Highlights

• Record third quarter Revenue of $1,819.1 million and adjusted EBITDA of $230.1 million, against $72.9 million a year earlier.

• Average gross Margin widened to 25.9% from 22.6% in the second quarter; annualized return on Capital reached 35%.

• A quarterly Dividend of $0.44 per share is payable December 15, 2026; Liquidity stood at $418 million after a large Working Capital build.

Russel Metals Inc. (TSX:RUS) announced its results for the third quarter of this year on Wednesday evening, and the headline was a trio of records: quarterly revenue, adjusted EBITDA and adjusted earnings per share. The metals distribution group, which supplies and processes steel and other metals for industrial customers, benefited from firm pricing, tight Supply into North America and a full contribution from acquired American branches. The company also completed the sale of a Subsidiary and left its quarterly dividend unchanged.

The Numbers Behind the Records

Revenue reached roughly one point eight two billion dollars, a jump of more than half compared with the third quarter a year earlier and about ten per cent above the second quarter of this year. Adjusted EBITDA climbed to about two hundred and thirty million dollars, more than triple the level of twelve months before. Net earnings came in near one hundred and twenty-six million dollars, or two dollars and twenty-nine cents per share, while adjusted Earnings Per Share reached two dollars and sixty-seven cents.

The gap between reported and adjusted figures reflects a non-cash mark-to-market charge on stock-based compensation, which rises when the share price rises, partly offset by a gain on the Color Steels sale. For the first nine months, revenue approached five billion dollars and net earnings more than doubled from last year, with earnings also supported by an earlier gain on a property sale in Delta, British Columbia.

Margins and Returns Widen Sharply

Gross margin is where Operating Leverage showed up most clearly. The average margin widened by roughly three and a third percentage points from the second quarter, helped by favourable market conditions, improving results at the former Kloeckner branches and better margins across the Canadian service centre network. Annualized return on capital reached thirty-five per cent for the quarter and twenty-seven per cent year to date, levels that are high for a distribution Business with significant inventory investment.

American plate and hot rolled coil prices rose through the period, and the company noted that prices at the end of September were higher again than the quarterly averages. Distributors tend to benefit when prices rise because inventory purchased earlier carries through at a higher realized price, a dynamic that can reverse quickly if the cycle turns.

Acquired Branches and the American Mix

The American Acquisition has changed the character of the company, and its effect on the geographic mix is now plain to see in the reported figures. Revenue from the United States made up well over half of the total in the quarter, compared with a little over four-tenths a year earlier. The branches acquired from Kloeckner contributed revenue of about two hundred and thirty-seven million dollars and EBITDA of about thirty-three million dollars in the quarter, roughly double the contribution of the prior quarter on the earnings line. Management said the acquisition generated an annualized return on invested capital of forty-two per cent over the first nine months.

Metals service centres shipped fewer tons than in the second quarter for seasonal reasons, though tonnage was meaningfully higher than a year ago, both overall and on a same-store basis. Energy field stores continue to benefit from solid industry activity, and steel distributors, which supply large volumes to other service centres, round out the third reporting segment. The release did not break out segment financials for the latter two, which limits how precisely their contributions can be assessed.

Cash Flow, Working Capital and Liquidity

The less flattering part of the report is cash. Operating Activities used about fifty-eight million dollars during the quarter because receivables and inventory expanded sharply with higher prices and activity. Cash from operations before working capital was a healthy one hundred and eighty-two million dollars, but changes in working capital absorbed about two hundred and four million. Accounts Receivable now stand far above year-end levels and inventories are up by about a fifth.

Net Debt was reported at about two hundred and fourteen million dollars, and total liquidity was four hundred and eighteen million dollars. Long-term debt was essentially unchanged. Proceeds from the Color Steels sale, about forty-two million dollars in cash, helped offset capital spending, dividends and Lease payments. A working capital build of this size is characteristic of a rising price environment and typically unwinds if prices flatten, releasing cash, but it also means the Balance Sheet is more exposed to a price reversal.

Dividend and Share Repurchase Position

The board declared a regular quarterly dividend of forty-four cents per share, payable in mid-December to shareholders of record in late November. No shares were repurchased in the quarter under the normal course issuer bid, although cumulative purchases since the programme began in the summer of twenty twenty-two total about eight point seven million shares. Investors who follow Midcap Stocks frequently look at distributors like this one for the combination of a steady payout and cyclical earnings power, though the cyclical element cuts both ways.

Management said that the company continues to evaluate American metals service centre acquisitions with a near-term emphasis on smaller tuck-in transactions rather than another large purchase. That leaves capital allocation weighted toward Facility modernization, value-added processing equipment and dividends.

Outlook, Industry Backdrop and Risks

Looking ahead, management expects the market dynamics of the first three quarters to continue in the near term, citing favourable demand, limited international supply entering North America, extended supplier lead times and energy and transportation inflation. Fourth quarter service centre daily shipments are expected to be similar to earlier quarters but across fewer operating days because of holidays in Canada and the United States. Medium-term growth is tied to American industrial manufacturing, Canadian nation-building and infrastructure projects, and data centre and energy investment.

Risks are the mirror image of those supports. Metal prices are volatile, trade policy can change with little notice, and Demand for steel products is closely linked to industrial and construction cycles. Credit exposure rises with receivables, and the release lists covenants, currency movements, cybersecurity, labour disruptions and geopolitical conditions among other risk factors. Canadian Interest Rate decisions by the Bank of Canada also feed into construction, equipment and energy-sector demand.

Index Context

Russel Metals is a mid-sized TSX-listed company and sits among the constituents tracked by the [S&P/TSX Composite Index], while its size profile also fits the [S&P/TSX Completion Index] universe of mid-cap names. The stock's reaction to the report will depend on how the market weighs record earnings against the heavy working capital draw and a cycle that is already at a strong level. The investor conference call was scheduled for the following morning.