Ryerson Profit Climbed as Olympic Steel Lifted Scale
Adjusted EBITDA excluding LIFO rose to $101.0 million as acquisition contributions and same-store gains broadened.
Ryerson Holding (RYZ), the metals processor and distributor, more than tripled second-quarter net income as Olympic Steel added scale and the legacy business increased prices and shipments. Net income rose to $15.5 million, or $0.30 a diluted share, from $4.5 million, or $0.10 a share, in the first quarter and $1.9 million, or $0.06 a share, a year earlier.
Revenue increased 28.1% sequentially to $2.01 billion after rising 41.8% in the first quarter. The latest period included a full quarter of Olympic Steel, compared with six weeks in the prior period. Excluding the acquisition, same-store revenue rose 11.5% sequentially to $1.44 billion and increased 23.3% from a year earlier, reflecting gains in both pricing and volume.
The underlying business strengthened alongside the acquisition contribution. Same-store adjusted EBITDA excluding LIFO increased to $77.5 million from $54.9 million, while Olympic Steel contributed $23.5 million, above management's expectation of $21 million to $23 million. Total adjusted EBITDA excluding LIFO rose 49.9% sequentially and 124.4% from a year earlier, with its margin expanding to 5.0%.
Carbon steel led the product gains, with revenue rising 38.0% sequentially to $1.09 billion as shipments increased 25.3% and pricing rose 10.1%. Aluminum revenue advanced 24.0%, while stainless-steel revenue increased 18.1%, with both categories benefiting from higher volumes and prices.
Reported gross margin contracted 70 basis points sequentially to 17.7%, reversing the first quarter's expansion, as Ryerson recorded a $15.7 million purchase-accounting charge tied to acquired Olympic Steel inventory. Excluding LIFO and that charge, gross margin expanded 20 basis points to 19.3%. Operating expenses also declined as a share of revenue despite the merger, and Ryerson realized about $5 million of synergies during the quarter.
For the third quarter, Ryerson expects seasonal shipment declines of 3% to 5% and pricing ranging from flat to 2% higher. The company projects revenue of $1.87 billion to $1.95 billion and adjusted EBITDA excluding LIFO of $88 million to $92 million. It expects pressure from higher-cost inventory, customer price lags and lower nonferrous prices, along with another $5 million to $7 million of purchase-accounting inventory charges through year-end.
Ryerson now expects third-quarter merger synergies of $13 million to $14 million, an annualized pace above its $40 million first-year target, while retaining its $120 million two-year goal. The company repurchased about 39,000 shares for $0.8 million during the quarter, leaving its new $100 million authorization fully available, as net debt rose to $913.3 million but leverage improved to 4.0 times trailing adjusted EBITDA excluding LIFO.