An anonymous director reports

RUSSEL METALS ANNOUNCES 2023 SECOND QUARTER RESULTS

Russel Metals Inc. has released its financial results for the three months ended June 30, 2023.

• Revenues of $1.2 Billion and EBITDA1 of $131 Million
• Strong Capital Structure with Liquidity1 of $837 Million
• Repurchased $44 Million of Shares in Q2 - Renewal of NCIB for Up To 6.1 Million Shares
• Sale of TriMark Interest will Complete Exit from OCTG/Line Pipe -
• Repatriated $375 Million over the Past Three Years

Our basic earnings per share of $1.37 for the quarter ended June 30, 2023, was lower than the $1.96 per share recorded in the second quarter of 2022 but higher than the $1.19 recorded in the 2023 first quarter. For the six months ended June 30, 2023, our basic earnings per share of $2.56 compared to $3.53 for the same period in 2022. Revenues of $1.2 billion were lower than the $1.4 billion experienced in second quarter of 2022 and consistent with the 2023 first quarter. Our gross margins of 23.1% compared to 25.3% in the same quarter of 2022 and 21.9% in the 2023 first quarter.

Our EBITDA for the quarter was $131 million compared to EBITDA of $189 million in the same quarter of 2022 and $116 million in the first quarter of 2023. EBITDA in the second quarter of 2023 was impacted by a $2 million expense related to the non-cash mark-to-market on our stock-based compensation compared to a benefit of $4 million in the 2022 second quarter and a $4 million expense in the 2023 first quarter.

All of our business segments made strong contributions in the 2023 second quarter and resulted in an improvement in our consolidated margins, EBITDA and earnings as compared to the first quarter of 2023. Our metals service centers reported consistent revenues and higher margins in the 2023 second quarter compared to the 2023 first quarter due to higher average prices and consistent demand. Metals service centers generated average price realizations that increased 3% compared to the 2023 first quarter while tons shipped were consistent with both the first quarter of 2023 and the second quarter of 2022. Our energy field stores revenues and margins increased in the 2023 second quarter versus the 2022 second quarter due to a continuation of the favourable trend in energy sector business activity. The seasonally slower second quarter, as compared to the first quarter, was due to road closures from spring break-up in Western Canada and significant wildfire activity. Results at our steel distributors remain strong with a reduction in revenues being offset by an increase in margins, which resulted in comparable operating profits in the second quarter versus the first quarter of 2023.

Market Conditions

The steel price increases that were experienced in the later part of the 2023 first quarter continued in the early part of the 2023 second quarter but moderated down towards the end of the quarter. Inventory in the supply chain remains relatively modest while demand remains active. Our energy field store segment experienced good demand in what is typically a seasonally slow second quarter in Western Canada. On June 30, 2023, the Canadian rig counts were 167 compared to 166 in the 2022 second quarter and the U.S. rig counts were 674 compared to 750 on June 30, 2022.

Capital Investment Growth Initiatives

In the 2023 second quarter, we invested $16 million for capital expenditures, as we focused our spending on facilities modernizations and value-added equipment projects. As part of our facilities modernizations, we recently approved a US$11 million expansion and equipment upgrade project at our Green Bay, Wisconsin location and a US$9 million expansion and equipment upgrade project at our Texarkana, Texas location. Both of these projects are expected to be completed in late 2024. In addition, we are advancing a number of our other potential modernizations and value-added equipment projects in both Canada and the U.S. that should be completed in phases through the back half of 2023 and into 2024 and beyond.

Over the course of the past quarter, we evaluated a number of potential acquisitions, and we continue to explore opportunities to grow our business in ways that would be financially attractive and operationally complementary with our existing business segments. On August 10, 2023, we entered into an agreement to purchase Alliance Supply Ltd., a field store operation in Western Canada that generated 2022 revenues of approximately $23 million. The acquisition of Alliance Supply will become part of our Canadian energy field store business. The transaction is expected to close in the fourth quarter of 2023.

TriMark Joint Venture

In the second quarter of 2023, we received $10 million of dividends from our joint venture ("TriMark"). On July 31, 2023, we entered into an agreement to sell our equity interest in TriMark to our venture partner for approximately $61 million subject to normal closing adjustments. The transaction is expected to close in the third quarter and represents the final step in our staged exit from the OCTG/ line pipe business. In the past two years, we have received $36 million in dividends from TriMark, which when combined with the sale of the retained equity interest for $61 million will equate to a return on investment of over 200%. Over the last three years we have repatriated approximately $375 million in capital from the OCTG/line pipe business.

Returning Capital to Shareholders

We have adopted a flexible approach to returning capital to shareholders through: (i) our ongoing dividend; and (ii) share buy backs.

In May 2023, we announced a 5% increase on our quarterly dividend from $0.38 per share to $0.40 per share. In the second quarter, we paid dividends of $25 million or $0.40 per share. We have declared a dividend of $0.40 per share, payable on September 15, 2023, to shareholders of record at the close of business on August 29, 2023.

In August 2022, we initiated a normal course issuer bid to purchase for cancellation up to 3.2 million of our common shares over 12 months, representing 5% of our issued and outstanding shares. In the 2023 second quarter, we purchased and cancelled 1.2 million shares for total consideration of $44 million. Since August 2022, we purchased and cancelled 2.2 million shares at an average price per share of $32.18, for total consideration of $72 million. Subject to approval from the Toronto Stock Exchange, we intend to renew our normal course issuer bid to purchase for cancellation up to approximately 6.1 million of our common shares representing 10% of our public float over a 12-month period.

Liquidity and Capital Structure

During the 2023 second quarter, we generated $131 million of cash from operating activities and ended the quarter with total available liquidity of $837 million.

Outlook

We expect a continuation of favourable market conditions into the third quarter with demand at our metals service centers and steel distributors to be comparable with the levels experienced in the second quarter, except for the typical slowdown for the Quebec construction holiday and other seasonal factors. The prevailing steel price environment is expected to lead to a moderation of margins in the third quarter. Our energy field stores expect to benefit from stronger sector activity.

Investor Conference Call

The Company will be holding an Investor Conference Call on Friday, August 11, 2023, at 9:00 a.m. ET to review its 2023 second quarter results. The dial-in telephone numbers for the call are 416-764-8688 (Toronto and International callers) and 1-888-390-0546 (U.S. and Canada). Please dial in 10 minutes prior to the call to ensure that you get a line.

A replay of the call will be available at 416-764-8677 (Toronto and International callers) and 1-888-390-0541 (U.S. and Canada) until midnight, Friday, August 25, 2023. You will be required to enter pass code 902448# to access the call.

Additional supplemental financial information is available in our investor conference call package located on our website.

About Russel Metals Inc.

Russel Metals is one of the largest metals distribution companies in North America with a growing focus on value-added processing. It carries on business in three segments: metals service centers, energy field stores and steel distributors. Its network of metals service centers carries an extensive line of metal products in a wide range of sizes, shapes and specifications, including carbon hot rolled and cold finished steel, pipe and tubular products, stainless steel, aluminum and other non-ferrous specialty metals. Its energy field stores carry a specialized product line focused on the needs of energy industry customers. Its steel distributors operations act as master distributors selling steel in large volumes to other steel service centers and large equipment manufacturers mainly on an "as is" basis.

We seek Safe Harbor.