Q1 2025 Ryerson Holding Corp Earnings Call
Unknown Executive: Good day and welcome to the Ryerson Holding Corporation's first quarter 2025 conference call. Today's conference is being recorded.
Good day and welcome to the Ryerson holding Corporation's first quarter 2025 Conference call. Today's conference is being recorded there will be a question and answer session. Later, if you will.
Unknown Executive: There will be a question and answer session later. If you would like to ask a question, please press star one on your telephone keypad at any time. Again, that is star one to ask a question.
Like to ask a question. Please press star one on your telephone keypad at any time.
Then that is star one to ask a question.
Pratham Dear: At this time, I'd like to turn the conference over to Mr. Pratham Dear, Manager of Investor Relations. Good morning. Thank you for joining Ryerson Holding Corporation's first quarter 2025 earnings call. On our call, we have Eddie Lehner, Ryerson's President and Chief Executive Officer, Jim Claussen, our Chief Financial Officer, and Molly Kannan, our Chief Accounting Officer and Corporate Controller. John Orth, our Executive Vice President of Operations, Trent McFarlane, our Senior Vice President of Supply Chain, and Jorge Beristain, our Vice President of Finance, will be joining us for Q&A.
Pat Dear: At this time I'd like to turn the conference over to Mr. Pat them Dear manager of Investor Relations. Please go ahead Sir.
Speaker Change: Good morning, Thank you for joining Ryerson holding corporations first quarter 2025 earnings call on.
Jim Hoffman: On our call we have any later rations, president and Chief Executive Officer, Jim Hoffman, Our Chief Financial Officer, and Molly, Canada, Our Chief Accounting Officer and corporate controller.
Speaker Change: John <unk>, our executive Vice President of operations.
Speaker Change: Macfarlane, our senior Vice President of supply chain, and Jorge Bear, saying, our vice President finance will be joining us for Q&A.
Unknown Executive: Certain comments on this call contain forward-looking statements within the meaning of the federal securities laws. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. These risks include, but are not limited to, those set forth under risk factors in our annual report on Form 10-K for the year ended December 31st, 2024, our quarterly report on Form 10-Q for the quarter ended March 31st, 2025, and in our other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date they are made and are not guarantees of future performance.
Speaker Change: Certain comments on this call contain forward looking statements within the meaning of the federal Securities laws. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those implied by the forward looking statements.
Speaker Change: These risks include but are not limited to those set forth under risk factors in our annual report on Form 10-K for the year ended December 31, 2020 for our quarterly report on Form 10-Q for the quarter ended March 31, 2025 and in our other filings.
Speaker Change: With the Securities and Exchange Commission.
Speaker Change: You are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date they are made.
Speaker Change: Not guarantees of future performance.
Unknown Executive: In addition, our remarks today refer to several non-GAAP financial measures that are intended to supplement, but not substitute for, the most directly comparable GAAP measures. A reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures is provided in our earnings release filed on Form 8K yesterday, also available on the Investor Relations section of our website.
Speaker Change: In addition, our remarks today refer to several non-GAAP financial measures that are intended to supplement.
Speaker Change: But not a substitute for the most directly comparable GAAP measures a reconciliation of non-GAAP measures to the most directly comparable GAAP financial measures is provided in our earnings release filed on form 8-K yesterday also available on the Investor Relations section of our website.
Edward Lehner: I'll now turn the call over to Eddie. Thank you, Pratham. Good morning.
Eddie: I'll now turn the call over to Eddie.
Eddie: Thank you Paolo good morning, and thank you all for joining us to discuss our first quarter 2025.
Edward Lehner: And thank you all for joining us to discuss our first quarter, 2020 FOCUS. During the first quarter of 2025, we continued our operating model renovation. by progressing further significant CapEx investment. across our service center network that when fully operationalized are expected to provide an improved quality of earnings through the cycle. We are continuing to see promising. that our historical efforts to modernize our service center network and go-to-market capabilities are paying off even amidst very uniquely challenging market dynamics, especially given the scale and still newness of these CapEx investments throughout our network. I want to commend our entire Ryerson team as we saw significant improvements across the business sequentially, but more importantly, we can see the vision we have for Ryerson taking better shape and effect as our investments plug in and begin playing within a strong culture of providing great customer experiences over the medium and longer term.
Speaker Change: During the first quarter of 2025, we continued our operating model renovations by progressing further significant capex investments across our service Center network that when fully operationalized are expected to provide an improved quality of earnings.
Eddie: Cycle.
Eddie: We are continuing to see promising indicators that our historical efforts to modernize our service Center network and go to market capabilities are paying off even amidst very uniquely challenging market dynamics, especially given the scale and still newness.
Eddie: These capex investments throughout our network.
Eddie: I want to commend our entire Ryerson cheap as we saw significant improvements across the business sequentially, but more importantly, we could see the vision, we have for Ryerson, taking better shape in effect as our investments plug in and begin playing with a strong culture of providing great customer experiences.
Eddie: Over the medium and longer term.
Edward Lehner: During the quarter, excellent working capital management and encouraging spot transactional market share gains offset slow OEM contract. and Lagging Contract Price Adjustments.
Eddie: During the quarter excellent working capital management, and encouraging spot transactional market share gains offset slower OEM contract business and lagging contract price adjustments.
Edward Lehner: This was a quarter of three minutes. January showed up as the 13th month of 2024 as depressed business conditions extended into the first month of the quarter and average selling prices bottomed. By February, we saw much improved quote and order activity, restocking mixed with forward buying, which lasted through mid-March, after which came some deceleration in quoting and order levels as customer activity tailed off at quarter end due to elevated levels of uncertainty across price, demand, capital markets, and trade barriers. On a relative basis, our carbon transactional sheet franchise saw some welcome improvement, while our non-ferrous franchise, where our market share is strong but the macro environment is still depressed, particularly stainless steel, remained ahead.
Eddie: This was a quarter or a three month.
Eddie: January showed up as the 13th month of 'twenty 'twenty four is depressed business conditions extended into the first month of the quarter and average selling price was bought by February we saw much improved quote and order activity restocking mixed with forward buying which lasted through mid March after which.
Eddie: Some deceleration in quoting and order levels as customer activity tailed off at quarter end due to elevated levels of uncertainty across price demand capital markets and trade variables.
Eddie: On a relative basis, our carbon transaction with sheet franchise saw some welcome improvement, while our nonferrous franchise, where our market share is strong, but the macro environment is still depressed, particularly stainless steel remains a headwind.
Edward Lehner: At present, buyers and customers are very cautious, given significant volatility in aluminum and nickel markets and notable backwardation in bellwether, hot-rolled coil indexes, as current spot prices are well above futures prices, given expectations of potential declines in inventory replacement costs. Looking ahead to the second quarter, industry inventories appear balanced, mill lead times have shortened, and domestic metal availability is generally good, as Ryerson sources the overwhelming majority of its industrial metals from domestic suppliers. Price indicators have stabilized somewhat over the past several weeks, although non-ferrous surcharge resets are creating spot price oscillations month-to-month. Field Purchases Remain Affected by Falling Scrap Prices and Spot-to-Futures Curve Backwardation.
Eddie: At present buyers and customers are very cautious given significant volatility in the <unk> aluminum and nickel market and notable backwardation and bellwether Hot rolled coil index is at current spot prices are well above futures prices given expectations of potential declines in inventory.
Eddie: Placement cost.
Eddie: Looking ahead to the second quarter industry inventories appear balanced mill lead times have shortened and domestic mental availability is generally good as ryerson sources.
Eddie: Well the majority of its industrial metals.
Eddie: Domestic suppliers.
Eddie: Price indicators have stabilized somewhat over the past several weeks, although nonferrous surcharge resets are creating spot price oscillations month to month.
Eddie: Steel purchases remain affected by falling scrap prices and spot the futures curve backwardation.
Edward Lehner: On the demand side, although quote and order activity has come in from mid-Q1 levels and demand visibility is opaque at best, Average selling price and transactional margin trends have improved early into the second quarter, leading to our guide.
Eddie: On the demand side, although quote and order activity has come in from mid Q1 levels and demand visibility is opaque at best.
Eddie: Average selling price and transactional margin trends have improved early into the second quarter, leading to our guide.
Speaker Change: Quench, we improving operating income in Q2 2025 at this point I'll turn it over to Jim Claussen to discuss market conditions and our financial results.
Unknown Executive: Operating Income in Q2 2025.
James Claussen: At this point, I'll turn it over to Jim Claussen to discuss market conditions and our financial Thanks, Eddie. And good morning, everyone. I would like to start by reviewing the demand environment across our industry and end market. Ryerson's first quarter sales volume of 500,000 tons was approximately 12% higher quarter over quarter, displaying normal seasonal restocking demand and some tariff pre-buy. Overall volumes were in line with our guidance of shipments of up 11 to 13% versus the fourth quarter. North American industry sales volumes, as measured by the Metals Service Center Institute, or MSCI, increased by nearly 11% quarter over quarter.
Jim Claussen: Thanks, Eddie and good morning, everyone.
Jim Claussen: I would like to start by reviewing the demand environment across our industry and end markets.
Jim Claussen: <unk> first quarter sales volume of 500000 tons was approximately 12% higher quarter over quarter displaying normal seasonal restocking demand.
Jim Claussen: Some tariff pre buy.
Speaker Change: Overall volumes were in line with our guidance of shipments up 11% to 13% versus the fourth quarter.
Speaker Change: North American industry sales volumes as measured by the metals Service Center Institute or MSCI increased by nearly 11% quarter over quarter.
James Claussen: Over the same period, Ryerson North American shipments increased by almost 14%, implying an outperformance of 3%. The market share gain was experienced across most of our metal product category. Similarly, we saw volume increases across all of our end markets with the most pronounced in construction equipment, metal fabrication, industrial machinery and equipment, HVAC, and consumer durables during the first quarter.
For the same period, Ryerson North American shipments increased by almost 14%, implying an outperformance of three percentage points.
Speaker Change: Our market share gain was experienced across most of our metal product categories.
Speaker Change: Similarly, we saw volume increases across all of our end markets with the most pronounced and construction equipment metal fabrication industrial machinery and equipment.
Speaker Change: AC and consumer durables during the first quarter.
James Claussen: Let's now turn to our first quarter performance compared to guidance and our second quarter 2025 out. During the first quarter, we exceeded our guidance range for adjusted EBITDA excluding LIFO and beat guidance on loss per share due to better than anticipated margins excluding LIFO and effective operating cost control. In terms of expense management, we maintained our $60 million expense reduction target, which is evidenced by a $32 expense per ton reduction when comparing the first quarter of 2024 versus the first quarter of 2025 and annualizes above our $60 million target in cost savings. Looking at the second quarter of 2025, we expect volumes to be relatively flat, plus or minus 1% compared to the first quarter, with daily shipments expected to come in below normal seasonal volume expansion in 2Q as tariff related uncertainty restrains normal seasonal restocking demand.
Speaker Change: Let's now turn to our first quarter performance compared to guidance and our second quarter 2025 outlook.
Speaker Change: During the first quarter, we exceeded our guidance range for adjusted EBITDA, Excluding LIFO and beat guidance on loss per share due to better than anticipated margins, excluding LIFO and effective operating cost control.
Speaker Change: In terms of expense management, we maintained our $60 million expense reduction target, which is evidenced by a 32 dollar expense per ton reduction when comparing the first quarter of 2024 versus the first quarter of 2025 and annualized above our $60 million target and cost savings.
Speaker Change: Yeah.
Speaker Change: Looking at the second quarter of 2025, we expect volumes to be relatively flat plus or minus 1% compared to the first quarter with daily shipments expected to come in below normal seasonal volume expansion in <unk> as tariff related uncertainty restrained normal seasonal restocking demand.
James Claussen: Given this demand backdrop, we expect revenues to be in the range of $1.15 to $1.19 billion, with average selling price increasing 3% to 4%. We expect to see the benefit of lag program price resets, partially mitigated by flatter pricing expectations on spot. Based on this, we forecast adjusted EBITDA for the second quarter of 2025, excluding LIFO, in the range of $40 to $45 million, and earnings per share in the range of $0.07 to $0.14 per diluted share. We expect LIFO expense to be between $5 and $7 million in the second.
Speaker Change: Given this demand backdrop, we expect revenues to be in the range of 1.15 to 1.19 billion.
Speaker Change: With average selling price, increasing 3% to 4%.
Speaker Change: We expect to see the benefit of lag program price resets, partially mitigated by flatter pricing expectations on spot business.
Speaker Change: Based on this we forecast adjusted EBITDA for the second quarter of 2025, excluding LIFO in the range of 40 to 45 million and earnings per share in the range of seven to 14 per diluted share.
Speaker Change: We expect LIFO expense to be between five and $7 million in the second quarter.
James Claussen: Turning to our investments in the business, in the first quarter, we invested $8 million in capital expenditures, which included, most notably, the final components of our modernization, automation, and expansion of our Shelbyville, Kentucky, non-ferrous coil processing facility, as well as strategic equipment and infrastructure upgrades to increase productivity and value-added capabilities. After the last three years of service center enhancements, our 2025 CAPEX projects are targeting productivity and customer service enhancements that support our model optimization. For the full year 2025, we reaffirm our $50 million annual CapEx target.
Speaker Change: Turning to our investments in the business in the first quarter, we invested $8 million in capital expenditures, which included most notably the final components of our modernization automation and expansion of our Shelbyville, Kentucky, not Paris coil processing facility as well as strategic equip.
Speaker Change: <unk> and infrastructure upgrades.
Speaker Change: Increased productivity and value added capabilities.
Speaker Change: After the last three years of service Center enhancements are 2025, Capex projects are targeting productivity and customer service enhancements that support our model optimization.
Speaker Change: For the full year 2025, we reaffirm our $50 million annual Capex target.
James Claussen: Given the counter cyclical volume and pricing conditions over the last 12 months, resulting in lower trailing 12 month adjusted EBITDA excluding LIFO, our leverage ratio for the quarter of 4.3 times was above our 2 times target range. As we progress through the optimization of our operations, we believe that the first quarter marks a cyclical leverage peak and expect that ratio to improve throughout the rest of 2025. In Q2, we expect earnings to improve, which, coupled with a projected slight release in working capital for the quarter, leads to stronger operating cash flows and net debt reduction.
Speaker Change: Given the countercyclical volume and pricing conditions over the last 12 months, resulting in lower trailing 12 month adjusted EBITDA, excluding LIFO, our leverage ratio for the quarter of four three times was above our two times target range.
Speaker Change: As we progressed through the optimization of our operations, we believe that the first quarter marks a cyclical leverage peak and expect that ratio to improve throughout the rest of 2025.
Speaker Change: In Q2, we expect earnings to improve which coupled with a projected slight release in working capital for the quarter leads to stronger operating cash flows and net debt reduction.
James Claussen: In terms of our cash generation and liquidity profile, in the first quarter we used $41 million of cash in our operations, primarily due to an increase in accounts receivable driven by increased customer sales volume. We ended the period with $498 million of total debt and $464 million of net debt, which increased from $468 million and $440 million, respectively, as of the prior. The company's available global liquidity remains healthy and increased to $490 million in the first quarter from $451 million in the fourth quarter on higher receipts.
Speaker Change: In terms of our cash generation and liquidity profile in the first quarter, we used $41 million of cash in our operations, primarily due to an increase in accounts receivable driven by increased customer sales volumes.
Speaker Change: We ended the period with $498 million of total debt and $464 million of net debt, which increased from $468 million and $440 million, respectively as of the prior quarter.
Speaker Change: The company's available global liquidity remains healthy and increased to $490 million in the first quarter from $451 million in the fourth quarter on higher receivables.
James Claussen: Turning to shareholder returns, Ryerson returned $6 million in the form of dividends during the quarter. We paid a quarterly dividend of $0.1875 per share and have announced a second quarter 2025 cash dividend of the same amount. We did not repurchase any shares in the first quarter and ended the period with $38.4 million remaining on our share repurchase authorization. As we look forward to the second quarter and into the rest of 2025, we will continue to prudently evaluate our overall capital allocation.
Speaker Change: Turning to shareholder returns Ryerson returned $6 million in the form of dividends during the quarter, we paid a quarterly dividend of <unk> 18, and three quarter cents per share and have announced the second quarter 2025 cash dividend of the same amount.
Speaker Change: We did not repurchase any shares in the first quarter and ended the period with $38 $4 million remaining on our share repurchase authorization.
Speaker Change: As we look forward to the second quarter and into the rest of 2025, we will continue to prudently evaluate our overall capital allocation.
Molly Kannan: I will now turn the call over to Molly Kannan to discuss our financial performance highlights. Thanks, Jim, and good morning, everyone. In the first quarter of 2025, Ryerson reported net sales of $1.14 billion, which was 12.7% higher than the fourth quarter of 2024. We saw low double-digit sequential volume growth across all three product categories. During the fourth quarter, Ryerson's average selling price of $2,271 per ton represented an increase of approximately 1% quarter over quarter and came in within our guidance expectations. Looking at sequential changes in average selling prices across our product mix, carbon products were roughly flat and aluminum products were higher by 2 percent, while stainless steel products were lower by approximately 3 percent.
Speaker Change: I will now turn the call over to Molly Canada to discuss our financial performance highlights for the first quarter.
Molly Canada: Thanks, Jim and good morning, everyone.
Molly Canada: In the first quarter of 2025, Ryerson recorded net sales of 114 billion.
Molly Canada: Which was $12, 7% higher than the fourth quarter of 2024.
Molly Canada: We saw low double digit sequential volume growth across all three product categories.
Molly Canada: During the fourth quarter Ryerson as average selling price of $2271 per ton represented an increase of approximately 1% quarter over quarter and came in within our guidance expectations.
Molly Canada: Looking at sequential changes in average selling prices across our product mix.
Molly Canada: Carbon taxes are roughly flat.
Molly Canada: Luminaire products were higher by 2%.
Molly Canada: Stainless steel products, but lower <unk>.
Molly Canada: Approximately 3%.
Molly Kannan: Gross margin during the quarter contracted 100 basis points versus the prior quarter to 18 percent, influenced by $7 million in LIFO expense as rising commodity prices in the period translated to material costs increasing faster than average selling prices given the lagged nature of pricing recognized in our contractual business. Excluding LIFO, gross margin expanded sequentially by 220 basis points to 18.6%. On the expense side, warehousing delivery, selling general and administrative expenses increased by $13.6 million, or 7.2% quarter over quarter to $202 million, driven by higher volumes and increases in variable incentive competition. Increases in overall expenses were partially offset by decreases in reorganization expenses as CapEx projects continue winding down and are placed into service.
Molly Canada: Gross margin during the quarter contracted 100 basis points versus the prior quarter to 18% influenced by $7 million and LIFO expense as.
Molly Canada: As rising commodity prices in the period translated to material costs, increasing faster than average selling prices given the lag nature of.
Molly Canada: Pricing recognized in our contractual business.
Excluding LIFO gross margin expanded sequentially by 220 basis points.
Molly Canada: 18, 6%.
Molly Canada: On the expense side warehousing delivery selling general and administrative expenses increased by $13 6 million.
Molly Canada: Our seven 2% quarter over quarter to 202 million driven by higher volumes and increases in variable incentive compensation.
Molly Canada: Increases in overall expenses were partially offset by decreases and reorganization expenses as capex projects continued winding down and are placed into service.
Molly Kannan: Net loss attributable to Ryerson was $5.6 million, or $0.18 loss per diluted share, compared to net loss attributable to Ryerson of $4.3 million and diluted loss per share of $0.13 in the prior quarter. Ryerson achieved adjusted EBITDA excluding LIFO of $32.8 million in the first quarter of 2025, which compares to $10.3 million in the prior quarter.
Molly Canada: Net loss attributable to Ryerson was $5 6 million or 18.
Molly Canada: Loss per diluted share.
Molly Canada: Compared to net loss attributable to Ryerson, a $4 3 million and diluted loss per share of <unk> 13 cents in the prior quarter.
Molly Canada: Ryerson achieved adjusted EBITDA, excluding LIFO of $32 8 million in the first quarter of 2025, which compares to $10 3 million in the prior quarter.
Edward Lehner: With this, I'll turn the call back to Eddie. when digesting and synthesizing all that's going on in the world. Especially when seemingly every headline starts with could, might, and maybe.
Molly Canada: And with this I will turn the call back to Eddie Thank.
Eddie Thank: Thank you Molly.
Speaker Change: When digesting and synthesizing all thats going on in the World.
Speaker Change: Especially when seemingly every headline starts with could might and navy.
Edward Lehner: We have to keep to the consistent and high level execution of our fundamental basics and controllables while bringing our investments to return and weaving everything together as intended within and throughout our network of intelligently connected and technology enabled services. Again, I want to thank our entire Ryerson team for doing the hard work necessary. to effect the change required to innovate and advance our next generation operating model. for the long-term benefit of all Ryerson stakeholders.
Speaker Change: The key to the consistent and high level of execution of our fundamental basics controllable, while bringing our investments to return and weeding everything together is intended within and throughout our network of intelligently connected and technology enabled service centers.
Speaker Change: Again, I want to thank our entire Ryerson team for doing the hard work necessary to effect the change required to innovate and advance our next generation operating model.
Speaker Change: For the long term benefit of all Ryerson stakeholders.
Edward Lehner: As challenging as current industrial metal supply and demand dynamics are at present, we look forward to participating and competing in a more vibrant, robust, and durable North American manufacturing economy as uncertainty around trade resolves and a more level and equitable trade playing field ensues. With that, we look forward to your questions. And as a reminder, that is star one.
Speaker Change: As challenging as current industrial metal supply and demand dynamics are at present.
Speaker Change: Look forward to participating in competing in a more vibrant robust and durable mirrored manufacturing economy.
Speaker Change: Uncertainty around trade resolved and more level and a more level and equitable trade Plainfield and students with that we look forward to your questions operator.
Speaker Change: And as a reminder, that is star one if you would like to ask a question.
Samuel Mckinney: If you would like to ask a question, we'll take our first question from Samuel McKinney with KeyBank Capital Markets. Hey, good morning, Eddie and team. Despite the overall debt load increasing about $30 million from the end of the year, you guys did a great job in the first quarter of bringing interest expense down sequentially.
Speaker Change: Well take our first question from Samuel Mckinney with Keybanc capital markets.
Samuel Mckinney: Hey, good morning, Eddie and team.
Speaker Change: Hey, Sam good morning despite.
Speaker Change: Despite the overall debt load increasing about $30 million from the end of the year you guys did a great job in the first quarter, bringing interest expense down sequentially could you talk about your plans to manage debt levels and further drive that interest expense lower in the periods ahead.
Edward Lehner: Could you talk about your plans to manage debt levels and further drive that interest expense lower in the periods ahead? Yes, Sam, I'll start and I'll let Jim comment. I really think the key and really try to highlight this in the release and in the script. It really comes down to winding down a lot of our CapEx projects and operationalizing those CapEx projects. What you started to see in the quarter, which was really encouraging and we expected it, was as we start to normalize operations throughout the network, the disruption element to the record CapEx that we deployed, especially as a percentage of sales, it creates a lot of network costs.
Speaker Change: Yes, I'll start and I'll, let I'll, let Jim comment.
Speaker Change: I really think kian.
Speaker Change: Really tried to highlight this in the release and in the script.
Speaker Change: Really comes down to winding down a lot of our capex projects and operationalize in those capex projects, what you're starting to see in the quarter, which is really encouraging and we expected it was.
Speaker Change: As we start to normalize operations throughout the network the disruption element to the record Capex that we deployed especially as a percentage of sales it creates a lot of network costs and.
James Claussen: you take, as you know, money goes out before it comes back in. And so we needed to make these investments, we needed to modernize the company. But as that starts to settle out, and everything starts to normalize, and it behaves as expected, and we start to bring these investments to return, cash flow gets better, EBITDA gets better. And the metrics that we're after, market share growth, margin expansion, those things start to come as you start to move CapEx to a a place in service status. And we're doing that more and more. There are a lot of big projects that we did across the network.
Speaker Change: You take as you know money goes out before it comes back in and so we needed to make these investments we needed to modernize the company, but as that starts to settle out and everything starts to normalize and it behaves as expected and we start to bring these investments to return cash flow gets better EBIT gets better and the metrics that we're after.
Speaker Change: Market share growth margin expansion those things start to come out.
Speaker Change: As you start to move Capex.
Speaker Change: Sure.
Speaker Change: Are placed in service status and we're doing that more and more of it there are a lot of big projects that we did across the network and so the plan is we understand how ryerson.
James Claussen: And so the plan is, we understand how Ryerson can and should function, especially given the investment and As Those Things Operationalize. Debt will come down. Cash flow will go up. ETH will go up. I mean, it's all relative to the cycle to some extent, but self-help being what we expect it to be, we'll be in a position to pay out debt, bring that down, and interest expense will come down as a result.
Speaker Change: Should function, especially given the investments that we made and as those things operationalize.
Speaker Change: That will come down cash flow will go up EBITDA will go up I mean, it's all relative to the cycle to some extent, but self help being what we expect it to be we will be in a position to pay down debt.
Speaker Change: That down and interest expense will will.
It will come down as a result, Jim.
James Claussen: Yeah, Sam, I think Eddie handled most of the answer there for you. I think as you look near term, really, as we generate more cash and earnings come up, it's that lower capex burden spend going out and really the ability to take the debt down with the higher cash flows. And so having that higher EBITDA, the lower debt, that's how we expect to see the leverage ratio trending down. Yeah, Sam, I mean, if you go back even and look at our financials 12 or 13 years ago, depreciation expense being half of what it is today, on the front end, you take an EPS hit and you finance those expenditures out of cash flow.
Samuel Mckinney: Yeah, Sam I think Eddie handled.
Speaker Change: Most of the answer there for you I think as you look near term.
Really as we generate more cash and earnings come up.
Samuel Mckinney: It's that lower Capex burden spend.
Samuel Mckinney: Going out and really the ability to take the debt down.
Samuel Mckinney: With the higher cash flows and so having that higher EBITDA lower debt. That's how we expect to see the leverage ratio trending now yes, Tim I mean, if you go back even if look at look at our financials 12 or 13 years ago.
Samuel Mckinney: Depreciation expense being half of what it is today on the front end, you've taken EPS hit and you <unk> you.
Samuel Mckinney: <unk> finance those expenditures.
James Claussen: And then you start to see the returns, and you start to normalize CAPEX investment and things really come back into balance. And then that's going to afford us the opportunity to do other things that are created for shareholders.
Samuel Mckinney: Cash flow.
Samuel Mckinney: And then you start to see the returns and you start to normalize Capex investment and things really come back into balance and then that's going to afford us the opportunity to do other things that are accretive to shareholders as well.
Unknown Executive: Absolutely.
Samuel Mckinney: And then the second quarter pricing outlook a little bit below where we thought you guys might guide, and you did touch on this earlier, Eddie, but are you seeing pockets in a specific part of the portfolio, whether it's carbon, stainless, aluminum, or is that more a function of mix with some customer destocking? Yeah, Sam, I'll tell you, it really smacks you right in the face when you look at it. OEM contracts got off to a rough start. You know, average selling price is autumn to January, and they started to come back. So if you really look at the deltas year over year, it's really a story of really good transactional growth.
Samuel Mckinney: Absolutely.
Speaker Change: And then the second quarter pricing outlook, a little bit below where we thought you guys might guide you did touch on this earlier, Eddie but are you seeing pockets in a specific part of the portfolio, whether it's carbon stainless aluminum or is that more a function of mix with some customer destocking.
Speaker Change: Yes, Sam I'll tell you it really snacks REIT in the space when you look at it OEM contracts start up.
Speaker Change: Average selling prices bottomed in January they started to come back. So if you really look at the Delta is year over year.
Speaker Change: Really a story of really good transactional growth and some of the Capex investments really starting to pay off but then on the contract OEM side. If you map through to what Youre seeing in the class eight truck market. If you map through what youre seeing in the machinery and equipment market.
Edward Lehner: And some of the CapEx investments really started to pay off. But then on the contract OEM side, if you map through to what you're seeing in the Class A truck market, if you map through what you're seeing in the machinery and equipment market, you can see, and in the appliance market as well, you can see how that program OEM revenue and volume is off year over year. And that was really, I would say, the biggest headwind when you look at those year over year comparisons, maybe where some of the model estimates were pegged.
Speaker Change: See any of the appliance market as well.
Speaker Change: You can see how that program OEM revenue and volume is off year over year and that was that was really I would say the biggest headwind when you look at those year over year comparisons, maybe where some of the the model estimates were packed.
Edward Lehner: Okay, and then last one for me, slide 15 of your presentation calls out ryerson.com 3.0. I just wanted to give you the opportunity to discuss some of the wins there given transactional sales were up double-digit percentages year-over-year in the first quarter. Yeah, unique transactional customer visits are up on .com. So really, it's sort of a similar story to the last question that we have a lot of program accounts that use .com and they use it as a service portal, they also use it to enter orders. That part of the market was weak, but we're pleased with what we see on the transactional side, especially unique new customers that come to the site and establish login credentials, look at what is more and more an endless aisle of product that we make available to them with additional value added processing.
Speaker Change: Okay, and then last one for me Slide 15 of your presentation, you called out Ryerson Dotcom 3.0, just wanted to give you the opportunity to discuss some of the wins there given transactional sales were up double digit percentages year over year in the first quarter.
Speaker Change: Yes unique transactional customer visits are up on dot com.
Speaker Change: So really its sort of a similar sort of the last question that we.
Speaker Change: We have a lot of program accounts that use dot com and they use it as a service portal. They also used to enter orders that part of the market was weak, but we're pleased with what we see on the transactional side, especially unique new customers that come to the site.
Speaker Change: And established login credentials look at what is more and more of the endless style of product that we make available to them with additional value added processing. So we're seeing nice trends after having released that in the second half of last year, and we really kind of bring that up.
Edward Lehner: So we're seeing nice trends after having released that in the second half of last year, and we really kind of bring that up its own maturation.
Speaker Change: Its own maturation curve.
Unknown Executive: Okay, thank you guys. Thanks, Sam.
Speaker Change: Okay. Thank you guys.
Speaker Change: Thanks Sam.
Unknown Executive: Once again, that is star one.
Speaker Change: And once again that is star one if you would like to ask a question.
Katja Jancic: If you would like to ask a question, our next question will come from Katja Jancic with BMO Capital. Hi, thank you for taking my question. Maybe staying on the transactional sales, can you update us on what the current split is between transactional versus contractual sales?
Speaker Change: Next question will come from Carter, Yes, Johnson with BMO capital markets.
Speaker Change: Hi, Thank you for taking my questions, maybe staying on the transactional scale of sales Ken can you.
Speaker Change: The update us on what the current split is between transactional versus contractual sales.
James Claussen: Sure. Right now, Jim. Yeah, a little under, we're moving up from below 40s to about, it was about 47% in the first quarter transactional. Moving up from, I believe we finished the year about 43% last year. So certainly seeing an increase in that. Yeah, go ahead. Sorry, and is the target still to reach about 60% if I'm not mistaken? Yeah, it is. And we know that it's not going to be, it's not going to be a beautifully linear climb up.
Speaker Change: Sure.
Jim: Right now Jim you want to take that.
Speaker Change: Yes.
Speaker Change: Little under.
Speaker Change: We're moving up from below 40%, but it was about 47% in the first quarter transactional.
Speaker Change: Moving up from I believe we finished the year about 43% last year.
Speaker Change: So certainly seeing.
Speaker Change: Yes go ahead.
Speaker Change: Sorry.
Speaker Change: The target still to reach about 60% if I'm not mistaken.
Speaker Change: Yeah. It is and we know that it's not going to be it's not going to be a beautifully linear climb up.
Edward Lehner: But you just, this goes back to the investment cycle, not to be redundant, but When we look at where we've placed assets to shorten lead times and improve service levels and increase on time delivery, it's all very intentional as to how you approach that transactional market. The law of this industry is if you have it in stock and it's close Your chances of getting that spot bill of material order goes up significantly. So very intentionally, we want to position that product. We have the analytics to tell us what our customers buy, get it close to the customer and improve those service levels, those lead times, that on-time delivery, and that's going to grow transactional over time.
Speaker Change: But this goes back to the investment Gotcha.
Speaker Change: Not to be redundant, but.
Speaker Change: When we look at where we've placed out too.
Speaker Change: To shorten lead times and improve service levels and on time delivery, all very intentional as to how you approach that transactional market. The law. This industry is if you have it in stock and it's close to the customer your chances of getting that spot bill of material order.
Speaker Change: Goes up significantly so very intentionally we want to position that product, we have the analytics to tell us what our customers by getting closer to the customer and improve those service levels as the top of that on time delivery and.
Speaker Change: And thats going to grow transaction over time.
Speaker Change: Yeah.
Edward Lehner: And then maybe when looking at the portfolio or the metal mix, it seems that the stainless side has been a bit of a drag for a few quarters now. How are you thinking about this portfolio mix? Are you potentially looking at diversifying more away from the stainless market, or how should we think about it? Yeah, I mean, I don't think stainless is going to be depressed forever. I think it's true enough that if you go back and you look at the peak of stainless, which was probably the second quarter of 2022, over the last 10 quarters, I would say eight out of those 10 quarters have really been rough, you know, in stainless steel.
Speaker Change: And then maybe when.
Speaker Change: Looking at the portfolio or the metal mix. It seems that the stainless side has been a bit of a drag for a few quarters. Now how are you thinking about this portfolio mix are you potentially looking at diversifying more away from the stainless market or how should we think about it.
Speaker Change: Yeah, I mean, I don't think stainless is going to be depressed forever I think it's true enough that if you go back and you look at the peak of stainless which was probably the second quarter of 2022.
Speaker Change: For the last 10 quarters, I would say eight out of those 10 quarters have really been a bit rough.
Speaker Change: In stainless steel and we are over weighted so our market share is still strong I mean, if anything to gain market share and statements. We've made investments in the stainless franchise. So no need to really run away from that at all I mean, if you look at the investment in Shelby Bill what I think is really promising there is you bring down the cost to serve you process larger coils are closer to the.
Edward Lehner: And we're overweighted. So our market share is still strong. I mean, if anything, we gained market share in stainless, we made investments in the stainless franchise. So no need to really run away from that at all. I mean, if you look at the investment in Shelbyville, what I think is really promising there is you bring down the cost to serve, you process larger coils, you're closer to the customer, you get much better throughput and much better service out to that transactional marketplace, especially for stainless sheet and aluminum. So routing out the answer, we are overweighted the market when you look at aluminum and stainless, we're 51%, I'm sorry, we're 51, 52% carbon, we're 48, 49% non-ferrous.
Speaker Change: Customer you get much better throughput and much better service out of that transactional marketplace, especially for stainless sheet and aluminum. So rounding out the answer we are over weighted to market. When you look at aluminum and steel were 51%.
Speaker Change: There were $51, 52% carbon were $48, 49% non ferrous so we're overweighted the market.
Katja Jancic: So we're overweighted the market. relative to our competitors who are more in line with MSCI overall metrics and carbon, which tend to be somewhere between 67 and 70% of the industry. So we really have an opportunity to grow our carbon franchise, especially transactionally. And it's not so much taking away from stainless and aluminum as it is being more complementary on the carbon side and really being able to take market share on the carbon side that's profitable. Thank you.
Speaker Change: Relative to our competitors, who are more in line with MSCI overall metrics in carbon which tend to be somewhere between 67% 70% of the industry. So we really have an opportunity to grow our carbon franchise, especially transactional.
Speaker Change: It's not so much taken away from stainless and aluminum as it is being more complementary on the carbon side.
Speaker Change: And really being able to take market share on the carbon side that's profitable.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Hey, Scott here.
Unknown Executive: Okay, it appears there are no further telephone questions.
Speaker Change: And it appears there are no further telephone questions I'd like to turn the conference back to our presenters.
Unknown Executive: I'd like to turn the conference back to our presenters. Thank you everybody for your interest and support in Ryerson and we look forward to being with all of you next.
Speaker Change: Yeah.
Speaker Change: Thank you everybody for your interest and supported Ryerson and we look forward to being with all of you next quarter.
Unknown Executive: Once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.
Speaker Change: And once again that does conclude today's conference. We thank you all for your participation you may now disconnect.
Speaker Change: [music].
Speaker Change: Yes.