Participants

Pratham Dear; Manager – Investor Relations; Ryerson Holding

Edward Lehner; President, Chief Executive Officer, Director; Ryerson Holding Corp

Jim Claussen; Chief Financial Officer; Ryerson Holding

Molly Cannon; Chief Accounting Officer & Corporate Controller; Ryerson Holding Corp

Nick Webb; Director of Risk Management and Commodity Hedging; Ryerson Holding Corp

Phil Gibbs; Analyst; KeyBank Capital Markets

Presentation

Operator

Good day and welcome to the Ryerson Holding Corporation's 4th quarter 2024 conference call. Today's conference is being recorded. [operator instruction]
At this time, I would like to turn the conference over to Mr. Pratham Dear Please go ahead, sir.

Pratham Dear

Good morning. Thank you for joining Ryerson Holding Corporation's 4th quarter and full year 2024 earnings call. On our call, we have Eddie Lehner, Ryerson's President and Chief Executive Officer, Jim Claussen, our Chief Financial Officer, and Molly Cannon, our Chief Accounting Officer and corporate controller. John Orth executive Vice President of operations, and Jorge Baristain, our Vice President of finance, will be joining us for Q&A.
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 10K for the year ended December 31, 2024, and there are 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 guaranteed of future performance.
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-gap 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.
I'll now turn the call over to Eddie.

Edward Lehner

Thank you, Pratham, and thank you all for joining us this morning. It is never easy to do the hard things. The fourth quarter of 2024 and all of 2024 can be summed up by doing hard things through a hard macro time for the right reason.
As we completed year three of a record Capex cycle for Ryerson, we're confident the payoff will come, as this was always about curing a legacy investment deficit and renovating our operating model to generate higher and less volatile earnings through future business cycles. As more of these investments operationalize to their expected potential in 2025 and beyond, and as cyclical industry conditions improve, Ryerson and our stakeholders should see the proof we've been working for.
The 4th quarter was the continuation, and we hope culmination of a long and winding manufacturing downturn. Commodity price bellwethers, most notably in stainless steel and industrial metals demand, declined throughout the quarter as they did through the prior three quarters of 2024, resulting in lower volumes, margin compression and Slack service center capacity utilization.
January 2025 saw the tailing out effects of these recessed industry conditions with a post-holiday season hangover on slow OEM program shipments and contract price reset lag effects through the first half of January. Over the past 30 plus days, however, we have seen a significant increase in sales quote and order activity, particularly in transactional and value-added sales.
Our bookings since mid-January are at their highest levels since the second quarter of 2021 as pricing trends in carbon and aluminium are improving, with stainless steel and nickel still lagging behind. With respect to tariffs and trade policy impacts, it is still too early to call the magnitude and duration of what these perspective changes may bring in demand and price conditions.
But we expect we will know more as we move through the balance of the first and second quarter of 2025. At present, we view the improvement in business conditions more as a function of self-help, restocking, scrap price increases, and commodity price resets from their recent cyclical autumn, while acknowledging that no lead times have recently started to extend along with expectations of higher metal supplier spot prices looking beyond the 1st quarter.
At this point, I'll turn it over to Jim Claussen to discuss market conditions and our financial results.

Jim Claussen

Thanks, Eddie, and good morning everyone. I'd like to start by reviewing the demand environment across our industry and markets. Ryerson's fourth quarter sales volume of 447,000 tons was 7.8% lower quarter over quarter, matching historical holiday period seasonality, but coming in slightly better than expectations of volumes 8%x to 10% lower than the third quarter.
North American industry volumes as measured by the Metal Service Center Institute, or MSCI decreased by 7.1% quarter over quarter. Over the same period, Ryerson North American shipments decreased by 8.5%. In line with normal seasonality, as we progressed into the fourth quarter towards Thanksgiving and the end of the year, we saw quoting activity which represents inbound demand from fabricators and manufacturers slow down.
In terms of end markets, we saw slowdowns most pronounced in HVAC construction equipment, industrial machinery, and metal fabrication during the fourth quarter. For the full year 2024, Ryerson's sales volume of 1.9 million tons was roughly equivalent to 2023, down 0.3%. I would like to note that while our sales volume was roughly equivalent to 2023, we managed through two milestone operating footprint modernizations in University Park, Illinois and Shelbyville, Kentucky.
Additionally, well, our industry has operated in a contractionary environment for most of 2024, based on the readings from the Institute of Supply Management's Purchasing Managers Index and US industrial production year over year comparison, we made gains in market share. In North America, industry volumes for the MSCI were down 3% year over year. This is compared to down 1% for Ryerson's North American volumes, with Ryerson noting market share gains across our metal mix, led by stainless steel and aluminium and followed by carbon.
In terms of end markets, we noted slowdowns in consumer durables, oil and gas, commercial ground transportation, and industrial machinery and equipment, which were partially offset by volume increases in HVAC, food processing and agricultural equipment, construction equipment, and metal fabrication and machine shops.
Given the demand conditions we operated in, let's turn to our fourth quarter performance compared to guidance and our First quarter 2025 outlook. During the fourth quarter, we met our guidance range for adjusted EBITDA excluding LIFO and beat guidance on loss per share due to higher than expected LIFO. Additionally, we generated free cash flow despite weaker than expected market conditions. Mali will provide a deeper dive into our financials.
Looking to the first quarter of 2025, we expect volumes to be up 11% to 13% sequentially compared to the fourth quarter, with daily shipments expected to continue to increase as we move through the balance of the quarter. As such, we expect revenues to be in the range of $ 1.12 billion to $ 1.15 billion, with average selling price increasing 0% to 2%.
Based on these expectations, we forecast adjusted EBITDA for the first quarter of 2025, excluding LIFO in the range of $ 28million to $ 32 million based on seasonal restocking demand and a loss per share in the range of $0.27 to $0.20 per diluted share. We expect LIFO expense for the quarter to be between $6 million to $8 million.
Turning to our investments in the business, in the fourth quarter, we invested $24 million in capital expenditures, which included, most notably the modernization, automation, and expansion of our Shelbyville, Kentucky, non-arris oil processing facility. And strategic equipment and infrastructure upgrades throughout our network to increase productivity and value-added capabilities.
For the full year we invested $100 million into modernizing our service and our footprint highlighted by our previously mentioned two major modernization investments enhancement to our online sales presence through the improvements to Ryerson.com, as well as equipment upgrades across our network to enhance productivity.
Additionally, we kick started our transition from the investment cycle to the optimization cycle. As we announced in the first quarter of 2024, we initiated a cost reduction plan to reduce operating expenses. Over 2024 we were able to reduce operating expenses to meet our $60 million annualized reduction target by reducing personnel related expenses, lowering fixed expenses, and creating efficiencies within our network by increasing A1 inventories which allowed us to reduce freight expenses.
With our new assets in place in 2025 and beyond, we will continue to pursue operating efficiency of the business while we provide excellent customer experiences and high service levels.
Finishing off our investment cycle has led to a greater drawdown on our credit facility. This drawdown has occurred at the same time as a slowdown in business conditions which resulted in lower adjusted E dot generation. We ended the quarter above our two times target range for net debt leverage at 3.9 times.
While we remain mindful of our balance sheet and reaffirm the importance of a healthy balance sheet as a central long-term fulcrum balancing growth and financial discipline, we expect being above the two times net leverage over the short term as we look to normalizing our net debt level to our needs while our business strives to generate revenue and cash across recently placed in service assets. With our continued commitment to our long-term range of 0.5 to 2 times net leverage.
In terms of our business cash generation and liquidity profile, in the 4th quarter, we generated $ 92 million of cash flow from our operations. We ended the period with $ 468 million of total debt and $ 440 million of net debt, which decreased from $ 522 million and $ 487 million respectively as of the prior quarter. The company's available global liquidity remains healthy but decreased to$ 451 million in the fourth quarter from $ 491 million in the third quarter.
Turning to shareholder returns, Ryerson returned $6 million in the form of dividends during the fourth quarter. We paid a quarterly dividend of $ 0.1875 per share and have announced a first quarter 25% cash dividend of the same amount. Well, we did not repurchase any shares in the fourth quarter. For the full year 2024, we repurchased 2.5 million shares for approximately $ 51 million in the open market, and we ended the year with $ 38.4 million remaining in the share repurchase authorization.
As we look forward to the first quarter and into 2025, we will continue to prudently evaluate our overall capital allocation. I will now turn the call over to Molly to discuss our financial performance over the fourth quarter and the full year 2024.

Molly Cannon

Thanks, Jim, and good morning, everyone. Turning to review fourth quarter and full year 2024 financial results in the fourth quarter of 2024, Ryerson reported net sales of $1.01 billion which was 10.6% lower than the third quarter of 2024. During the fourth quarter, Ryerson's average selling price, or ASP of $ 2,254 per ton, represented a decrease of 3% quarter over quarter and came in below our guidance expectations. Looking across our product mix, we experienced a 6% lower ASP on carbon products and approximately 1% lower ASPs on aluminium and stainless-steel products.
Gross margin during the quarter expanded by 110 basis points versus the prior quarter to 19%, partially supported by $ 25 million in LIFO income, which was $7 million greater than the previous quarter. Excluding LIFO, gross margin expanded sequentially by 10 basis points to 16.4%, as the cost of goods sold decrease outpaced lower average selling prices for our sales mix. On the expense side, warehousing, delivery, selling, general, and administrative expenses decreased by$ 8.4 million, or 4.3% quarter over quarter to $ 189 million driven by reductions in expenses related to personnel, operating expenses, and delivery expenses. Decreases in expenses were partially offset by increases in professional fees, as well as increases in depreciation and amortization expenses from our capital spending on major projects that were placed into service in the fourth quarter.
Net loss attributable to Ryerson was $ 4.3 million or $0.13 per diluted share compared to a net loss attributable to Ryerson of 6.6 million and a diluted loss per share of $0.20 in the prior quarter. Ryerson achieved a just EBITDA, excluding LIFO, of $10.3 million in the fourth quarter of 2024, which compares to $ 21 million in the prior quarter. For the full year 2024, Ryerson reported net sales of 4.6 billion compared to 5.1 billion in 2023.
Net sales decreased primarily due to lower average selling prices of 10% compared to 2023, with volumes basically flat. The difference in pricing represents approximately $ 500 million lower revenues due to market pricing environment.
Comparing year over year prices, December 2024 prices were 18% lower for carbon or hot rolled coil, 29% lower for stainless steel or LME nickel, and 8% lower for aluminum or LMU aluminum compared to December 2023 prices.
The pricing dynamics translated into 2024, average selling prices being lower across our product mix, with carbon lower by 8%, stainless steel lower by 15%, and aluminium lower by 4%. Due to the declining pricing environment over the year, as well as the lagged nature of our customer contracts, our full year gross margins excluding LIFO contracted by 110 basis points to 17% compared to 18.1% for 2023.
Gross margin during the year contracted by 190 basis points versus the prior year to 18.1%. Due to declining commodity prices impacting our inventory values, we recognized $ 52.5 million in LIFO income, which was 46% or $ 45 million less than the LIFO income recognized in 2023.
On the expense side, warehousing, delivery, selling, general and administrative expenses increased by 7.7 million, or 1% year over year to $ 801 million driven by increases related to recent acquisitions in 2023 and 2024. These increases were partially offset by decreases in personnel, operating, and delivery expenses.
Finally, for the full year 2024, net loss attributable to Ryerson was $8.6 million or $0.26 per diluted share compared to net income attributable to Ryerson of $ 145.7 million and diluted earnings per share of $4.10 in the prior year. Ryerson achieved adjusted EBITDA excluding LIFO of $ 114 million in 2024, which compares to $ 231 million in the prior year. And with this, I'll turn the call back to Eddie.

Edward Lehner

Thank you, Molly. As we stride into 2025, we do so with budding optimism, momentum, and confidence. After all, as Eric Draven said in the movie The Crow, it can't rain all the time. The modernization of our operations, the strategic investments we have made, and the discipline we are applying in our optimization phase are expected to drive sustainable value creation for years to come.
I want to thank my Ryerson colleagues for their hard work and dedicated efforts in helping create a better and stronger Ryerson for the long term amidst a long and grinding downturn which looks to be inflecting toward an improved macro manufacturing environment as we move through the first quarter of 2025.
I could be more positive about what comes next as we further integrate and optimize and begin realizing the earnings potential of investments made over these past three years throughout our facilities, network, and overall business. With that, we look forward to your questions, operator.

Question and Answer Session

Operator

[Operator instruction] And we'll now take a question from Phil Gibbs with KeyBank Capital Markets.

Phil Gibbs

Doesn't rain all the time, Eddie, but it feels so sure feels like it's snowing, all the time right now. Let me get need to get back to that part.

Edward Lehner

I knew that wouldn't get by you. I knew it wouldn't.

Phil Gibbs

Oh, such a such a sharp memorable quote. How are you all thinking about, Capex for 2020, 2025?

Edward Lehner

Yes, So, we're dialling it back to the $50 million to $ 55 million range, and the reason for that more than anything is we've invested so much in Capex, and it's been an extended cap Capex investment cycle that it's really time to operationalize those assets and really integrate them well into the fabric of the network. I mean, if you just look at Centillion, I was just thinking a lot about this, so we moved out of Renton Washington where we had been for a generation and an IKEA store, opened up in time next to our service center. So, at that point, not the best place to conduct service center operations. So we go to Centralia, which is close to the border of Washington and Oregon, and we can service Oregon and Washington really well in a very uncongested manner.
And I don't think there'll be an IKEA there, at least for the duration of my career, and the beauty of that is it's very open. We can reach our service territories, but if you think about the disruption of winding down a service center where you've been for a generation and all your bill material routings and all your inputs go into that facility, and then you take it down and then you move into a brand-new service center and you hire and you train. You build your systems into that facility; you install your equipment. It's a long transition and you take a hit during that period of time. You have to spend money on outside processing costs which impact your margins. You lose your volumes, and you have to build them back up. The good news is this.
We're done with a record investment capex cycle, and we expect to get the returns from that cap X. Other people that might be starting now that maybe didn't do it over the last 345 years, those costs aren't coming down unless there's some type of brutal recession that's around the corner. Those costs aren't coming down, and I think, as you follow the industry the way that I know you do, no one's really had an easy Capex cycle, not even the people that are really, very prolific in doing major Capex.
So, it's been worth it. But I think as we operationalize these assets and they start to cash flow, particularly as the market starts to infect, it's really, it will accrue to the benefit of Ryerson stakeholders, but we just don't need to do as much because we really need to work with what we have and concentrate our efforts there.

Phil Gibbs

Can you take us through some of the progress on University Park since the September showing?

Edward Lehner

Yes, absolutely. So, in September, for example, when we think about University Park, same kind of thing. We get out of Kedzie, which is an antiquated facility near Midway. We go to a brand new service center, state of the art, beautiful. However, you go through a bottoming process and I'm happy to say that he's done a great job. We have a slide in the deck showing the increases in productivity, but also bookings are up by 20% from their bottom.
And so. As customers start to refamiliarize themselves with the service that you can provide now at a lower cost of service so now you're meeting one to two to three day lead times in the market, your quality is excellent, and it's that consistency that your customers really want. So, you can't have high service levels one month and then low service levels the next. You can't have tight short lead times for one month and then have them explode and look like a bad EKG. You really have to. Get that consistency. So, University Park is on a nice glide path now. They're refining their inventory profile, the equipment's working beautifully, and that facility is really rounding up and rounding out nicely.

Phil Gibbs

Thanks Eddie, and can you give us a picture of how Kind of your unit, your core unit gross margins trended through the fourth quarter and are kind of trending into the first quarter, obviously knowing that you do have a portion of your business that lags.

Edward Lehner

Yes, sure. So Q4 was just a wicked shimmy. I mean, nickel, you can see how Nickel got beat up through the year. I mean if you if you go through the commodity reporting that we do, Nickel's been a really rough ride that no Ferris has been a rough ride in general over the last 2.5 years, and we have about 48% exposure to non-Ferris But as we come through Q4 now and you go through that long inventory reset where margins really bottom out, now transactional margins are finally inflecting higher. I'll say this, 2024 is a rough year, so we saw an uncharacteristic compression of spreads even between contract business and transactional business. So historically, you'll see transactional spreads of probably 6% to 10%. Last year they're more like 3% to 5%. So, the competitiveness of the market relative to the demand available compress those margins. So we bought them out in Q4. Now transactional margins really start to expand as we as we are seeing from like mid-January through the present looking at forward pricing curves, spot transactional pricing will continue to improve, and then the contract book of business will start to improve because those lagging prices, we write all that down. Some of our contracts have a 90 days plus a one-month lag, not all of them, but you're well versed in how that works. And so, as those sweep through Q4 and we come up into really Q2 and Q3, we should start to see more favourable resets as we move through the balance of the year. I mean, assuming the trends hold that we're starting to see emerge.

Phil Gibbs

And then lastly for me, how are you all thinking about the tariffs for managing your business around it particularly and maybe some of the areas where you operate outside the US. Thanks.

Edward Lehner

Yes, I mean, I think there'll be some currency headwinds, but when we look at where our revenue is concentrated, so there'll be some currency headwinds in Canada, Mexico, and China, but The majority of our revenue is generated, in the in the US, and so there's probably going to be some I'd say timing differences in terms of how this all plays out, but, in general, as we look at the operating leverage that we have in the company and we have a lot of operating leverage that we carry through with these projects through this investment cycle, we're really well positioned. Our inventory is profiling now as good as it has in three years. Our inventory is really well positioned. Our supply chains are really good.
So we believe as we're kind of looking at these forward pricing curves, and I'm going to kick it over to Nick Webb here. We got a special guest here, Nick Webb. If you've never been out to listen to Cup of Joe on YouTube, it's definitely worth an hour of everybody's time. But you know Nick really, runs our risk management function and he's really on top of these issues. I'm going to let him speak to that a little bit, but as we look at this transition, I would say so from average cost to replacement cost. We've already seen the mass distributors raise their prices. We've seen them be more aggressive pricing to replacement costs. So that's usually a really good indicator that prices are going to start to increase and then even we don't know what's going to happen yet in Canada, Mexico and China, but so far in the US things are looking, they're definitely looking up.

Nick Webb

Yes, hey, Nick Webb here, as it relates to tariffs, I mean, there's going to be a lot that we're going to learn over the next two to three weeks as the tariffs take effect, at least as far as we know right now. But the impacts that it's having on both commodity prices as well as conversion markets. You take aluminium, for example, over the last month or two we've seen Midwest premiums reflect that replacement cost increase. Of about $0.10 to $0.15, similarly on conversions, I'd say similar moves $0.10 to $0.15 we're seeing, mills increase their conversion prices depot inventory prices are going up and inventories are getting a bit depleted, so we have to adjust our own price book to reflect that. And then on the carbon side, as I'm sure you know well, futures have certainly rare ratcheted higher to reflect that potential for the need to increase the replacement cost there because we're still going to be in that importer of steel, so those tariffs remain in effect, that metal is still going to flow in, it's just going to flow into the country at a higher price.

Phil Gibbs

Thanks. Appreciate it, everybody.

Edward Lehner

Thanks, Phil. I appreciate you.

Operator

[operator instruction]
And it appears there are no further telephone questions. I'd like to turn the conference back over to Mr. Lehner for any additional or closing comments.

Edward Lehner

Thank you and thank you for your continued support of an interest in Ryerson. Stay safe, be well, and I look forward to being with you in May We got some questions wait, we got some late arriving questions. All right, stop.

Pratham Dear

So, I'll read this out. The first question is from Curtis Jensen from Robotti and Company. The question is, why is net debt reduction not part of your capital allocation if you are so far out of your leverage target?

Edward Lehner

It is. I think what's maybe it's not explied well enough, but I believe what's implied certainly in our comments, both in the script and in the release, given where we see our Capex budget, given where we think the industry is going, at least based on current indicators and given the Operationalizing our Capex investments, we see the ability to really bring our leverage down as we as we move through 2025 and as things normalize and stabilize across our service center network it's certainly a priority for us.

Pratham Dear

And there was a follow-up question written by Curtis saying, are lease liabilities part of the leverage calculation within your bank agreements?

Edward Lehner

I can take that one, from a bank agreement standpoint, the lease liabilities are not really factored into any kind of a leverage ratio calculation. Our bank agreement specifically on the ABL is more about availability, and the borrowing base.

Pratham Dear

The next question is from Konner Reed from Integrity Asset Management. Connor writes, given generally rising prices, how are you thinking about working capital as a use or benefit to cash flow in 2025?
Sure, I mean historically we can finance $1 of revenue. So, there's usually a ratio of 7 to 1, meaning we'll generate $7 of revenue for a $1 investment in networking capital. So, we're very familiar with how to manage that. We've always managed that well. I would say that our working capital management is really rounded back into form for us. I mean, it's really at our standard, which is a high standard, especially if you compare it to our peers. So, we are really doing a good job again at managing our working capital and I expect that that's going to continue, and we'll still maintain and even enhance that ratio where we can finance more revenue with a $1 incremental increase in that working capital.
And the final question is from Tariq Ali from Anavrin Capital. Tariq writes, Can you discuss progress on the new ERP system? How is it handling the potential complexity of customer orders? How are you monitoring feedback with the branch level employees using it?
Yes, it's a great question. So it was tough. It was really tough. ERP conversions are really hard. I think we spoke to that at length through last year and even the year prior. So, we converted about 40% of our revenue to SAP and a uniform ERP environment throughout our general line business. It's really hard to do. If you look at the Livia companies that have remarked on that over the years. I think it attest to that. Now, having said that, we are through the hardest part of that. We've seen a really strong normalization of operations at all of our service canters that converted to SAP. They're becoming fluent. They're becoming knowledgeable. Those bills of materials are getting mapped effectively into the facilities again and our service levels, and this is how we, this is the tale of the tape when it comes to that question.
Our service levels at standard is our on-time delivery getting better and our lead times coming in and then do we give a consistently high value customer experience? The answer is yes across all that metrics. Still room to improve, but we are certainly through the worst of it, and I think we're starting to see how we can realize the best of it.
Those are all the questions.

Edward Lehner

Alright, I'm going to wait for ten seconds just in case. Just in case we have anybody that wants to get in on the wire.
Okay, so as I was saying, stay safe, be well, and we look forward to being with all of you in May for our first quarter of 2025 earnings release and conference call.
Thank you.

Operator

And once again that does conclude today's conference. We thank you all for your participation. You may now disconnect.