Ryerson Holding Corporation Q2 FY2026 earnings call

• Merger Integration Progress

  • This was the first full quarter of combined operations following the Ryerson and Olympic Steel merger, with synergy realizations meeting guidance, and additional commercial growth opportunities identified ahead of expectations.
  • Teams are coordinating order flow strategically across the combined network: aligning lower-margin contract business at well-positioned Olympic facilities to free up capacity at Ryerson facilities for higher-margin, quicker-turn transactional work, improving overall facility utilization and earnings quality.
  • Asset sharing and network optimization has already delivered cost reductions, such as moving Integrity Stainless storage to an existing internal facility to cut external and logistics costs.
  • A network consolidation project in Mexico is already complete, generating ~$1.3 million in annual run-rate synergies; a Connecticut project consolidating Olympic Milford and Ryerson specialty alloys is on track to complete in Q1 2027.

• Demand and Market Conditions

  • Overall manufacturing demand has improved asymmetrically, with 6 consecutive months of expanding ISM manufacturing PMI. Strength is heavily concentrated in AI, aerospace, defense, semiconductor, and electrification end markets, while agriculture, consumer discretionary, and residential construction are still recovering.
  • Year-to-date North American tonnage increased 49% year over year (5.8% on a same-store basis), outpacing industry growth of 2.9% and indicating market share gains.
  • Customers increasingly prioritize product availability, reliability, processing speed, and processing capabilities, all areas where the combined company's expanded scale improves competitive positioning.

• Financial Performance

  • Reported net income was $15.5 million ($0.30 per diluted share), impacted by a $15.7 million one-time purchase accounting adjustment. Adjusted net income excluding one-time items was $27.6 million ($0.52 per diluted share).
  • Adjusted EBITDA excluding LIFO was $101 million, exceeding the guidance range of $88-$92 million. Adjusted gross margin excluding LIFO expanded 20 basis points sequentially to 19.3%.
  • WDSG&A expenses improved operating leverage: per-ton WDSG&A decreased to $398 per ton total company (from $404 in Q1) and $402 per ton same-store (from $416 in Q1), and fell as a percentage of same-store sales from 16.8% to 15.2%.
  • Inventory days of supply decreased 1 day to 73 days, within the company's 70-75 day target range. Leverage decreased from 5.1x to 4.0x quarter over quarter, driven by higher trailing 12-month EBITDA.

The combined Ryerson and Olympic Steel enterprise reports a 40%/60% split between transactional and contract (program) business as of Q2 2026. Net sales for the total company in Q2 2026 were $2.01 billion, an increase of 28.1% sequentially, with 800,000+ tons shipped (a 22.6% increase from Q1 2026). Same store revenue was $1.44 billion, up 11.5% sequentially, with 4% tons shipped growth and 7.2% higher average selling prices. Olympic Steel contributed $23.5 million to adjusted EBITDA excluding LIFO, up from $12.5 million in the 6-week sub-period of Q1 2026. Demand tied to data center and power generation projects represented approximately 7% of Q2 2026 revenue, growing 30% sequentially. Among end markets, climate delivered double-digit same-store volume growth, commercial transportation saw solid single-digit growth, agriculture and fabrication/welding improved modestly, and consumer products volumes were flat quarter over quarter. Transactional business leads year-to-date growth with double-digit gains, while contractual business has seen early year-over-year improvement in Q3 2026 for the first time since 2022.

• Q3 2026 Financial Guidance:

  • Volumes are expected to be 3% to 5% lower than Q2 2026 in line with normal seasonal trends. Average selling prices are expected to be flat to +2%, as stable carbon pricing will offset recent corrections in stainless and aluminum prices. Total Q3 revenue is guided to $1.87 to $1.95 billion.
  • Excluding remaining purchase accounting adjustments, net income is expected to be $19 to $21 million (37 to 40 cents per diluted share), with LIFO expense of $16 to $18 million. Adjusted EBITDA excluding LIFO is guided to $88 to $92 million, with Olympic Steel contributing $21 to $23 million.
  • $5 to $7 million of additional inventory purchase accounting adjustments will be recognized through the end of 2026 as remaining acquired inventory is sold.

• Synergy Guidance:

  • Q2 2026 realized $5 million in synergies. Q3 2026 synergy realization is expected to be $13 to $14 million, bringing the annual run rate to $52 to $56 million, exceeding the original first-year target of $40 million annual run rate synergies ahead of schedule.
  • The company remains confident it will hit the total two-year target of $120 million in annual run rate synergies. Synergy breakdown for Q3: ~$6.5 million from procurement, ~$3 million from efficiency and public company cost savings, ~$2 million from commercial enhancement, ~$2 million from network optimization.

• Capital Allocation and Leverage:

  • Full-year 2026 capital expenditures are expected to remain ~$75 million, with $50 million in same-store CapEx.
  • Working capital requirements are expected to moderate in Q3 2026, supporting free cash flow generation and net debt reduction. The company expects to move closer to a 3x net leverage ratio by the end of 2026.
  • The full $100 million share repurchase authorization remains available through April 2028; the board declared a steady quarterly dividend of 18.75 cents per share.

• Inflationary delivery cost pressures built through Q2 2026 as fuel prices rose and truck capacity tightened. There is a lag in passing these higher costs through to contract (program) customers due to contractual terms, creating near-term margin pressure.
• Supply-side tensions: extended mill lead times, low distributor inventories, domestic production capacity constraints, and heightened geopolitical turmoil complicate customer backlog turnover and efficient resource allocation across the network.
• The 700-800 basis point margin gap between transactional and program business is wider than the historical 600-700 basis point average, dragging overall near-term margin performance. Most program contracts are index-based with pricing that lags current market prices by one quarter, so margin improvement from rising carbon prices will take additional quarters to fully flow through.
• Non-ferrous (aluminum and stainless) prices saw an approximately 15% price reversion at the end of Q2 and into early Q3 2026, which will create transitional margin headwinds as existing inventory cycles through the business in Q3.
• Recovery across more cyclical end markets (agriculture, consumer discretionary, residential construction) remains slow and uneven, with agriculture demand still expected to be subdued in the near term and consumer purchasing still constrained by higher-for-longer interest rates.

Q: Where is Ryerson seeing transactional market share gains, and what is the current split between transactional and contract business? / A: Transactional growth is broad-based, driven by strong service levels (targeting 95% availability for core inventory items), well-positioned inventory across the expanded network, and matured technology investments that improve quoting speed and bandwidth. The combined company currently has a 40% transactional / 60% contract split, with a target to shift to 45%/55% to capture higher transactional margins. By moving contract business to facilities optimized for high-volume work, Ryerson frees capacity for higher-margin transactional business, improving overall portfolio margins.

Q: The 700-800 basis point margin gap between transactional and program business is wider than historical levels—what is driving this lag in program margins, and can the company improve it? / A: The gap is wider than the historical 600-700 basis point average largely due to timing: most program contracts use index pricing that is set a quarter in arrears, so recent rising carbon prices have not yet fully flowed through to contract pricing. Moving more contract business to Olympic facilities that can support full shifts and higher asset utilization will also improve contract margins, while freeing Ryerson capacity for transactional work. These dynamics are transitory, and margins will catch up as pricing resets.

Q: Why aren't rising freight and fuel costs being fully passed through to customers immediately, and what is the outlook for these cost pressures? / A: There is a natural lag for pass-through on contract business, as contractual terms only allow fuel surcharge and price adjustments on set schedules. Spot/transactional business has full flexibility to adjust pricing immediately for higher costs. The company is leveraging combined network synergies to reduce overall logistics costs by optimizing shipping routes and reducing unnecessary miles, and synergy gains are offsetting near-term lagged cost pressure.