RELIANCE, INC. Q1 FY2025 earnings call

Key Points

• Delivered stronger-than-expected first quarter 2025 results with record tons shipped, 140 basis points Q/Q gross profit margin increase, and non-GAAP EPS of $3.77.
• 2025 capital expenditure budget is $325M, expected cash outlay $375-$400M including carryover projects.
• Benefited from 2024 acquisitions, still positioned for strategic acquisitions but pace slowed due to macroeconomic uncertainty.
• Funded stockholder return activities of $318M.

Demand and Pricing

• Record tons sold: Q1 tons sold increased 12.8% Q/Q and 9% Y/Y same-store, outperforming industry decline. Average selling price down 1.2% Q/Q due to product mix and tons growth.

End Market Trends

• Nonresidential construction: Strong demand with carbon steel products showing growth, pricing improvements in March-April continued.
• General manufacturing: Diversified with some sectors (industrial machinery, military) strong, others (consumer products, heavy ag) weaker, with some demand pull forward.
• Aerospace: Commercial aerospace demand up sequentially, defense-related stable.
• Tolling: Processed tons consistent Y/Y. Semiconductor: Shipments under pressure due to excess inventories.

Nonresidential construction represented roughly one-third of Q1 2025 sales, with carbon steel tubing, plate, and structural products showing significant year-over-year and sequential shipment growth. General manufacturing also made up roughly one-third of total sales, with shipments increasing year-over-year and sequentially. Aerospace products comprised approximately 10% of Q1 2025 sales, with commercial aerospace demand increasing sequentially and defense-related aerospace/space programs remaining strong. Tolling business represented ~4% of Q1 2025 sales, with processed tons relatively consistent with Q1 2024. Semiconductor industry shipments were under pressure in Q1 with excess inventories in the supply chain.

• 2025 LIFO estimate revised to $100M expense from prior $60M income due to higher carbon steel and aluminum costs.
• Q2 2025: Tons sold expected down 1%-up 1% Q/Q, up 3%-5% Y/Y; average selling price up 1%-3% Q/Q; FIFO gross profit margin expected to expand; non-GAAP EPS range $4.50-$4.70 (inclusive of $0.35 per share LIFO expense).

• Macro-economic uncertainty affecting acquisition pace. - Limited exposure to direct imports in cost of sales (over 95% from domestic producers), but some CapEx from foreign suppliers with potential tariff impact needing mitigation.

Q: About exposure to imports in COGS and CapEx A: Karla Lewis states over 95% of purchases are from domestic producers for cost of sales, and CapEx has a small percentage from foreign suppliers with efforts to mitigate tariff impact Q: LIFO calculation change related to aerospace A: Arthur Ajemyan says relatively unchanged for aerospace, with reassessment ongoing based on price changes Q: Onshoring and M&A opportunities A: Karla Lewis mentions selective fabrication opportunities and slower M&A activity due to market uncertainty, with smaller to midsize deals being more common Q: Same-store sales and market share vs acquisitions A: Karla Lewis says 3.5% of consolidated tons increase from 2024 acquisitions, ~5.5% from same-store growth, driven by end market strength and market share gains Q: Inventory levels and steel market lethargy A: Karla Lewis talks about inventory management based on shipment levels, with inventory turns slightly above goal, and focus on own business despite broader steel market trends