Russel Metals Inc. (RUS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to our 2025 first quarter results for Russel Metals. Today's call will be hosted by Mr. Marty Juravsky, Executive Vice President and Chief Financial Officer; and Mr. John Reid, President and Chief Executive Officer of Russel Metals Inc. [Operator Instructions] I would now like to turn the meeting over to Marty Juravsky. Please go ahead, Mr. Juravsky.

Great. Thank you, operator. Good morning to everyone. I plan on providing an overview of the Q1 2025 results. And if you want to follow along, I'll be using the PowerPoint slides that are on our website and just go into the Investor Relations section, and it's located in the conference call submenu. If you go to Page 3, you can read our cautionary statement on forward-looking information. Let me start with a little perspective on the quarter, which I've outlined on Page 5. So in Q1, we generated strong bounce-back results following a down period in the back half of 2024. After our Q4 2024 results were released, I characterized it as a bit of a cycle trough. And now that we have posted the Q1 results, it demonstrates that our Q4 trough was pretty solid for what was a down quarter, but it also shows how quickly results can bounce back as they did in Q1. This ties into one of the themes that we've been talking about for some time related to the expected impact of our portfolio changes with the expected impacts being: one, to lower earnings volatility; two, to raise the cycle floor; and three, to raise the cycle ceiling. And the steel price volatility over the past several quarters has been quite high and have provided a great test of how we've performed in both up and down markets. So looking deeper into our Q1 results, our key metrics such as revenue, tonnage prices, margins were better at the end of Q1 than at the beginning of Q1. And these good metrics have continued into the early part of Q2. So the momentum suggests that Q2 should be a pretty solid quarter as well. So if we go a little bit deeper into some of the items on Page 5. In Q1, we had record shipments and our $86 million of EBITDA was the highest quarterly level in over a year. If we go to the second row of the diagram, it summarizes some of our growth initiatives. We increased capital investments. We're active on the investing front in early 2025 as we had $29 million in CapEx, which was a record level of quarterly CapEx due to a range of discretionary projects. Also, we had a series of operating initiatives related to last year's acquisitions of the Samuel businesses and Tampa Bay. We started to convert the Samuel branches onto Russel's IT platform, which should allow us to focus on the integration benefits and realize improvements in performance. In addition, we are pleased with the results posted for Tampa Bay in the approximate 4 months since we completed the acquisition. And while that business continues to operate in a very similar manner to the period prior to acquisition, we're starting to see some benefits related to Russel Metals' procurement programs. Second bucket, our capital deployment grew. As a result of our investments, our capital grew from $1.3 billion at the end of 2023 to $1.6 billion at the end of 2024 and just over $1.7 billion as of March 31. Third bucket, we generate solid return on invested capital. Our return on invested capital has averaged over 20% per year over the past several years, but Q4 was a down quarter at only 10%, while Q1 was a nice bounce back at 15%. As we benchmarked our Q1 results against the Q1 results for our publicly traded peers, we have once again shown the highest return on investment -- return on invested capital in this past quarter. We grew in strategic ways, the fourth box on that second row. We grew our U.S. platform, which was 44% of revenues in Q1 as compared to 39% in 2024 and 30%, a number of years ago back in 2019. We also grew our specialty metals such as stainless and aluminum. Nonferrous was 7% a year ago in Q1 2024, 9% for full year 2024 and has now grown to 11% in Q1 of 2025. Looking at the last row of the diagram, returning capital to shareholders. We had a pretty balanced approach in Q1. In Q1, we returned $25 million via share buybacks and $24 million via dividends for a total of $49 million of capital returned to shareholders. The far right box, maintaining a strong capital structure is critical as we operate in a cyclical industry. We're able to opportunistically add $300 million of investment-grade term debt at a very attractive rate and extend and fine-tune our bank facility. As a result, our liquidity is strong. We have flexible bank covenants. We have no financial covenants in our term debt and our maturities are now extended to 2029 for the bank debt and 2030 for our term debt. So let's now turn to market conditions, which is on Page 6. We've seen the carbon sheet and plate prices exhibit strong upswing over the past several months because of the tariff dynamic. Prices have since stabilized over the past little bit, and the outlook will be driven by the evolving tariff dynamic. That being said, carbon prices are currently at favorable levels, and we do benefit in this environment as we are a cost pass-through business. The other thing that has been interesting is that the shipment levels have remained strong regardless of the increase in prices, and that's a very similar dynamic to what we saw during the price run-up in 2018 and 2021, 2022 as volumes remained strong through those higher price periods. So to talk about tariffs for a moment, we do not have any material direct impact from tariffs as we are a cost pass-through business, and we generally sell our products to local customers. The key thing from a Russel perspective is that we have a very flexible business model with an ability to adjust to whatever circumstances may unfold. On the bottom chart of that page, we've shown both aluminum and stainless prices. As I said earlier, those are a more meaningful part of our product mix at a little over 11% of our Q1 revenues. And as shown on this chart, those products don't exhibit as much volatility as carbon plate and sheet prices do as they have very different supply and demand dynamics. The charts on the right, supply chain inventories in both Canada and the U.S. have come down over the past few months as the industry has destocked of its strong shipment levels. I believe this dynamic has supported the prevailing price environment that is quite favorable right now. On Page 7, we have a snapshot of our historical results. And if we look across the various charts from top left, revenues were up 13% versus Q4 due to the favorable business conditions and a full quarter of Tampa Bay. Revenues of almost $1.2 billion was the highest level in over 2 years. EBITDA of $86 million was the highest level achieved since early 2023. Margins increased 113 basis points for gross margins and 140 basis points for EBITDA margins. Earnings per share, $0.75 per share, which was the highest level that we've achieved since early 2024. Our Q1 annualized return on invested capital came in at 15%, which, as I said earlier, is a nice bounce back from the trough in Q4. And as I also mentioned earlier related to our capital structure, we're in pretty good shape. Our net debt to invested capital is only 4%, so it gives us a lot of flexibility. If we go into our more detailed financial results on Page 8, starting at the top of the page from an income statement perspective, I've already covered several of the high-level items earlier, but a few other items to note. As I said earlier, revenues were up 13% from Q4, which is supported by a very nice seasonal recovery. And I'll talk more about volumes later, but it was a strong shipping quarter, plus we did have a full quarter contribution from the Tampa Bay acquisition that closed in December. Gross margins and EBITDA margins were up on a quarter-over-quarter basis. And looking at the line items below EBITDA, there was an increase in D&A as well as interest expense because of the 2 acquisitions that were completed in the latter part of 2024. Our Q1 results were impacted by the mark-to-market on stock-based comp. That was a $3 million recovery in Q1 versus a $3 million expense in Q4. Moving down to the middle of the page from a cash flow perspective. In Q1, we used about $100 million for working capital due to the pickup in business activity. Share buybacks, I mentioned earlier, $25 million for the quarter before tax. And cumulatively, the share buyback since August of 2022 are a little over 11% of our shares outstanding for $266 million or $37.27 per share. Our quarterly dividend was $0.42 per share in March, and we've just declared a 2.4% increase to $0.43 per share payable in June. Our CapEx of $29 million was a record quarterly level, and I'll talk about that a little bit more in a few minutes. In the bottom part of the page from a balance sheet perspective, we remain in a very strong position with only $68 million of net debt. And lastly, our book value per share grew again and remains at just over $29 per share. On Page 20 -- excuse me, Page 9, we show our EBITDA variance analysis between Q4 2024 and Q1 of 2025. And if we start on the left-hand side of the page, looking at service centers, the volumes were up compared to Q4 as were our margins, and those were both meaningful contributors to the increase in EBITDA for the service center business. There was a $20 million increase in cash operating costs and about 1/3 of that was due to the full quarter contribution of operating costs from Tampa Bay, and there was an amount related to our variable compensation increase, which moved up with much higher profitability for the service centers. In total, service center EBITDA was up $25 million for the quarter. Energy field stores were down $3 million as it was a slow start to 2025, but activity did pick up towards the end of the quarter. Steel distributors had a very good quarter being up $6 million as it benefited from the higher steel price environment. And in the other bucket, there was a favorable impact from the mark-to-market on the stock-based compensation, but that was more than offset by the seasonal decline at our Thunder Bay Terminals operation and the higher variable compensation that related to higher operating results. On Page 10, we have our segmented P&L information. For service centers, virtually all metrics were up in Q1 versus Q4, and I'll go through some of those in more detail on the next page. In energy field stores, we are continuing to see solid performance. But as said earlier, it was a slow start to 2025, and it impacted margins and operating profit, which were down for the quarter. Distributor revenues were flat, but margins were up with the price environment. One of the takeaways from this page is that our diversified portfolio has been very helpful in reducing our cycle volatility. For example, in the right-hand graph, we show that our energy field stores in the red line was steady and an important contributor to operating profit in the back half of 2024 at the same time when our metal service center segment, as shown in the green line and steel distributors, as shown in the yellow line, faced some challenges in the back half of 2024. In Q1, the reverse occurred and that energy field stores had a slower start, but metal service centers and steel distributors had strong quarters. The net result is that the portfolio composition has some counterbalancing dynamics that has and should continue to reduce our through-the-cycle volatility. Page 11. We have a deeper dive on the metrics for our metal service center business. The top right graph is tons shipped. Q1 was a record being up 15% versus Q4 and up 11% on a same-store basis. On the bottom left graph, we have revenues and cost of goods sold per ton. On revenue per ton, our price realizations were up. Our cost of goods sold are down a little bit, resulting in a gross margin per ton of $430, which was up $62 per ton from Q4. On Page 12, we've illustrated our inventory turns, and this chart shows inventory turns by quarter for each segment, energy, red, service centers in green and steel distributors in yellow. In addition, the black line is the average for the entire company. Overall, our inventory turns improved from 3.6 to 3.7, which is consistent with what typically happens at this time of year. And by sector, service centers remained strong at 4.1, which was up slightly from Q4. our energy service stores -- excuse me, our energy field stores were 3.4, which was up from Q4. And lastly, our steel distributors decreased from 3.1 to 2.3 due to timing of some inbound inventory. On Page 13, we have the impact of inventory turns on inventory dollars. Total inventory was up $74 million at March 31 compared to December 31, and this was mostly related to the increased market activity, particularly in our metal service center business. On Page 14, we have the overall impact on capital utilization and returns. As said earlier, our capital deployed is now over $1.7 billion as of March 31. On a return basis, our 3-year average return on invested capital was 24%. And if we look back over the past several years, we continue to achieve industry-leading returns and at levels that are greater than our cycle average target of 15%. Page 15, a bit of an update on our capital structure. In Q1, we issued $300 million of investment-grade term debt into the Canadian market. The interest rate is 4.423%, and the notes mature in 2030. We also amended and extended our bank credit facilities in April. And the net result of these changes is that our liquidity is strong, our maturities have been extended and the cost of our term debt is the lowest it's ever been. Lastly, our equity base continues to grow despite share buybacks and dividends. Over the past quarter, we've grown our book value per share, and it's $1.27 higher than at this time last year. Page 16, we have an update on our capital allocation priorities going forward, and we continue to have this multipronged approach. As I said earlier, for investment purposes, we seek average returns over the cycle greater than 15%, and we've delivered well above that target. The ongoing opportunities remain threefold: continuing to pursue the value-added projects and equipment; two, facility modernizations, and we completed most of the 5 modernizations that were underway, and we have more projects on the drawing board. Three, in terms of acquisitions, we are continuing to explore new and interesting potential opportunities. For returning capital to shareholders, we have adopted a fairly flexible approach. And over the past 12 months, we have returned $141 million to shareholders via the NCIB, while the current annual run rate for our dividends is around $97 million. Page 17, I want to provide a little bit of context to our reinvestment program. In 2024, we invested $90 million of CapEx, which is a level higher than in the past. And in Q1, we've extended that and have invested $29 million as we are continuing to implement more discretionary projects. On this page, I've included a couple of photos on the right-hand side that show our latest flat laser project. And we currently have several of these 30,000 lasers being installed in both Canada and the U.S., and these are the most up-to-date technology that is replacing smaller legacy lasers. And it highlights not only are we installing value-added equipment in new locations, but we are also finding opportunities to upgrade existing equipment in order to stay ahead of the curve. On Page 18, we show a deeper dive on returning capital to shareholders. Starting with the top left graph, we have our long-term dividend profile and with the just announced $0.43 per share per quarter. We will continue to regularly revisit the appropriate dividend level in the context of our capital structure, earnings profile and other capital deployment alternatives as was done when we lifted the dividend in May 2023, May 2024 and now in May of 2025. And over the past 3 years, we've increased the dividend by a cumulative amount of 13%. On the bottom left chart, we show our NCIB activity since it was put in place in August of 2022. And again, it further illustrates that we don't have a fixed approach to the program, but view it as an opportunistic way to buy back shares, and we have been more aggressive at certain price points than others. On the bottom right chart, the impact of the NCIB has been a gradual reduction of our share count over the past 2-plus years and resulted in greater than 11% reduction in our shares outstanding. And on the top right chart is the aggregation of the dividends versus the NCIB over the past couple of years and shows a fairly balanced approach that has recently been more weighted to the opportunistic share buybacks over dividends. So in closing, on behalf of John and other members of the management team, I'd like to express our appreciation to everyone within the Russel family for their contributions. We are really pleased with the start to 2025 and look forward to realizing on a series of interesting opportunities that are on the horizon. So operator, that concludes my introductory remarks, and please open the line up now for any questions.

[Operator Instructions] And the first question comes from James McGarragle at RBC Capital Markets.

Congrats on the really solid quarter there. So I wanted to ask on the commentary on the outlook. You flagged some uncertainty surrounding trade policy that Q1 was potentially helped out by some pull forward. So on one hand, we might see a bit of an air pocket into Q2. But if we look at some of the commentary from your U.S. peers, they were kind of flagging they're expecting volumes to hold up pretty well into Q2, which is pretty impressive given how good Q1 was. Now within that context, can you just give us an update on how you're thinking about volume trends into Q2?

Yes. James, that's a fair observation, including looking at what some of the publicly traded comparables have already talked about. And I don't think our view would be any different from that, which is there's probably some element of pull-forward demand, but the ultimate test is how things have evolved since the tariffs came into place and shipment levels remained at a pretty reasonable clip and steady clip. So it's not like there was a bubble that was out there. There was probably at the margin a little bit that was brought forward. It's hard to quantify it. But overall, we're now sitting here in May and the tariffs were put in place almost 2 months ago and shipment levels remain at a relatively solid level. So we haven't seen any of that big variance that could have been in place. And so the commentary that some of our competitors have come up with in their Q1 commentary, we probably echo some of those same views.

And then can you provide a little bit more detail on what you're seeing in the U.S. versus in the Canadian business? And any change in those trends potentially since tariffs were implemented a few months back?

Yes. I'd say, overall, what we're seeing in the U.S. versus Canada is more of the same, both pre-tariffs and post tariffs, which is it's fairly straightforward that the U.S. has had a more robust economy over the past couple of years than Canada has. Our Canadian business is well positioned and does well, but the level of performance in our U.S. business is probably a notch higher than it has been in the Canadian business, and I characterize it as that both a little bit pre-tariffs as well as post tariffs. So it's more of the same, but there is a distinction between the performance of the Canadian economy overall and -- versus the U.S. economy over the past period of time.

The next question comes from Devin Dodge at BMO Capital Markets.

Look, I was going to ask about the energy field stores. Look, we saw that one of your U.S. competitors recently sold its Canadian operations, which I mean, I guess would bring maybe a greater focus on some of those assets under the new ownership. Just wondering if you have seen or do you expect to see a more competitive environment in Canada?

Go ahead.

Yes. I don't think it changes the landscape. It just changes the names on the door. And so there's still a number of competitors. They had shrunk quite a bit over the last 2 years as they were exiting Canada quietly. And so it's allowed us to gain some market share there. So I don't see really any landscape change outside of what it's been for the last 4 to 6 months. Really more interested in where Canada is going as a whole because I think it's going to really benefit us from the energy perspective out there. Mr. Carney comments, I think, yesterday were he wanted to reestablish Canada as an energy superpower, which is obviously going to benefit any of our energy business as well as our service centers.

Okay. Got it. And just one clarification. If I look on a year-over-year basis, revenue per ton in service centers was down 8% or around 8%. That's both on a reported basis as well as the same-store. I would have expected the mix shift towards nonferrous would have had a more positive benefit. Are you able to provide any color or kind of help explain that?

Yes, the nonferrous, when you look at it in totality, keep in mind, our nonferrous, a lot of that growth has come from our U.S. side of the service centers, some of those numbers Marty referenced, we did grow some. But the adding of Samuel was completely a much bigger mix in carbon, 100% in the U.S. And again, all the 2 locations in Canada were carbon. So it did displace some of that a little bit. That should continue to grow, and you should see a change in that in the future.

And the thing I'd supplement too, Devin, is when we look at our publicly traded U.S. competitors and looking at what their Q1 2024 versus Q1 2025 price realizations were on a same-store basis, we actually were better on a relative basis than they were when we use those same comparisons. So everybody collectively is down compared to Q4 -- Q1 of this year versus Q1 of last year. But the relative change, our relative change in price realizations is better than theirs were.

Okay. Got it. And then just one last one, likely for you, Marty, but obviously, the balance sheet is in great shape here. We've seen this recognized by the rating agencies, which is great to see. Just in order to maintain that investment-grade credit rating, what do you feel is the range for leverage on a go-forward basis?

Yes, it's a good question, Devin. And I -- let me answer it in an indirect way first, and then I'll get to your very specific question. It starts with more of a philosophy of being committed to an investment-grade type approach. And we think there's a tremendous benefit with the ability to execute in the Canadian investment-grade market at attractive levels. So there's a commitment to doing it. And the commitment goes beyond just what is a single metric that makes sense. This has been a multiyear migration to get to this point, and I don't want to go backwards. That being said, when you look at the rating agencies and some of their commentary, they all use guides, for example, less than 2x debt-to-EBITDA as a frame of reference. And that's plenty fine for us given our capital structure and liquidity and types of use of capital that we might have. From a net debt to invested capital perspective, 30% or so at the high end. But again, I don't even see anything on the horizon that gets us from where we are today, which is in the low single digits to that level. So being able to achieve and maintain that investment-grade status is quite important as it relates to maintaining the low cost of capital.

The next question comes from Frederic Bastien at Raymond James.

We've been hearing about some project owners taking a wait-and-see approach to new projects, which obviously makes sense given the tariff uncertainty. But I'm wondering how this uncertainty might be impacting or shaping your potential buyers -- sorry, potential sellers of steel distribution business, i.e., your targets. Are you having different discussion nowadays with these mom-and-pop operators? Or just curious how the M&A landscape is looking right now.

Thanks, Fred. The M&A landscape is very active right now. People are looking at things through a little bit of a different lens. We just came through a very robust period with '21 and '22. I think the expectations have been reset now. Obviously, there is a very volatile political landscape out there that continues to evolve on a daily basis. And so I think people are looking at this very differently. So we think there'll be a fair amount of opportunities to look at. We'll see if there's anything that comes to fruition.

Marty, anything you need to add or just that's...

No. You know what, it's a fair observation. And I think the other interesting thing for me is when we do a look back over the last number of years and how the M&A landscape has unfolded, there's been years where we've been active, and there's been years where we've been very active, but we haven't find the right -- found the right opportunities that meet our criteria. So we kind of stick to our criteria of what works, what doesn't work. And sometimes those things line up, and it just so happened that there was 2 M&A transactions that we were able to push across the finish line last year. But there were also years like 2022 and 2023, where for a variety of reasons, including, in some cases, vendor value expectations, we didn't find the right opportunities. So we don't chase for the sake of chasing. We stick to our criteria. And if we get the right opportunities at the right valuations that fit our operating criteria and all cultural criteria, we're more than capable of moving across the finish line. And we remain very active, but it's yet to be seen whether we find those things that line up with our criteria or not. And if they do, terrific, and if they don't, we bite our time and we're patient capital.

Okay. And then you did a good job over the last, I guess, several quarters telling us that there'd be a lot of heavy lifting behind the Samuel acquisition. I'm wondering how that integration is proceeding right now? And are you ahead of plan or anything that is not going to -- according to expectations? Just to get an update here would be appreciated.

We're tracking to plan, Fred. Phase 1 is done. We've got about 3 distinct phases. Phase 2 is now being implemented with some conversions from the Samuel system to our system, so we can further integrate inventories, look at operating costs. And so that was done this past weekend in Canada. It will be done in the first week in June. In the U.S., everything went smooth there. So that allows us to move fully forward with step 2. And then step 3, we'll continue to look at the real estate rationalization opportunities that are out there. And so we feel pretty comfortable that this is all going to be done within this calendar year.

I'll squeeze a last one. You number -- you cited a number of factors behind the volume gains. I was just wondering if you could split those between M&A, I guess, the recent acquisitions, just market share gains and just straight good old industry demand?

Well, the -- on the M&A front, the only real change between Q4 and Q1 was a full quarter of Tampa. And Tampa was a nice contribution from a margin and from an earnings perspective, but it isn't a big volume operation. So it was a relatively small volume impact from Tampa Bay being in their for a full quarter. So if you look on a same-store basis versus a consolidated basis, it was a little bit of volume, but it really didn't have much of an impact. So by and large, when you look at Q4 versus Q1, most of that was really about the macro, the seasonal factor as well as just general market conditions, which were favorable in Q1.

The next question comes from Michael Tupholme at TD Cowen.

You saw in service centers a nice quarter-over-quarter improvement in gross margins in Q1. With steel prices still up but leveling off lately, wondering if you can help us think about service center gross margin performance in Q2 2025 versus the 20.9% you just delivered in the first quarter.

Yes. It's a really good question, Mike, because there were a lot of moving pieces in Q1 and frankly, into the early part of Q2 as well. And so we benefited by a little bit higher prices in Q1 as a whole, but it obviously picked up steam at the back end of the quarter. At the same time, on the cost of goods sold side, we still actually had some lower cost inventory, which actually helped us from a margin perspective. So when you look at Q1, we benefited from a little bit better top line and the cost of goods sold didn't really move by a whole heck of a lot. So actually, the margin increase, some of that was just a function of the lag effect that worked in our benefit in Q1. That continued into April and probably early May. That will probably normalize down a little bit, all other things being equal as we get into June and July, I suspect. But what it probably means is we'll still have a very good margin profile in Q2 as compared to Q1.

Okay. That's definitely helpful. Would the same hold true -- the same sort of higher-level commentary hold true for steel distributors? Is the dynamics there similar?

Yes, similar, Mike, yes.

Okay. And then back around service centers and again, sticking with gross margin, sort of trying to look through some of the noise, I guess, that can result from changing metals prices. With all of the value-added investments that have been made over time and recently, and I guess also some of the acquisitions, like how should we think about normalized steady-state gross margins within service centers at this time?

Well, it's a bit of a moving target in some respects. So I'm going to answer it without answering it too directly because as an example, one of the things on that CapEx page that I talked about is we've got a number of new pieces of equipment that we're installing in real time. And so those haven't taken effect yet. So the goalpost keeps moving for us. That being said, we directionally view the multiyear migration in margins to be probably a couple of hundred basis points on an apples-to-apples basis. That being said, it's hard to do an apples-to-apples when the cycle keeps moving all the time. But if we did things on a steady-state basis, and we look at the stuff that has been done in 2024, the stuff that is in the pipeline for 2025, it should add a couple of hundred basis points over the course of a couple of years. And we're still at the front end of seeing some of those benefits. And again, I keep referring back to that one slide where I talked about the new lasers that are going in a variety of locations. Those are impactful, but they're just happening right now.

Okay. That makes sense. Over on field stores, energy field stores, can you talk about the top line outlook for that segment in 2025? I guess what I'm wondering is, should we be assuming some year-over-year revenue growth as you move through the year? Or is what we saw in the first quarter when we saw sort of similar revenues on a year-over-year basis, is that more what we should be expecting here is just sort of a more consistent performance on a year-over-year basis? I realize there's seasonality, but I'm thinking about year-over-year.

Let me answer that in a really indirect way if I can. And in some ways, it's a look back. That business for us has been fairly steady. I mean, it does move around and there's some seasonality attached to it, but it's been relatively steady if we look back over the past period of time. So all other things being equal, it's a pretty -- it has been and we would expect it to be a pretty steady contributor. That being said, with John's comment that he made earlier, there is public policy that is evolving in real time. We think we should be a net beneficiary of how some of that is evolving. We don't know what the timing of that is going to be. And I would hate to be too prescriptive of what quarter that impacts, let alone what year that might actually show up. But directionally, those things are all good for our business on both sides of the border, frankly, not just on the Canadian side of it. But if we kind of strip that stuff aside, it's been a pretty steady business for us over a period of time, and it will ebb and flow a little bit. And even just as I look at Q1 as an example, it was a slow start to the year, but it picked up in March. When we look at Q1 as a whole, it was an okay quarter, but it was really more March related than January and February related. But over the course of several quarters, it has been a very, very consistent performer for us, and we expect that to continue public policy aside and what's potentially positive for the industry as a whole.

Yes. That's definitely helpful. And then just in terms of energy field stores in terms of the margins, again, quite consistent and stable in the last several years and obviously much improved from what they used to be in that segment after all the changes you made. A little bit of a tick down in the first quarter. Like is that mix related? Is there anything going on there to explain that? And should we expect them to kind of go back up to the levels we've seen in the last few years? Or is this more of a current run rate, the gross margin?

It was a little bit mix related, but I think part of the frame of reference is there is a bandwidth that it operates in from a gross margin perspective. And even though Q1 was down from a gross margin perspective, it was within the normal bandwidth. And if we look also at how the gross margins are relative to our other business segments, it continues to remain our highest gross margin business. So yes, it was a down quarter from a margin perspective and that related to mix, but it was within the range, probably towards the low end of the range.

Okay. Got it. And then just lastly, just in terms of CapEx, I apologize if I missed this. Is the expectation that it's similar in 2025 on a full year basis? Or how do we think about that? And maybe if you can just also comment the fact that you finished up a lot of the facility modernization work. I think you said you're contemplating what you do next there, but how do we think about that? Is that something that could begin in the fairly near term? Or is that more in the next few years?

It's probably a 2-year frame of reference of where some of those facility modernizations become potential realities. And to deal with your first question first, last year, we spent about $90 million on CapEx. Q1 was $29 million, so a little bit ahead on a run rate basis. But if you use the frame of reference of $100 million for 2025, it's rough orders of magnitude. That being said, we tend not to look at it on necessarily an annual basis, even though that is a structured period of time as what we have is an evergreen list of projects that runs for several years. Things are coming on, things are coming off all the time. And that pipeline of projects is probably about $200 million today. Yet some of them are very, very preliminary and some are fairly advanced, but it's a multiyear evergreen list. So that's why we kind of -- we look at the pipeline directionally and say there's still a fair amount of discretionary projects that are not just what was done in 2024, but on the come for 2025 and probably also on the come for 2026.

Your next question comes from Ian Gillies with Stifel.

As it pertains to steel distributors, with everything going on in the global steel market, would you -- do the opportunities -- does the opportunity set there feel like this is a bit more like 2023 as a whole rather than 2024, acknowledging everything could change in 2 months' time?

The last comment is probably spot on.

Yes, I was going to say if you're looking at directional pricing for the moment for steel versus are you looking for tariffs in the next 60 days. So it can push or pull either way. I feel like we're in a much better place than we were ending 2023. On both sides of the border, again, the businesses operate very differently. I mean Canada operates much more contractually back-to-back sales versus much more transactional in the U.S., but we're seeing opportunities on both sides. We think there's probably some quota head's going to prevail in the near future, and this will revert back to a more normalized setting. But we are seeing opportunities within both countries, either from domestic mills or trading partners that have quotas or opportunities to come into the country. So right now, we think it's going to be a pretty solid year for them.

Understood. Going back to the greenfield project scope of $200 million. Marty, can you remind us how you think about those projects, either -- whether it be from an IRR basis and/or from an EBITDA payback basis, just to think about the potential growth opportunities?

Yes. So just one item of clarification, Ian. It's not $200 million worth of greenfields. It's $200 million of CapEx, some of which are for modernization, some of which are for equipment upgrades, some of which is for just normal course CapEx. So that $200 million is not just for modernizations. That being said, when we use -- when we look at projects, they have quite a vast range of paybacks. Some of them that might relate to, frankly, more safety and good housekeeping, they don't have great paybacks, but there are things that we do as a matter of course. There are some projects like equipment and some of these value-added pieces that might have a 2-, 2.5-year payback. So it's a whole waterfront in terms of projects, and we look at them quite holistically. Some of them are not discretionary, which we have to do as a matter of course and may not have a payback attached to them. So from a portfolio perspective, the 15% is really the frame of reference, and that goes to both CapEx and M&A. Some are better, some are lower than target, but we're trying to achieve that 15% across all the capital deployment scenarios, recognizing that they're not all equal. They have different priorities depending upon circumstances.

Understood. One last one for me on the M&A side. When Camden Metals was purchased, it was viewed as a launching point into the Florida market. Obviously, it's still early days there. But how would you define, I guess, your entrance into that market so far? And what are you learning about the market and potential other, I guess, targets to grow that business over the next number of years?

So again, like you play on words there with launching and all being in the Florida market under NASA. But it's a -- we have had a really good move there. It's only been 4 months. It's a real plug and play. There's a great team in place. They have all the value-added processing in place, a very good mix of nonferrous. And so it's allowing us to reach out further into markets that are probably outside of their coverage zone right now. It wouldn't be long-term sustainable to develop a marketplace to either go greenfield or look at acquisition. So again, we felt like this would be ripped literally and figuratively a beachhead for us being in Central Florida, so we could look at going both north and south. So we see that as something that could develop quickly over the next 2 to 3 years.

Your next question comes from Maxim Sytchev with National Bank Financial.

John, maybe the first question for you, if I may. In terms of looking at the broader trends, I mean, like on the one hand, you read like auto, resi kind of like under pressure, general manufacturing, people are sort of pushing decision-making to the right. Like what were maybe the key industry drivers behind the volume improvements year-on-year and kind of like also the positive commentary from what it seems for Q2. Just maybe if you can put it in buckets, if that's possible.

Yes. And I think it's broader than industry buckets that are out there, Max. Part of this is our transactional nature and the way we've structured the business to be successful. When you look at a cyclical industry and if we're cyclical throughout periods of time, the only thing that's constant is the price is always going to change. But what we're able to do in this transaction in times of extreme volatility caused by whatever is out there right now, obviously, the tariffs being the big point, we're able to work with buyers of our product because they're trying to buy hand to mouth. They don't know if the price of steel is going up. They don't know if it's going down. They're very nervous. So they're really not taking long positions on inventory. So as Marty said, it's very difficult to quantify, but we don't think there was a lot of pull ahead. I just think that our transactional nature of our business really benefits people that they know they can get service the next day and get it quickly. They can move into the value add where we can help them, so they don't have to take long-term positions and put themselves in volatile spots. So I think that's where we -- typically in times of that transition, be it up or down, we typically gain market share because it lets people protect their position. And so I think we saw that in the late first quarter, and we're seeing it in the early second quarter. And so it's more of our business model fits volatility, which is an industry we live in.

And I guess does that comment apply to the nonferrous business, like, for example, what Tampa is doing as well?

Yes. We are -- again, in the nonferrous, we're still taking the same template that says we're not going into the long-term contractual business. We have some longer-term commitments on that, but it's not -- again, we're not going into the contract type business. So we are trying to remain hyper transactional on that. And so we're easing our way into that and growing that market share and we're doing it very targeted at being transactional.

Okay. Okay. That's great. And then one last question around energy stores. I mean the fact that oil pricing has contracted somewhat, and I think in the past, you mentioned that it's more relevant from an OpEx perspective. So we should not be extrapolating the lower oil price into kind of corresponding volume declines. How would you, I guess, qualify, quantify this relationship?

Yes. Keep in mind, again, for OpEx, for our field stores, a big portion of their business is based on the maintenance and the life of wells. So those wells that are already existing. So they're a little bit immune to oil pricing because they've got to maintain it for the life of that well. And that's why, again, we started off slow in Q1, but you saw that steady state because they were in that maintenance mode. When things picked up in the energy patch, we saw some projects get released in March. Some of those things then they will push us back up over [Technical Difficulty] maintenance of the life of the well that's out there. So any time oil is improving, we really jump up quickly.

[Operator Instructions] Your next question comes from Devin Dodge with BMO Capital Markets.

Just had a couple of quick follow-up questions on pricing. So if I look at U.S. prices for plate and sheet in Q1, I think they were up high single digit or low double digits versus Q4. I look at Russel, I think it was 1% sequential improvement on a same-store basis, more like 2% on revenue per ton with that M&A in there. Just wondering if that reflects different pricing trends in Canada versus the U.S.? Or is there something else that helps explain that sequential pricing gap versus market?

Devin, just one element first, just as a comparison point, this in some ways goes to the earlier discussion about relative to our competitors. What we did in -- on a same-store basis in Q1 versus Q4 is our price realizations were up 1%. As I look at a couple of our competitors who report similar type of data points, they were either down 1% or up 1%. So we were within the norm of the industry. And the industry, by and large, is more U.S. weighted than anything else. So does that make sense, John?

Yes. No. And yes, Marty is exactly right. And there also is a timing lag. So from the minute you see the new steel pricing to purchase to the ship. So there will be a timing lag. And so we saw some of that in third quarter as we saw margins really ramp up in Q3, but there was the effect of -- I'm sorry, in the third month of the quarter in March. And -- but there was that lag in January and February that were out there. So those will carry forward. But again, based on our inventory turns, it takes 2 to 3 months to cycle through.

Okay. Got it. I got it. I guess maybe extending that last answer. Just if you look at the service center business, how did average revenue per ton in April compare to the Q1 average?

Well, let's put it this way. It would have been comparable to March, but March was higher than the Q1 average because if we look through Q1, February was higher than January, March was a lot higher than February and April continued at a level similar to March. So that's why April would have been higher than the Q1 average, but March was also higher than the Q1 average.

There are no further questions at this time. Please proceed with any closing remarks.

Great. Thank you, operator, and thanks very much, everyone, for joining our call. If you have any questions, please feel free to reach out any time. Otherwise, we look forward to staying in touch during the balance of the quarter. Take care, everyone.

Ladies and gentlemen, this concludes your conference call for today. We do thank you for participating and ask that you please disconnect your lines. Have a great day.