us, and those are the type of situations, plus or minus, that we’re continuing to look at.

Michael Tupholme, Analyst, TD Cowen: Okay. That makes sense. Thank you.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: K. Thanks, Mike.

Conference Operator: Thank you. There are no further questions at this time. I will now turn the call back over to mister Marty Djrowski. Please continue.

Marty Djarowski, Executive Vice President and Chief Financial Officer, Russell Metals: Great. Thanks, operator. And again, really appreciate everybody very much for joining our call. If you have any questions, please feel free to reach out. Otherwise, look forward to staying in touch during the balance of the quarter.

Take care, everyone.

Conference Operator: Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great

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