Q1 2021 Reliance Steel & Aluminum Co Earnings Call
Greetings and welcome to the reliance steel and aluminum company first quarter 'twenty 'twenty One earnings conference call. At this time all participants are in a listen only mode of question and answer session will follow the formal presentation.
If anyone should require operator <expletive>istance during the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded I will now turn the conference over to your host Kim Orlando of Adam of Investor Relations you may begin.
Thank you operator, good morning, and thanks to all of the for joining our conference call to discuss the lines of code.
One of 2021 financial result.
I am joined by Jim Hoffman, So Karla Lewis President of Arthur of Jimmy and Vice President and CFO.
The sales executive Vice President operations will also be available during the question and answer portion of this call.
The recording of this call will be posted on the investors section of our website at the investor the Rfps the dotcom.
The press release on the information on this call may contain certain forward looking statements, which are based on the number of assumptions that are subject to change and involve known and unknown risks uncertainties or other factors, including the impacts of the COVID-19 pandemic of really.
Weighted economic conditions on our future operations.
It may not be under the company's control that may cause the actual results performance or achievement of the company to be materially different from the results performance or other expectations implied by these forward looking statements.
These factors include but are not limited to those factors disclosed in the company's annual report on form 10-K for the year ended December 31, 2020 under the caption risk factors.
Closure in our press release this morning, and other documents reliance filed or furnished with the securities and Exchange Commission.
The press release and the information on this call speak only as of today's date and the company disclaims any duty to update the information provided therein and here I.
I will now turn the call over to Jim Hoffman CEO of reliance.
Good morning, everyone and thank you all for joining us today to discuss our first quarter 2021 financial results.
I will begin today with a high level overview of our first quarter performance and capital allocation priorities.
Karla will then speak to our operating results and demand trends by end market and Oracle will conclude with the review of our first quarter of 2021 financials.
Our resilient business model, coupled with outstanding execution, and a favorable market resulted in record financial performance. During the first quarter of 2021 I would like to personally. Thank all of my colleagues within the reliance family of companies for their dedication to help.
Safety and operational excellence, despite disruptions from the ongoing global pandemic and various supply chain constraints.
We experienced ongoing strength in metals pricing during the first quarter led by multiple price increases for carbon steel products, along with improving demand in many markets.
Leverage our decentralized operating structure small order sizes and diversification of products and markets and geographies to achieve a record gross profit margin for the third.
Second quarter of 33.6% of.
The 60 basis points from the fourth quarter of 2020, and the 330 basis points from the first quarter of 2020.
Our record quarterly gross profit margin combined with average selling prices well above our expectations and our continued focus on expense control contributed to record pretax income of $359 million in the first quarter of 2021.
All of over 100 per shop from the prior quarter and up over 300 per cent from the prior year period.
Our currently quarterly earnings per diluted share of $4.12 were also a record and substantially exceeded our outlook.
Our strong earnings.
Sort of working capital management resulted in cash flow from operations of $161 eight.
$8 million in the first quarter of 2021, despite $182 $8 million of working capital investment.
This is of significant result, as we typically use cash in the first quarter as we rebuild working capital from seasonal low fourth quarter levels compounded by the significant increases in metals costs, we are experiencing.
We improved our inventory turn rate to 514 times, surp<expletive>ing our 2020 annual rate and companywide turn goal of 4.7 times.
Our ability to cross sell inventory among our family of companies, which we believe is the key advantage and differentiator of our model and scale was the significant contributor to our improved inventory management.
<unk> extended mill lead times, and the inventory shortages collaboration among our family of companies and strong long standing relationships with our domestic mills enabled us to source the level needed by our customers.
Our managers in the field effectively support our valued customers.
Ensuring inventory of availability, while maximizing margin on opportunistic orders.
Our strong cash flow generation and significantly enhance liquidity position enables us to maintain a flexible capital allocation strategy focused on both gross and stockholder returns.
Our 2021 capital expenditure budget of $245 million includes new buildings and other projects to expand upgrade and maintain many of our existing operating facilities. However, when factoring in the project delays and extended lead times for equipment.
Due to COVID-19, we believe our potential cash flow outlays for our capital expenditure will be closer to $300 million in 2021 due to the priority of your hold overspending.
During the first quarter of 2021, we invested $43.7 million back into our business through capital expenditures, including several growth opportunities to address and exceed our customers' and suppliers' needs.
For instance, we've invested in toll processing expansions in Texas and Kentucky.
Given the significant demand we've experienced in our toll processing capabilities throughout our footprint.
Operations out of our Kentucky facility commenced in November 2020, and they have been steadily ramping ever since.
Structuring continues in Texas on our new Greenfield facility focused on carbon steel tolling, which will support increased capacity of our toll processing customers, who are primarily metals producers and their.
Customers.
We're very excited about these opportunities to expand our toll processing service offerings and see many more possibilities.
In the future for our toll processing capabilities moving forward.
As mentioned on the allowance call, we're installing energy efficient lighting and solar panels in certain of our facilities as well as investing in additional innovative processing equipment to continue providing our customers with the highest quality products and services.
Turning to M&A, we continue to see a healthy pipeline of prospective opportunities, including in the adjacent businesses. In addition to traditional metal service center businesses as we've broadened our universe of potential acquisition candidates.
The less we will maintain our strict transactional transaction criteria, including our focus on quality of earnings when you're evaluating prospective targets to ensure a strong fit within our family of companies.
I will now turn to our stockholder return activity.
In the first quarter of 2021, we paid $44 $8 million in dividends to our stockholders. We've maintained our payment of regular quarterly dividends for 62 consecutive years without ever suspending payments, we're reducing our dividend rate in fact, we've increased our dividend 20.
Eight times since our 1994 IPO, including the most recent increase of 10% in the first quarter of 2021.
At March 31, 2021, approximately two 8 million shares remained available for repurchase under our stock repurchase program.
We expect to remain of prudent allocator of capital.
Maintaining our flexible approach focused on both gross which remains our top priority and stockholder return activities, including opportunistic repurchases of our common stock.
In summary, I'm inspired by the strong operational execution demonstrated by the entire of reliance team during the first quarter of 2021.
Our unwavering focus on the core elements of the reliance business model, including health and safety pricing discipline diligent expense control when needed inventory management organic growth and innovation enables us to perform from a position of strength in both of them.
Good times and bad.
In the current environment characterized by extremely high metal pricing strong demand from many of our customers and the limited mental availability, we believe reliance remains well positioned to continue generating strong earnings.
Given our strong liquidity position, we look forward to continuing to support the gross and needs of our customers and suppliers. While also returning value for stockholders. We will continue to support our colleagues customers suppliers and communities in a sustainable manner through.
Both the challenges and opportunities that lie ahead.
We remain confident of the America is going to need reliance to rebuild.
Thank you for your time and attention today I will now I'll turn the call over to Karla to review, our operating results and demand trends karla.
Thanks, Jim and good morning, everyone.
I would like to Echo Jim's sentiments by thanking all of our colleagues within the reliance family of companies for their amazing performance during the first quarter.
Wrong demand conditions in the majority of our end markets resulted in our tons sold increasing 11, 3% compared to the fourth quarter, which was within our guidance range of up 10% to 12% and above the typical seasonal improvement in shipping volumes, we experienced in the first quarter.
While demand is healthy and continues to improve in most markets. Our first quarter shipments did not reach pre pandemic level and were down 4% from the first quarter of 2020, however on a per day basis, our tons sold were down only two five per cent.
And we believe underlying demand is stronger than our shipment levels reflect given many factors holding back economic activity for us our customers and our suppliers, including metal supply constraints supply chain disruptions for various components of materials.
And labor and trucking shortages. The good news is we expect to fill this demand in future periods and these factors support increased metal pricing.
The strength in demand, coupled with rising input costs and limited metal availability resulted in metal price is accelerating throughout the first quarter for many of the products, we sell most notably carbon steel products, our average selling price increased 20% compared to the fourth quarter of <unk>.
<unk> 2020, exceeding our guidance of about 12% to 14% by a significant margin.
These robust demand and pricing conditions contributed to an all time high quarterly gross profit margin of 33, 6% non non-GAAP FIFO basis, which we believe is the best measure of our day to day operating performance we achieved of.
Record gross profit margin of 37.1% an increase of 350 basis points compared to the prior quarter and up 600 basis points from the first quarter of 2020.
The way to go team of reliance.
Our record gross profit margin was the result of outstanding execution by our managers in the field, who once again effectively implemented price increases at the time that the mill announcement prior to receiving the higher cost metal into inventory.
Their focus on higher margin orders and were very selective given limited metal supply.
Which enabled us to capture an incremental margin benefit in excess of already strong levels.
I'll now turn to a high level overview of our key end markets.
Demand for nonresidential construction, which includes infrastructure and it's the largest end market. We serve continue to improve with first quarter shipments approaching pre pandemic levels.
We continue to experience strong quoting activity for projects for big box retailers health.
Health care facilities schools.
Large warehouses and data processing centers among others.
Given our healthy backlogs quoting activity and positive customer sentiment, we believe demand will remain steady at current solid levels.
We saw continued strength and demand for the toll processing services, we provide to the automotive market surp<expletive>ing activity levels in both the fourth and first quarters of 2020 with automotive Oems and steel and aluminum mills continuing to ramp production.
Importantly, our tolling operations, serving the automotive market the only minimal impact to date as a result of the global Microchip shortage and we expect toll processing volume to remain strong.
Demand in heavy industry for both the agricultural and construction equipment continued to improve in the first quarter as our customers increase production levels to meet customer demand and replenish dealer inventories.
Demand for industrial machinery is the manufacturing processes was also strong in the first quarter of 2021.
Absent of disruptions for our customers that impact their production, we expect demand to continue at strong levels.
Semiconductor demand during the first quarter continued to strengthen from the fourth quarter and we expect this to continue the.
Semiconductor space continues to be one of our strongest end markets.
In regard to aerospace.
I'd like to remind you all of that commercial aerospace represents roughly half of our aerospace exposure.
Demand in commercial aerospace began to experience limited signs of improvement compared to the fourth quarter of 2020, which we believe was the trough of the current cycle.
We expect limited improvement throughout 2021 on.
On the other hand demand in the military defense and space portions of our aerospace business remains strong with backlog improving during the quarter, we anticipate strong demand continuing and the non commercial aerospace market for the balance of the year.
Finally demand in the energy sector, which is mainly oil and natural gas price.
Modest recovery towards the end of the first quarter of 2021.
We anticipate a slight improvement in the second quarter, given current oil prices and customers needing to replenish inventory for certain products.
We entered the second quarter of 2021 with strong demand and pricing momentum that create an environment for us to optimize our model and deliver strong results.
We remain dedicated to partnering with our key customers and suppliers. During these extraordinary times and we can only do this with the continued commitment to health and safety and operational excellence that our reliance colleagues have demonstrated every day throughout very challenging times.
Thank you all I will now turn the call over to Arthur who will review our financial results Arthur.
Thanks, Karla and good morning, everyone.
I'll start with a recap of our quarterly results strong pricing healthy demand and record gross profit margin.
<unk> two of record gross profit dollars.
Which in turn drove record pre tax income and record earnings per share.
Turning to our sales.
The significant increase in metal pricing and healthy demand resulted in our first quarter sales, increasing 33% over the fourth quarter of 2020.
Compared to the prior year period, our first quarter sales were up over 10%.
<unk> by the strong pricing momentum for most of the carbon steel products.
As Jim and Karla mentioned, the strong pricing environment.
Along with our focus on higher margin orders and continued investments in value added processing capabilities.
Collectively resulted in record quarterly gross profit of $853 7 million.
And the record gross profit margin of 33, 6% in the first quarter of 2021.
We incurred LIFO expense of $100 million in the first quarter of 2021. This compares to LIFO income of $20 million in the first quarter of 2020.
And LIFO expense of $15 5 million from the.
Fourth quarter of 2020.
At the end of the first quarter, our LIFO reserve on our balance sheet was $215 6 million.
We revised our annual LIFO expense estimate to 400 million from.
The $840 million.
Primarily due to higher than anticipated costs for certain carbon steel products.
System, one of our accounting policy.
Reallocate our annual estimate on a pro rata basis and each quarter as such.
Current projected LIFO expense for the second quarter of 2021 is $100 million.
As in prior years moving.
We'll update our expectations each quarter based upon our inventory cost.
And metal pricing trends.
Now turning to our expenses.
Our SG&A expense was generally consistent with traditional seasonal trends, increasing $54 9 million.
Or 11, 8% compared to the fourth quarter of 2020 ease of <unk>.
<unk> volume and pricing momentum.
The quarter over quarter increase was mainly a result of higher incentive based compensation given our record gross profit and pre tax income.
Overall, our head count remained relatively consistent with year end levels and.
In comparison to the prior year period, SG&A expense was roughly flat due to the <unk>.
Lower wages as a result of reduced head count.
Which was down approximately 8% year over year and was offset by higher incentive compensation in the record earnings levels in the first quarter of 2021 and to a lesser extent inflationary increases.
We will maintain a disciplined approach to expense management and continue to monitor our expense structure as we progress further into 2021.
Our non-GAAP pre tax income of $357 1 million in the first quarter of 2021 was the highest in our company's history and represents an increase of the.
The $36 5 million or 61, 9% from the first quarter of 2020.
Due to a favorable.
The demand and pricing conditions strong execution, and diligent expense management or.
Our non-GAAP pretax income margin of 12, 6%. It was also a record in the.
We exceeded the prior year period by 400 basis points.
Our effective income tax rate for the first quarter of 2021 was 25, 3%.
Up from 24, 3% from the first quarter of 2020, mainly due to higher profitability.
Currently anticipate a full year 2021.
The income tax rate of 25 per cent.
As a result of all of these factors, we generated record quarterly earnings per share of $4.12 from the first quarter of 2021.
Prior to the 92 cents in the first quarter of 2020.
On a non-GAAP basis.
Our first quarter earnings of.
$4 10 per share significantly exceeded our outlook and we're up 104 per cent from $2.
And one set from the fourth quarter of 2020, and up 67, 3% from $2.45.
In the first quarter of 2020.
Turning to our balance sheet and cash flow.
Our operations continue to generate cash.
The significantly higher working capital needs.
We generated strong cash flow from operations of $161 8 million during the first quarter of 2021 of the water of profitable operations and effect of working capital management.
Moving our focus on inventory turns.
As of the end of the first quarter.
The total debt outstanding was $1 six 6 billion.
The resulting in a net debt to EBITDA multiple of <unk> eight times.
We had no borrowings outstanding on our $1 5 billion revolving credit facility.
Providing us with ample liquidity to continue executing on all areas of the hard capital allocation strategy, while maintaining our investment grade credit ratings.
I'll now turn to our outlook, while macroeconomic uncertainty stemming from the COVID-19 pandemic continues.
And optimistic about business conditions with strong underlying demand in the majority of the end markets we serve.
However of factors impacting shipment levels in the first quarter of 2021, such as metal supply constrained and supply chain disruptions for many of our customers will continue to persist in the second quarter of 2021.
Despite these factors we estimate tons sold will be flat to up 2% in the second quarter of 2021 compared to the first quarter of 2021.
We expect metal pricing will remain near current levels with the potential for further upside in certain product.
And its current metal prices are substantially higher than the average selling price in the first quarter of 2021.
We estimate our average selling price per tons sold from the second quarter of 2021 will be up 5% to 7%.
Given the strong demand and pricing fundamentals.
Anticipate continued strength in our gross profit margin in the second quarter of 2021.
Based on these expectations. We currently anticipate non-GAAP earnings per diluted share in the range of $4 and 22 of $4 40 from the second quarter of 2021.
In closing, we're extremely pleased with our record first quarter 2021 operational and financial performance supported by strong pricing and demand trends as well as excellent execution by all of our colleagues in the field. These factors collectively resulted in yet another quarter of robot.
The profitability and cash flow, enabling us to continue executing on our capital allocation priorities of investing in the growth of our business and returning value to our stockholders that concludes our prepared remarks. Thank you for your attention and at this time wed like to open the call up the questions operator.
Thank you at this time, we'll be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad co.
Information call indicate your line is in the question you May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the starkey. Our first question is from Seth Rosenfeld with Exane BNP Paribas. Please proceed with your question.
Good morning, Thank you for taking our questions today.
If I can kick off with Morningstar.
Sorry, if I can pick up into the question on the margin performance and.
The inventory holding gains you achieved in Q1.
You walked through the benefits of the company in p<expletive>ing on the higher.
Price hikes of your customers before you realize the higher cost inventory can you give us some color on how you expect that to progress into Q2 and beyond should we expect comparable level of tailwind or some compression as of yet.
On the inventory cost side.
Thank you.
Yeah, sure I'll answer that Howard of socks.
Hello.
Yeah, well you know we've been doing this a long time, we've that's our that's part of our model I think our customers are.
So yes.
Part of their business.
The.
Customers, we service no and we've proven to be there for them.
On the gun with innovative new equipment, and the fact of we're able to to a.
Two of them an uninterrupted flow of production equipment. So we work real hard to make sure that we're there for them and let them down so I think.
All of the majority of the customers that we do business with legacy of Stifel.
If they want a lower price they can go elsewhere.
By the time on the phone and try to meet somebody down on the price of we know what we bring to the market. So we're going to continue to do that.
Because it works.
The care about our customers and our supplier suppliers of care about us So let's say.
All of them, we've been working real hard on for decades and over the past couple of years, we tweak.
The two to actually do more volume.
So.
It will continue to go in one of the we're not going to we're not gonna look of our customers down in the.
I know that our that our domestic partners aren't going to let us know so that cause the Ah <unk>.
The two.
Well continue to be able to p<expletive> these increases the long because right now it's a matter of you know, it's a matter of availability and service in Mojave and rely on shelves as true world.
To do real well and both of those.
Yeah, and Seth just to add on the little more specifically to your question on the inventory holding gains as Jim said I mean, that's been our model for years, and we think our folks execute on it very well.
You know with the guidance, we've given and as we commented on prices did increase more than we had anticipated in Q1. So we were able to keep that momentum going during the quarter you know with the way it works for us in our model if at some point the increases stop.
And as we do get more of the higher cost of metal and then we will see some compression in those elevated gross profit margins. However, with the current dynamics that are out there of continued price increases and.
You know I'm, a little bit of supply constraint.
You know getting the metal and the average up our inventory.
We have been experiencing these really strong FIFO gross profit margin, but we don't know that there are sustainable that level, because we do anticipate as I said, some compression whenever our inventory cost increases, but right now.
We're seeing continued strong pricing.
And the potential for more increases.
Okay. Thank you so <unk>.
Moving into Q2, but as ever not sure how sustainable in the longer term that makes perfect sense.
On working capital very good working capital performance in Q2, and Q1, sorry, and you touched on the ability to sell across the platform as being a benefit for you versus many of your peers.
Can you give us a sense of how you expect working capital the progressed into Q2 and beyond can we expect further modest investment in Q2 or something more neutral of ads.
Piece of the prices potentially starts to stabilize.
Yeah sure Seth This is Arthur of good question.
So when you look at Q1, we.
We had I would say the Sydney.
Net income portion of the kind of working capital build behind us so to speak from the higher prices, particularly in our accounts receivable, which was up close to $350 million quarter over quarter. So we wouldn't anticipate any more significant build.
Receivables.
But.
With inventory and others continued cost escalation. So it's probably going to be some addition of build there and then on the payables side.
We anticipate having some tax payments in the second quarter that that's probably going to the use of <unk>.
The cash so all in all I think to recap, it's fair to say that the the law.
A large piece of the working capital build is somewhat behind us.
That's very clear thank you.
Thank you. Our next question is from cities, Kevin anything with Deutsche Bank. Please proceed with your question.
Yeah, Hi, good morning, Jim Karla and Arthur Thanks for taking my questions.
My first question is on the M.
M&A landscape given the current type of profitability across the industry.
Seeing any reduction in available opportunities and when do you think there could be of turnaround.
Yeah sure Josh Thanks for the question Yeah on the M&A front.
It's the active we were we continue to see.
Our activity there.
Okay.
The last call we looked at over 100 of from last year and didn't see one the makes sense or things just didn't work out for right now.
The what we're looking at it.
It looks it looks it looks fine.
That's just not traditional total service and also looking at adjacent type businesses. So we're we're often the good companies we don't.
I'm sure you've heard before.
So the goal of like we're going to buy three companies. This year of five companies of this year. We just look of the most of the income we're always on the prowl looking for good companies.
The strict criteria to kind of to get into the family of companies. We are free we protect the up very proud of it we care about the.
People, we want to be part of the team.
And there is some fine companies out there.
As a matter of.
The sale and what kind of.
I think the worst or what we can share worth or both.
The foreign companies out there all of them will continue to.
Well look at those things, it's a it's a guess.
Part of our model.
It has been for a long period of time, we've done 67 of all of them. There's no reason to think that the pipeline is empty because it's not but we'll just we'll continue to work hard.
All of our due diligence.
And we've proven over a long period of time.
If you bought of the right if you buy the right.
Oh my goodness.
It should then reliance that we can.
The really do good things so world.
We'll continue to.
To do that.
So the M&A.
That's just one of those just one of the avenues, the we're able to.
So we use our cash for us or one of the good situation with cash.
And.
Well continue to do the prudent thing.
But with the with the cash like we always are but M&A is certainly.
A part of that and.
That's all I can really say right now without telling you everything I know, but there's a lot of good companies out there to look at probably might have something to add to that.
Yeah, I would just add on to that and as Jim said, obviously M&A is a part of our growth strategy, but so is the organic growth that we talked about our large capex budget, we see a lot of continued growth opportunities and a lot of that of spread out across our network, but at the same time.
For instance in last year's budget, we have the two tolling operations that we talked about one of Kentucky and one in Texas that was the new startups individually, they're as big and bigger than the contribution we can get from some of the acquisitions that we do so I think.
Maybe we don't always point that out as much that you know.
Some of those projects are similar to doing an acquisition. We just you know usually make more of its cl<expletive>. When we are when we do it through an acquisition. So there is definitely a growth continuing on the organic side as well.
Yeah, just one thing to add there Karl is right. We're also.
Worked our way of mature position, where we.
We can reach a lot of we've already talked about some of it.
Hum.
James you look at the company in the particular part of the World and the applicable do we buy the company and play of freemium or do we simply a dip into our Capex fund in and out of ads from equipment with one of the companies we already own so that that takes into you should take that into consideration. When you look at our M&A activity, it's pretty good.
The place to be but that is part of our that's all for us.
Oh, Yeah, Yeah. That's helpful color Oh, Yeah, Oh My my my.
My second question is on non res construction of <unk>.
Given the strong order the backlog Oh are you, adding or even planning to add additional crews to cater to the increased demand.
Yeah, so on the non res side.
Our largest end market and we're very positive on that we have continued to invest in.
In our operation of servicing non res consistently with the additional value added processing equipment also expanding facilities. So we think we're in a very good position. We've you know we've been selective we're focused on our high quality earnings and trying to do more value add for the right orders, but we do have as we've met.
And before additional capacity in our current network to take on more volume so whether that comes from.
More traditional non res of the infrastructure Bill p<expletive>es and we see a significant pickup there which would be very positive for us. We do have the capabilities because we have consistently invested in those operations over the years.
Okay. Thank you good luck.
Thank you. Our next question comes from Phil Gibbs with Keybanc capital markets. Please proceed with your question.
Hey, just listen in the previous questions whenever you're doing keep doing it so it's working.
The the.
The demand environment right now, Jim and Karla for April how how is that shaping up so far relative to what you saw in our in March just in terms of how the cadence of for us through the through the first quarter and into April.
Hey, Bill.
There continues.
So without giving you specifics of gist.
Just because of the quarter changed calendars didn't change of the market. So it will continue to continues to do what it's doing.
The two to quote the friend of mine, we're still working our Mojo. So we continue to do that well.
We have another.
So yeah. It just answer of course it continues.
Okay.
<unk>.
As bill on the call at all.
Yeah, Phil I'm here, Hey, Bill how are you good great.
There was some commentary earlier in the call about defense and space being being solved this year with with I think even you said the increasing.
Backlogs.
In terms of the big major major programs of where the pushes happening any any specifics you can give behind that.
Well just are one of the the larger programs that we support as the joint strike fighter and that activity.
The level is strong and continues to be strong and I think that outlook as we said for the balance of the year.
Should continue and but then just overall when you look at.
Program. After program there is a lot of activity on the military and defense and space side. So it's great seeing a little bit of the downturn that we've had to deal with on the commercial aerospace side that we do have some offset in these other markets.
Okay.
That's great and then and then just on some of the signs that you all are seeing in an oil and gas and maybe some select inventory replenishment is that something that you all expect to to accelerate as the year progresses and is that purely of domestic comment or is that is that of global comment as well.
Right, Hey, Phil so on the Carlisle and high on the oil and gas side and remember too where we participate we're not in the big other P. T. J your line type products.
So in the areas, where we participate in.
We tried to make it clear it wasn't a huge increase but kind of any activity was positive activity. It's good to see our folks down in Houston smiling again. So so we're pleased to see some activity. We think you know more of its current probably maintenance and repair as opposed to any.
The significant new growth that's more on the the domestic side. So we do see our customers.
You know.
Coming in.
Asking us for quotes again that we haven't seen for a while we're seeing them have some holes in certain parts of their inventory other parts of theres still plenty of inventory out there, but it was just because especially compared to the low levels in the fourth quarter. It was positive to see some activity starting there we.
I think that that will continue but again as you know kind of slow moderate rates as we move through the year international of that has held up.
Better than domestic so that the state you know more study from an international standpoint.
Thanks, Phil.
Are they also participate in renewable energy as well.
However, the there is.
It was true.
The last question just out of curiosity, given all of the swirling headlines.
Headlines on the semiconductor shortages in <unk>.
And the OE outages.
Obviously participate aggressively in automotive through through your tolling business, which I think just based on memory of lot of that is just in time. So what what are you seeing there.
In terms of the ebbs and flows in some of these disruptions what are your customers telling you in terms of what may happen in terms of catch up. If you are seeing impacts just trying to understand in front of that out because there's obviously a lot of a lot of things swirling.
The billable unless your answer the yes.
Yeah Phil.
As we said, we really saw a minimal impact to.
To that in the first quarter.
We do think we will see slightly more of an impact in Q2, but we're also.
April we're picking up some new business on the tolling side I think it will partially be offset by some new programs that we have so we do expect that we will see a little more of an impact in Q2, but it's still going to be.
Minimal from an overall point of view and I think if you look at the programs that we support you know it's more focused on the SUV and truck platforms and those are the more profitable platforms with the auto guys. So youre point of do we think theres going to be some cash.
Absolutely we do we think the bill.
To ramp up predict production.
To offset some of these losses as soon as the.
The chip availability is back in place so.
I know thats, the focus and I think of all of those Oems are working hard to minimize the impact of the shortage.
I appreciate all the comments thanks, so much.
Hey.
Thank you.
Reminder, if you'd like to ask a question. Please press star one on your telephone keypad. Our next question comes from Alex Hacking with Citibank. Please proceed with your question.
Yeah, good morning, and thanks for the time.
Regarding the supply chain.
Disruption.
Of that that you and everyone else in the industry has been seeing have you seen any alleviation. There I mean, you mentioned that it's continuing into the two Q, but I guess, what's the cadence.
And then yeah.
I guess without without.
Without all of these disruptions do you do you think demand would be back at pre COVID-19 levels. When you look across the board even above pre COVID-19 levels, given some of the restocking activity that's going on.
Thanks very much.
It's a great question.
I can just tell you what our crystal ball says it all of the a word on the metal side.
It sounds like the the mills or of our ramp.
Ramping up which is a good thing so that should that should help with that and as far as the.
You know the supply chain issues, I'm, <expletive>uming you're referring to computer chips and.
And the rubber and all of other things and freight all of those types of things that are existing right now the all of those things have a tendency to work themselves out not all of them I don't think they're there they are.
The that'll change of just a matter of one when they all work out our thoughts are and our hopes are the people who have learned their lesson over the long supply chains don't work very well.
And reliance for decades of says.
And knows that and we are short of.
R R.
You know the decision to support our domestic suppliers.
Because they're all good looking folks although they are it's just the amount of their here and this is the shorter it's a shorter.
Supply chain, so I hope people learn that that sounds like some of our of redburn certain oh.
The chip manufacturers are going the route.
Some of the production in <unk>.
Manufacturing to the United States, which is of great step.
So I thank.
Karla you may have.
So more of on that but but or for optimistic about things getting better.
Yeah, I would say as we kind of said in our prepared remarks, we feel that underlying demand is strong in the first quarter shipments would've been stronger if not for some of these disruptions.
We see that we do see that continuing into Q2, you know there are a lot of different factors affecting the supply chain. So it's hard to really talk specifically about the cadence except that we do think there third.
They will still be there.
But we also believe that underlying demand is strong based on what we hear from our customers. In addition to you know actual like chipset and rubber and things like that.
There is also the issue with labor shortages, you know, we do hear from a lot of our customers that if they had qualified people to fill jobs that they would be at higher production line.
You know also there are the freight shortages because of the activity. That's out there you know of reliance rig.
Remember that we actually manage own and manage our own fleet of trucks. So we think that's a real advantage for us in markets like this and all the markets, including in the current one so we're very confident we can deliver to our customers of theirs.
The more of a difficulty getting metal into some of our locations, where we rely on third parties the little more but we worked very closely with our domestic now and are looking at creative solutions to try to help with that as well, but we do think that's an advantage, but we see a lot of.
Those <unk>.
Pressures continuing into the second quarter.
I think the and then this is a really good lesson.
On the you know the.
The closed the cheapest is expensive.
The people are learning that again this time around so let's split the.
We'll keep our fingers crossed it.
People will remember at this time.
Okay. Thanks for the comments since it sounds like there's a lot of pent up demand still still out there waiting to be felt.
Thank you.
Thanks.
Thank you we have reached the end of the question and answer session and I will now turn the call over to Jim Hoffman CEO for closing remark.
Great.
And thanks to all of you on the call today for your time and attention we were thrilled with the strong operational execution demonstrated by the entire of reliance team, which contributed to our record financial achievements in the first quarter of 2021, none of which would have been possible without the hard work and relentless commenced.
And then to health safety and the wellbeing of our colleagues in the field.
Lastly, before we sign off I would like to remind all of you that we will be participating virtually in the following upcoming investor conferences in may.
Wells Fargo Industrial conference.
Oldman Sachs industrial.
<unk> Conference and Bank of America Merrill Lynch Global metals and mining steel companies.
We hope many.
We hope to see many of you at these events and thank you very much for your continued support and commitment to relaunch please stay safe and healthy.
This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation and have a great day.
Okay.
Okay.
Okay.