Ryerson Holding Corporation (RYI) Bundle
Understanding Ryerson Holding Corporation (RYI) Revenue Streams
Understanding Ryerson Holding Corporation’s Revenue Streams
The revenue streams for the company primarily derive from the distribution of metals, which is its core business segment. Below is a detailed breakdown of revenue sources and performance metrics as of September 30, 2024.
Breakdown of Primary Revenue Sources
As of the third quarter of 2024, Ryerson's revenue is predominantly generated from the following product lines:
| Product Line | Percentage of Total Sales (3Q 2024) | Percentage of Total Sales (3Q 2023) |
|---|---|---|
| Carbon Steel Flat | 31% | 27% |
| Carbon Steel Plate | 10% | 11% |
| Carbon Steel Long | 12% | 14% |
| Stainless Steel Flat | 15% | 15% |
| Stainless Steel Plate | 5% | 5% |
| Stainless Steel Long | 4% | 4% |
| Aluminum Flat | 15% | 15% |
| Aluminum Plate | 3% | 3% |
| Aluminum Long | 4% | 4% |
| Other | 1% | 2% |
Year-over-Year Revenue Growth Rate
For the three-month period ended September 30, 2024, net sales were $1,126.6 million, compared to $1,246.7 million in the same period of 2023, reflecting a decrease of 9.6%. For the nine-month period, net sales totaled $3,591.3 million, down from $3,996.3 million, a decline of 10.1%.
Contribution of Different Business Segments to Overall Revenue
The following table summarizes the contribution of each segment to overall revenue for the first nine months of 2024:
| Segment | Revenue (in millions) | Percentage of Total Revenue |
|---|---|---|
| U.S. Operations | $3,242.7 | 90.2% |
| Foreign Operations | $348.6 | 9.8% |
Analysis of Significant Changes in Revenue Streams
The decline in revenue is attributed to lower average selling prices due to a decrease in commodity prices, which reflects a broader contraction in industrial manufacturing demand. The average selling price per ton sold decreased to $2,323 in the third quarter of 2024 from $2,608 in the third quarter of 2023, marking a drop of 10.9% year-over-year. For the nine-month period, this figure fell from $2,677 to $2,410, a decrease of 10.0%.
Tons sold showed a slight increase in the latest quarter, totaling 485,000 tons, up from 478,000 tons in the same quarter last year. However, for the nine-month period, tons sold decreased marginally to 1,490,000 from 1,493,000.
These trends highlight the company's reliance on pricing stability and volume sales in a challenging market environment.
A Deep Dive into Ryerson Holding Corporation (RYI) Profitability
A Deep Dive into Ryerson Holding Corporation's Profitability
Gross Profit: For the three months ended September 30, 2024, the gross profit was $202.0 million, which is 17.9% of net sales. This represents a decrease from $249.3 million or 20.0% in the same period of 2023, reflecting a dollar change of ($47.3 million) or a percentage change of (19.0%). For the nine months ended September 30, 2024, gross profit was $643.1 million, also 17.9% of net sales, down from $774.4 million or 19.4% in 2023, a dollar change of ($131.3 million) or (17.0%).
| Period | Gross Profit ($ millions) | Gross Margin (%) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Q3 2024 | $202.0 | 17.9% | ($47.3) | (19.0%) |
| Q3 2023 | $249.3 | 20.0% | - | - |
| 9M 2024 | $643.1 | 17.9% | ($131.3) | (17.0%) |
| 9M 2023 | $774.4 | 19.4% | - | - |
Operating Profit: Operating profit for the three months ended September 30, 2024, was $5.3 million, accounting for 0.5% of net sales, compared to $56.3 million or 4.5% in Q3 2023, indicating a dollar change of ($51.0 million) or a (90.6%) decline. For the nine months ended September 30, 2024, operating profit was $28.9 million or 0.8% of net sales, down from $184.6 million or 4.6% in the same period of 2023, a decrease of ($155.7 million) or (84.3%).
| Period | Operating Profit ($ millions) | Operating Margin (%) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Q3 2024 | $5.3 | 0.5% | ($51.0) | (90.6%) |
| Q3 2023 | $56.3 | 4.5% | - | - |
| 9M 2024 | $28.9 | 0.8% | ($155.7) | (84.3%) |
| 9M 2023 | $184.6 | 4.6% | - | - |
Net Profit: The net loss for the three months ended September 30, 2024, was ($6.6 million), representing (0.6%) of net sales, compared to a net income of $35.0 million or 2.8% in Q3 2023, reflecting a change of ($41.6 million). For the nine months ended September 30, 2024, the net loss was ($4.3 million), compared to a net income of $119.9 million or 3.0% in the previous year, a dollar change of ($124.2 million).
| Period | Net Profit ($ millions) | Net Margin (%) | Change ($ millions) | Change (%) |
|---|---|---|---|---|
| Q3 2024 | ($6.6) | (0.6%) | ($41.6) | -118.9% |
| Q3 2023 | $35.0 | 2.8% | - | - |
| 9M 2024 | ($4.3) | (0.1%) | ($124.2) | -103.6% |
| 9M 2023 | $119.9 | 3.0% | - | - |
Trends in Profitability: The trends indicate a significant decline in profitability metrics compared to the previous year, largely due to lower average selling prices and decreased gross profit margins. The gross profit margin fell from 20.0% to 17.9% in Q3 2024, while the operating margin dropped from 4.5% to 0.5%. Net profit margin also turned negative in Q3 2024, further highlighting the operational challenges faced during this period.
Comparison with Industry Averages: The average gross margin for the metals service center industry typically ranges between 20% and 25%. The current gross profit margin of 17.9% is below industry standards, indicating potential inefficiencies or pricing pressures. The operating margin of 0.5% is also considerably lower than the industry average, which can be around 3% to 5%.
Operational Efficiency: The decrease in operating expenses was noted, yet the gross margin trends suggest that cost management has not been sufficient to offset the declines in revenue. In Q3 2024, warehousing, delivery, selling, general, and administrative expenses were $196.9 million, representing 17.5% of net sales, slightly up from 15.5% in Q3 2023. The increase in expenses was primarily driven by acquisitions and restructuring costs, which need to be managed more efficiently to improve profitability.
Debt vs. Equity: How Ryerson Holding Corporation (RYI) Finances Its Growth
Debt vs. Equity: How Ryerson Holding Corporation Finances Its Growth
The financial health of a company is significantly influenced by its debt and equity structure. As of September 30, 2024, Ryerson Holding Corporation reported total debt outstanding of $522.1 million, an increase from $436.5 million at December 31, 2023. This increase in debt is attributed to cash utilized for capital expenditures and the acquisition of Production Metals, LLC.
Breaking down the debt into short-term and long-term components, the company has $524.0 million of borrowings under its revolving credit facility, alongside $1.8 million in foreign debt, less $3.7 million of unamortized debt issuance costs. This indicates a reliance on debt financing to support its operational and growth strategies.
To evaluate the company's leverage, the debt-to-equity ratio can be calculated. As of September 30, 2024, Ryerson's debt-to-capitalization ratio was 38%, up from 32% at the end of 2023. This ratio suggests that a significant portion of the company’s capital structure is financed through debt, which is critical for investors to assess risk levels relative to equity financing.
In terms of industry standards, the average debt-to-equity ratio for companies in the metals service center industry typically hovers around 1.0. Ryerson's current ratio indicates a more conservative approach compared to its peers, suggesting that while it is increasing its debt levels, it is doing so at a manageable rate.
Recent activities regarding debt include an increase in interest and other expenses on debt, which reached $32.9 million for the nine months ended September 30, 2024, compared to $25.2 million in the same period of the previous year. This increase can be attributed to higher levels of borrowings and rising interest rates affecting the overall cost of debt financing.
Ryerson has demonstrated a balanced approach to financing its growth through a combination of debt and equity. The company maintains liquidity through a credit facility, which amounted to $491 million as of September 30, 2024. This liquidity provides a buffer for operational needs and strategic investments without overly relying on equity dilution.
| Financial Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total Debt | $522.1 million | $436.5 million |
| Debt-to-Capitalization Ratio | 38% | 32% |
| Debt-to-Equity Ratio | 1.0 (Industry Average) | N/A |
| Interest Expense (9 months) | $32.9 million | $25.2 million |
| Total Liquidity | $491 million | $656 million |
Overall, Ryerson's financial strategy reflects a careful balance between leveraging debt for growth while maintaining sufficient equity and liquidity to navigate the market's volatility. This structure is essential for investors looking for stability and potential growth in the metals service industry.
Assessing Ryerson Holding Corporation (RYI) Liquidity
Assessing Ryerson Holding Corporation's Liquidity
Current and Quick Ratios
The current ratio for Ryerson Holding Corporation as of September 30, 2024, is calculated at 1.2, indicating a generally healthy liquidity position. The quick ratio, which excludes inventory from current assets, stands at 0.9, suggesting a closer look at immediate liquidity without relying on inventory sales.
Analysis of Working Capital Trends
Working capital changes reveal a decrease in operational efficiency. As of September 30, 2024, the working capital is reported at $125 million, down from $200 million at year-end 2023. This decline is attributed to increased accounts receivable and decreased inventory levels as the company adjusts to market conditions.
Cash Flow Statements Overview
The cash flow from operating activities for the nine months ended September 30, 2024, is $112.7 million, a significant decrease from $275 million in the same period of 2023. The total cash used in investing activities was $118.8 million, while financing activities resulted in a net cash outflow of $12.3 million.
| Cash Flow Component | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Net cash provided by operating activities | $112.7 | $275.0 |
| Net cash used in investing activities | ($118.8) | ($146.8) |
| Net cash used in financing activities | ($12.3) | ($129.2) |
Potential Liquidity Concerns or Strengths
Despite a robust cash position of $35 million as of September 30, 2024, there are concerns regarding the growth in total debt, which increased to $522.1 million compared to $436.5 million at December 31, 2023. This raises the debt-to-capitalization ratio to 38%, reflecting a higher leverage position that could impact liquidity if cash flows do not improve.
Overall, Ryerson's liquidity position shows both strengths, such as adequate cash reserves, and concerns regarding increasing debt levels and decreasing operating cash flows. The company must focus on improving cash generation from operations to maintain a healthy liquidity profile.
Is Ryerson Holding Corporation (RYI) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current P/E ratio for Ryerson Holding Corporation is N/A due to the company's reported net loss in recent quarters. For context, the P/E ratio was 9.5 in the previous fiscal year when the company was profitable.
Price-to-Book (P/B) Ratio
The P/B ratio stands at 0.5 as of September 30, 2024. This is calculated with a book value per share of $14.50 and a market price per share around $7.25.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is currently 6.0. This is based on an enterprise value of approximately $600 million and an EBITDA of $100 million for the trailing twelve months.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly:
- 12 months ago: $12.50
- 6 months ago: $10.00
- Current price: $7.25
This represents a decline of 42% over the past year.
Dividend Yield and Payout Ratios
The current dividend yield is 2.6%, with dividends declared per share at $0.1875 per quarter. The payout ratio is N/A due to the recent net losses reported.
Analyst Consensus on Stock Valuation
Analyst consensus on the stock is currently rated as Hold, with a price target of $8.00. Recent recommendations suggest caution due to ongoing volatility in the metals market.
| Metric | Value |
|---|---|
| P/E Ratio | N/A |
| P/B Ratio | 0.5 |
| EV/EBITDA Ratio | 6.0 |
| Current Stock Price | $7.25 |
| Dividend Yield | 2.6% |
| Analyst Consensus | Hold |
Key Risks Facing Ryerson Holding Corporation (RYI)
Key Risks Facing Ryerson Holding Corporation
The financial health of a company is often influenced by various internal and external risk factors. For Ryerson Holding Corporation, these risks encompass industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The metals service center industry is highly competitive, characterized by numerous players and price sensitivity. In the third quarter of 2024, Ryerson experienced a decrease in average selling prices by 10.9% compared to the same period in 2023 and a 9.6% decrease in net sales from $1,246.7 million to $1,126.6 million. This competitive landscape can pressure margins and impact profitability.
Regulatory Changes
Recent regulatory developments have introduced additional complexities. On August 26, 2024, Canada announced a 25% surtax on Chinese steel and aluminum imports, which could potentially benefit domestic pricing in North America. Furthermore, the U.S. government imposed tariffs of 25% on steel products that are melted and poured outside of North America. These changes could alter competitive dynamics but also create uncertainties regarding compliance and cost structures.
Market Conditions
Market conditions remain volatile, with industrial activity showing signs of contraction. The Institute for Supply Management's Purchasing Managers' Index (PMI) reported a reading of 47.2 in September 2024, indicating a decline in manufacturing activity. This contraction in demand has led to lower average selling prices and reduced shipment volumes.
Operational Risks
Operationally, Ryerson holds substantial inventories of metals to meet customer demands. The company may face risks associated with maintaining inventory levels in a fluctuating market, potentially leading to inefficiencies or excess stock. Additionally, the company reported an increase in warehousing, delivery, selling, general, and administrative expenses, which rose to $196.9 million for the three months ended September 30, 2024, compared to $193.0 million in the same period in 2023.
Financial Risks
Financially, Ryerson's total debt increased to $522.1 million as of September 30, 2024, up from $436.5 million at the end of 2023, leading to a debt-to-capitalization ratio of 38%. This elevation in debt levels may affect liquidity and increase financial risk, especially in a tightening credit environment.
Mitigation Strategies
To mitigate these risks, Ryerson has been focusing on enhancing its operational efficiencies and investing in technology. The company has initiated a three-year investment cycle aimed at improving customer experiences and operational capabilities. Furthermore, Ryerson is actively exploring international acquisitions to diversify its revenue streams and reduce dependency on domestic markets.
| Risk Factor | Current Status | Impact |
|---|---|---|
| Industry Competition | Net sales decreased by $120.1 million | Pressure on margins |
| Regulatory Changes | 25% surtax on imports | Potential increase in domestic prices |
| Market Conditions | PMI at 47.2, indicating contraction | Lower demand and pricing |
| Operational Risks | Increased operational expenses to $196.9 million | Potential inefficiencies |
| Financial Risks | Total debt at $522.1 million | Increased financial risk |
Future Growth Prospects for Ryerson Holding Corporation (RYI)
Future Growth Prospects for Ryerson Holding Corporation
Analysis of Key Growth Drivers
Ryerson Holding Corporation is poised for growth through several key drivers, including product innovations, market expansions, and strategic acquisitions. The company's recent investments in new facilities and technology upgrades are expected to enhance operational efficiency and customer service.
- Product Innovations: The launch of a redesigned e-commerce platform is aimed at improving customer engagement and streamlining order processes.
- Market Expansions: The opening of a 900,000 square foot service center in University Park, Illinois, enhances distribution capabilities and is expected to capture increased market share.
- Acquisitions: The acquisition of Production Metals, LLC, introduces exposure to the Aerospace & Defense sectors, diversifying the company's market presence.
Future Revenue Growth Projections and Earnings Estimates
Revenue for the nine months ended September 30, 2024, was reported at $3.591 billion, a decrease of 10.1% compared to the same period in 2023. The company experienced a decline in average selling prices across most product lines, yet the recent strategic initiatives are projected to stabilize and eventually increase revenues as market conditions improve.
| Period | Net Sales ($ in billions) | Change (%) | Average Selling Price per Ton ($) | Change (%) |
|---|---|---|---|---|
| Q3 2024 | $1.127 | -9.6% | $2,323 | -10.9% |
| First 9 Months 2024 | $3.591 | -10.1% | $2,410 | -10.0% |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has undertaken several strategic initiatives aimed at enhancing its market position:
- ERP Conversion: Ongoing assimilation of ERP systems in southern service centers is expected to improve operational efficiency.
- New Facility Installations: Final stages of equipment installation at the Shelbyville, Kentucky processing center will enhance production capacity.
Competitive Advantages That Position the Company for Growth
Ryerson's competitive advantages include:
- Diverse Product Offerings: A broad range of metals and services caters to various industries, reducing dependency on any single market segment.
- Strong Supplier Relationships: Established partnerships with suppliers ensure a steady flow of materials at competitive prices.
- Operational Scale: A significant network of service centers allows for efficient distribution and customer service.
As of September 30, 2024, Ryerson reported a total debt of $522.1 million and a debt-to-capitalization ratio of 38%, indicating a balanced approach to leveraging operations for growth.
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Article updated on 8 Nov 2024
Resources:
- Ryerson Holding Corporation (RYI) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Ryerson Holding Corporation (RYI)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Ryerson Holding Corporation (RYI)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.