RS — Reliance Steel & Aluminum Co.

Summary of Reliance Inc. Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Tons Shipped: Increased by 6.2% year-over-year to 6.4 million tons, outperforming the industry by over 7 percentage points.
• Tolling Tons: Rose by 1.2% to 7.4 million customer-owned tons processed.
• Gross Profit Margin: Non-GAAP FIFO gross profit margin at 28.8%, slightly below the sustainable range of 29% to 31% due to tariff-related costs.
• Earnings per Share (EPS): Full-year diluted EPS declined by 10.2% year-over-year; however, adjusted non-GAAP FIFO EPS increased by 13.5%.
• Operating Cash Flow: Generated $831 million, with $276 million in Q4 alone.
• Capital Expenditures: 2026 budget set at $275 million, with total expected spending of $300 million to $325 million.
• Dividends: Returned $849 million to shareholders in 2025, with a 4% increase in the dividend to $5 per share.

2. Strategic Updates and Business Highlights

• Market Share Growth: U.S. market share increased from 15% in 2024 to approximately 17% in 2025, driven by strong operational execution and customer service.
• Product Focus: Growth primarily in carbon long and flat-rolled products, with improved gross profit margins in these areas.
• Operational Efficiency: Continued investments in processing equipment and a focus on maximizing returns from previous capital expenditures.
• M&A Activity: Although no acquisitions were closed in 2025, the company remains active in seeking opportunities, emphasizing organic growth as a significant contributor to volume increases.

3. Forward Guidance and Outlook

• 2026 Expectations: Anticipate a healthy demand environment with a projected 5% to 7% increase in tons sold in Q1 2026 compared to Q4 2025.
• Pricing Outlook: Average selling prices expected to improve by 3% to 5% in Q1 2026, contributing to a modest improvement in FIFO gross profit margins.
• Earnings Guidance: Q1 2026 non-GAAP EPS projected to be between $4.50 and $4.70, reflecting year-over-year growth of 19% to 25%.

4. Challenges and Points of Concern

• Tariff Impact: Significant tariff-related aluminum cost increases affected profitability, with a total LIFO expense of $114 million for 2025, impacting gross margins.
• Market Volatility: Soft demand in certain sectors, particularly commercial aerospace and semiconductor markets, continues to pose challenges.
• Labor Market: Difficulty in hiring qualified personnel, particularly in warehouse and driver roles, may impact operational efficiency.

5. Notable Q&A Insights

• Gross Margin Projections: Management indicated that while margins may be near the lower end of the sustainable range in Q1 2026, improvements are expected as demand stabilizes.
• Demand Trends: Positive outlook for carbon products, with increasing quoting activity and customer orders noted, particularly in infrastructure and energy sectors.
• M&A Environment: Reliance remains open to acquisitions but is cautious about valuations, focusing on organic growth as a cost-effective strategy.
• Aerospace and Semiconductor Markets: Continued inventory overhang in semiconductors is expected to improve by late 2026, while aerospace demand remains subdued but is anticipated to gradually recover.

Overall, Reliance Inc. reported strong operational performance in 2025 despite facing headwinds from tariffs and market volatility, positioning itself for continued growth in 2026 with a focus on strategic investments and market share expansion.