Reliance Steel & Aluminum Co. (NYSE:RS) Q4 2022 Earnings Call Transcript

Katja Jancic: Hey. Thank you for taking my question. Just maybe going on the first Q guide. Can you talk a bit more about what is driving the above seasonal pickup in volumes, maybe what markets or how are you looking at it, please?

Karla Lewis: Hi, Katja. We have been pleased to see the way that we have rebounded in Q1. We are used to the normal seasonal downturn in Q4, and certainly, Q4 shipments we are at the low end of our guidance and so we are seeing a little bit better than typical bounce back in Q1. We have our — we think we have our people excited to pick up some market share and to be out there selling. We are just out there to service our customers well and overall all, there are a couple of markets down potentially down a little bit, but overall, our customers are busy. We have been telling you guys this for a while and our customers truly do still have backlogs. They just need people and all their components and underlying demand remains pretty healthy. So we are seeing generally across most of the markets we serve with our small customers, quick turnaround. We see continued strong demand coming from them.

Katja Jancic: Okay. And maybe just on the tolling business. Can you remind us how much is auto, I think, there is also other business in that outside of auto?

Karla Lewis: Yeah. So our tolling businesses, we have a company in the U.S. with about 13 locations. They are very good at what they do and then we have another company down in Mexico with four locations. We have expanded their operations, continue to expand them for both of our companies. They see a lot of opportunity out there, because they are really good at what they do and their customers keep asking them to do more, about 65% of our tolling business is automotive related. And remember on tolling, we don’t own the metal, so we have no price risk on there. We don’t have to deal with the volatility from metal prices. We charge a fee for processing, delivery, storage, which has been in high demand in the last couple of years through all the supply chain disruptions.

And then the next biggest market in our tolling business behind automotive is appliance and we have seen some weakness on some of the residential appliance recently. But we are able to make that up with increased business with automotive and also some beverage can and other applications.

Katja Jancic: Okay. Thank you very much.

Karla Lewis: Thanks, Katja.

Operator: Our next question comes from the line of Lawson Winder with Bank of America Securities. Please proceed.

Lawson Winder: Thank you, Operator. Good morning, Karla, Stephen and Arthur. Nice to hear from you all. I wanted to ask about the capital deployment in another way. So net debt is very low, which you have referred to several times on this call. How should we think about capital deployment in terms of the buyback versus the now higher dividend and the CapEx that you have discussed?