Q2 2020 Reliance Steel & Aluminum Co Earnings Call

[music].

Okay.

Second quarter.

[music].

Good assumption subject to change and there's no.

[music].

Burden <unk>.

Sales of $2.02 billion.

[music] gone through the.

Resulted in pretax income of $32 million and earnings per diluted share.

<unk>.

We joke, we're working capital.

[music].

Yep.

[music] by each and every one of our revised called for their flexibility and hard work truly extraordinary button.

We are the book.

Do we go.

They were up or <unk> or <unk>.

Oh, no we do feel.

No we do the a highly volatile quarter, we'll remain focused on employee Oh Im sorry.

Good and implement <unk>.

To litigate basically.

[music] other kids.

The combined.

[music] they.

Protocols, but gone in Boise. These older the group they perform very cool.

[music].

Who's the extraordinary.

I'd also like I like the scope of avoid Baltimore.

[music].

No.

Good morning.

[music].

Good God compared with first quarter.

[music].

2012.

[music].

The majority of these actions.

[music] April.

Fortunately no you called approximately in line.

Good morning.

About we bought.

[music] <unk> help recover.

Notably.

[music].

Well go through real quickly and working because there are too low.

Location by location based.

As we move.

Our daily feel good about it did go to stabilize the level.

[music] about 15%.

First quarter two buildings.

If we see <unk> activity, we will take additional actually to rightsize.

[music].

In regard to listen to them or not.

And on the local construction or was it.

Good.

[music] they've shelter in those quarters, resulting in a deferral.

But.

However, as we.

Beginning to look across the country.

<unk> <unk>.

Okay.

Completing projects that had previously been billable.

Moving activity remains strong for broader Kuwait schools.

[music].

Okay.

We remain calm.

[music] to go through client base.

Uh huh.

[music].

But the good news about the all new smoker fell sharply.

[music].

The only.

[music] operations in both Europe and Mexico.

Sure.

[music].

The old.

[music].

Very well.

[music].

We believe cost.

[music].

So.

[music].

Good grief that are there other than when you go to.

19 or IPO.

[music].

We have no.

[music].

Sure.

[music].

Boosting your hard work.

[music].

Yeah.

They do.

The good thing to do help.

Combined with solid execution, we're driving Kumar.

[music].

Oh to operate older.

[music].

Exactly.

[music] provided.

And the rapid changes in demand.

And the restructure.

[music].

Your long term profitability.

Got to build coupled with a strong balance sheet.

[music].

Excluding the local John.

Good grief.

For the.

[music].

Thank you.

[music] results.

Oh.

[music].

I'll now.

[music] are kind of go.

Our.

Decline [laughter].

[laughter] compared to where it getting married in February.

[music].

Great.

[music].

<unk>.

As approximately.

[music] that automotive market.

In March compared to January February.

[music], 2%.

Well.

[music].

We need to crew in July.

[music] second quarter 2000.

[laughter] meritor.

[music].

There is a direct there's no yeah.

[music].

Hi challenging circuit.

[music].

They could be higher margin workers.

[music].

Oh.

[music].

[laughter].

The increase in our gross profit margin.

Right.

[music] highlighting the strength of our gross margin.

Oh.

We recorded.

[music].

Great.

[music] Gallery.

Because overall.

[music].

You record.

Well you dollars right, though.

[music].

Well.

[music].

[laughter].

[music].

Compared to the second.

[music].

Great.

All right at the director.

[music].

In the second quarter.

[music].

Yeah.

[music].

Only 6%.

Well above our expectations heading into the quarter.

Good uncertainty regarding potential.

[music].

Our effective tax rate.

Quarter with 3.9% error.

For the 25 zero percent <unk> second quarter 2018.

3%.

Correct.

Very good income level.

[music].

We estimate our.

[music].

Non.

[music].

First quarter two.

[music].

Second quarter 2020.

Down from $2 hearing.

<unk> second quarter 2008.

[music].

2020.

Our continued.

[music].

Working capital in there.

That's true.

Hi, good cash.

Second quarter.

I agree.

<unk> increased by only $1.43 days.

Cash collection exceeded our expectation.

Because it 19 pandemic.

The weather reduced sales activity lowered our accounts receivable balance providing cash flow from operation of $130 million.

Further our focus on right sizing our inventory.

Reduced shipping activity produced 150.

[music] dollars at cash from operation.

But.

If we work together.

[music] changing.

At June Thirtyth 2020 activity.

[music] $1.5 billion.

The ratio of between 4% compared to 25.4%.

For 2020.

Our net debt to EBITDA multiple with 1.3 times.

Our leverage ratio.

Or are investment grade credit rating and are well within our debt covenant requirement.

I get the ended the second quarter, we had $1.1 billion.

[music] <unk> in credit.

Operating through this challenging environment and remain confident that we could be.

And your credit Mark.

<unk>.

<unk> Jude.

Good bye.

[music] market.

The long term growth.

Our company has work.

To provide returns to our stock orders.

For 2020 capital expenditure budget of one.

Galleries include strategic investment.

[music].

Organic growth.

[music], Michigan and share repurchases.

Turning to our outlook.

We need macroeconomic uncertainty there.

[music].

Earnings per share died.

Third quarter 2000.

Uh huh.

However, like to share.

Correct.

And our current expectation and market conditions.

Good day.

With that.

[music].

[laughter].

Compared to second quarter 2020.

We are cautiously optimistic.

In the nonresidential construction market.

However, we anticipate this will be on that.

Decline.

[music].

Okay great.

Operator.

Right.

Due to normal.

And then sat down and the cases.

[music] quicker.

That's really decline.

As in prior years due to lower anticipated shipment.

Second quarter.

As a result.

[music].

So.

2%.

[music].

In addition, we expect that wouldn't bother me to increase maybe.

[laughter] quarter.

Work automotive production rate.

This improvement is not reflected in our outlook for Terry.

And are not included in this metric.

We expect metal price.

Third quarter.

I mean generally.

Current level.

During the resiliency above the line.

No.

Traded in the second quarter of 2020.

Execution.

[music].

Our gross profit margin will remain in Ireland.

[music] sustainable range of 20 or 30%.

Well, we wouldn't be subject to ongoing.

Right.

We will continue to execute our business model and the focus on managing <unk> element.

Within our control.

In closing.

Barry <unk> second quarter results.

So that night and government.

Go there.

Jackson in there.

I will talk or pricing environment.

Excellent execution and marriages and field.

Okay, and higher margin business and effective working capital management resulted in yet another quarter.

[music] cash flow.

Yeah.

For our growth.

Organic or priority.

I presumed gratitude to all of them.

In line with company.

<unk> ongoing commitment to health safety and operational excellence, which we believe.

Yep.

[music].

Extraordinary environment.

Worker, highlighting the strength and we really see.

We are model and also our people.

[music] condition and the quarters ahead, as we work with her.

Customer.

Hi, Eric.

He needed.

[music].

That concludes our prepared remarks.

Thank you for your attention.

Sure.

But open the call up two questions.

[music].

The next question.

Alright, Thank you very much for taking the questions they and congrats on a very strong performance in Q2.

And they may I have a couple of questions with regard to the volume outlook.

But the market share and also how you do inventories across the space.

<unk> market share can you comment to what extent relied <unk> business model. If you allow you to take.

Market shares going based Luxembourg.

Looking forward do you view, though you've been stayed a little more temporary dr., maybe a little.

It is but perhaps not out of the market.

And then secondly, with regard to the inventory outlook I believe you called it to your prepared remarks ongoing efforts to right size inventories can you comment a little bit Isle, where you already.

Hey levels are they at a level that you comfortable Robertson state demand environment or be inventories as being you know that too low demand recovering or perhaps the bladed if you feel more gradual recovery it works at age to.

Thank you very much.

Sure. Thanks.

Our first on Mark.

No.

When it all focused on market share and I've always going to <unk> numbers.

Yeah.

Good day.

We are.

We we focus on bottom line.

What do you care about the shareholder return.

ER.

Our RF fusion.

Mortgage or kind of comes along with no colleagues.

<unk> running.

Oh, we're doing.

Okay.

The.

We aligned our he sold compared to Q1, we fell 17% and industrial ship that 25%.

You know as you're aware the medicine, our time it yeah.

It's a lot of that goes into automotive are not included.

In late in our numbers, but we know we began shipment are pretty heavily weighted towards the carbon flat rolled it would need to be more impacted during the quarter on their standards and now.

He said.

So to me.

Yes, we did pick up indebtedness.

In challenging times, you typically see service center customers.

Smaller or why the they want and delivered more frequently maybe they're concerned about.

<unk>.

Financially stable suppliers supporting down so he did pick up yeah orders during the type of Ireland and.

Okay, Great service, our people to buy definitely will keep those customers going back to them.

And inventory.

Our media.

[music].

Our model.

[music].

Further we got Opex, you did a great job or not I know, a nice costar and get our inventory in line in the fourth.

Quarter last year, so when you're welcome vision going into.

Unusual situation, we find ourselves.

[music] Lucky Bogo they were last year.

Oh, no deal together I understand.

We remain focused on.

Well no not really going now we want to do because unless somebody who do you do get America open enrollment.

They're going to relax and.

We need to be there.

Our relationship.

Right.

We're very manageable.

[music].

No I'm Glover, we're opening anymore is in line to vote will no longer Oh, I always believed in what we're doing so we will.

No we spend our money so.

[music].

Thank you everybody. That's one follow up with regards to that you commented that I'll just do you.

Discipline do other than that.

2019.

Your cost your cash performance.

And you want or manageable level, how does that tie into your expectation for working capital as we look into the second half a year.

Would you expect they due to strong task and working capital to continue on the structural basis or not at the beginning to work, although you might see cracks weeks. When you go to the working capital in the last few quarters.

Yes.

[music].

2018 years.

Starting with the Oh Im getting mentioned our efforts to read.

18 or successful.

We continue that well see reacting here.

So that's the key.

When they shape, but we are still focused on our inventory of our business days, where our outlook is not as strong we are continuing to focus to work down we would expect inventory to me.

So.

In other parts business.

Dan was deeply will be more favorable.

We need to well, okay right now HM.

[music].

Builds to working capital and we would love to have to do that that would be very positive.

Did you give me the second half would be a little lighter every dollar that same.

Level cash from operations that we had in second quarter, but at this time, we would expect.

Generate.

Yes.

Working capital, we going into the second half.

[music] [laughter]. Thank you.

On the telephone keypad.

[music].

Hi, everyone.

[music] Cowen and company.

Maybe a question.

Hey, good morning didn't Colin Bill if you want.

[music].

Congratulations on the second quarter.

Just wanted to ask maybe if you could give us sense for you know how your volumes trended into July.

Daily basis versus you know January and February levels.

And maybe just kind of speak to the degree of upside maybe you're experiencing the toll processing volumes.

You know toward our goal now covering.

So I could sit on our ER.

[music].

[laughter] Wally.

No we were all sharp downturn amazed rather rapidly.

Well good luck.

Manager, where do you.

[music].

Fairly strong.

We're.

And again remember we already know.

Well move saying.

Same level.

Yeah. Thanks.

Pretty early in.

In July.

It appears to be on a daily basis, we have seen.

On the ship or day come down and it.

However.

For a couple weeks in July typically do that because of the July 4th holiday.

Why the day this year, we know they.

Yeah, you never get indication.

Well there yet.

You know they generally hanging in there you know holiday.

Let me.

Exactly.

Our Oh.

Hey, Bill.

Oh I mentioned earlier, you know we've seen a rebound on the tolling June was about 66% compared to January February.

Yeah.

And then.

Based on the ramp up.

Yeah, we'll see that he brings in July.

Yeah.

So.

[music].

The cost about [laughter], what our plan at the levels were eight anyway, but in February, but we were down about 34%.

[music] started in June.

Oh, it a whole lot of debt Jan Feb at a higher level.

It was definitely into July and that should continue.

As you walk from what we're hearing from our customers.

[music].

I go to prosecute only automotive.

While as well.

Right, Okay very helpful. Thank you.

And then just curious if there's been a considerable changed given your value added processing mix and the second quarter.

You know say versus the first quarter and maybe how would you expect that to trends.

Moving into the third quarter, given your outlook or various end markets.

Great.

I I, we're not going to reduce the number you're still working on as you know and <unk>, we've gone from a GAAP.

40 resolved so.

[music] form.

I expect that no again, but can you do another I know it goes.

Given that there yet.

No.

With our anyone in our modeling that we've been known over the last several years.

Sure no.

HM two.

[music].

I feel the reason processes that are.

Customers about the news.

But our money wisely.

I am very nicely, obviously nobody follows Commons what are those reos them.

After.

A dramatic downturn.

[music] that happens the our customers come out.

Got or were they vary when there is any any doldrums, they don't spend money and they are the Oregon, We will go to <unk>.

He will be work on the downside of them when they come out maybe somebody I need to realize these are all in and we spend our money.

Disease.

We invested money in the new technology is.

Fascinating to me.

We continue to do that.

And so our Oh.

[music].

Well you know.

[music].

Great Okay, and that's that's a good segue to another portion I had just on.

In a progression moving into the third quarter, either should should that track you your expectations on the in terms of the topline trajectory or volume guidance.

Or would you expect a bit more upside getting getting you bought back some of the per load workforce in the toll processing side.

You know and if you're expecting some some stronger mix.

No.

The.

What I refer you to rebuild our company day to day, we wouldn't want.

Okay, Alright, well go way our estimated one goes down everything to do that.

Due to 65% era.

Oh, sorry.

We know how to wrap up around.

When you do and what we've got no go.

[music].

And Oh.

[music].

We are radar.

[music].

Yeah value added.

Oh, yeah right.

So the of course.

[music].

Ross will not review.

[music].

They were not anticipating the level.

You know workforce reduction activity in Q3 that we had in Q2.

[music].

Based on whether they are today, so there were going up there.

[music].

It is being extended too.

They were laid out and so.

[music].

Those extra costs.

Q3 or not.

In Q2, so that was built in a down a bit however, if activity levels back.

Where are you commented on the tolling and get back when we bought makes today.

Back to where are you will see executed.

In the has adopted we will also.

Yeah, no more than covered by our gross profit that we generated on the tolling.

Got it thanks very much.

[music].

Hey, Joe.

I see and someone else.

Yep.

[music] question.

Hey, good morning.

[music].

Question, just generally speaking on the nonresidential construction market I know that market is very key to you all.

Curious in terms of how you saw the quarter progress.

[music].

Boards.

Although we are.

Now onto usually what.

You know what you see a lot a lot of mixed views in terms of public stays strong, but perhaps new projects on the private side.

People, taking a pause due to.

To the issues, obviously, we all know.

Yeah.

You know our governor very well our.

Usiminas.

Smaller.

[music].

We're stories below.

And.

Due to answer your question how early on the Goldman.

Oh my goodness worldwide.

We didn't have a lot of cancellations no we don't want to people.

Later date.

Given the current backup Goodyear and going on to play in that market is a really strong throughout.

Right now.

[music].

I want to broaden spending money on and I don't want gosh, It was or do you guys.

Who knows the distribution centers that are out there.

We are supposed to do not want to see how many others out there or do they really do plenty on book.

Sure.

[music].

No no.

[music].

There was no strong marketplace.

To be very waste water.

<unk>.

[music].

A steel.

Partners out there.

[music], they're doing well.

<unk>.

[music], which is good rose nonmembers.

No no.

Sure.

Good enough.

<unk>.

Greetings and what government.

[music].

No we won't see real leadership has been below would be good your country.

We're doing a lot so.

We were cautiously optimistic or.

Sure.

[music] to any bill semi side.

What are.

What's the what's the widens out there and I know, it's been good but but it also can be very erratic for you know your own historical observations yeah. Yeah. It can be who start stop quickly, but as we mentioned there's been a bright spot for us.

And the outlook for about two years, so very positive so.

We believe that market is going to continue to be learning for us.

No I know.

You all mentioned that you took a couple of facilities out.

What it sounds like Europe for the aerospace.

Side.

How are you all I guess, please for the next year or two or three based on.

What would be indication you're getting from the mill deals.

Yeah, well you know is as Jim said earlier, you know we've got one our business day to day, a week to week month tomorrow, but that whole aerospace commercial aerospace is a very either situation.

Our guys who've done a great job looking at.

Where the demand level is where we think it's going to be and really attacking both the expense side any inventory.

But it's going to be a challenge in order to be a challenge for the balance of the year and.

Probably the next year.

And we really just trying to stay abreast of where.

The market is added where the demand is going to be in can make those adjustments.

As we need to.

You beyond that.

Yeah. Those are the other part of that is the white box.

Our base business use the military defense side and.

So that we continue to see strength, there and you see.

The second half there, we're going to we're going to continue to see strength. So.

That's the good news without park, partially offset some will what we're going to.

Okay.

See from a negative standpoint on the commercial aerospace side.

You sticky adds as Jim out of curiosity, what what's been the company policy in terms of business travel given everything that's been no.

Yeah, we are reader zero.

[music] travel a lot of birds and.

Sure enough to go way up the food turned into a.

To.

Good food.

And but I'd love nothing wrong with really no no.

Oh.

[music].

Moving on we got one meeting will be.

<unk>.

That actually need somebody to be onsite at all customer order food, but also moved through.

Well situation, but basically it's not wide open I can tell you.

Or.

Local driving type travel.

Yeah, So I am using basis.

Oh Rooster regulations about cone and going to know that offers and the mill.

We jump all number, but where do you know you know.

On the.

Do you see.

[music].

Hubert.

Let's say from healthy and again.

And just in general.

There were.

[music] out there and.

We'll continue to be extremely low.

Diligent when it comes to.

Economical and our view these sixtyl.

Excluding a major so weird times appreciate it.

<unk>.

You.

We got really good morning, good execution out there.

Thank you.

[music] Star one.

You bet.

[music].

No further questions and they say well that's a good healthy.

Yes.

Oh, Hey, thanks, very much for your time today and then he.

An important grew to love to remind you all that on August.

We plan to do.

Bruce you go through Congress will be held the virtually inmobi look a lot over here and Oh I can hear he needs before you can really be realized I hope you all screen. So you know thank you.

Hey, Dan.

[music].

That's your line at this time.

In addition.