Good morning, ladies and gentlemen, and welcome to the 2022 year-end and fourth quarter results for Russel Metals. Today's calls will be hosted by Mr. Martin Juravsky, Executive Vice President and Chief Financial Officer, and Mr. John Reid, President and Chief Executive Officer of Russel Metals Inc. Today's presentation will be followed by a question-and-answer period. At this time, if you have a question, please press star one on your telephone keypad. I will now turn the call over to Mr. Martin Juravsky. Please go ahead, sir.
Great. Thank you, operator. Good morning, everyone. I'll provide an overview of the Q4 2022 results, and if you wanna follow along, I'll be using the PowerPoint slides to reference that are on our website, and just go to the investor relations section. If you go to page three, you can read our cautionary statement on forward-looking information. Let me start with a little perspective on the quarter in 2022 as a whole. In 2022, we generated record revenues, a little over $ 5 billion, and EBITDA of $ 579 million. Our EBITDA and net income were the second-highest in the company's history and only a little bit behind the records that were set in 2021. We generated annual gross margin of 22% and a return on capital of 33%. Both are tremendous results.
The results for 2022 were strong overall, but if we look at the second half of 2022, in particular, I'm even more proud of how we performed as the market experienced volatility during that period. Our business is now more resilient as we have substantially reduced the volatility of our earnings profile. In addition, we continue to show the counter-cyclical nature of our cash flows. In Q4, not only did we deliver good operating results, but we also generated $ 146 million of cash from working capital. As a result, our balance sheet is extremely strong, and it gives us a great opportunity to take advantage of both internal and external investment opportunities. Let's begin by talking about market conditions, which are on page five. Steel prices came down in Q4, but remained at healthy levels by historical comparisons, particularly for plates.
In addition, we have seen price stabilization, in fact, some price upticks over the past month or so. If we look back to around mid-December or so, the market was at somewhat of an inflection point at that point, as it felt like prices had hit a floor. As we've now rolled into January, there's now a more upbeat tone to the market, and we are cautiously optimistic based upon what we see today. The right charts on the page illustrate the recent movements in service center inventories for the industry. Inventory tonnage levels for Canada is on the top right chart, and the U.S. is on the bottom right chart. They both came down over the past few months, which is typical at this time of year. The result is that supply chain inventories are modest and are in check.
As we look at takeaways from our customer base, demand has picked up quite nicely in early 2023, and we see it across most geographies and end markets. If we go to page six for our financial results, from an income statement perspective, revenue of $ 1.1 billion in Q4 was down from Q3, but comparable to Q4 of 2021. Overall, gross margins declined to 20% from 22%, but remained very healthy. EBITDA of almost $ 100 million for the quarter was very good for what is typically a seasonally weaker quarter. Interest expense came down by $2 million as the increase in interest rates is allowing us to generate some interest income from our growing cash balance. Overall, we generated earnings of $58 million and earnings per share of $ 0.93 per share.
Our Q4 results were impacted by a few non-operating items. In the case of TriMark, we picked up $10 million of earnings from that joint venture, which was about the same amount as the $8 million of cash flow that came into us as dividends in Q4. Stock-based comp had a $ 2 million negative impact versus nil in Q3, and we had a small, about $3 million increase in our inventory and NRV reserves. One of the things that has changed in our portfolio over the past number of years is how we manage inventory in a period of falling prices. There were times in the past where we had significant NRV adjustments in some of our business units.
The business units that had experienced those wild swings in the past are either no longer part of Russel Metals or are under much tighter inventory control measures than in the past. Lastly, we had a $1 million expense for the amortization of a significant portion of our DB pension plan. This transaction closed in early Q4 and involved the transfer of around $35 million of pension assets and liabilities off our books to that of a AA-rated insurance company. In addition, it allows us to de-risk and secure the current pension surplus of around $40 million for use across our other pension plans. From a cash flow perspective, in Q4, we generated, as I said earlier, $ 146 million from working capital.
We have a countercyclical business that generates strong free cash flow in market downturns. We did experience some of that in Q4 with a decrease in both inventory and AR. The decline in inventory was a combination of a decrease in both tonnage as well as average unit costs. I expect that going forward into Q1, we might see a small decline in tonnage and some further price drops in average cost as our on-order inventory remains below the average cost for our on-hand inventory since we use an average cost system. CapEx of CAD 50 million for the quarter has picked up. We are continuing to advance a series of value-added equipment projects and facility modernizations. Going into 2023, our CapEx should pick up. I suspect it'll average around $75 million or so over the next number of years.
From a balance sheet perspective, we are now in a net cash position, which is made up of our term notes of $ 300 million that are more than offset by cash position of a little over $ 360 million. In total, if we look back over the past year, our net debt position has declined by about $ 230 million as a result of the strong free cash flow generation. Our liquidity is $ 743 million, and our credit metrics are strong. In Q4, we are using our NCIB to acquire shares, and since the NCIB was put in place, we've acquired a million shares at average price just below $ 28. Our current share count is now back to around $62.1 million shares.
Our capital base continued to grow in the quarter with our book value per share up to around $ 25.10. This represents a more than $ 5 or 27% increase in book value just over the past year. Lastly, we have declared a quarterly dividend of $ 0.38 per share, and that will be payable on March 15th. If you go to page seven, you can see our variance analysis between last quarter and this quarter. In looking at service centers, the seasonal decline in volumes impacted EBITDA by around $ 10 million. As mentioned earlier, we lost some operating days due to normal holiday schedules. The $25 million decline in margins was due to lower prices, which have only partially been offset by lower cost of goods sold due to the lag effect.
We expect cost of goods sold to come down further in Q1. Offsetting this is a $9 million favorable variance due to the direct drive system we have on variable comp, that went the other direction in the quarter to create that favorable variance of $ 9 million. Energy declined by about $6 million in the quarter, steel distributors declined by about $2 million due to the moderation of steel prices that particularly impacted our U.S. distributors business. There was a $9 million unfavorable variance in other, which included TriMark's lower earnings in Q4 versus Q3 and the mark-to-market on our stock-based compensation. Go to page eight. We have some segmented P&L information. The service centers continued to do well amidst the market volatility. Revenues were down versus Q3, still represented a good Q4 result.
Average prices were down versus Q3, but still up versus the historical average. Gross margin in percentage terms is down to about 18%, but is still strong in dollar per ton terms. I'll go into a little bit more detail on that in a minute on the next page. In energy, we're continuing to see positive market sentiment. There was a seasonal factor with the Q4 revenues, but overall market conditions remain upbeat as we look into 2023. Gross margins came in at 28% and have remained north of 25% since the monetization of the OCTG line pipe business. Not to repeat the old cliché we've used in the past, but we're doing more with less. Distributors' revenues and operating results came down as they were impacted by the moderation of steel prices.
If you go to page nine, we want to show a deeper dive on some of the metrics within our metals service center business. Last quarter, we started to disclose both current and historical tonnage and allow us for some unit and dollar per ton comparisons. The top graph is the past five years for tons shipped, as you can see, the typical Q4 dynamic is around a 5%-10% pullback in volumes from Q3 levels because of that seasonal factor. In Q4 of 2022, the shipments declined around 8%, which is within the normal range, as we roll into Q1 of 2023, we expect to see a bounce back to more typical activity levels for Q1. On the bottom left graph, we have the revenue and cost of goods sold per ton.
On revenue per ton, even though there was a pullback in the past couple of quarters, average price realizations remain around 50% higher than the long-term average. The bottom right graph shows gross margin and EBITDA per ton. Similar comment to revenues in that margins have come down from the peak levels but are strong and well above historical levels. As one basis of comparison, even though gross margin percentage is 18% in this past quarter, which has been below the cycle average, the gross margin dollar per ton is around $ 464 per ton, which is much higher than the historical average that tended to be between $ 300- 350 per ton.
Some of this increase is related to market prices being higher on average, and some is due to increase in our value-added processing that is part of the portfolio and is continuing. On page 10, we have illustrated our inventory turns. This chart shows the inventory turns by quarter for each segment, with energy in red, service centers in green, steel distributors in yellow. In addition, the black line is the average for the entire company. A few observations. Overall, our inventory turns remain strong at just under four. By sector, service centers improved a little bit from 4.1-4.2 in the quarter.
Our energy field stores came down from 4.4 to 3, but this is really a timing dynamic in that our inventory did pick up towards the end of the year to address the 2023 backlog of business for that business unit. For steel distributors in yellow, the inventory turns increased from 2.3- 2.7 as our inventory position declined in the quarter. If you go to page 11, you see the impact of some of that on the dollars for inventory. Total inventory came down by about $ 100 million from September 30th, which we expected. This was mostly a reduction in service center and steel distributors. The service center saw a 7% reduction in unit costs and a 4% reduction in tonnage.
As I said earlier, the service center tonnage may inch down a little bit, but is already in pretty good shape. At the same time, we should see additional declines in unit costs with the lag effect of the inventory on order being lower than the, which is inventory on-hand costs. As I said earlier, it's meant to serve the backlog of business for that segment. If we go to page 12, you can see the overall impact on capital utilization and returns. Our capital deployment is down a bit with repatriation of some working capital, but we remain around $ 1.5 billion. More importantly, our returns continue to be industry-leading with a strong end of the year and a 33% return for 2022 as a whole.
If we go to page 13, I wanna give you an update on our capital allocation priorities going forward. For investment opportunities, as we've talked about before, we seek average returns over the cycle of greater than 15%, and we've delivered well above that over the multiple cycles. The ongoing opportunities are threefold. We are continuing to identify and pursue value-added projects. In 2022, we moved forward on a series of initiatives in both Canada and the U.S. As we look back on the projects that have recently been completed, we are pleased with their operational and financial performance to date. Facility modernizations. In several cities, we have legacy locations that can be upgraded and consolidated into newer, modern facilities. These projects will allow for volume growth, improve operating efficiencies, and improve health and safety conditions.
In the most recent example, we just approved about a $10 million expansion project in our Joplin Missouri, operation. This branch is part of the 2021 Boyd Metals acquisition, it illustrates that we often uncover incremental opportunities to deploy capital and grow the operations that come via acquisitions. In terms of acquisitions, we remain committed to our financial and operating criteria. That being said, we expect to remain disciplined, yet active in seeking out growth opportunities that fit into our existing business units. We are seeing a pretty reasonable deal flow of opportunities that we are taking a look at. In terms of returning capital to shareholders, we adopted a more balanced approach over the past couple of quarters. For dividends, we've maintained our $ 0.38 per share per quarter dividend, which equates $24 million in the past quarter.
In addition, during the back half of 2022, since we put in place our NCIB, we have purchased a million shares in total for around $ 28 million. 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. 2022 was a really great year for the company. Not only were we pleased with the financial results, but equally important were the series of initiatives that translated into record low health and safety incidents, strong community engagement, and ongoing people development. Thanks to everyone across the company for those major accomplishments. Operator, that concludes my introductory remarks. You can now open the line for questions, please.
Thank you, sir. Ladies and gentlemen, if you would like to ask a question at this time, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you would like to withdraw from the question queue, you will need to press star followed by two. If you're using a speakerphone, we ask that you please lift your handset before pressing any keys. Your first question will be from Michael Doumet at Scotiabank. Please go ahead.
Hey, good morning, guys. obviously another nice quarter, and a strong close to the year. Marty, I'm not sure if I missed your comment in terms of margin expectations for Q1 for metal service centers, just giving the firming steel prices in the last couple of months? maybe just to build off of that too, you know, the spread between plate prices and HRC has remained, you know, wide, I guess, on a historical basis. John, maybe if you had to get your views there on the price discrepancy in the near, and medium term?
Yeah. Why don't we start with John to talk about the market, and then I can flip it over and talk about the margin dynamic.
Michael, good morning. Again, it's a good observation. The spread has remained high. There have been some changes. I think some of the mills have talked about the changes to the dynamic. Two things really playing. Again, you have about five plate mills in North America, one of which is not operational right now out of Mexico, so that's limiting supply on the plate side. The other is the steel, the Section 232 being in plate, so that gives a premium there for that plate product. We're not seeing a lot of imports, so I think the mills are at a really sweet spot, if you will, on pricing. That, it, you know, if you take that 25% off, it just, the imports are just not attractive at this time to come in at those numbers.
I think they're in a very healthy position. supply is good. it, it's not, you know, there's not a ton of extra material out there. At the same time, there is some availability, so it's not out of control. I think the mills have done a good job. They've been very disciplined on their pricing with plate as it in the historical comparison to the spread with coil. Coil, there's a little bit more supply. It's, it's obviously a little more volatile. You've seen it shoot up higher, come down lower. But again, it seems to be operating in a good place. we've seen a rebound at the December and January. Two price increases have come through, most of which have stuck. The market's receiving those fairly well.
Scrap's going up. We think that that pricing has stabilized and then started to turn the corner in recent weeks.
Michael, in terms of margins, in Q4, within the service centers, the margins in dollars per ton averaged around $460. What we saw during the quarter was month-over-month, it was coming down during the quarter. October, November, December, it came down. The exit margin from Q4 was lower than the Q4 average. That was a function both prices were coming down on average, and cost good sold was coming down on average. What we've seen in early Q1 is more of a stabilization in the early stages of Q1 from a margin perspective. Because the pace was declining during Q4, the stabilization now is stabilizing at a slightly lower level than the Q4 average. Does that get to your question, Michael?
Yeah. No, it's totally helpful. I mean, I guess we can work the math from the Q3, Q4 number and then align to Q1 just in terms of how you've outlined it. It's really helpful. Maybe the second question, I guess, just bigger picture, and I really appreciate the new disclosures around tonnage and, you know, what that gets us to for gross margin per ton. You know, if you look at the chart, already a number slide nine, it's historically hovered, you know, the gross profit per ton at $ 300, and you've been well above that for several quarters now. I'm just trying to get a sense for where we can land and what the new normal is because you're doing a lot with the business just in terms of value-add investments. You're looking to add scale through M&A.
You know, you've talked about inventory control. You know, what's the new normal look like? Maybe to push us a little bit further, if you can care to quantify what a new normal could look like.
I'd love to quantify, but I'm not sure that I know how to. How's that for an answer? I think your observation is pretty fair though, which is the old normal was three to fifth . The new normal, we feel comfortable is higher. What normal looks like and when we hit normal, I mean, the cycle always moves above normal, below normal, and somehow we average to create what normal is supposed to be. That's a function of both market pricing levels still remains at a pretty healthy level compared to historicals in addition to our value-added initiatives. You know, if the historical average was three to fifth , we should be averaging more than that on a normal through the cycle basis.
As we continue to uptick on these investment initiatives, you know, those are within our control, we'll continue to move up that margin curve.
That's great. Thanks, guys. Appreciate the call.
Yeah. Thanks, Michael.
Thank you. Next question will be from Frederic Bastien at Raymond James. Please go ahead.
Good morning.
Good day.
I was wondering if you could please comment on the puts and takes around energy products results in Q4? We saw lower volume sequentially, which is a bit unusual, but margins have a quite strong. Wondering if you could comment on that, please?
You know, it's, there is a little bit of a seasonal dynamic there, less than there has been in the past. One of the things is, one of our business units within energy field stores had a really, really strong middle part of the year. Even though sequentially it's, you know, looked down, if we kinda look past some of the lumpier type of stuff that happened earlier in the year and transactional business, day-to-day type business, that's still moving on the uptick. You know, we benefited some of that lumpier stuff earlier in the year. If we look at the more day-to-day type stuff, that was moving up through Q4 and is moving up through early stages of 2023.
That was kind of the dynamic in Q4 where you saw energy pull back a little bit. It was pulling back because it was being compared against Q2 and Q3 results, where there was some of that lumpier stuff that showed up.
Okay, that's helpful. Building on that, you had higher energy field store inventory at the end of the year. You said that's to help address backlog. Is this backlog higher than it was 12 months ago? Just trying to get a sense of, you know, are we seeing growth within the energy field stores and what's your outlook, you know, next... I know your visibility is somewhat limited, you know, in this next 6 months, what is it looking like?
Yeah. Fred, on the energy inventory, we saw a couple dynamics happening. One division specifically was really trying to play catch up. Their sales were running ahead of their inventory, so they finally caught up. Some of the port congestion was catching them. Finally caught up and got their inventory where it should be. There was a little bit of a surge there. Another division, Comco specifically, has got some projects going into Q1 and Q2, where they had to go ahead and bring the inventory in to be prepared for the projects due to the lead times. They saw a surge in their inventory as well. It's project-based, it'll be a back-to-back order. Regarding what we see going forward for Q1, is very strong in energy, both in Canada and the U.S.
In more of your medium to small type projects and our day-to-day business in the field stores is very strong. You know, breakup's hard to call for that second quarter of the year as to how long it will last, what the weather impacts will be, but we think we will have a strong breakup season based on the drilling that's out there right now. We're being told from our customers their backlogs are well into Q3 and early Q4 right now. Their desire is to work through breakup as much as possible, weather permitting.
Thanks. Another one on energy. You did benefit from nice equity pickups and you received sizable dividends from the TriMark JV last year. What is your view on it going forward? Is it something that you're kinda very happy holding or is that something you would look at potentially, you know, selling your share into it?
I think that, again, their business is very much, busy through the year as well as these drilling programs are busy, so we're happy with the performance. Again, long term, it's something that, you know, we would probably look to exit that, either with, doing something with our partner that's there, or look to exit that business. It's not part of our core portfolio, and if it were business we were looking to. As we did exit it completely in the U.S., we would probably look to exit that as well at some point in time.
Okay. Thanks. That's all I have for now. Thank you.
Great. Thanks, Fred.
Your next question will be from Michael Tupholme at TD. Please go ahead.
Thanks. Good morning.
Hey, Mic.
Hey. I guess I wanna start with the demand outlook. You talked in your outlook about expecting a rebound in demand, and I think this is both for service centers and energy field stores. I think the commentary was really specifically about kind of the near term and, you know, improvement versus Q4. Sounds like part of that, I guess, is a seasonal uptick. I'm wondering if you can comment on if we sort of look beyond seasonality and any improvement as a result of that, what are you seeing in terms of underlying demand?
If we look out sort of across 2023 as a whole, any thoughts or views on what you think you can do in terms of volume growth in service centers, for 2023, as a whole?
Well, thanks, Mic. Overall, one of the proxies that we use is mill capacity utilization. If you've looked at it for the last three or four weeks, we're seeing a steady uptick in that. We're back up to +74%. Appears it'll climb again next week. We watch mill inventories. Those are coming down dramatically, so people are restocking the shelves that are out there along with end users. What we're seeing from the end user demand side across the board is a very steady backlog, that they're very bullish on the first half of this year. There are some impacts to inflation, higher interest rates that are impacting housing, which we don't participate a lot in housing or residential, more non-res construction.
If the interest rates climb, that could get into their backlogs, but they're nine months out right now on those backlogs, there's a pretty big lead on those. Outside of that, if you're looking at agriculture, if you're looking across the board at any manufacturing of equipment, all those backlogs are really, really strong. Anything to do with energy, solar, wind, oil and gas, all extremely busy right now. They're pretty bullish on their backlogs. We think that wind in particular in the back half of this year is gonna get extremely busy as new subsidies start to come out, tax incentives start to come out from the government. Pretty bullish on that.
Also, with the infrastructure projects coming on board, we think those are gonna really, really have some strong impacts for us in Q2 and beyond.
Just one supplement to that. One of the fascinating dynamics that's come out of the global supply chain issues over the last couple of years is the concept of more onshoring has kind of evolved from a theory to a reality. It's early stages, but we are seeing some of that activity where local North American base, predominantly in the U.S., but a little bit in Canada as well, activity has really been onshoring. I think that's a trend that we're gonna start to see in 2023 take hold, and that is an ongoing trend that isn't gonna go back to where it was for obvious reasons that we've seen over the last couple of years with some of the supply chain issues.
I wouldn't be surprised if we look at 2023 as a whole and compare it to 2022 and take out some of the quirkiness of seasonality and all that we see some version of a low single-digit type growth in volumes for the industry, and we are trying to outperform the industry in terms of market share.
Okay. That's all very helpful. Thanks very much. I, and I know you've already had a few questions here on energy field stores and your outlook there, and it sounds like it's fairly positive, which makes sense for a variety of reasons. I guess, John Reid, you commented on drillers having strong backlogs and potentially working, you know, as much as possible through breakup. I'm just wondering here, we have seen energy prices moderate early here in 2023, particularly natural gas. I guess oil dropped a bit as well. I think it's bouncing today on the Russia supply cuts. You know, could drillers pivot, or is the backlog that they have, is that sort of hard backlog and committed?
Is there a risk here that if energy prices do, you know, particularly again natural gas, if, you know, could they change the outlook relative to what you're describing?
I think we're dealing with a much different dynamic than we were three or four years ago with the drillers and the energy companies due to the fact that their balance sheets are finally in such good shape. There's a long period of time there where they were outrunning cash flow with these drilling programs. When you would see a downturn, a reverse course in the either natural gas prices or oil prices, there would be those very quick pivots. I don't think those are as necessary now because their balance sheet.
Now, if it's a dramatic downturn and prices cut in half, I'm sure there'll be some changes, but they're not as volatile as they used to be on pivoting all tied to that oil price. Although oil prices have pulled back some, natural gas prices have pulled back some, they're still running at really, really nice levels. I think that makes sense for the drillers to keep going forward. We're not hearing a lot of commentary that says they would have any reason to pull back at this point. It's more full steam ahead and how fast can we get this going.
Okay, that's helpful. Thanks. Then just a question on the CapEx. I think, Martin, you said about $75 million per year for the next few years. Two questions on that. I guess, first off, are you able to give us a sense for how much of that amount is related to the facility modernizations, I guess this year and over the next few years? Then on the value-added processing side, I mean, this is something you've been talking about for quite a while, and it sounds like you've made a fair bit of progress. It certainly sounds like there's more room to go. Just to use the baseball analogy, I guess, could you talk about what inning you think you're in as far as that value-added processing, expansion capability?
Going to your first question first, Mic, our maintenance spend is call it around $25 million per year ±. Anything above that is related to either the value add, the mill modernizations, discretionary projects that have return dynamics attached to it. Dealing with that item first. Your observation is right, though, which is, it's picking up pace. There's more opportunities at end site. The funny thing is, if you consider what inning we're in, we're probably in the fourth inning, but we were in the fourth inning last year, and we were probably in the fourth inning the year before because the game just keeps getting extended with newer and newer opportunities. The, the scope of opportunities as every year goes by just seems to be presenting in new situations.
As we go further down the path on certain ones, it just opens up new paths or new opportunities that we didn't see before. As we've done acquisitions, with those acquisitions, you know, we did one in 2020. We did one in 2021. With those acquisitions, we didn't really contemplate what specifically we could do for value add projects, but we're seeing those projects. The one I just referenced in Missouri, part of that is to put in some value added equipment. Those are things that are just keep showing up as we're looking at more and more opportunities. I know we probably said we were in the fourth inning of the, of the 9-inning ballgame a couple years ago. We're still in the fourth inning because more and more opportunities are becoming available.
Okay, that makes sense. Thanks for that. Just a couple questions on steel distributors. I guess two parts, I guess from a demand or revenue perspective, or maybe more revenue as opposed to demand, how do you see that business evolving over the course of 2023 versus 2022? From a margin perspective, I mean, that one I find is has some of the more volatile margins across the business, and I'm just wondering what you see as sort of a normalized run rate gross margin percentage in steel distributors.
You're right. There is more volatility attached to that. In some ways, and just to go back, Mike, you know, there's two pieces to that business for us. There's the U.S. piece, which tends to be more on the volatile and more transactional, and there's a Canadian piece of the business that tends to be more back-to-back lower risk, lower margins. If we look at Q4, you know, Q4 for steel distributors wasn't all that different bottom line results from Q3. That's really because even though the steel market pulled off, that impacted more of our U.S. business than our Canadian business, which tends to be more of a steady eddy, steady as she goes type of business.
Q4 is actually not a bad reflection in terms of what it looks like on balance over cycle, just because we did see the pull-off on the U.S. side, which does really, really well in up markets, and we didn't see that up market in Q4. Our Canadian business, that's called Wirth, it was steady as she goes and did quite nicely in Q4. Q4 is probably not a bad litmus test.
Okay. That's great. Sorry. Just on the top line outlook for that business, I mean, it sounds like you're constructive on the other two in terms of demand. Does that apply to steel distributors as well?
Yes, it does. Again, to Martin point, again, more back-to-back contractual type business in Canada. We're continuing to see that come through, so that'll be a more steady flow. We'll see it will ebb and flow more with the market price in the U.S. and opportunistic, again, as they're highly transactional. Again, I see that following along the same lines as the service centers as far as total market demand. Keeping in mind, service centers, either ourselves or others, are a big customer for them.
Okay, great. Thanks very much.
Great. Thanks, Mic.
Thank you. As a reminder, ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone phone. Your next question will be from Ian Gillies at Stifel. Please go ahead.
Morning, everyone.
Ian.
With respect to the M&A environment, are you able to qualify for us where seller expectations are maybe relative to six and 12 months ago? I know that's been a challenging part of executing the M&A plan.
Yeah. It's a great question, Ian. You know, it's sometimes hard to gauge because we only see it through our lens. It's not like there's a slew of activity that we have seen that's been transacted by other people. We're seeing lots of deal flow, some of which is interesting to us, some of which is not interesting to us, but there hasn't been a lot of stuff that we've seen cross over the finish line and say, "Here's what value is." It's more of an anecdotal comment than any hardwired data that I can point to. Anecdotally, yeah, it seems like there's a better tone to expectations today than there would have been six or nine months ago.
Okay. That's helpful. I'm gonna take a shot in the dark here. Are you willing to maybe talk at all about how the discussion went with the board around dividend increases and your thoughts there, just given strength of the balance sheet, future cash flow generation and the like?
Sure. Well, it really wasn't a hot topic, to be perfectly candid. We think we've got a healthy dividend as it stands right now. For us, we talk more holistically about capital deployment in a variety of areas, and our focus right now is we've got, as you're right, we've got an extremely strong balance sheet, and we see opportunities to deploy capital in a variety of ways. You know, your question about M&A is interesting. There's potentially opportunities that we're continuing to be optimistic about, but we'll see. The projects that we have internally. As of today, we're collectively comfortable with the healthy dividend that we have.
Last one around capital allocation. The NCIB was obviously pretty active through last year. It doesn't look like it's been used a lot through the early part of this year. Is that a function of Russel Metals being in blackout or the perceived view of where the share price is today being healthier now?
Yeah, we've been in blackout since January first.
Okay. I just wanted to confirm that. That's helpful. That's all for me, guys. Thanks very much for the detail on the call.
Great. Thanks, Ian.
Thank you. At this time, gentlemen, we have no further questions. Please proceed.
Great. Thanks, operator. Appreciate everybody for joining the call and dialing in today. If you have any further questions, please feel free to reach out. Otherwise, we look forward to staying in touch during the quarter. Take care, everyone.
Thank you, sir. Ladies and gentlemen, this does indeed conclude the conference call for today. Once again, thank you for attending. At this time, we do ask you to please disconnect your lines.