10-Q: Reliance, Inc. Reports Record Tons Sold Amidst Profit Decline and Pricing Volatility in Q2 2025

Reliance, Inc. achieved record tons sold in the second quarter and first half of 2025, yet experienced significant year-over-year declines in net income and earnings per share due to lower average selling prices and increased working capital investment.

Summary

• Net sales for the second quarter of 2025 were $3,659.8 million, a slight increase from $3,643.3 million in the prior year period.
• Net sales for the first six months of 2025 decreased by 2.0% to $7,144.5 million, down from $7,288.1 million in the same period of 2024.
• Net income attributable to Reliance decreased by 12.7% to $233.7 million for Q2 2025 and by 24.0% to $433.4 million for H1 2025.
• Diluted earnings per share (EPS) fell to $4.42 for Q2 2025 (from $4.67) and to $8.15 for H1 2025 (from $9.90).
• Operating income declined by 11.2% to $312.2 million for Q2 2025 and by 21.2% to $586.6 million for H1 2025.
• Tons sold reached record levels, increasing 4.0% in Q2 2025 and 6.4% in H1 2025 compared to the same periods in 2024.
• Average selling price per ton sold decreased by 3.2% in Q2 2025 and 7.8% in H1 2025.
• Gross profit margin remained strong at 29.7% for both the second quarter and first six months of 2025.
• Cash provided by operating activities decreased by $199.1 million to $293.5 million for the first six months of 2025, mainly due to lower net income and increased working capital investment.
• The company increased its quarterly cash dividend to $1.20 per share, payable in August 2025, marking 66 consecutive years of cash dividends.
• Net debt-to-total capital ratio increased to 14.1% as of June 30, 2025, from 10.2% at December 31, 2024.

Sentiment

Score: 4

Explanation: While the company achieved record tons sold and maintained strong gross profit margins, significant year-over-year declines in net income, diluted EPS, operating income, and cash flow from operations, primarily driven by lower average selling prices and increased working capital investment, indicate a challenging financial period. The increase in net debt also adds a negative aspect, outweighing the positive volume and dividend news.

Positives

• Achieved record tons sold in the second quarter and first six months of 2025, increasing 4.0% and 6.4% respectively year-over-year.
• The increase in tons sold surpassed the industry-wide decline of 3.1% reported by the Metals Service Center Institute (MSCI) by over seven percentage points.
• Gross profit margin remained strong at 29.7% for both the second quarter and first six months of 2025, within the estimated sustainable range despite significant metals pricing volatility.
• Same-store SG&A expense per ton declined 2.5% for the first six months of 2025, indicating improved operational leverage.
• Increased the quarterly cash dividend to $1.20 per share, marking 66 consecutive years of cash dividends and the 32nd increase since the 1994 IPO.
• Maintained investment grade credit ratings, enhancing the ability to access capital markets.
• Remained in compliance with all financial maintenance covenants under the Credit Agreement.

Negatives

• Net income attributable to Reliance decreased by 12.7% to $233.7 million for the second quarter of 2025 and by 24.0% to $433.4 million for the first six months of 2025.
• Diluted earnings per share (EPS) decreased by 5.4% to $4.42 for the second quarter of 2025 and by 17.7% to $8.15 for the first six months of 2025.
• Operating income declined by 11.2% to $312.2 million for the second quarter of 2025 and by 21.2% to $586.6 million for the first six months of 2025.
• Net sales for the first six months of 2025 decreased year-over-year due to a lower average selling price per ton sold.
• Average selling price per ton sold decreased by 3.2% in Q2 2025 and 7.8% in H1 2025.
• Cash provided by operating activities decreased significantly by $199.1 million (40.4%) to $293.5 million for the first six months of 2025.
• Increased working capital investment in the first six months of 2025 due to a rising metals pricing environment.
• Net debt borrowings increased by $282.0 million in the first six months of 2025.
• Net debt-to-total capital ratio increased to 14.1% as of June 30, 2025, from 10.2% at December 31, 2024.
• Share repurchases decreased to $333.1 million in H1 2025 from $519.3 million in H1 2024.

Risks

• Changes in domestic and worldwide political and economic conditions, including U.S. and foreign trade policies, inflation, and the likelihood of an economic recession or slowdown.
• Impacts of labor constraints and supply chain disruptions.
• Deteriorations in economic conditions due to tariffs or trade barriers, economic policies, slowing growth, outbreaks of infectious disease, or geopolitical conflicts (e.g., Ukraine and the Middle East) could lead to a decline in demand.
• Potential adverse impact on financial markets and corporate credit markets, which could affect access to financing.
• Product price fluctuations, particularly in carbon steel, which represents a majority of gross sales.
• The possibility that the expected benefits of acquisitions and capital expenditures may not materialize as expected.
• Potential cleanup costs related to an environmental remediation project at former manufacturing operations, although expected to be covered by insurance.
• Routine litigation incidental to the business, though not expected to have a material adverse impact.
• Uncertainty regarding the recoverability of goodwill and other indefinite-lived intangible assets, and long-lived assets, which are critical accounting estimates.

Future Outlook

The company believes its primary sources of liquidity, including funds from operations, cash, and its $1.5 billion revolving credit facility, will be sufficient to meet cash requirements and stockholder return activities for the next 12 months and beyond. It expects to have sufficient liquidity to fund future operating needs and repay debt obligations, including $400.0 million of senior notes due in August 2025. The company anticipates continued access to capital markets due to its investment grade credit ratings and expects liquidity sources to be adequate for operations, capital expenditures, strategic growth, dividends, and share repurchases. The recently enacted One Big Beautiful Bill Act is not expected to materially impact the effective tax rate, but bonus depreciation will affect deferred income taxes and income tax payments.

Management Comments

• "Demand in the second quarter and first six months of 2025 was healthy in the majority of the end markets we serve, most notably in non-residential construction, despite the current uncertain trade environment."
• "Our second quarter of 2025 tons sold were a second-quarter record following record quarterly tons sold in the first quarter of 2025; however, our operating results declined year-over-year mainly due to lower average selling prices."
• "The declining metals pricing trend we experienced throughout 2024 and into February 2025 reversed in March 2025 when trade actions were announced. Given the strong tariff-driven momentum of both demand and metals pricing near the end of the first quarter of 2025, pricing for many carbon steel and aluminum products peaked in April, then declined for the remainder of the second quarter."
• "We believe our broad range of product and service offerings to diverse industries, expansive value-added processing capabilities, focus on smart, profitable growth, and long-standing relationships with our domestic mill suppliers supported the increases in our tons sold."
• "Our gross profit margin of 29.7% for the second quarter and first six months of 2025 remained strong and within our estimated sustainable range despite significant metals pricing volatility."
• "We have paid regular quarterly cash dividends on our common stock for 66 consecutive years."
• "We have increased our quarterly dividend 32 times since our 1994 IPO, with the most recent increase of 9.1% from $1.10 to $1.20 per share effective in the first quarter of 2025."

Industry Context

The company's performance in the second quarter and first six months of 2025 indicates a strong position relative to the broader metals service center industry. While the industry, as reported by the Metals Service Center Institute (MSCI), experienced a 3.1% decline in tons sold in Q2 2025, the company achieved a 4.0% increase in tons sold, significantly outperforming the industry trend. This suggests effective market penetration and demand capture despite a volatile metals pricing environment influenced by trade actions. Healthy demand in non-residential construction is a positive underlying industry trend supporting the company's volume growth.

Comparison to Industry Standards

• The company's 4.0% increase in tons sold in the second quarter of 2025 significantly surpassed the industry-wide decline of 3.1% reported by the Metals Service Center Institute (MSCI) for the same period, indicating strong market share gains or resilience.

Corporate Governance

Legal Proceedings

• Involved in an environmental remediation project related to former manufacturing operations of Earle M. Jorgensen Company (EMJ), with costs expected to be covered by existing insurance policies.
• Not currently a party to any pending legal proceedings other than routine litigation incidental to the business, with no expected material adverse impact on financial position, results of operations, or cash flows.

Stakeholder Impact

• Shareholders: Experienced a decline in net income and EPS, but continue to receive increased quarterly dividends ($1.20/share) and benefit from an ongoing share repurchase program with $1.02 billion remaining authorization.
• Employees: Benefited from inflationary wage adjustments, which contributed to increased SG&A expenses, and participate in stock-based compensation plans.
• Customers: Demonstrated healthy demand, leading to record tons sold, particularly in the non-residential construction sector.
• Creditors: The company's debt increased, and its net debt-to-total capital ratio rose, but it remains in compliance with financial covenants and expects sufficient liquidity to meet debt obligations, including a significant maturity in August 2025.

Next Steps

• Payment of the 2025 third quarter cash dividend of $1.20 per share on August 29, 2025.
• Repayment of $400.0 million of senior notes due in August 2025.
• Continued funding of future operating needs, capital expenditures, strategic growth through acquisitions and internal initiatives, dividends, and common stock repurchases.
• Implementation of new income tax disclosure requirements effective for the 2025 fiscal year.
• Implementation of new disaggregation of income statement expenses disclosure requirements effective beginning with the 2027 fiscal year.

Key Dates

Recommendation

While Reliance, Inc. achieved record tons sold and maintained a strong gross profit margin, the significant year-over-year declines in net income, diluted EPS, and operating income due to lower average selling prices and increased working capital investment are concerning. The increase in net debt also warrants caution. However, the company's consistent dividend increases, ongoing share repurchase program, and strong market position relative to the industry (outperforming MSCI) provide some stability. An investor would likely hold to see if pricing trends stabilize and profitability improves in subsequent quarters, given the underlying demand strength and the company's robust operational capabilities.

Keywords

Metals service centers, Steel, Aluminum, Stainless steel, Alloy, Copper and brass, Toll processing, Metal distribution, Metal processing, Non-residential construction, Earnings, Dividends, Share repurchase, Debt, Working capital, Supply chain, Inflation, Economic conditions, SEC filing, Quarterly report