Q2 2023 Russel Metals Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to our second quarter 2023 earnings call for Russel metals today's call will be hosted by Marty <unk> Executive Vice President and Chief Financial Officer, and John Reid, President and Chief Executive Officer of Russel Metals, Inc. Today's presentation.
He will be followed by a question and answer period at that time. If you have a question. Please press star followed by one on your telephone keypad I will now turn the meeting over to body Jurafsky. Please go ahead.
Great. Thank you operator, and good morning, everyone.
I plan on providing an overview of the Q2 2023 results and if you want to follow along I'll be using a powerpoint slides that are on our website just go into the Investor Relations section.
If you go to page three you can read our cautionary statements on forward looking information.
Let me start with a little perspective on the quarter. In Q2, we were pleased with the financial results not just on an absolute basis, but also on a relative basis against our publicly traded peers. As you know we're always trying to achieve first decile performance on key metrics with key focus on return on capital once again, we've shown industry leading performance on that benchmark.
As we outperformed our comps also this quarter puts into context the initiatives of the past few years that serve to reduce the volatility of our business raise our cycle floor and raise our cycle ceiling I think we've demonstrated great progress on this journey, so far and we expect more on the come.
Let's turn to market conditions on page five.
Steel prices picked up in the early part of Q2, but came off somewhat towards the end of the quarter in particular sheet prices have adjusted downward plate prices have come off a small amount, but remain at good and healthy levels. As you can see from the charts on the right supply chain inventories are modest so the industry appears to be well positioned from a supply and demand.
<unk> from.
So on the demand side, we are seeing solid demand from our customer base notwithstanding that we do encounter some seasonal dynamics in parts of North America in Q3, due to Canada day fourth of July and the construction holiday in Quebec during late July and early August .
We go to page six there is a snapshot of Q2.
We saw consistent revenue in Q2 versus the past few quarters, but a sequential pickup in EBITDA margins and returns if we look across the various charts on the bottom of the page starting at the top left revenues were $1 $2 billion versus $1 2 billion in Q1.
EBITDA was $131 million versus $160 million in Q1 due to a pickup in margins at our service centers. Overall, we saw an approximately 100 basis point pickup in EBITDA margins and solid results from each of our business segments.
From a bottom line perspective, EPS and return on invested capital also improved with earnings per share of $1 37 per share in Q2 2023 annualized return on invested capital of 31%.
In terms of capital structure, we have net cash of over $150 million versus net debt of almost $500 million at the end of 2019, the $650 million increase from free cash flow gives us a lot of financial flexibility going forward. It will also be further strengthened in Q3 with the closing there.
<unk> transaction that will realize approximately $61 million in the quarter I will provide more details on that transaction a few minutes.
Going forward, we are seeing some interesting opportunities to continue to grow the business and I'll also talk about that in a few minutes.
So if we go to a more detailed financial results on page seven.
From an income statement perspective, I covered a number of the high level items already on the previous page, but a few other items to note.
On margin service centers and steel distributors improved while energy field stores were stable in what is typically a seasonally weaker quarter in Canada that being said, we did see margins pull back towards the end of Q2 for the service centers as a result of shifts in steel prices that I mentioned earlier.
Interest expense came down to $3 million as the increase in interest rates is allowing us to generate interest income on our cash reserves overall, we generated earnings of $85 million earnings per share of $1 37 per share.
Our Q2 results were impacted by a few non operating items.
Hi, Mark we picked up $7 million of equity earnings from that joint venture and on the cash flow statement side, we picked up $10 million in cash flow from dividends that we received in Q2.
Stock based comp it at $2 million negative impact versus a $4 million impact in Q1, and we had a small approximately $3 million decrease in our inventory and our view of reserves in the quarter.
From a cash flow perspective in Q2, we generated $27 million from working capital there were a number of moving pieces with accounts receivable going down accounts payable coming up in a small increase in inventory.
Capex of $60 million was up a bit from Q1 and trending higher as we continue executing on our discretionary projects as.
As previously discussed our annual Capex should pick up to around $75 million per year on average for the next few years.
From a balance sheet perspective.
We are a net cash position of around $154 million, which is made up of our term notes of $300 million that are more than offset by cash cash position of around $450 million, our liquidity is over $800 million.
Foreign exchange did move a fair amount from the end of Q1 to the end of Q2, which had an impact on our OCI account.
Our book value moved up again and is now over $26 a share notwithstanding that we are active on our share buybacks in the quarter.
Lastly, we have declared a quarterly dividend of <unk> 40 per share.
On page eight I have included a summary of the trademark transaction that we announced a short while ago.
As a starting point. This is the final step in what has been a three year process to monetize our legacy OS CTG line pipe businesses in both Canada and the U S. We considered the trademark investment to be noncore from day, one and we were waiting for the right time to work with our JV partner to undertake the sale as I.
Earlier, our goal in making the portfolio changes over the last couple of years was to reduce the volatility of our earnings lowered the risk profile enhance our margins and returns over a cycle and this transaction is another piece to that shift.
If we go to the chart I want to summarize the cash return evolution from this transaction.
We start with $141 million of capital just prior to the joint venture being created that being said the amount of capital in the business was higher prior to the closing the joint venture, but we reduced the invested capital in the three to six months, leading up to the joint venture create creation.
When the JV is set up we were able to quickly convert $109 million into cash as the capitalization of the joint venture was through nonrecourse debt, which provided us with substantial cash payout at that time and therefore, our net capital at risk in mid 2021 was only around $32 million, which was the face value of the preferred shares.
But we also held a 50% interest in the common shares which at the time had nominal value, but gave us a tool to participate in the upside.
In the two years since the joint venture was created we received $36 million of dividends.
Through the through the preferred and common shares and when combined combined with the expected proceeds of around $61 million will equal $97 million versus our retained equity interest of $32 million.
This equates to an over 200% return on that investment.
This structure has worked out very well when we take into account our participation in the upside from the unusually robust <unk> line pipe up cycle. The last two years and the deal just received regulatory approval and we expect it to close on September one.
When we take this transaction combined with the other OTT line pipe liquidations in 2020, and 2021, we will repatriate around $375 million over the last three years.
This liquidation and monetization is a large reason why we are in a strong financial position that we are currently in today.
If we go to page nine you can see our EBITDA variance analysis between last quarter and this quarter and looking at service centers. The volumes were very similar in Q2 versus Q1. So the biggest factor was really a pickup in margins that added around $60 million to that segment's EBITDA <unk>.
Energy field stores were mostly flat quarter over quarter, which is pretty good since we encountered the normal seasonal slowdown for spring breakup in Canada, but also the impact of the unusual wildfire activity.
Steel distributors was comparable in Q2 versus Q1, which is a pretty good level by historical frame of reference and there was a $4 million favorable variance in other which included the seasonal pickup in our Thunder Bay terminal operation and a lower mark to Mark on our stock based compensation and this was somewhat offset by lower earnings from the <unk>.
<unk> joint venture in Q2 versus Q1.
If you go to page 10, we have our segmented P&L information service centers continued to do well as the market improved revenues margins and EBIT picked up we saw good momentum at the front part of the quarter, but there was some softening as we came off a little bit in June .
In energy field stores, we're continuing to see positive market sentiment has said earlier Q2 was impacted by some seasonal factors.
But we were up in Q2 2023 versus Q2 2020 to overall market conditions remain upbeat as we look into the back half of 2023, particularly as we've focused on gaining market share from our competitors.
Gross margins came in at 27% and has remained in that 25% to 30% range since the monetization of the OCG line pipe businesses in mid 2021.
Distributors revenues were down slightly but margins were up which resulted in similar operating profit in Q2 versus Q1.
If we go to page 11, we have the deeper dive on some of the metrics for our metal service Center business top right graph is the past five years for ton shipped and as you can see Q2 volumes were similar to Q1 as well as to Q2 2022 demand continues to look solid and the early part of Q3, although there are some seasonal dynamics.
For summer holidays that will lower Q3 levels. If we look typically over the last couple of years Q3 volumes are traditionally down 5% to 10% versus Q2 to take into account some of that seasonal dynamics.
On the bottom left chart, we have the revenue and cost of goods sold per ton on revenue per ton or price realizations increased to around 96 increased by about $96 per ton versus $43 increase in cost of goods sold which resulted in a $53 per ton pickup in margin.
For the quarter, our margin per ton was $536, which is much higher than the long term historical average.
As we've said many times in the past, we expect to realize higher average margins and lower volatility over the cycle as compared to the pre COVID-19 margins due to our ongoing investment initiatives.
On page 12, we've illustrated our inventory turns this chart shows the inventory turns by quarter for each segment energy in Red service centers in Green and steel distributors in yellow the Black line is the average for the entire company.
A few observations overall, our inventory turns were similar versus Q1 at about three nine turns.
By sector service centers improved from $4 7 million to $4 nine as we proactively manage inventory and reduce risk when we benchmark versus our publicly traded peers, where generally the top performer on this metric our energy field stores were down to $2 six from 3.0, Judah seasonal factor with spring breakup that I previously mentioned.
For steel distributors in yellow the inventory turns were similar in Q2.
On page 13, you'll see the impact of inventory turns on inventory dollars total inventory has been pretty steady for the past three quarters. The service center saw a reduction in inventory, which was mostly due to a 4% decline in tonnage, whereas there was a pickup in energy inventory with the higher expected activity in our field stores going.
Into Q3.
If we go to page 14, you can see the overall impact on capital utilization and returns our capital deployment remains right around that $1 $5 billion Mark more importantly, our returns continue to be industry, leading and our last 12 months returns stand at 27%.
If we go to page 15, I want to update our capital structure.
The continuation of favorable market conditions, and our disciplined approach to capital utilization gives us a lot of financial flexibility.
On the left table you can see that our cash cash position went up to $450 million, which was a $49 million increase over March 31, and a $263 million increase since this time last year, we're really seeing a return on our cash balance that substantially offset the interest cost on our outstanding notes.
Our shareholders equity is over $1 6 billion.
The chart on the right shows the continuation of the growth in our equity base book value per share is now over $26 per share, which is a 51 cent per share increase since March 31.
And a $3 52 per share increase since this time last year.
If we go to page 16, we have an update on our capital allocation priorities going forward.
Given our strong balance sheet, we have a multi pronged approach to capital allocation as we've always talked about in the past for investment opportunities. We seek average returns of over 15% through the cycle and we have delivered well above that target the <unk>.
Going opportunities are multifaceted.
One on value added equipment, we are continuing to identify and pursue new value added projects in total we have over 30 equipment projects ongoing throughout North America.
Two on facility modernization, we are moving forward with several expansion and upgrading projects. We just approved two new projects being up $11 million U S.
Project at Green Bay, Wisconsin, as well as the $9 million U S project.
Texas Arcana, Texas.
These projects should be completed in late 2024.
When combined with other projects on the go we have a robust series of initiatives that should grow our volumes increase operating efficiencies generate attractive returns and improve health and safety conditions.
In terms of acquisitions, the third piece to it.
Initiatives.
We remain committed to our financial operating criteria that being said we are optimistic about opportunities that are in the pipeline yesterday, we signed an agreement to acquire alliance supply, which is a small tuck into our energy field store business in Western Canada, and we have other potential M&A opportunities on the go that we are continuing to pursue.
In terms of returning capital to shareholders, we have adopted a fairly flexible approach for dividends last quarter, we increased our dividend to <unk> 40 per share and we will continue to review it.
Reevaluate the appropriate level on a go forward basis.
For the NCI, we acquired one 2 million shares last quarter and to date, we have acquired two 2 million shares at an average price of $32 in 18.
Going forward, we'll file file it renewed and CIB that will allow us to acquire up to $6 1 million shares over the next 12 months and we plan to continue using the NCI on an opportunistic basis.
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.
Wouldn't be happier withheld the Russell team has navigated its way through the evolving markets over the past few years.
And we look forward to the new opportunities that are ahead.
To everyone across the company for your contributions.
That concludes my introductory remarks, so operator, you can now open the line for any questions. Please.
Thank you ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question. Please press star followed by one if you'd like to withdraw. Your question. Please press star followed by two if you're using a speaker phone. Please lift the handset before pressing any Q1 moment for your first question Okay.
Okay and your first question comes from Devin Dodge from BMO capital markets. Devin. Please go ahead.
Yes.
Thanks, Good morning, guys.
Okay.
Good quarter.
Just a question on M&A apologize a little bit more optimism there. So I'm just trying to get a sense I think you've seen balance sheets.
It's really strong across the sector, including at Russell, obviously that you highlighted but M&A has been a bit slower to materialize I know you did a tuck in but.
I think just a lot of dialogue, but not a lot of action yet just why do you think that is an industry consolidation to be a bit more active over the next six to 12 months.
Yes, it's a fair point and maybe dealing with your last 0.1st.
I do expect there to be more activity in the next six months and there has been in the last six months or last year for that matter.
Like any market there is always recalibration of appropriate value and to be candid I think there was a fair number of transactions that were in the market over the last little bit that had fairly unrealistic views of value and there seems to be based upon the lens that we're looking through more.
Have a reality check on things that meet our criteria. So I'm more optimistic as we look forward for the next six months because of that reality check perhaps kicking in for four potential vendors.
Okay. Okay interesting, Okay, and then we saw that industry volumes based on MSCI data they were up about 3% to 5% in Q2, but Russell will.
We will stay flat to maybe down very slightly in the quarter do you think that reflects some competitors getting a bit a bit less disciplined in going after market share.
Okay. Devin this is John again, Youll see that from time to time based on People's inventory positions with their go to market approaches out there, but in the markets. We serve we don't feel like we gave up any share compared to the MSCI statistics for those that were out we actually gained share in those markets. So again I think there may be a bit of anomaly.
We're footprint, obviously is very focused in the U S, where it's very broad in Canada. So we think overall the market share. It was fine, but you do see that from time to time, where you have pockets where people will get aggressive or you have an important situation, where maybe in the coastal area. They get aggressive for a short period of time.
And just to supplement that.
What is also interesting is the MSCI data includes lots of different companies private public all kinds of other data. That's in there. If we look at the publicly traded companies those who have reported already including.
The larger player in the sector there quarter over quarter volumes was very similar in terms of changed ours.
Okay. Good color. Thanks, a lot I'll turn it over.
Thanks, Kevin.
Your next question comes from Michael <unk> from Scotiabank, Michael. Please go ahead.
Hey, good morning, guys.
On the topic of organic growth I guess, maybe as a follow up to devins question.
Can you talk about why.
Moved up some of the expansion projects.
And then maybe if it's related.
The combination of these expanded facilities.
Increased re shoring, maybe it's infrastructure that kicked in in the second half in the U S is that can accelerate organic growth going forward.
Thanks, Kevin.
It's that we have on the go right now that we're expanding obviously, we're running at capacity we have an opportunity.
Move into some more automation to improve our operating cost as well as expand our footprint for products, we carry and services. We offer. So obviously you can grow in those markets.
All of those have that component involved with them, we're seeing it across the board as we grow our value added initiative.
We're having more opportunities to expand that value added initiatives, we've kind of got the hubs.
Initially set up now business folks are leading growth from to add equipment and add more market share with.
With the re shoring coming on you do see that.
Specific areas and there are specific opportunities that seem to be a little bit more broad brush right now.
So we could I couldnt point to one specific and say this one is making a huge material impact for all of Russell, but we are seeing an impact across Russell and various opportunities there with Richard.
And Michael I guess the only the other thing is you were also asking about have we moved up expansion projects and we haven't moved them up. This is just the cadence that they're in and so the projects that were announced for Green Bay and Texarkana. For example, those were things that were accelerated or decelerated there's a.
Preparation there as an organization there is engineering work Theres prep work that's required so the work to get to this point of having them announced started quite some time ago. So I wouldn't say they've been accelerating the preparation started behind the scenes.
Probably a year ago, if not earlier than that in terms of thinking that these projects could make sense and it just takes a while for them to come to fruition.
Okay.
For the clarification there Marty.
And then maybe Marty I think I caught this in your prepared remarks, just talking about share gains in energy products.
Just curious.
On what's driving that dynamic there.
I'd say, yes, you pick that up correctly.
And we look at both the public data for those folks who operate in the same backyard in the energy field stores as we do and compare it to our data and we are picking up gain and I think it's.
Primarily a function of we have a really well positioned business, particularly in Canada, and they're continuing to do the right things with customers and we perhaps have competitors, who may be less committed to certain markets. So our folks on the ground are doing an exceptionally good job of taking advantage of the market opportunities that are.
Our out there.
Alright, Thanks, a lot guys.
Thanks, Michael.
Your next question comes from James Mcgarrigle from RBC capital markets. James. Please go ahead.
Hey, good morning, guys. Congrats on a really good quarter here.
Great. Thanks, James Thanks.
Yes, so I would just.
Some of your U S competitors during reporting.
Looking about some of the benefit they are kind of seeing.
The early benefit from the U S infrastructure spending.
Is your team is seeing a similar benefit and is that are you.
You're seeing that in both the Canadian service centers and in the U S service centers are primarily concentrated more in the U S.
The concentration is more in the U S. Again, we're seeing some benefit again across the board.
Big project or two you could point to that would be material within all of Russell, what we're seeing it across the board.
When you look at the infrastructure spending there is a lot on the come that is coming coming forward in the next 234 quarters and so that's starting to ramp up we're seeing that go through the process now of the bid process, whether that'd be bridge work, whether it would be wind tower. So a lot of plate usage, it's coming forward. So very optimistic about what that's doing again for our U S service centers.
On the Canadian side, we're seeing some of that as well we do win work in Canada, and so that will go cross border.
Again, where we can actually ship that across if you look at the Canadian Index. If you look the architectural billing index, it's actually gone back above 50%. Some of that is driven by preparation for infrastructure projects.
Purchasing manager Index has come down below 50, but in Canada. It's hovering just below 50, so we're actually seeing Canadian manufacturing has been holding up better this year than the U S manufacturing has been holding up.
I appreciate that color and then on the Q3 outlook.
Somebody in the U S peers were a little bit more conservative I know youre businesses arent exactly comparable but you know.
Your guidance, obviously, a little more optimistic so can you just provide some color on some of the end market strength that youre seeing I guess kind of what gives you that confidence.
During the remainder of Q3 here.
Sure.
Keep in mind, we don't do automotive so automotive is obviously a question Mark right now for some of our competitive.
With that we're out there of it when they were talking about demand. There is a concern around what's going on with automotive and potential strike, but we're not involved in the automotive industry by design.
When you look at demand, we're seeing that Marty.
Marty mentioned the typical seasonal dynamics you have with the holidays construction holidays, so we're seeing steady manufacturing.
Manufacturing right now we deal with small to medium size and users again and a transactional in nature. So we are not contractual.
The Oems that we deal with again medium sized small all of those have very steady backlog right now.
Construction side of our business, we're seeing the fabricators are very busy.
You do have a construction holiday that they take off a week in July on a week in August and Quebec, which is normal but coming back out of that backlog is very good right. Now. So we have not seen interest rates really impact the construction backlog like we thought we would.
The energy side of the business, where fuel stores again very steady.
Canada has got a very steady growth right now trend for us because we are taking market share also when you look at the rig count was down slightly.
Taking into consideration all of the wildfires that were going on I don't think theres anything to be concerned about there. So overall across the board. We do see our end markets is very steady when we look at them right now.
And then before I turn the line over to you one more question on returns.
Your team had talked about.
2% to 3% lift versus pre pandemic returns.
Just on the back on some of those investments.
Team has made during the pandemic.
We've seen a pretty big decline in steel prices.
But.
The returns are well above that kind of 2% to 3%.
You had previously talked about.
Have you changed.
Your view on how Youre viewing returns that you can kind of deliver longer term or do you think it's too early to say that right now just given some of the uncertainty.
Uncertainty are looking at.
It's a good question James we haven't changed our point of view that being said there is always some element of cyclicality to the business. So when we look at that two to 300 basis point shift that is not at a point in time thats through the cycle and theres going to be ebbs and flows through the cycle.
As I said earlier the thing that I think we've done a really good job of is taking some of that volatility out of the cycle from what we have seen in the past and some of Thats by virtue of businesses. We got out of some of that is by virtue of the investments we've made the acquisitions, we've made but no.
Our point of view Hasnt changed.
And when we look through the cycle, we're very comfortable that the initiatives that we have completed and are still underway, we're going to generate that couple hundred basis point pickup over the course of a cycle.
I appreciate you, taking the time and I'll turn the line over thank you.
Thanks James.
Ladies and gentlemen, as a reminder, should you wish to ask a question. Please press star followed by one. Your next question comes from Michael <unk> from TD Securities. Michael. Please go ahead.
Thank you good morning.
Hey, Mike.
Hey.
I guess the first question is just Oh.
Around one of the comments in the outlook section related to.
An expectation for some moderation in margins in the third quarter, which I gather is a function of the fact that steel prices just as you mentioned in sort of late in the second quarter and into early Q3 have pulled back.
A little bit so.
So I guess the question is if you could just kind of help me understand that how to think about that that moderation, maybe starting with service centers.
Margins were up a touch sequentially in the second quarter.
How should we think about margins as we move into the third quarter is this sort of going back to the kind of level. We saw in Q1 and is that sort of the.
The run rate normal level to think about service centers absent sort of bigger.
Bigger moves in steel prices.
Yes, that's a fair framework for reference so.
Within the quarter within Q2.
Margins did come down in June versus what they were for the average of the quarter and so if we look at where things are at right now they are closer to Q1 levels on average than Q2 levels on average so as a frame of reference.
Q3 margins should be down from Q2.
Of something closer to Q1 without trying to be too specific about it. So the comments that were made about margins was really about service centers. We're still so when we look across.
Energy field stores, we don't really see any substantial change in terms of margins in that business as John talked about earlier.
Good backlog good activity good dynamic in terms of market conditions, our businesses are well positioned so the comments on margin or more related to energy field stores steel distributors will follow a similar cycle, though and so there is probably some softening of of those margins coming into Q3 as well.
Just to add onto that just to add onto that Michael from the industry as a whole again keep in mind.
Service centers, returning their inventory pretty high level in comparison to historical levels. In addition, there are a lot of mill shutdowns that are scheduled.
For the third quarter. So you will take a lot of supply out of the marketplace scrap has bottomed appears and gone up maybe 20 Bucks a ton we think flat roll is now seeing the bottom.
July early August so it's starting to bounce alone May go up plagued never really came off much of March.
So we're seeing some things that say okay. This we've hit the bottom.
People should flush through their inventories fairly quickly youll have some outliers that are out there that maybe in a bad position, but overall the industry is in a pretty good position so as far as it goes running back up we will see what pricing does but there is a lot of them.
Supply coming out of the marketplace in Q3 shutdowns I think there's over eight mill shutting down in Q3 for maintenance.
Okay.
Really helpful. Thank you John .
When we think about margins in steel distributors.
I appreciate your comment.
Directionally I guess, though they will follow a similar.
Pattern in terms of movements to what Youll see in service centers.
You still have quite healthy levels in steel distributors relative to what you would have seen historically I mean, I think you're down from where you were a couple a year or two ago.
But relative to kind of a longer term level in steel distributors youre running at quite healthy levels. What what is the right way to think about the margins in that business kind.
Kind of over the medium to longer term is this sort of a new normal.
15% EBIT margin in the second quarter.
Steel distributors and gross margins were 22, 5% like is this is this the new normal or how do we think about the medium to longer term.
We will still see the cyclicality in that business.
With the trade suits.
Again with imports maintenance thats help stabilize that market.
Both sides of the border for us.
The groups of well over 30 years. So the very professional traders are what they are doing when they are bringing in product or working product from inside the north American market. So again there'll be very opportunistic.
We have one side or the worst.
But in sale is all kind of locked up so its pretty much flow through with very low margin risk. There is a little more risk in the U S. But again, they will pull back from markets that they don't see the opportunity to make those kind of margins.
Were they won't just keep plowing forward as maybe some others do in the market.
There will be cyclicality to this that photo steel prices steel pricing that's out there, but they will pull back and they may slow the revenue side them before they give up margin.
Okay.
That's helpful. Thank you just maybe on picking up on your comment there about about imports being up a what.
<unk>.
Do you anticipate any change.
On that front going forward and I guess I'm thinking about one they seem to have been fairly.
Fairly modest for some time, but at the same time prices are healthy here in North America, and then your comment about no shutdowns in the third quarter like does that attract.
Some import product as a result of those shutdowns kind of here in the shorter term.
If you look at the import statistics are not marginally different they're they're up a little bit year over year, but that's really a function of quotas and timing when they brought in and the steel from the imports on quotas more more so than they are bringing in more.
There are product specific things that will come an ebb and flow there.
Will you bring them on but right now we're not seeing that as a dramatic change. We don't think the 232 of any significant change its up for review.
In November December , but going into an election year I think there may be some window dressing around some things moved around but I don't think there'll be any material change in that.
232 is functioning as intended.
It's protecting the north American steel market from a surge of low priced imports.
And so I don't see any directional changes on that.
I don't think youre going to have an important market that's going to make.
Any more impact than it has in the last two or three years.
Okay. Thank you and then.
Regarding M&A, obviously announced a tuck in in energy field stores.
I think I've asked this before and others have as well, but but when we think about your M&A strategy.
Can you talk about what the main focus is right now in terms of ideally what you'd be targeting it sounds like activity and opportunities are picking up.
So maybe that gives you an opportunity to.
To go after the kinds of things that you are most interested in whereas in the past.
That may not have been possible given given market dynamics and conditions. So just kind of curious if you can just talk to what the focus is here at this point.
It's a good question Mike.
In some ways. The last two acquisitions, we made in service centers one at the tail end of 2020 and one at the tail end of 2021, we're really good illustrations of the types of things that are front and center for us now.
I think they're businesses that are complementary to where our service centers are both from a product perspective as well as from a geographic perspective.
Augmenting the regions, where we currently operate and sometimes product expansion as well into other.
Opportunities value added opportunities nonferrous opportunities from time to time.
But in complementary geographic region. So we're not looking to do stuff that's far afield.
We do look at those things from time to time that could be standalone business units, but by and large we're looking for stuff that fits very well into what we currently house and is complementary to that.
Most of the focus is on the service center side, there are situations that pop up from time to time on the energy field stores side and the small tuck in that we announced is an example of that but most of it is really complementary expansions within the service center business on both sides of the border.
Just to add on to that Mike I mean, we've.
About it in the past, we obviously look at culture is a big thing for us will they be able to fit in the Russell culture, how do we integrate that.
It can be highly decentralized are they very centralized and is there going to be a natural Rob there is this somebody.
Smaller location that is a key person, leaving it will impact the business. So we like to buy them well run businesses, we like to look for opportunities to expand our product to expand our offering.
And we're not tied to a geographic as we maybe once though we will always continue to grow in the U S. If we kept buying stuff in Canada. So we're more opportunistic on that if it fits for us and there is obviously the financial metrics that we look at.
I have to complement what we're doing so we stay pretty disciplined there as well.
Okay. That's all very helpful. I will leave it there. Thank you.
Thanks, Mike.
Your next question comes from Patrick fashion from Raymond James' Perfect. Please go ahead.
Hi, good morning.
Hey, Brett.
I was a little surprised by how active you were buying back stock in Q2, given now in the stocks been trading lately, if my math is correct.
The repurchase one 2 million shares at an average price of.
36, <unk> during the period, which is quite a step up from what you did earlier.
I guess in the back half of last year.
Can you comment on that.
Secondly on your appetite to continue by buying back stock at the current level.
Yes.
Your math is close yes, we picked up about one 2 million shares in the quarter. The average was just below $36 per share for the quarter cumulatively, we picked up $2 2 million shares since we put the NCI will be in place at a little over $32.
We view this approach to acquire shares opportunistically relative to our view of intrinsic value.
So from our perspective, we're always recalibrating opportunities, we're always recalibrating, our view of intrinsic value and I think thats. The game plan that will continue to have going forward as we've done the renewal of the NCI.
For up to $6 1 million shares if we think there's a good opportunity to pick up our shares it's no different in looking at acquisitions or anything else in terms of capital deployment. We think it makes good economic sense and in particular on the <unk> the focus is.
Being able to do it opportunistically below our intrinsic value and we think where we're trading at today is below intrinsic value.
Great.
It's all I have thanks.
Great. Thanks, Rick.
Your next question comes from vaccine.
Steve.
National Bank financial please go ahead.
Hi, John Good morning.
Hey, Matt.
I think I.
Asked my question, but maybe.
Just thinking a little broader in terms of kind of capital deployment on a prospective basis.
Is sort of more flexibility.
Yes.
Sort of part of kind of a new algorithm when it comes to capital deployment on a going forward basis, just curious what's been sort of maybe the catalyst to potentially sort of we think your approach or obviously I guess the balance sheet net cash position. So just of course more optionality just maybe some broader thoughts will be super helpful. Thanks.
Yes.
Really the way you characterize it is spot on east two words of flexibility and Optionality and that those are very those ring true to how we think about it as well we have the balance sheet that gives us a tremendous amount of flexibility to do anything that makes sense or do nothing if it doesn't make sense and so.
We're not wedded to one thing or another or another that being said, we do see opportunities across a variety of capital deployment alternatives, but given the way our balance sheet is set up right now.
We think we can do a variety of things if they all make sense.
This past quarter again, we were active on the NCI B, we stepped up our dividend last quarter did a little tuck in acquisition, we're being active on internal investments we have the flexibility to do a variety of things. So your operative words optionality flexibility those do ring very true in terms of how we think about capital.
Appointment opportunities.
Okay excellent.
That's it for me and a quick one thanks so much.
Thanks, Matt.
There are no further questions at this time I'll turn it back to Marty for closing remarks.
Great. Thanks, operator, I appreciate everybody for tuning in if you have any follow up questions. Please feel free to reach out at any time, otherwise we look forward to staying in touch during the quarter and have good rest of the day everyone.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.