Q4 2022 Russel Metals Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the 2020 to yearend and fourth quarter results for Russel metals today's call will be hosted by Mr. Martin Jurowski Executive Vice President and Chief Financial Officer, and Mr. John Reid, President and Chief Executive Officer of Russel Metals, Inc. Today's presentation will be followed by a question and answer.
At this time, if you have a question. Please press star one on your telephone keypad I will now turn the call over to Mr. Martin drove Skus. Please go ahead Sir.
Great. Thank you operator, good morning, everyone I'll provide an overview of the Q4 2022 results. If you want to follow along I'll be using a powerpoint slides referenced that are on our website and just go to the Investor Relations section if.
If you go to page three you can read our cautionary statement on forward looking information.
So let me start with a little perspective on the quarter and 2022 as a whole.
In 2022, we generated record revenues, a little over $5 billion and EBITDA of $579 million, our EBITDA and net income were the second highest in the company's history and only a little bit behind the records that were set in 2021.
We generated annual gross margin of 22% and our return on capital of 33% both are tremendous results.
The results for 2022 were strong overall, but if we look at the second half of 2022 in particular I'm, even more proud of how we performed as the market experienced volatility during that period our.
Our business is now more resilient as we have substantially reduced the volatility of our earnings profile. In addition, we continue to show the counter cyclical nature of our cash flows in Q4, not only did we deliver good operating results, but we also generated $146 million of cash and working capital as a result, our.
Sheet is extremely strong and that gives us a great opportunity to take advantage of both internal and external investment opportunities.
Let's begin by talking about market conditions, which are on page five.
Steel prices came down in Q4, but remained at healthy levels by historical comparisons, particularly for plates. In addition, we have seen price stabilization in fact, some price upticks over the past month or so.
We look back to around mid December or so the market was at somewhat of an inflection point at that point as it felt like prices have hit a floor and as we've now rolled into January there is now more upbeat tone to the market and we are cautiously optimistic based upon what we see today the right charts on that.
Page illustrates the recent movements in service center inventories for the industry inventory tonnage levels for candidly is on the top right chart in the U S is on the bottom right chart. They both came down over the past few months, which is typical at this time of year. The result is that supply chain inventories are modest and are in check.
As we look at takeaways from our customer base demand has picked up quite nicely in early 2023, and we see it across most geographies and end markets.
If we go to page six for our financial results from an income statement perspective revenue of $1 $1 billion. In Q4. It was down from Q3, but comparable to Q4 of 2021 overall gross margins declined to 20% from 22%, but remained very healthy.
EBITDA of almost $100 million for the quarter was very good for what is typically a seasonally weaker quarter interest expense came down by $2 million as the increase in interest rates is allowing us to generate some interest income from our growing cash balance overall regenerative generated earnings.
$58 million and earnings per share of <unk> 93 per share.
Our Q4 results were impacted by a few non operating items in.
In the case of try Marc we picked up $10 million of earnings from that joint venture, which was about the same amount as the $8 million of cash flow that came into us as dividends in Q4.
Stock based comp had a $2 million negative impact versus nil in Q3, and we had a small about $3 million increase in our inventory and our view of reserves.
One of the things that has changed in our portfolio. The past number of years is how we manage inventory in a period of falling prices. There were times in the past, where we had significant in RV adjustments in some of our business units.
<unk> units that had experienced those wild swings in the past are either no longer part of Russell.
Or are under much tighter inventory control measures and in the past.
Lastly, we had a $1 million expense for the utilization of a significant portion of our DB pension plan.
This transaction closed in early Q4 and involve the transfer of around $35 million of pension assets and liabilities off our books to that of a double a rated insurance company. In addition, it allows us to derisk and secure the current pension surplus of around $40 million for use across our other.
Pension plans.
From a cash flow perspective in Q4, we generated as I said earlier $146 million from working capital.
We have a countercyclical business that generates strong free cash flow in market downturns, and we did experience some of that in Q4 with a decrease in both inventory and AR the.
The decline in inventory was a combination of a decrease in both tonnage as well as average unit costs.
Spect that going forward into Q1, we might see a small decline in tonnage and some further price drops and average cost as our on order inventory remains below the average cost for our on hand inventory since we use an average cost system.
Capex of $50 million for the quarter has picked up and we are continuing to advance a series of value added equipment projects and facility Modernizations going into 2023, our capex should pick up and I suspect it will average around $75 million or so over the next number of years.
From a balance sheet perspective, we are now in a net cash position, which is made up of our term notes of $300 million that are more than offset by cash position of a little over $360 million.
In total if we look back over the past year, our net debt position has declined by about $230 million as a result of the strong free cash flow generation.
Our liquidity of $743 million and our credit metrics are strong.
In Q4, we are using our NCI to acquire shares and since the NCI <unk> was put in place. We've acquired 1 million shares an average price just below $28. Our current share count is now back to around $62 1 million shares or capital base continued to grow in the quarter with our book value per share up.
To around $25 10, this represents a more than $5 or 27% increase in book value just over the past year.
Lastly, we have declared a quarterly dividend of <unk> 38 per share and that will be payable on March 15th.
If you go to page seven you can see our variance analysis between last quarter and this quarter in looking at service centers the seasonal decline in volumes impacted EBITDA by around $10 million as mentioned earlier, we lost some operating days due to normal holiday schedules.
$25 million decline in margins was due to lower prices, which have only partially been offset by lower cost of goods sold due to the lag effect, we expect cost goods sold to come down further in Q1.
Offsetting this is a $9 million favorable variance due to the direct drive system, we have on variable comp and that went the other direction in the quarter to create that favorable variance of $9 million.
Energy declined by about $6 million in the quarter in steel distributors declined by about $2 million due to the moderation of steel prices that particularly impacted our U S distributors business.
There was $9 million favorable full very unfavorable variance in other which included <unk> lower earnings in Q4 versus Q3, and the mark to market on our stock based compensation.
Go to page eight we have some segmented P&L information.
The service centers continued to do well amidst the market volatility revenues were down versus Q3, but still represented a good Q4 result average prices were down versus Q3, but still up versus the historical average.
Gross margin in percentage terms is down to about 18%, but it's still strong in dollar per ton terms I'll go into a little bit more detail on that in a minute on the next page in energy. We are continuing to see positive market sentiment. There was a seasonal factor with the Q4 revenues, but overall market conditions remain upbeat as.
As we look into 2023 gross margins came in at 28% and for remained north of 25% since the monetization of the Oc TG line pipe business.
And not to repeat the old cliche, we've used in the past, but we're doing more with less.
Distributors revenues and operating results came down as they were impacted by the moderation of steel prices.
If we go to page nine we wanted to here is show a deeper dive on some of the metrics within our metals Service Center business.
Last quarter, we started to disclose both current and historical tonnage and allows for some unit and dollar per ton comparisons.
The top graph is the past five years for ton shipped and as you can see the typical Q4 dynamic is around a 5% to 10% pullback in volumes from Q3 levels because of that seasonal factor in Q4 of 2022 shipments decline was around 8%, which is within the normal range and as we roll into Q1 of 2002.
Three we expect to see a bounce back to more typical activity levels for Q1.
On the bottom left graph, we have the revenue and cost of goods sold per ton on revenue per ton, even though there was a pullback in the past couple of quarters average price realizations remain around 50% higher than the long term average.
The bottom right graph shows gross margin and EBITDA per ton similar comment to revenues and that margins have come down from the peak levels, but are strong and well above historical levels and is one basis of comparison, even though gross margin percentages, 18% in this past quarter, which has been below the cycle average the gross margin dollar per ton.
<unk> is around $464 per ton, which is much higher than the historical average it tended to be between 303 hundred $50 per ton.
Some of this increase is related to market prices being higher on average and some is due to the increase in our value added processing that is part of the portfolio and is continuing.
On page 10, we have illustrate our inventory turns this chart shows the inventory turns by quarter for each segment with energy and Red service centers in Green steel distributors and yellow. In addition, the black line is the average for the entire company.
Observations overall, our inventory turns remained strong at just under four by sector service centers improved a little bit from four one to $4 two in the quarter, our energy field stores came down from four four to three but this is really a timing dynamic in that our inventories did pick up.
Towards the end of the year to address the 2023 backlog of business for that business unit for.
For steel distributors in yellow the inventory turns increased from two three to $2 seven as our inventory position declined in the quarter.
If you go to page 11, you see the impact of some of that on the dollars for inventory.
Total inventory came down by about $100 million from September 30, which we expected. This is mostly a reduction in service centers and steel distributors. This service center saw a 7% reduction in unit cost and a 4% reduction in tonnage is they said earlier the service center tonnage may inch down a little bit but is already in pretty good shape.
At the same time, we should see additional declines in unit costs with the lag effect of the inventory on order being lower than that which is inventory on hand costs. We did see an increase in energy field store inventories as I said earlier, it's meant to serve the backlog of business for that segment.
We go to page 12, you can see the overall impact on capital utilization and returns.
Our capital deployment is down a bit with the repatriation of some working capital, but we remain around one 5 billion.
More importantly, our returns continue to be industry, leading with a strong end of the year and a 33% return for 2022 as a whole.
We go to page 13, I want to give you an update on our capital allocation priorities going forward.
For investment opportunities as we've talked about before we seek average returns over the cycle of greater than 15% and we've delivered well above that over multiple cycles. The ongoing opportunities are threefold.
We are continuing to identify and pursue value added projects in 2022, we move forward on a series of initiatives in both Canada and the U S and as we look back in the projects that have recently been completed we are pleased with their operational and financial performance to date.
Facility Modernizations and several cities, we have legacy locations that can be upgraded and consolidated into newer modern facilities. These projects will allow for volume growth improve operating efficiencies and improve health and safety conditions in one in the most recent example, we just approved.
A $10 million expansion project in our Joplin, Missouri Operation. This branch as part of the 2021 Boyd acquisition and it illustrates that we often uncover incremental opportunities to deploy capital and grow the operations that come via acquisitions.
In terms of acquisitions, we remain committed to our financial and operating criteria that being said, we expect to remain disciplined yet active in seeking growth opportunities that fit into our existing business units and we are seeing pretty reasonable deal flow of opportunities that we are taking a look at.
In terms of returning capital to shareholders, we adopted a more balanced approach of the past couple of quarters for dividends. We have maintained our 38 cents per share per quarter dividend, which equates $24 million in the past quarter.
In addition, during the back half of 2022 since we've put in place our NCI B, we've purchased 1 million shares in total for around $28 million.
In closing on behalf of John and other members of the management team I would like to express our appreciation to everyone within the Russell family.
2022 was a really great year for the company not only were we pleased with the financial results, but equally important were the series of initiatives that translated into record low health and safety incidents strong community engagement and ongoing people development.
Thanks to everyone across the company for those major accomplishments.
Operator that concludes my introductory remarks, you can now open the line for questions. Please. Thank you, Sir ladies and gentlemen, if you would like to ask a question at this time. Please press star followed by one on your Touchtone phone.
Tom prompt acknowledging of your request and if you would like to withdraw from the question queue. You will need to press star followed by two and it's using a speaker phone. We ask that you. Please lift your handset before pressing any keys and.
Your first question will be from Michael <unk> of Scotiabank. Please go ahead.
Hey, good morning, guys.
Obviously, another nice quarter.
On a strong close to the year.
Marty I am not sure if I missed your comment in terms of margin expectations for Q1 for a metal service centers just given the affirming.
Oil prices in the last couple of months.
And maybe just to build off of that to you.
The spread between plate prices and Herc has remained.
Wide I guess on a historical basis, John maybe to get your views there on the price discrepancy in midyear.
Tim.
Yes, why don't we start with John if you could talk about the.
The market and then I can flip it over and talk about the margin dynamic.
Yes, Michael Good morning again.
Observation spread has remained high there has been some changes I think several of the mills, we've talked about that.
Changes to the dynamic two things really.
And again you have about five Lake Mills in North America, one of which is non operational right now out of Mexico, So thats limiting supply.
So.
The other is it still the 232 being in place so that gives a premium there for them.
Blake product, we're not seeing a lot of imports. So I think the mills are at a really sweet spot if you will on pricing.
If you take the 25% off.
<unk> does not attractive at this time to come in at those numbers. So I think they are in a very healthy position supply is good.
It's not.
Extra material out there at the same time you can get there is some availability. So it's not out of control. So I think the mills have done a good job and been very disciplined on their pricing with fleet is it.
And the historical comparison to the spread with coil coil there is a little bit more supply. It's obviously, a little more volatile you've seen it shoot up higher come down lower.
But again it seems to be operating in a good place we've seen a rebound.
December and January two price increases have come through most of which have stopped the market's receiving those fairly well scrap.
Scrap going up so we think that pricing has stabilized and started to turn the corner in recent weeks.
And then Michael in terms of margins in Q4.
Within the service centers the margins in dollars per ton averaged around $460.
What we saw during the quarter was months over months it was coming down during the quarter. So October November December came down so the the exit margin from Q4 was lower than the Q4 average and that was a function of both prices were coming down on average.
And cost of goods sold was coming down on average.
What we've seen in early Q1 is more of a stabilization in the early stages of Q1 from a margin perspective.
But because the pace was.
Was declining during Q4 the stabilization now is stabilizing at a slightly lower level than the Q4 average.
Does that get to your question Michael.
Yes, no. It's totally helpful. I mean, I guess, we can work the math from that Q3, and Q4 number and then align to Q1 just in terms of how you've outlined it so really helpful.
Maybe the second question I guess, just bigger picture and I really appreciate the new disclosures around tonnage what that gets us to you for gross margin per tonne if you.
Look at the chart Marty a number slide nine is.
It's historically hovered the gross profit per ton at $300.
<unk> been well above that for several quarters now so I'm just.
Trying to get a sense for where we can land and what the new normal is because youre doing a lot with the business just in terms of value add investments youre looking to add scale through M&A.
You've talked about inventory controls.
What's the new normal look like and maybe to push us a little bit further if you can care to quantify what a new normal could look like.
I'd love to quantify but I'm not sure that I know how to set.
For an answer but I think your.
Your observation is pretty fair, though which is the old normal was $3 to $3 50, the new normal.
We feel comfortable is higher what normal looks like and when we hit normal I mean, the cycle always moves above normal below normal and somehow we average to create what normal supposed to be.
But that's a function of both the market pricing levels still remains at a pretty healthy level compared to historical in addition to our value added initiatives. So if the historical average was $3 to $3 50, we should be averaging more than that on a normal through the cycle basis and as we continue to uptick on.
These investment initiatives.
Those are within our control, we will continue to move up that margin curve.
That's great. Thanks, guys I appreciate the color.
Okay. Thanks, Michael.
Thank you next question will be from best day at Raymond James. Please go ahead.
Good morning.
Sure.
I was wondering I was wondering if you could please comment on the puts and takes around energy products results. In Q4, we saw lower volumes sequentially, which is a bit unusual but.
<unk> Hello quite strong so I'm wondering if you could comment on that please.
Yes.
There is a little bit of a seasonal dynamic there is less and there has been in the past one of the things is.
One of our business units within energy field stores had a really really strong middle part of the year, so even those sequentially.
Look down if we kind of look past some of the lumpier type of stuff that happened earlier in the year and.
Transactional business day to day type business, that's still moving on the up tick. So we benefited from that some of that lumpier stuff earlier in the year, but if we look at the more day to day type stuff that was moving up through Q4 and is moving up through <unk> through.
<unk> through 'twenty early stage of 2023.
So that was kind of the dynamic in Q4, where you saw energy pullback a little bit it was pulling back because it was being compared against Q2 and Q3 results where there was some of that lumpier stuff that showed up.
Okay. That's helpful. Now building on that you had.
Higher LNG field store.
Inventory.
At the end of the year, you said Thats helped too that's to help address backlog as.
Is this backlog higher than it was 12 months ago, just trying to get a sense of are we seeing growth within the energy field.
<unk> stores and.
What's your outlook Alan Thanks.
Your visibility is somewhat limited, but Todd Neal in this next six months, what's what is it looking like.
Yes, so so Fred on the energy inventory, we saw a couple of dynamics happening.
One division specifically was really.
Really trying to play catch up and so their sales were running ahead of their inventory. So they finally caught up some of the port congestion was catching them. So finally call it and get the inventory where it should be so there was a little bit of a surge there.
Another division comp code, specifically has got some projects going into Q1 and.
Q2, where they had to go ahead and bring the inventory and to be prepared for the projects due to the lead times. So they saw a surge in their inventory as well as project base. So it will go back to back order regarding what we see going forward for Q1.
It's very strong and energy both in Canada, and the U S.
Again more of your medium to small type projects.
Our day to day business in the field stores is very strong.
Brightcove is hard to call for the second quarter of the year as to how long it will last what the weather impacts will be.
We think we will have a strong breakup season based on the drilling that's out there right now what we're being told from our customers. Their backlogs are well into Q3 and early Q4 right now so their desire.
He has to work through breakup as much as possible weather permitting.
Okay. Thanks.
Another one on energy you did benefit from nice equity pickups, and you received sizable dividends from the <unk> JV last year, but what is your view.
On it going forward does it is it something that you are kind of very happy holding or is that something you would.
Potentially.
Selling youre sharing to it.
I think again their business is very much.
We're busy through the year as well as these drilling programs are busy so we're happy with the performance.
We get a long term, it's something that we would we would probably look to exit.
Sure.
Hoping with our partner there.
Olympics that business is not part of our core portfolio and it was a business we were looking to as we do.
<unk> exited completely in the U S. We will probably look to exit those will at some point in time.
Okay. Thanks, Thats all I have for now thank you.
Great. Thanks, Brad.
And your next question will be from Michael come home at TB. Please go ahead.
Thanks, Good morning.
Hey, Mike.
Hey.
I guess I want to start with the demand outlook. So you talked in your outlook about expecting a rebound in demand.
This is both for for service centers and energy field stores.
And I think the commentary was really specifically about kind of the near term.
An improvement versus Q4 sounds like part of that I guess is a seasonal uptick I'm wondering if you can comment on.
Look beyond seasonality and any improvement is a result of that.
What are you seeing in terms of underlying demand and if we look at it sort of across 2023 as a whole.
Any thoughts or views on what you think you can do in terms of volume growth and service centers for 2023.
Yes.
Yeah. Thanks, Mike.
So overall.
One of the proxies that we use as mill capacity utilization, if you've looked at it for the last three or four weeks, we are seeing that steady uptick in the back of the 74% appears to climb again next week, we watch mill inventories those are coming down dramatically. So people are restocking their shelves that are out there along with end users, but we are seeing from the end user demands out across the.
Board is a very steady backlog.
So very bullish on the first half of this year.
There are some impacts to inflation higher interest rates that are impacted housing, which we don't participate a lot in housing residential more non risk construction. So yes.
We've seen interest rates climb that could get into their backlog or nine months out right now moves backlog, so theres a pretty good lead on those.
Out of that if you are looking at agriculture, if youre looking.
Across the board in the manufacturing of equipment, although all those backlogs are really really strong anything to do with energy solar wind.
Oil and gas all extremely busy right now so they're pretty bullish on their backlogs, we think that wind in particular in the back half of this year is going to get extremely busy as new subsidies.
Start to come out of tax incentives start to come out from the governments, so pretty bullish on that also with the infrastructure projects coming onboard.
We think those are going to really really have strong impact for us in Q2 and beyond.
Just one supplement to that one of the fasting dynamics has come out of that has come out of the global supply chain issues over the last couple of years is the concept of more on shoring has kind of evolved from a theory to a reality.
And it's early stages, but we are seeing some of that activity where.
Local north American based predominantly in the U S, but a little bit in Canada as well activity has really been onshoring and so I think thats a trend that we are going to start to see in 2023 take hold and that is an ongoing trend that isn't going to go back to where it was for obvious reasons that we've seen over the last couple of years with some wholesale.
Apply chain issues, so I wouldn't be surprised that if we look at 2023 as a whole and compared to 2022 and take out some of the core keenness of seasonality and all that that we see some version of a low single digit type growth in volumes for.
For the industry and we are trying to outperform the industry in terms of market share.
Okay. That's all very helpful. Thanks very much.
And I know you've already had a few questions here on energy field stores and your outlook, there and it sounds like it's fairly positive.
Which which makes sense.
For a variety of reasons I guess.
John you commented on drillers, having strong backlogs and potentially working as much as possible through breakup I am just wondering here, we have seen energy prices moderate.
Early here in 2023, particularly natural gas I guess oil's off a bit as well I think it's bouncing today on the Russia supply cuts but.
Could drillers pivot or.
Or is the backlog that they have is that sort of hard backlog and committed.
Is there a risk here that if energy prices do.
Particularly again natural gas.
Could they change the outlook relative to what you're describing.
I think we're dealing with a much different dynamic than we were three or four years ago with the drillers and the energy companies due to the fact that their balance sheets are finally in such good shape Theres a long period of time, there where they were running cash flow with their drilling programs. So when you would see a downturn.
A reverse course and then either.
Gas prices or oil prices there would be those very quick pivots I don't think those are as necessary now because their balance sheet and if its a dramatic downturn in prices could it have I'm sure there'll be some changes, but they are not as volatile as they used to be on clothing, all tied to that oil price and so although oil prices have pulled back some.
Natural gas prices have pulled back some are still running at really really nice levels and I think that makes sense for the drillers to keep going forward. We're not we're not hearing a lot of commentary. This is they would have any reason to pull back at this point. So it's more full steam ahead and how fast can we get this going.
Okay. That's helpful. Thanks.
And then just a question on the Capex I think Marty you said about $75 million per year for the next few years.
So two questions on that I guess first stock are you able to give us a sense for how much of that.
Amount is related to the facility Modernizations.
This year and over the next few years and then.
On the value added processing side.
Is this something you've been talking about for quite a while and it sounds like you've made a fair bit of progress. It certainly sounds like there's more room to go but.
Just to use the baseball analogy I guess could you talk about what inning, you think youre in as far as that value added processing.
Expansion and capability.
So.
So going to your first question first Mike.
So where our maintenance spend is call it around $25 million per year, plus or minus so anything above that is related to either the value add the mill modernizations discretionary projects that have return dynamics attached to it.
No.
Dealing with that item first your.
<unk> is right, though which is.
It's picking up pace there is more opportunities identified and the funny thing is if you can say what inning. We're in we're probably in the fourth inning, but we were in the fourth inning last year. When we are probably in the fourth inning or the year before because the game just keeps getting extended with newer newer opportunity. So the scope of opportunities is every.
Year goes by just seems to be presenting new situations as we go further down the path on certain ones that just opens up new paths, where new opportunities that we didn't see before as we've done acquisitions with those acquisitions. We did one in 2000 22020, we did one in 2021 with those acquisitions, we didn't really call.
Complaint with specifically, we could do for value added projects, but we're seeing those projects and the one I just referenced in Missouri part of that is to put into value added equipment. So those are things that are just keep showing up as we're looking at more and more opportunities. So I know, we probably said were in the fourth inning of the 19 ballgame a couple years ago, we're still in the fourth.
Because more and more opportunities are becoming available.
Okay that makes sense.
Thanks for that.
And then.
A couple of questions on field distributors.
I guess from a.
Two parts I guess from a from a demand or or revenue perspective or from me more revenues. Both the demand how do you see that business evolving over the course of 2023.
Versus 2022, and then from a margin perspective, I mean that one I find us at <unk>.
Some of the more volatile margins across the business and I'm just wondering what you see as sort of a run rate normalized run rate gross margin percentage in steel distributors.
You are right there is more volatility attached to that and in some ways is just to go back Mike.
There's two pieces to that business for US there is the U S piece, which tends to be more on the more volatile and more transactional and theres. The Canadian piece of the business that tends to be more back to back lower risk lower margins lower risk.
And if we look at Q4.
Q4 for steel distributors. It wasn't all that different bottomline results from Q3, and that's really because even though the steel market pulled off that impacted more of our U S business and our Canadian business, which tends to be more of a steady Eddie steady as she goes type of business. So Q4 is actually not a bad reflection in terms of.
What it looks like on balance over a cycle just because we did see the pull off on the U S side, which doesn't really really well in up markets and we didn't see that upmarket in Q4, but our Canadian business. That's called worse. It was steady as she goes and did quite nicely in Q4. So Q4 is.
Probably not a bad litmus test.
Okay. That's great and then just just on the topline outlook for that business I mean, it sounds that youre constructive on the other two in terms of demand.
It did.
That apply to distributors as well.
Yes, it does.
And again to Marty's point.
More back to back contractual type business in Canada, we're continuing to see that come through so that'll be a more steady flow, we'll see will ebb and flow more with the market price in the U S and opportunistic again as theyre highly transactional, but thats again see that following along the same lines as the service centers as far as total market demand keeping in mind service centers.
Get ourselves or others or big customer for them.
Okay, great. Thanks very much.
Great. Thanks, Mike.
Thank you.
Ladies and gentlemen, if you would like to ask a question. Please press star followed by one on your Touchtone phone and your next question will be from Ann Gillis at Stifel. Please go ahead.
Good morning, everyone.
Hey, Ian.
With respect to the M&A environment are you able to qualify for us where seller expectations are maybe relative to six and 12 months ago, because I know that's been a challenging part of executing the M&A plan.
Yes.
It's a great question Ian and.
Yeah.
It's sometimes hard to gauge.
Because we only see it through our lens.
And.
It's not like there is a slew of activity that we have seen thats been transacted by other people. So we're seeing lots of deal flow some of which is interesting to us some of which is not interesting to us, but there hasnt been a lot of stuff that we've seen cross over the finish line and say here's what value is so it's more of an anecdotal comment then.
Any hardware data that I can point to but anecdotally, yes, it seems like theres, a better tone to expectations today than there would have been six or nine months ago.
Okay. That's helpful.
Im going to take a shot in the dark here.
Are you willing to maybe talk at all about how the discussion.
With the board around dividend increases and your thoughts there just given the strength of the balance sheet future cash flow generation and alike.
Sure well it really wasn't a hot topic to be perfectly candid, we think we've got a healthy dividend as it stands right now so for US we talk more holistically about capital deployment.
In a variety of areas and our focus right now is we've got an extremely.
Streaming strong balance sheet, and we see opportunities to deploy capital in a variety of ways. Your question about M&A is interesting.
Potentially opportunities that we're continuing to be optimistic about but we'll see.
And the projects that we have internally so as of today, we're collectively comfortable with the healthy dividend that we have.
Yeah.
And then last one around capital allocation and the NCI <unk> was obviously pretty active through last year and it doesn't look like it's been used a lot through the early part of this year is that a function of Russell being in blackout or perceived view of where the share price is today being being healthier now.
Yes, we've been in blackout.
Since January one.
I just wanted to confirm that that's helpful.
That's all from me guys. Thanks, very much for the detail on the call.
Great. Thanks, Ian.
And at this time gentlemen, we have no further questions. Please proceed.
Great. Thanks, operator, I appreciate everybody for joining the call and dialing in today. If you have any further questions. Please feel free to reach out otherwise we look forward to staying in touch during the quarter. Thank you everyone.
Thank you, Sir ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time, we do ask you to please disconnect your lines.
Okay.
[music].