Ryerson Holdings Bets on Merger Upside After Tough Q4

Ryerson Holdings ((RYI)) has held its Q4 earnings call. Read on for the main highlights of the call.

Ryerson Holdings’ latest earnings call mixed near-term pain with longer-term optimism as management leaned heavily on its newly closed Olympic Steel merger and strong early‑2026 demand signals. While a difficult fourth quarter, marked by margin pressure and a sizable LIFO charge, pushed the company into a net loss, executives framed these setbacks as largely temporary against a stronger strategic backdrop.

Merger Closed and Scale Expansion

Ryerson confirmed the closing of its merger with Olympic Steel just a week before the call, creating a combined platform of more than 6,000 employees across roughly 160 locations. Management has established an integration team and is targeting $120 million in annual run‑rate synergies over the next two years, positioning the enlarged business for greater scale and cost efficiencies.

Strong Early 2026 Demand and Q1 Outlook

Executives highlighted encouraging early‑2026 demand indicators and issued upbeat guidance for the first quarter, with tons shipped expected to rise 13%–15% versus 2025 and same‑store revenue projected at $1.26 billion–$1.30 billion. Net income is forecast at $10 million–$12 million (excluding merger fees), and combined with Olympic Steel the company expects Q1 revenue of $1.52 billion–$1.58 billion and adjusted EBITDA excluding LIFO of $63 million–$67 million.

Full‑Year 2025 Revenue and Pricing Gains

For full‑year 2025, Ryerson posted net sales growth of 9.7% year‑over‑year, reflecting both higher volumes and better pricing. Average selling prices rose 6.3% while total tons shipped increased 3.1% versus 2024, underscoring the company’s ability to capture value in its product mix despite a volatile metals pricing environment.

EBITDA Improvement on a Non‑LIFO Basis

Despite the tough finish to the year, the company delivered improved core profitability when stripping out inventory accounting noise. Fourth quarter adjusted EBITDA excluding LIFO reached $20.4 million, up from $10.3 million in the comparable 2024 period, signaling operational progress even as reported earnings were hit by commodity cost swings.

Strong Cash Generation and Deleveraging Progress

Ryerson generated $113 million of cash from operations in the fourth quarter, using that strength to chip away at its balance sheet. Gross debt fell by $37 million and net debt by $34 million quarter‑over‑quarter, bringing trailing‑12‑month leverage down to 3.1x from 3.7x, while liquidity remained solid at $502 million and the cash conversion cycle improved to 68 days.

Committed Capital Investment Program

Capital expenditures totaled $21 million in the fourth quarter and $52 million for full‑year 2025 as Ryerson continued to invest in its network and processing capabilities. Management plans roughly $50 million of same‑store CapEx in 2026, or about $75 million including Olympic Steel, and pointed to payback examples such as record output in Shelbyville and Central Steel & Wire volumes rising from around 520 to more than 780 tons per day after recent upgrades.

Improved Financial Flexibility via Expanded Credit Facility

To support the enlarged company and fund integration initiatives, Ryerson extended and expanded its revolving credit facility from $1.3 billion to $1.8 billion. This additional capacity is intended to backstop working capital needs, underpin the synergy program, and provide flexibility for disciplined capital allocation as the merger benefits begin to materialize.

Fourth Quarter Net Loss and Miss

The fourth quarter underscored the downside of commodity volatility, with Ryerson reporting a net loss attributable to the company of $37.9 million, or $1.18 per diluted share. That result was materially worse than the prior‑year loss of $4.3 million, or $0.13 per share, and came in below management’s guidance for the period, highlighting execution and market headwinds.

Gross Margin Compression and Elevated LIFO Charges

Margin pressure was intense as gross margin slipped 190 basis points to 15.3%, while gross margin excluding LIFO fell 100 basis points to 17.3%. A LIFO expense of $22.5 million, well above the company’s prior expectation of $10 million–$14 million and up from $13.2 million in the third quarter, weighed heavily on reported profitability and masked some underlying operational gains.

Material Cost Inflation Outpacing Price Pass‑Through

Rapid increases in commodity and material costs, especially in aluminum, outran the company’s ability to pass those hikes through to customers during the quarter. As price increases took longer to filter through the value chain than the cost spike, Ryerson’s margins came under pressure, illustrating the timing risk inherent in metals distribution.

End‑Market Weakness and Seasonal Volume Declines

Several of Ryerson’s key end markets remained soft in the fourth quarter, including commercial transportation, climate systems such as HVAC, and heavy equipment for agriculture and construction. Total company tons shipped declined just under 5% quarter‑over‑quarter, in line with guidance, and slightly better than the broader MSCI industry, where volumes fell 5.8% sequentially.

Leverage Still Above Target Range

While leverage trends improved, management acknowledged that debt remains higher than desired, with trailing‑12‑month leverage at 3.1x versus a target range of 0.5x–2.0x. The company plans to use merger synergies, cash generation, and disciplined spending to continue deleveraging toward its stated goal over the next several years.

One‑Time Merger‑Related and Advisory Costs

Fourth quarter warehousing, delivery, and SG&A expenses reached $205.3 million, an increase of $4.9 million compared with the third quarter. Management attributed much of this uptick to advisory fees and other costs associated with the Olympic Steel transaction, characterizing them as largely one‑time items that contributed to the period’s earnings shortfall.

Pause in Share Repurchases

Ryerson did not repurchase any shares in the fourth quarter, choosing instead to prioritize merger integration and balance‑sheet repair. The company still has $38.4 million remaining under its share repurchase authorization, suggesting buybacks could return once leverage is closer to target and synergy capture is further along.

Forward‑Looking Guidance and Strategic Priorities

Looking ahead, management expects Q1 2026 tons shipped to rise 13%–15% year‑over‑year, with same‑store revenue of $1.26 billion–$1.30 billion, average selling prices flat to up 2%, and net income of $10 million–$12 million before merger fees. They forecast LIFO expense of $6 million–$8 million and adjusted EBITDA excluding LIFO of $51 million–$54 million for the standalone business, with Olympic Steel’s final six weeks adding $260 million–$280 million of revenue and $12 million–$13 million of adjusted EBITDA, supporting combined guidance and underpinning a synergy target of $120 million over two years alongside planned 2026 CapEx of about $50 million on a same‑store basis.

Ryerson’s earnings call painted a picture of a company absorbing a difficult quarter while betting heavily on the benefits of greater scale and operational discipline. With solid cash generation, expanded credit capacity, and clearly defined synergy targets, management is asking investors to look past short‑term margin and earnings volatility to a stronger, more profitable combined platform in the coming years.