Russel Metals Q2 Earnings Call Highlights

Russel Metals (TSE:RUS) reported record second-quarter revenue and steel service center shipments as stronger metal prices, broad-based demand and contributions from its Kloeckner acquisition lifted profitability.

Executive Vice President and Chief Financial Officer Martin Juravsky said the company’s portfolio changes over recent years have reshaped its earnings profile. Since 2024, Russel Metals has deployed nearly C$700 million toward acquisitions and capital expenditures while selling C$90 million of non-core assets, he said.

“The Q2 results illustrate a new frame of reference for our earnings power when our business portfolio is combined with a favorable market environment,” Juravsky said.

Record revenue and higher margins

Quarterly revenue reached a record C$1.7 billion, up 17% from the first quarter and 37% from a year earlier, according to Juravsky. Adjusted EBITDA rose to C$154 million from C$93 million in the first quarter, while adjusted earnings per share were C$1.63, about double the prior-quarter level.

Reported earnings per share were C$1.43, with results affected by a C$15 million pre-tax mark-to-market expense on stock-based compensation. The company’s adjusted figures exclude that item and a first-quarter gain from the sale of its Delta property.

The steel service center segment recorded its first quarterly shipment volume above 500,000 tons. Shipments increased 6% from the first quarter, and same-store tonnage rose 6% from the second quarter of 2025, excluding Kloeckner contributions.

Steel service center gross margin improved to 22.2% from 20.9% in the first quarter. Gross margin per ton increased C$71 sequentially to C$529, the highest level since 2023. Juravsky attributed most of the margin improvement to the broader market environment, including higher prices and tight supply chains.

Prices realized per ton rose 9% from the first quarter. Overall consolidated gross margin expanded by about 130 basis points from the prior quarter.

• Service center volumes added about C$13 million of EBITDA versus the first quarter.
• Higher margins contributed about C$37 million of EBITDA.
• Higher delivery costs and performance-linked incentive compensation increased costs by C$12 million.
• Energy field stores improved EBITDA by C$5 million, while steel distributors added C$10 million.

Kloeckner integration and investment plans

The former Kloeckner operations generated approximately C$16 million of EBITDA in the second quarter, double their first-quarter contribution. Juravsky said the acquired branches still have a lower margin profile than Russel Metals’ comparable operations, but management is seeing early progress and expects additional benefits from operational changes and capital investments.

He said Kloeckner represented roughly 15% to 20% incremental revenue for Russel Metals and had a gross-margin differential of approximately 300 to 400 basis points versus the company’s established operations. Over time, management expects initiatives at those facilities and broader value-added investments to support 100 to 200 basis points of consolidated gross-margin improvement.

President and Chief Executive Officer John Reid said value-added sales, excluding Kloeckner, have exceeded 30% of the metals service center business. Russel metals aims to raise that figure to 50% over the next five years, including Kloeckner.

The company approved two facility modernization projects, each costing about C$10 million. One will be in Western Canada and the other at a former Kloeckner branch in the U.S. South. Juravsky said capital expenditures were C$18 million in both the first and second quarters but should increase later in 2026 and into 2027. Over a multiyear period, he expects capital spending to average roughly C$100 million annually.

Demand outlook remains favorable

Management said strong market conditions continued into the early part of the third quarter, despite the typical seasonal slowdown around summer holidays. Juravsky said July margins were similar to June levels, which exceeded the second-quarter average.

Reid said steel mills were operating at about 81% capacity and that customer and mill lead times had extended. Customer lead times, historically in a 30- to 45-day range, have moved to roughly 90 to 120 days, he said, while some mill lead times extend into next year.

“We think demand will be very solid and robust through Q3 and into Q4,” Reid said.

The U.S. market remained stronger than Canada during the quarter, though management said Canadian activity began gaining momentum in May and continued to improve through August. Russel Metals said its U.S. operations represented about 54% of revenue and 61% of operating profit in the second quarter.

Reid cited activity across end markets, including agriculture, liquefied natural gas projects, data centers and energy-related activity. He estimated that data-center-related demand currently represents about 8% to 10% of the company’s overall service center and energy field store activity, though he noted the exposure is difficult to quantify because the company supplies multiple components and channels.

Management also said hot-rolled coil prices in Canada had increased for 10 consecutive weeks and were approaching U.S.-equivalent levels after lagging earlier in the year. Plate supply could tighten further as three plate mills undertake planned maintenance outages in August and September, Reid said.

Capital allocation and balance sheet

Russel Metals ended the quarter with C$144 million of net debt and more than C$500 million of liquidity. Net debt declined by about C$26 million from the prior quarter. The company recently extended its bank facilities to 2030, matching the maturity of its term debt.

Return on invested capital was 24% on an annualized basis in the quarter and 23% year to date, according to Juravsky. The company used C$48 million of cash for working capital during the quarter as business activity increased, while total inventory rose approximately C$100 million from March 31, primarily due to higher cost per ton rather than higher tonnage.

Russel Metals returned C$24 million to shareholders through dividends in the second quarter and did not conduct meaningful share repurchases. Its quarterly dividend was raised to C$0.44 per share in June, and the company declared another C$0.44 per-share dividend payable in September.

Since its normal course issuer bid began in 2022, the company has repurchased 8.7 million shares for C$333 million, at an average price of C$38.13 per share. Management said it would continue to assess dividends, buybacks, acquisitions and internal investments independently rather than allocating capital according to a fixed formula.

Russel Metals also agreed to sell its Ontario-based Color Steels division, a non-core residential construction-focused business that generated roughly C$70 million in 2025 revenue. The company expects the sale, which is targeted to close in the second half of 2026, to produce a small gain. It also sold C$4 million of real estate during the second quarter.

About Russel Metals (TSE:RUS)

Russel Metals is one of the largest Metals distribution companies in North America with a growing focus on value-added processing. It carries on business in three segments: Metals service centers, energy field stores and steel distributors. Its network of Metals service centers carries an extensive line of metal products in a wide range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tubular products, stainless steel, aluminum and other non-ferrous specialty Metals.

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