10-Q: Ryerson Holding Reports Q2 Loss Amidst Declining Metal Prices and Soft Industrial Demand

Ryerson Holding Corporation experienced a net loss for the first six months of 2025, driven by lower metal commodity prices and contracting industrial manufacturing demand, despite some operational improvements and increased liquidity.

Summary

• Net sales for the three months ended June 30, 2025, decreased by 4.6% to $1,169.3 million from $1,225.5 million in the prior year.
• Net sales for the six months ended June 30, 2025, decreased by 6.5% to $2,305.0 million from $2,464.7 million in the prior year.
• Gross profit for the three months ended June 30, 2025, was $209.4 million (17.9% of net sales), down from $223.5 million (18.2% of net sales) in the prior year.
• Gross profit for the six months ended June 30, 2025, was $413.8 million (18.0% of net sales), down from $441.1 million (17.9% of net sales) in the prior year.
• Operating profit for the three months ended June 30, 2025, significantly decreased by 74.6% to $5.8 million from $22.8 million in the prior year.
• Operating profit for the six months ended June 30, 2025, decreased by 65.7% to $8.1 million from $23.6 million in the prior year.
• Net income attributable to Ryerson Holding Corporation for the three months ended June 30, 2025, was $1.9 million, down from $9.9 million in the prior year.
• Net loss attributable to Ryerson Holding Corporation for the six months ended June 30, 2025, was $3.7 million, compared to net income of $2.3 million in the prior year.
• Basic and diluted earnings per share for the three months ended June 30, 2025, were $0.06, down from $0.29 in the prior year.
• Basic and diluted loss per share for the six months ended June 30, 2025, were $0.12, compared to earnings per share of $0.07 in the prior year.
• LIFO expense was $13.2 million in Q2 2025 compared to LIFO income of $10.0 million in Q2 2024, and $20.0 million for the first six months of 2025 compared to LIFO income of $9.0 million for the first six months of 2024.
• Average selling prices per ton decreased by 3.2% for the three months and 6.1% for the six months ended June 30, 2025, compared to the prior year periods.
• Tons sold decreased slightly by 1.4% for the three months and 0.4% for the six months ended June 30, 2025, compared to the prior year periods.
• Net cash used in operating activities improved to $17.4 million for the six months ended June 30, 2025, from $21.9 million in the prior year.
• Total debt outstanding increased to $510.2 million at June 30, 2025, from $467.4 million at December 31, 2024.
• Total liquidity, including cash and credit facility availability, increased to $485 million at June 30, 2025, from $451 million at December 31, 2024.
• Net debt increased to $479 million at June 30, 2025, from $440 million at December 31, 2024.

Sentiment

Score: 3

Explanation: The company reported a significant decline in net sales, operating profit, and a shift to a net loss for the six-month period, indicating a challenging financial performance. While there are some operational positives like market share gain and improved operating cash flow, the overall profitability metrics are concerning amidst a soft industrial market.

Positives

• Net cash used in operating activities improved by $4.5 million, from $21.9 million in the first six months of 2024 to $17.4 million in the first six months of 2025.
• Total liquidity increased to $485 million at June 30, 2025, from $451 million at December 31, 2024.
• Ryerson's North American volumes decreased by 1.1% in the first six months of 2025, outperforming the MSCI North American service center volumes which decreased by 2.7%, implying market share growth.
• Quarterly sequential volumes (Q2 2025 vs Q1 2025) increased by 0.2%, with relative strength in consumer durable sectors (appliances, recreational vehicles) and HVAC.
• Capital expenditures decreased significantly to $17.9 million for the six months ended June 30, 2025, from $44.5 million in the prior year, indicating the completion of a three-year investment cycle.
• Interest and other expense on debt decreased in both the three-month and six-month periods ended June 30, 2025, primarily due to lower interest rates on the revolving credit facility.

Negatives

• Net sales decreased by 4.6% for the three months and 6.5% for the six months ended June 30, 2025, compared to the prior year periods.
• Operating profit declined significantly by 74.6% for the three months and 65.7% for the six months ended June 30, 2025, compared to the prior year periods.
• The company reported a net loss attributable to Ryerson Holding Corporation of $3.7 million for the six months ended June 30, 2025, compared to net income of $2.3 million in the prior year.
• Basic and diluted earnings per share turned into a loss of $0.12 for the six months ended June 30, 2025, from earnings of $0.07 in the prior year.
• LIFO expense increased significantly to $13.2 million in Q2 2025 from LIFO income of $10.0 million in Q2 2024, and to $20.0 million for the first six months of 2025 from LIFO income of $9.0 million in the prior year, negatively impacting gross profit.
• Average selling prices per ton decreased across all carbon and stainless product lines compared to the year-ago periods.
• U.S. industrial activity remains soft, with the Institute for Supply Management's Purchasing Managers Index (PMI) below the growth threshold of 50 for four consecutive months.
• Experienced quarterly sequential volume contraction in construction equipment and commercial ground transportation sectors.
• Total debt increased to $510.2 million at June 30, 2025, from $467.4 million at December 31, 2024, mainly due to increased working capital requirements.

Risks

• The metals service center industry is cyclical, volatile in demand and pricing, and difficult to predict.
• Declining metals prices can lead to lower sale prices, gross profits, and earnings as existing inventory is sold.
• Tariffs on steel and aluminum imports, and reciprocal tariffs from other governments, introduce significant uncertainty to supply chains and could impact financial position, results of operations, and cash flows.
• Events of default under the Ryerson Credit Facility could lead to acceleration of outstanding amounts and other remedies by lenders, potentially having a material adverse effect on the company.
• Changes in returns on pension plan assets, discount rates, and regulatory requirements can affect pension funding, cash flows, and financial condition.
• The full financial impact of the recently enacted One Big Beautiful Bill Act on deferred tax assets and liabilities is still being assessed and could affect future financial statements.

Future Outlook

The company anticipates a minimum required pension contribution funding of approximately $4.9 million for the remaining six months of 2025. The full financial impact of the 'One Big Beautiful Bill Act' on deferred tax assets and liabilities is still being assessed, with effects expected to be reflected in the third quarter ending September 30, 2025, though no material impact on future results of operations from tax rates is anticipated.

Management Comments

• Management uses adjusted net income (loss) and adjusted diluted earnings (loss) per share figures to assess year-over-year performance excluding non-recurring transactions.
• Management believes that cash flow from operations and proceeds from the Ryerson Credit Facility will provide sufficient funds to meet contractual obligations and operating requirements in the normal course of business.
• Management intends to permanently reinvest earnings held in foreign subsidiaries outside the U.S. and does not currently foresee a need to repatriate them.

Industry Context

The metals service center industry is characterized by cyclicality, volatile demand, and unpredictable pricing. Key steel industry economic indicators, such as the Institute for Supply Management's Purchasing Managers Index (PMI), reported soft industrial activity, remaining below the growth threshold of 50 for four consecutive months, though June showed a slowing rate of contraction. U.S. Industrial Production saw a modest rise of 0.3% year-over-year in June. The broader North American service center volumes, as reported by MSCI, decreased by 2.7% in the first six months of 2025, indicating a challenging market environment.

Comparison to Industry Standards

• Ryerson's North American volumes decreased by 1.1% in the first six months of 2025, outperforming the Metal Service Center Institute (MSCI) North American service center volumes which decreased by 2.7% over the same period, indicating market share growth.
• On a quarterly sequential basis, Ryerson's North American volume decrease of 1.2% was better than MSCI volumes which decreased by 2.1%, further implying market share growth.
• Ryerson's second quarter volumes were relatively consistent with the first, up 0.2%, showing resilience compared to the broader industry trend of contraction.
• The company experienced relative strength among customers in consumer durable sectors, specifically appliances and recreational vehicles, and also in the HVAC sector, contrasting with volume contraction in construction equipment and commercial ground transportation sectors.

Corporate Governance

Legal Proceedings

• No material changes to contingencies and legal matters from those disclosed in the Company's 2024 Form 10-K.

Stakeholder Impact

• Shareholders: Experienced a net loss and negative diluted EPS for the six-month period, and a decrease in net income for the three-month period, indicating reduced profitability. Dividends were maintained at $0.1875 per share.
• Employees: Headcount reductions in 2024 led to severance costs and pension curtailment gains. The freezing of the Ryerson Canada Salaried Pension Plan will affect future employee benefits.
• Customers: Subject to volatility in metal prices and trade policy uncertainty, which can impact supply chains and pricing.
• Creditors: Total debt increased, but liquidity also improved, and the company believes it has sufficient funds to meet obligations. The Ryerson Credit Facility has covenants and events of default that could impact creditors if triggered.

Next Steps

• The company anticipates a minimum required pension contribution funding of approximately $4.9 million for the remaining six months of 2025.
• Management will continue to monitor developments and expects to reflect the impact of the One Big Beautiful Bill Act in its financial statements for the third quarter ending September 30, 2025.
• Future quarterly dividends, if any, will be subject to Board approval.

Key Dates

Recommendation

The company's financial performance for the first half of 2025 shows a significant decline in revenue and profitability, resulting in a net loss, primarily due to lower metal prices and soft industrial demand. This warrants caution. However, Ryerson demonstrated operational resilience by gaining North American market share in a contracting industry and improved its cash flow from operating activities. Liquidity also increased, providing some financial stability. Given the challenging market conditions, the company's ability to maintain market share and improve cash flow from operations suggests underlying operational strength. A 'hold' recommendation is appropriate to observe if these operational improvements can translate into renewed profitability as market conditions potentially stabilize, while acknowledging the current headwinds.

Keywords

Metals distribution, Steel, Aluminum, Carbon steel, Stainless steel, Industrial metals, SEC filing, 10-Q, Financial results, Earnings, Revenue, Profitability, Liquidity, Debt, Tariffs, Commodity prices, Supply chain, Manufacturing, Industrial production, LIFO, Pension liabilities