Ryerson Holding Corp (RYI) 2025 Q4 法說會逐字稿

Good day, and welcome to the Ryerson Holding Corporation's fourth quarter 2025 conference call. Today's conference is being recorded. (Operator Instructions) At this time, I would like to turn the conference over to Justine Carlson. Please go ahead

Good morning. Thank you for joining Ryerson Holding Corporation's fourth quarter 2025 earnings call. On our call, we have Eddie Lehner, Ryerson's Chief Executive Officer; Jim Claussen, our Chief Financial Officer; and Molly Kannan, our Chief Accounting Officer and Corporate Controller.

A recording of this call will be posted on our Investor Relations website at ir.ryersonse.com. Please read the forward-looking statement disclosures included in our earnings release issued yesterday and note that it applies to all statements made during this call. In addition, our remarks today refer to several non-GAAP measures. Reconciliations of these adjusted numbers are also included in our earnings release.

I will now turn the call over to Eddie.

Thank you, Justine. Good morning, and thank you all for joining us to discuss our fourth quarter and full year 2025 performance. Before diving in, I would like to first extend a warm welcome to Rick Marabito, Rich Manson and Andrew Greiff, who are joining this morning's call as our President and Chief Operating Officer; our Senior Vice President of Finance; and our Executive Vice President of Ryerson and President of the Olympic Steel business unit and all of our Olympic Steel following the successful merger of Ryerson and Olympic Steel, which we closed just a week ago today.

It is my absolute pleasure to be working alongside you to serve both our collective shareholders and our employee base, it's more than 6,000 strong in approximately 160 locations. I'm looking forward to the great things we are going to accomplish together as a unified enterprise with significantly greater scale and expanded product and service offerings.

We are in the very early days of integration but we've been sitting on a spring for several months and strong, and we're off to an excellent start. We have established an experienced integration team focused on realizing the expected $120 million in annual run rate synergies with an emphasis on combining best practices, optimizing asset utilization and capturing combined targeted cost and revenue merger benefits. We are highly confident in our ability to deliver on the aforementioned synergies over the next two years and are looking forward to sharing our progress with you quarterly.

Turning to the business. The underlying commodity price gumbo for our mix of products increased at a faster rate than anticipated during the fourth quarter as supply side price drivers outpaced buyer price absorption and demand was still subdued and contractionary in the quarter. By the end of the quarter, supply side price increases had not yet materialized in our customer end markets due to contract customer pricing lags and transactional customer price stagnation.

With Q4 2025 in the rearview and as we progress through the first quarter of 2026, we are seeing encouraging strength in customer quote order activity relative to the past several years, and we expect to see gross margin expansion year-over-year and sequentially as better pricing propagates through the industrial metals value chain, along with improving demand signals. We also expect operating income improvement sequentially and year-over-year given better manufacturing demand, improved operating leverage and revenue growth.

These encouraging trends, though still early when looking at a more desirable duration of synchronized manufacturing growth certainly represent the best demand start to a year since 2022. It is always better to close a merger with improving industry fundamentals, and it is part and parcel of why the stage is also well set from a time perspective for our just completed merger with Olympic Steel.

Independently, over the past four years and now together, we have both invested significantly in our capabilities with strong balance sheets leading up to the merger, and now together, we expect to execute on $120 million on annual run rate synergies at the cusp of what we hope to be at least a multi-quarter cyclical inflection upward.

As we advance in 2026, our clear priorities are to continue integrating the combined organization in a way that preserves and enhances the customer experience as well as our employee culture, to begin realizing merger synergies as communicated to stakeholders, to improve the quality of earnings through disciplined execution of service center fundamentals across our expanded value-added service center network and to reduce leverage within our targeted range with updated shareholder capital allocation plans coinciding with synergy attainment.

Before we get into the details of our financial results, I want to thank all of my Ryerson and Olympic teammates for their hard work over these past six months, particularly given the additional time and effort involved in consummating our merger with Olympic Steel. We also appreciate the continued engagement and support of our customers, suppliers and shareholders as we enter this next phase together for the desired betterment of all.

With that, I'd like to turn the call over to Jim Claussen for a review of market conditions and financial results.

Thanks, Eddie, and good morning, everyone. North American industry volumes as measured by the MSCI, or Metals Service Center Institute, experienced normal seasonal decline in the fourth quarter relative to the third, decreasing by 5.8% sequentially and 1.5% for the full year of '25 compared to 2024.

By comparison, Ryerson's North American shipments decreased by 6.8% sequentially and less than 0.5 percentage point for the full year, indicating market share gains for the full year of '25 despite retracement during the quarter on majorly depressed OEM program demand and shipments.

Our total company tons shipped were down just under 5% quarter-over-quarter, in line with guidance and approximately 3% higher compared to the fourth quarter of last year. For the full year of '25, our total company tons shipped came in just ahead of last year, up by 0.5 percentage point.

Turning to performance at the end market level. I'd first like to note that we recently wrapped up a top to bottom review of our classifications and realigned our reporting to gain a clear, more accurate understanding of our business performance and better direct strategic decision-making.

Utilizing these new classifications, we saw the most year-over-year volume growth in our fabrication and welding sector followed by growth in the machine shop and machinery and equipment sectors. Partially offsetting that growth was weakness in the commercial transportation sector and, to a lesser degree, by weakness in our climate sector, which includes HVAC and in our heavy equipment sector, which includes agricultural and construction equipment.

Turning to fourth quarter performance. We achieved revenue within our guidance range with volumes in line with seasonal trends. However, as Eddie mentioned, material costs rose faster than anticipated during the quarter, outpacing our average selling price growth and the quarter expired before we were able to fully price these increases into the market.

As a result, we experienced weaker-than-expected gross margins and recorded a higher-than-expected LIFO expense for the quarter. Our operating expenses came in largely as expected. In all, our net loss of $38 million or $1.18 per share and our adjusted EBITDA, excluding LIFO generation of $20 million, came in below our guidance expectations.

Turning to current expectations. We have been seeing very strong activity in the first quarter of '26, and we anticipate finishing the quarter with tons shipped up 13% to 15% compared to the fourth quarter of '25. Same-store revenues are expected to be in the range of $1.26 billion to $1.3 billion, with average selling prices expected to be flat to up 2% quarter-over-quarter as fourth quarter material price increases start to flow into the market and expand gross margins.

We also expect to realize operating leverage as demand conditions improve. In all, we anticipate generating net income for the first quarter in the range of $10 million to $12 million before any merger-related fees. We also expect to record LIFO expense of between $6 million and $8 million and adjusted EBITDA, excluding LIFO, of $51 million to $54 million in the first quarter of '26.

Turning to our expectations for Olympic Steel. In the last six weeks of the quarter, we anticipate that Olympic will experience similar market dynamics and, therefore, generate accretive revenue in the range of $260 million to $280 million and adjusted EBITDA, excluding LIFO, in the range of $12 million to $13 million. For our combined companies, we anticipate first quarter revenue in the range of $1.52 million to $1.58 billion and adjusted EBITDA, excluding LIFO attainment, between $63 million and $67 million.

Turning to our investments in the business. In the fourth quarter, our capital expenditures totaled $21 million, contributing to a full year investment of $52 million. In '26, we anticipate investing approximately $50 million in capital expenditures on a same-store basis or $75 million including a prorated expectation for Olympic Steel.

We generated fourth quarter cash from operating activities of $113 million, as our seasonal working capital release more than offset the net loss generated. Inventory days of supply increased by three days quarter-over-quarter to 79 and was well managed, considering the typical fourth quarter trend. Our overall cash conversion cycle also remained well managed coming in at 68 days for the fourth quarter, which is consistent with the prior quarter and 11 days leaner than the same period last year.

Utilizing our cash flow generation we decreased our debt by $37 million and net debt by $34 million compared to the prior quarter. As a result of continued incremental improvements in both our net debt and trailing 12-month adjusted EBITDA, excluding LIFO, our leverage ratio decreased quarter-over-quarter from 3.7 times to 3.1 times, continuing to approach our target range of 0.5 times to 2 times.

From a global liquidity perspective, the company's profile remained healthy during the fourth quarter, and we ended the period with $502 million of liquidity compared to $521 million at the end of the third quarter. In conjunction with the closure of our merger with Olympic Steel, we successfully extended the maturity of our revolving credit facility and expanded its capacity from $1.3 billion to $1.8 billion. We expect to utilize the facility to fund our combined general corporate needs as well as support the pursuit of synergistic growth opportunities.

Turning to shareholder returns. Ryerson distributed $6.1 million in the form of dividends or [$0.1875] per share during the fourth quarter and has announced a first quarter dividend of the same amount payable to our now combined shareholder base. We did not repurchase any shares in the fourth quarter and ended the period with [38.4 million] remaining on our share repurchase authorization.

I will now turn the call over to Molly Kannan to discuss our financial performance highlights for the fourth quarter.

Thanks, Jim, and good morning, everyone. For the fourth quarter of 2025, Ryerson reported net sales of $1.1 billion a decrease of approximately 5% compared to the previous quarter, driven by lower tons shipped with average selling prices flat. Compared to the fourth quarter of 2024, net sales increased by 9.7% with average selling prices 6.3% higher as well as increased tons shipped of 3.1%.

As discussed, commodity prices rose more than anticipated during the quarter and resulted in a LIFO expense of $22.5 million compared to our expected expense of $10 million to $14 million and compared to the previous quarter expense of $13.2 million. Gross margin contracted by 190 basis points to 15.3% and gross margin, excluding LIFO, contracted by 100 basis points to 17.3% during the fourth quarter as we were unable to price these rapid increases into the market before the end of the period.

Warehousing, delivery, selling, general and administrative expenses totaled $205.3 million for the fourth quarter, an increase of $4.9 million compared to the third quarter, driven by advisory service fees related to the Olympic Steel merger.

In all, the gross margin compression and onetime expenses contributed to our fourth quarter net loss attributable to Ryerson of $37.9 million or $1.18 per diluted share. This compares to a net loss of $4.3 million and a diluted loss per share of $0.13 for the fourth quarter of 2024. Our adjusted EBITDA, excluding LIFO generation for the fourth quarter, was $20.4 million, which compares to $10.3 million generated in the fourth quarter of 2024.

And with this, I'll turn the call back to Eddie.

Thank you, Molly. While fourth quarter results were adversely influenced by ongoing recess manufacturing conditions, we are seeing the signs of an improving manufacturing economy through the early part of 2026 and the combined potential and prospects of our merger have us aim much higher in the quarters and years ahead.

Regardless, whatever the macro gives or takes away, our determination and conviction are resolute in making good on the $120 million in annual synergies we expect to deliver, and we as a team could not be more confident in the RYZ, riz or rise, whatever you prefer, organization that we have assembled to deliver it. As Ronnie Coleman and you got to Google it, used to say, "Ain't nothing to it, but to do it." With that, we look forward to your questions. Operator?

(Operator Instructions)

Katja Jancic, BMO Capital Markets.

Hi, thank you for taking my question. Maybe starting on more, I guess, near term. The 4Q was negatively impacted by the fast increase in prices and you not being able to push prices higher. Are you right now still seeing any potential pushback from your customers about fully accepting these price increases?

Hi, Katja, it's Eddie. And we've got Rick and Jim and Rich and Andy and Nick in the room with us, so we could give you a really fulsome answer. I'll tell you that I've been pleasantly surprised by the increase in business activity overall. When we look at quoting rates and we look at conversion rates, it's the best we've seen in a really in a long, long time.

So that's very positive. I think getting price increases into the market, it's finally starting to happen. But I also said, you look at mill utilization rates and you look at some of the recoveries in certain end markets is still somewhat uneven, it really is sort of the end market by end market and customer by customer. So it's a gradual pricing through on that side as we look at mill pricing getting through the distribution channel to customers. But for the first 45 days-plus of the quarter, it's been very positive overall. Rick?

Yeah. Thanks, Eddie. I agree. I think -- and everybody knows, we closed on the 13, so the first -- half of the first quarter is not included in our results going forward. But I agree with Eddie, we saw -- have seen a good start to the year in terms of both volumes and pricing. So we're optimistic, as Eddie said earlier in his comments, it's good to close the transaction and merge and have a little wind in our sails in terms of the market. So we're feeling good about that.

And Katja, I would say this, too, I mean you know from our attendance at the BMO conferences, which we're looking forward to seeing you again next week, last couple of years, I mean, it's been a long trough, and it got very tiresome to talk about the same things over and over again.

Looking at the investments that we both made individually and collectively and looking at the execution of both companies and having a lot of the CapEx really behind us, I'll give you an example. Shelbyville had a record month, and we had done a major expansion in Shelbyville. And we're starting to see the promise of those capital investments really show through in a meaningful tangible way.

And the the opportunity to go through every single one. But just suffice to say, we're really pleased with how those investments now are starting to look when we see some operating leverage in the industry and across our assets.

And given that the markets are improving, right, and you have bigger portfolio now. How are you thinking about capital allocation moving forward? And I understand that you're in the process of combining -- fully combining or integrating the two companies, but how should we think about that?

Yeah. So I'll start, and then I'm going to kick it over to Rick. So it's important to keep mentioning the main thing. And that is really getting after the $120 million in annual run rate and deleveraging. We still want to bring the debt down. People ask us about growth, but we just took a major quantum leap forward when it comes to growth through the merger.

So we want to delever, we want to get the synergies, we want to go ahead and optimize the footprint of the assets and that's job one. And I think when we get through the year as we get through the year and we have the success that we expect then I think we could start to keep one eye out for what may be on that horizon.

Rick, what do you think?

Yeah, I agree. And I think, obviously, Eddie talked about continuing the dividend, which we thought was really important as a piece of the capital allocation. But yes, I think really focusing on the cash flow and getting the debt down is job one. But certainly, continuing to look to also reward the shareholders through dividends and then we'll frame in as we move forward some more specifics on that.

Perfect. Thank you. And I'll see you next week.

As Katja, I look forward to it.

(Operator Instructions)

Samuel McKinney, KeyBank Capital Markets.

Hey, good morning, guys.

Hi, Sam.

Just going back to Katja's first question, this wasn't a Ryerson specific headwind this week. But you talked about the challenge in passing through rising mill prices to customers. Were there products and maybe aluminum where that strong was more pronounced than others?

Yeah, I would say that -- of the three commodities, I would say that aluminum has probably been the slowest to propagate through, but that's picking up now in terms of the ability to start to get those price increases through the value chain.

But yeah, if you're asking about aluminum specifically, I would say of the three, that's probably been the toughest when you look at when that price started to go up around April on on a regression line up, where it really started to turn up in April, and it's continued to move higher, sitting here today past the middle of February.

Carbon, you know that story. I mean it's like a right? And now finally, we've got some momentum upward on carbon, which has been good to see. And it's been somewhat gradual. It hasn't really spiked the way it has in years past, and that's a good story.

And then stainless was really, I mean, stainless and nickel been beat up for, what I'll call, structural reasons and also cyclical reasons. But as Nick Webb said, we finally maybe caught a bid on stainless where we've seen that now move higher over the last several months and so that's starting to get into the price book as well.

Okay. And then the first quarter same-store volume guidance up in the mid-teens sequentially and safely above your historical seasonality. Are you starting to see some restocking or some more activity from some of your major industrial customers?

Yeah. I mean the real story of 2025 for us was transactional was up 11%-plus and OEM was down 8%. And that was really the first time we've seen that type of decoupling when it comes to directional movements within an industrial metals and manufacturing cycle.

So I would say that overall, we're seeing -- on balance, as we referenced, we're seeing a stronger market consistent with a stronger PMI print and now industrial production and PMI are moving in the same direction. So we're tracking that really well. I also think it's a function of the improvements that we've made.

It's a function of how well Olympic has executed over the last several years and how well they continue to execute. And so I think it's also us getting better and improving and bringing those investments through finally to to full operating status. But let me take it over to Rick and he'll give you some more color.

Yeah. I couldn't agree more. I think -- and you know, Sam, just from following the Olympic story, much the same in terms of some of the concentrations of investments over the last year, too. So we had a pretty heavy CapEx, I'll call it, last 18 months to 24 months. A lot of those investments are really just coming to fruition right now and are phasing in over, I'll call it, fourth quarter into second quarter of this year. So again, a little wind in the sales from the market, plus some of the self-investment.

We're optimistic about growth. Eddie mentioned the PMI finally. I don't need to -- we don't need to keep continuing the historical bad news, but wow, how many months in a row and how many out of two years were we going to have PMIs printing down.

So yeah, I feel pretty good about the momentum in the market. I feel really good about the combination of the two companies and really excited about really showing everybody what we're going to be able to do in terms of those synergies and really bringing the combined strengths of the two companies together.

And really, that's what it's all about is being able to service our customers better with more capabilities, additional geography, and we're on it. I'd tell you, we got off to a -- I called it -- I said we want to get off to a running start, I think we got off to a sprinting start. But just excited about all that. And again, it's good to have a little wind behind us.

Sam, let me give you a little bit more, I would say, a little bit more of the inside when we look at how does our company operate and I think how does the industry operates. Stability is a big thing. I mean you're going to take a hit and you make investments. If you shut down a service center that's been in place for a long time and you build a new one and you do greenfields, I mean greenfields will shorten your length expectancy.

And I think it's hard to go through them, but once you're on the other side of them, it's really, really good. So I'll give you an example. Central where we moved out of we moved to University Park, that was a 900,000 square foot greenfield. And when we bottomed out during the construction, just before the grand opening, volumes went down to about 520 tonnes a day as an example, okay?

Well, bookings at CS&W -- very proud of the team and the leadership there, bookings at CS&W now over 780 tonnes a day, not including the intercompany work that they do for other virus locations. So when you think about that incremental 260 tonnes, it's very meaningful, but I also think it's indicative of what happens when you do major CapEx greenfields and you do heavy investments in facilities, you do ERP conversions, you take a hit.

And it's a hard thing to go through. But when you do get to the other side if things start to work and operate a lot better, and it then syncs up very well with what we see historically, where if you've got the right balance of investment to go with, I would say, stable, consistent, well-performing operations, you start to really realize that upside operating leverage in your network and things start to get it look a lot better.

Okay. Thanks. I appreciate all the color on that question. And then last one for me: Increasing the revolver by $500 million to $1.8 billion. In the context of trying to get back down to the leverage range, what's the chance you use this to explore more M&A? And if so could you do this before the achievement of synergies or are those mutually exclusive? And what do you feel you need to round out the now combined portfolio?

I think we finally have like half of the CFO questions, so we'll be able to pop that over to Jim and Rich, but I would just say, Sam, I mean, when it comes to M&A, we just did a huge transaction, and I want to emphasize or to keep the main the main thing.

I don't think you ever look away from what would truly be an exceptional opportunity, but you're just so much more selective because you really don't want to frac the attention of the organization on what it is we really have to do first and foremost, which is hit our marks, get the synergies and boost the overall performance that flows through our financials. So that really is the priority. But let me send it over to Jim and Rich.

Yeah. Good morning, Sam. I mean, Eddie really touched on it. I mean we did amend and extend the ABL, raising it up in order to really work through this merger and put the company in a good spot to continue to grow forward. But right now, as we sit here, week one in, it's full speed ahead on working through the synergy case, continuing to operate the business, serve our customers, and we'll continue to work through our capital allocation plans.

And Rich Manson is the synergy So Rich, what do you think?

Yeah. No, I think Rick said it a little earlier. As soon as the merger was done, we jumped in with both feet and started sprinting. And so lots of people involved, lots of great ideas. And we look forward to tackling and hitting all the numbers that we've set forth, and we'll do it.

Alright. Thanks, guys. Good luck and nice to talk you again.

Hey, thanks, Sam.

(Operator Instructions)

Alan Weber, JP Capital.

Good morning.

Hey, good morning, Alan.

Can you hear me?

Yeah.

So a question, given you guys doing the merger, which sounds great, and then you have Klockner being announced that they're going to be acquired. Can you talk about how you think about it longer term more consolidation impact on Ryerson/Olympic and like that?

Sure, sure. Alan, I think members of the team here certainly socialized the reality that for a long, long time, M&A activity was lacking in our sector. And it really is just a mathematical fact. If you look at consolidation on the mill side, if you look at consolidation on the customer side, we in the middle would just continue to really get squeezed given that there's like 7,500 firms that identify themselves as metal distributors, wholesalers and processors.

So I do think there'll be more. I think there's a realization of recognition that there should be more just to kind of balance things out in our industry when you look at shipment levels since 2006 up to the present time.

This was really a fantastic opportunity and move by both of our companies to do this, both when we look at the DNA of both organizations, but really in the larger industry as a whole. So the answer is yes. I'm really, really thrilled that we did it. I think our prospects are fantastic. And I think that the Worthington Clutter announcement, I think, is overall, it's a positive, it's healthy for the industry. Rick?

I think you nailed it, I really have nothing to add to that. Consolidation is good for our industry, period.

And Alan and it also is the customer experience. Like we want to get closer to the customer. We have more touch points, we can get closer. Andy Greif started out leading the supply chain integration council, the commercial integration council. And can you give you some color on just how attractive the opportunities look with the combined companies. Andy?

Well, I think Eddie, you said it right. The opportunity to take two great storied companies. And as customers today, the industrial OEM is really looking for downstream help and one of the first things they look at is the balance sheet of the companies that can help support them. I think you take this combination, it really sends a very strong message to our large customers that not only are we there financially to be able to support them.

But if you look at the investments that the two companies have made over the last three to five years, we're taking everything downstream as the customer today is looking for not just the rectangle of what was once upon a time, important in our business. But finish well to product that's going directly into their assembly.

And there's not a lot of people that can do that to the scale that our large customers are looking. And so I think the consolidation, in particular, this one is going to be fantastic for our customers. We've already gotten a number of calls as to what can we do collectively to try to help them grow their business, and we're excited to get in front of the customer.

Yeah. And I mean I think a better solution we offer the more repeat business and growth we're going to see. We just have to really make sure that the experience we offer is to the highest level and meets our aspirations for what we want to deliver those.

Great. Thank you, and good luck.

Hey, Alan. Thanks a lot.

As we have no further questions, I would like to turn the conference back to Eddie Lehner for any additional or closing remarks.

No, really, thanks so much for your support. We really look forward to being with you next quarter to report out on how we're doing with our synergies, how the business is operating, and I look forward to the next call. Thank you, everybody, stay well.

This concludes today's call. Thank you for your participation. You may now disconnect