Hello and welcome. My name is Jorge Bairstein. I'm the Vice President of Finance for Ryerson, and I'll be acting as a master of ceremonies for today's event, our inaugural Investor Day, which coincides with our 180th birthday as a continuous business operating under the Ryerson brand. We've got an informative lineup for you this afternoon, and we hope that you come away from this event with a better understanding of the full capabilities that Ryerson has to offer and additionally, our compelling equity investment thesis. Lastly, I would like to thank everyone in the room and watching online for your support.
We appreciate that your time is precious and we really value your support. Given that our Chief Legal Counsel, Mark Silver, is in the room, I would like to caution that certain forward looking statements that will be made today are made within the meaning of the federal securities laws. Please refer to our risk factors in our annual report on Form 10 ks for the year ended December 31, 2021, and additionally, our most recent quarterly report on Form 10 Q filed with the SEC. A reconciliation of our non GAAP to the most comparable GAAP measures is available on Ryerson Investor Relations website at www.ir.ryerson.com. Lastly, in order for us to get through Our material today, I would ask that you withhold any questions until the end of our presentation at 4:30 p.
M. Eastern Standard Time, where we will open things up for Q and A. For those watching online, you will be able to submit questions either through our Investor Day, Investor website at www. Ryersoninvestorday.com or our virtual stage tab or by e mailing our Ryerson IR inbox at investorinforierson.com. Our executive leadership team has over 160 collective years of experience and wisdom, and that's almost as long as 180 years that Ryerson has been in business.
Besides metals distribution and processing experience, our executive team comes with backgrounds from retail, Distribution, Software and Manufacturing, which brings a wealth of Different perspectives to the way we manage our company. Eddie Lehner has captained the financial and operational turnaround at Ryerson for the past 7 years. Prior to that, Eddie served as Ryerson's Chief Financial Officer since 2012 and briefly again prior to my boss, Jim Clausen becoming CFO 2 years ago. Besides our executive leadership team with us today in the room, we have other members of the Ryerson family present, including representatives from our supply chain, corporate development, legal and human resources areas. Full bios of our speakers today can be found on our Ryerson Investor Day website through which you registered for this event.
Just a recap of who we are. Ryerson is a 4,000 person strong company with approximately 100 locations in the United States, Canada and Mexico. We're a $1,000,000,000 market cap, leading metals distributor and Solutions Provider based in Chicago with a North American footprint. We forecast our revenue this year will exceed $6,000,000,000 and that we will end 2022 with over $11.50 in earnings per share. As an investment, we represent a way for investors to gain access to multiple themes within our stock, including those of on shoring and infrastructure spend via a low carbon footprint and our responsible ESG focus.
Again, this is a differentiating factor versus the broader metals and mining space under which we are classified. To be clear, we are a distributor and processor of value added metal solutions. We do not produce steel. Our North American footprint of processing capabilities and Digital Solutions is delivered coast to coast from Canada to Mexico. And importantly, our revenue mix, as you'll see in this slide, is nearly half bright metals, namely aluminum and stainless steel.
These metals are widely used in applications of health, Light Weighting, Decarbonization and Battery Electric. Our revenue mix is highly diversified with no one customer representing approximately more than 1% of our revenue. What we do, we sit at the nexus of a $230,000,000,000 evolving supply chain where our customers are seeking more value add from their traditional supply base. We're increasingly offering more complex value added processing and multistage processing capabilities and digital solutions in a highly fragmented market. We supply and process the metal that goes into the combines and the harvesters, which harvest your crops.
We supply the metal that goes into the Class 8 trucks, which delivers that produce to your local supermarket. We supply the metal and process the metal that goes into ventilation systems, HVAC and water purification systems. And we supply the metal that goes into your daily appliances that you use such as refrigerators, washers and dryers, barbecues and even recreational vehicles. And lastly, we also supply the metal for hospital beds in case you have a spill. And importantly, we supply and process the metal that goes into the generation of energy to heat your homes and propel your vehicles.
And as the economy increasingly shifts towards clean energy and battery electric solutions, Whether for vehicles, residential or industrial energy storage, we intend to grow with our industrial customers towards facilitating a clean energy future. In short, we are strong advocates of the circular economy and being stewards of the environment and see that metals' almost infinite recyclability is a key facet of creating a sustainable and more prosperous society. Given our leading position in the supply chain and evolving tailwinds that Eddie and other members of management will speak to today. We believe Ryerson is extremely well positioned to thrive in the decade ahead. And with that, I'll turn it over to Eddie Lehner, our CEO.
Jorge, thanks so much. I appreciate it. Good afternoon, everybody, and welcome. And thank you for being with us on this beautiful Tuesday afternoon. And I certainly want to thank my Ryerson teammates both here in person and virtually.
And 2 of my fellow board members, Eva Colosky and Steve Larsen, thanks so much for being here. I couldn't help as Jorge was making his comments, I'm going to improvise for a minute here. So don't be alarmed. My kids used to ask me, what do you do, dad? And I used to say, well, you're sitting on it and you're drinking out of it and you're typing with it.
And they said, dad, okay, it's enough, we get it. And the thing is this beautiful industry that we're in of industrial metals and when we say Ryerson is 180 years old, it's another way of saying we're perennial, we're perpetual, not old. We're Not old. We're new again all the time because you take these industrial metals and they are beautiful in their sustainability and the recyclability. We just use them over and over and over again into the things that you're sitting on that you're using things that heal you Things that make the food that you eat, again, I could go on and on and on.
So we're in this beautiful industry that renews itself constantly. We're going to that's going to be a Consistent thread and theme through this presentation today. But one of the takeaways I want you to have is In a fragmented market like we're in where we show you that it's at the nexus of a $230,000,000,000 industry, Understand too that there's $2,400,000,000,000 available in parts that are manufactured that go into spot fill of material applications. So even horizontally and vertically, when we get outside, I would say the traditional definition of Metals Wholesaling Distribution and Processing. There's such a much larger opportunity to harness fragmentation and to bring value to this market.
But it really is about creating great customer experiences. I think it's the only strategy that matters is did you have a good Experience with us just like I want you to have a good experience today. So I want to tell you a little story. In 1996, 40 years after my father left Hungary during the Hungarian Revolution, he took us back to Budapest and we Traced our roots in his childhood before he came to the United States as an immigrant. And he took us to this beautiful restaurant, maybe you've been there, it's called Restaurant Gundel, right at the entrance to City Park.
And it's famous for its strolling violinists and its Kind of mezzanine balcony that looks out onto the park. And he went to the maitre d' and had a conversation in Hungarian with the maitre d'. And after that conversation, we got seated at this beautiful table that looked out on the park and there were strolling violinists and it led to just a wonderful experience that I remember with such great clarity and affection even today. And I asked my dad when we sat down, I said, dad, what What did you and the Materd talk about? Of course, it's kind of a long conversation, but he truncated it for me and he said, the Materd said to me, Mr.
Lehner, I want you to have a good experience. And so for this Investor Day, I want you to have a good experience just like we have to create these great customer experiences for our customers, 37,000 plus with many more to be gotten, but the more great customer experiences we create, The better we're going to do. It's just that simple. So let's get downright enthusiastic about metal together. This perennial let's get excited about it, really.
I mean, you're here. Thank you for coming, but let's get excited about metal. This beautiful perennial material that we can use over and over again. And I want you to remember Five things at the outset of my presentation. I told you already I want you to have a great experience.
The other thing to remember is, is there a potential need and demand for what we sell. For 180 years, the answer has been yes. And I don't see anything That can knock this champ off the block. And we'll talk about that a little bit too. Should you be afraid of the counter cycle?
Should you should we be afraid of counter cycles and volatility? No. Now, do I wish that growth was unimpeded and uninterrupted and it just went like a beanstalk up into the sky? Of course, I do. But if you're going to have a counter cycle and you're going to have volatility and you're a well managed company, as I believe we are, Then that's an opportunity because we absorb so much free cash flow during an upturn And then we released that free cash flow during a counter cycle on our way to the next upturn.
And I got news for you. Every time we've been through a counter cycle in my tenure with the company, we came out better and stronger On the other side. So we do not fear counter cycles. I'm not going to go as far as to say we love them, but we like them well enough because we know We can benefit from them. Does Ryerson continue to have this is number 4, Does Ryerson continue to have the ability to manage working capital assets and expenses better than its peers?
And I would argue and we're going to demonstrate today that the answer is yes. Past is prologue. We're very good at managing working capital. We're very good at managing expenses. And then does number 5, does Ryerson have the vision and the plan And the ability to execute that plan to deliver higher through the cycle earnings And what we've demonstrated on average since our IPO.
And yet, and yet Now listen to this because I'm going to get winded when I recite this to you. And yet despite paying off all the high yield debt, Despite a strong balance sheet, which keeps getting stronger, despite average adjusted ex LIFO EBITDA Exceeded an 8 year average of $300,000,000 and yet despite a dividend yield that's about 2.5% depending on where we close in a little bit here. Despite share buybacks, more than 5% of our market cap, Despite free cash flow yields exceeding 23% per annum since we went public, Despite a very impressive investment track record since our IPO, but get this, Our enterprise value today is still less than what it was when we IPO ed in August of 2014. Well, look, after 180 years, maybe that's a mystery And maybe it's an opportunity. And now we're going to explain more and see if we can uncover this mystery and we can all agree It's a heck of an opportunity.
So why does DNA matter in an organization? Because you've got to build in the traits and the characteristics and the abilities because we're a collection of human beings, we're a collection of 4,000 people. So we've got to build the DNA That's going to make us successful and be able to compete and to be able to win and differentiate ourselves for many, many years into the future. So that's our DNA speed scale, value add in and Analytics. But let's zoom in on culture for just a second.
So our culture is say yes and figure it out Because way back when I joined the company, we were finding ways to say no. And they weren't good ways to say no. Got to say yes, but any fool can say yes. You have to give people the training and the tools and the capabilities To say yes, so they can deliver because we all know if you disappoint a customer enough times, they stop yelling at you and they just go away. So you've got to be able to give people the ability to say yes.
What do we mean by a differentiated customer centric model? So with all due respect to the metaverse, we're here to talk about the metaverse. The metaverse can wait. We got a lot of work to do here in the metaverse. But think about your own lives.
Think about how you Experience day to day interactions with companies that you buy things from. From the time you get it quoted or you get a price all the way to the time when it's delivered to your door, We have an opportunity to deconstruct that part of the process, reengineer it, rebuild it, invest in it all the way from quote to final mile And give you that best customer experience in the industrial metal space. This picture, we created this, I don't know, 4 or 5 years ago. And I still think This really crystallizes in an image who we are and what we're becoming and that is an intelligent network of Connected Service Center Assets. Look at this picture and it pretty much shows you from Canada to the U.
S. Mexico as Jorge said, from coast to coast up and down, We have the ability under a single brand with a diversified metals mix to conduct business 20 fourseven through all these points of light. But here's the beauty of what we're doing and where we're going. It's not just what we own linearly. So we have linear ownership of inventory.
We have linear ownership of fixed assets. But what about All the inventory and assets we can map to in the virtual service center space, not the metaverse, Other companies that own inventory, that own processing assets that we can map to, that we can spec to, So that we can provide an end to end metal solution for anybody digitally and with relationship touch points from no touch to high touch. Let's talk about network effects. You do business with companies that give you a better network effect. You do.
You buy from him every day. These are just some of the components that we're building, that we've built. These are some of the components that constitute Ryerson's network effect, whether it's pricing analytics, Whether it's customer shipment visibility, whether it's the virtual warehouse that I alluded to, we create a network effect because we know companies That master the network effect, delivering great customer experiences, they outperformed their peers. So let's talk about industry trends. Now Phil's known me for a long time.
We go back to my PSC metal days and we've been talking about these themes for a long time around What's changed? Well, from 1975 really until I'd say 2017, we under invested in CapEx and long life assets and we saw the middle class get eviscerated and it wasn't a good trade. We gave up a lot And we got very little back in return. We hollowed out the middle class. You didn't come here to hear me talk about all the problems in society that that created, but it did.
But the global met mega trends that benefit Ryerson, deglobalization, yes, decarbonization, certainly. On a risk cost adjusted basis, you can make a very compelling argument that this is the lowest cost place to manufacture in the world on a carbon risk adjusted all in cost basis. We've seen rising energy, labor and input costs And supply chain insecurity, not just through the pandemic, but the seeds were planted for that long before COVID. And we know that the key to longevity to get to 180 years, you have to make productivity Driven investments to keep increasing the rate of productivity in your organization. That leads us to North American trends.
Has there been domestic milk consolidation? If I asked you 20 years ago, anybody here besides Phil ever hear Geneva Steel? Joe, you can't answer either, to Barbary. Nobody's heard of Geneva Steel? Right.
But if I asked you, have you heard of Steel Dynamics, would you raise your hand? Okay. The industry is consolidated across steel, aluminum and stainless. It's even consolidated with respect to import sources and how that import what can come in, how it does come in. So There's been consolidation.
We all know that trade rules have changed. We know that there's an energy transition underway to renewables and there's a fight There's a fight going on because we still need traditional sources of energy, but we also know that we've got to transition to Renewable and low carbon sources of energy, both of which by the way are inflationary, both underscore the need and value for industrial metals. Commodity investment, it's lagged. It's lagged for a long time with fixed asset investment. The manufacturing customers are seeking more value add.
Now, Jorge doesn't like this slide. I'm going to tell you right now, he hates this slide. But I feel like I'm doing a public service By talking about it, look at what happened to U. S. Public infrastructure spend.
Look at that demon drop. Then it comes up a little bit, then it goes back down again. It's not a coincidence that When that infrastructure spend was peaking, the middle class was peaking. People were getting along better. But here's the tragedy of it.
How in the world do you figure that the world's largest economy Can have shrinking life expectancies. Now we all like superficial answers to an extent. We don't want to think about things too much or too deeply. But if you really think about it, and you're probably going to laugh because you're going to think I'm talking my own book, but I'm not. At the heart of the shrinking and life expectancy in the United States, which I never thought I would see, At the heart of it is underinvestment and that means underinvestment in industrial metals.
We're paying a really high tab It's a tragic tab. We're paying a really high tab for not investing what we should have, which was at least at the rate of GDP. Frankly, it needs to be higher than the rate of GDP, but look what happened to life expectancy. You think that's because people are eating more fast food and buying more fast fashion? No, no, this is chronic underinvestment for 50 years.
That's what gets you to shrinking life expectancies. And it's a tragedy, but if we make the right choices, we don't have to live with that. We can reverse that if we make the right investments. Okay. Here we underscore the point again, but in a different way.
Where was most of the metals and energy CapEx? Where was that done? Well, it was done mostly in China after their admission to the WTO. Then we had a little bit of a resurgence in investment during the U. S.
Shale revolution. And now we're finally making down payments again on what we need to do to bring Society to where it needs to go in terms of bringing down surface temperatures on earth, investing in productivity and infrastructure To really just deliver better outcomes for people, better quality of life, more broad based prosperity. Now we're finally starting to make investments in that, whether it be the CHIPS Act, Whether it be the Inflation Reduction Act, whether it be the Infrastructure Act, these are just down payments. I mean, the IMF, I understand that they're not that precise. But the IMF in December of 2021 came out and said, We're going to need 3,000,000,000 more tons of metal just to transition to a low carbon economy.
That's on top of maintenance industrial metal, what we call maintenance plus GDP, right? Replacement economy metal, which is pretty much the baseline of what's being So now plus GDP growth, now you've got transition metals on top of it. So do I think that's a bullish environment for industrial Cyclable sustainable metals? Yes, I do. Do we all know now that we need more resilient supply chains?
Yes, we do. Do we know that Europe's got an energy crisis going on because maybe friends or associates they thought would come through for them didn't exactly Deliver? Yes. Have we seen critical components cause supply chain shortages that couldn't be easily remedied? Right now, they're not being remedied.
I was talking to John Ort this morning at breakfast. There's still a lot of delays for equipment and components Affecting the demand cycle, I'm going to argue today that the demand cycle didn't even get fulfilled. It was interrupted by inflation. The demand cycle in the last 2 years did not even get fulfilled, which means it's just going to be additive for the demand that we're going to see when we come up through the next upturn. We come back to North America being the best risk adjusted place for people to manufacture.
Let's talk again about Decarbonization. We know through extreme weather events, we know through Water levels on the Mississippi through so many other strange occurrences with respect to weather patterns and temperatures. I think we all understand we've got to bring down carbon, we've got to bring down the level of heat because I think you all can acknowledge that You probably want to put your deposits down on any Great Lakes property you can find right now. In 20 years, the Great Lakes will be synonymous with Paradise. Believe it, you heard it here.
So we need to continue to decarbonize. We've got to strike that balance. It's not going to happen overnight. Most people aren't going to accept the trade offs. Probably the overwhelming majority of the world's population would not accept the trade offs of going cold turkey From traditional fuel production or energy production to where we need to get to, but make no mistake about it over Next 20, 30, 40 years that migration and transition is going to continue and we all know we got to decarbonize, but that favors recyclable Renewable Industrial Metals.
Now I got to make a pitch. I got to make a pitch because I want you to think about this for a second. Did anybody else read that article about Fast fashion, clothing that's been discarded, that's been collected, that's watching up on the shores, I think of Africa. Did anybody else read that? Did you read that?
Okay. You read it. Thank you. Do you know that's what happens to most things that are so called recycled? There's no Regenerative use for that material, plastics, no wood, very little glass, somewhat.
Metal though gets recycled. 93% of all metal gets collected and recycled. You know what happens to the other 7% that's slag? It gets reused in beneficiated applications, ballast. It's a filler for kilns, for cement kilns, etcetera, etcetera.
The other 7% gets used again and again and again. So metals really are the recycling sustainable heavyweight chance and that leads to commodities pricing support except for the distortion Of China, China subsidized capacity build out, it's obvious that over time, The actual underlying cost intercepts and the prices for industrial metals, they got to go up. They got to go up. So that underpins more value in terms of the materials that we buy from our mill partners and our supply chain partners and how we add value to that and upgrade that material as we deliver to our customers. And then of course there is fair trade and steel consolidation, which we've touched on, but This gives you a good picture of what's happened in terms of consolidation within the steel industry, but it's also happened in the aluminum industry and the stainless industry And steel imports have come down as well as a function of fair trade and a rebalancing of trade because we really got the worst of that trade for the last 25 years.
Dollars 850,000,000,000 it's a down payment. It's important. It's meaningful, but it's a down payment. That $850,000,000 you got to times it by 10 or 20 to really get to where you're really starting to make a sustained difference in lifespans and overall quality of life and well-being. And customers want more value add and they want great customer experiences.
So we continue to make the right investments in service centers and equipment within our M and A portfolio, within our project management office. We work on organic initiatives and building future state systems, all to add more value to the customer experience. So here's the evidence, here's the mystery. The mystery is even after de risking the balance sheet, all the supportive macro themes we Talked about over the last 20 minutes, reinvesting for growth. Remember, we used to pay off the past.
4 years ago, 5 years ago, 6 years ago, we're paying off the past. Now we're paying dividends, we're buying back stock, we're making investments in acquisitions, Machinery and Equipment, now we can invest in the future. We don't have to pay off the past. So you look at where we've taken total debt, $1,250,000,000 approximately down to $477,000,000 Interest expense has gone from $107,000,000 to $35,000,000 We turned around and put a significant amount of that back into dividend, Back into shareholder returns, look what's happened to legacy liabilities with pension and retiree medical payments, dollars 66,000,000 to 13,000,000 Against the profile of average 8 year ex LIFO adjusted EBITDA Exceeding $300,000,000 a year. This is the other picture that's worth all my words today and that is We want to make it easy for our customers.
People want easy. Things have been too hard. Wherever you can go get a customer experience, I know you're going to go back. You're going to go back. You want easy and good, then you want easy and great.
And you want it with running water type consistency. Want to get it over and over again. And when you get that, the endorphins are going to be going crazy and you're going to want more of it. And that's going to lead to more customers. It's going to lead to the kind of growth we want at Enhance Margins and up goes the virtuous cycle.
So I appreciate your time and attention during at least my part. I want to come back and join you for concluding comments and Q and A. I'm going to show you a short video because we want to keep you entertained. And then I'm going to pass the baton to My good friend and partner, our COO, Mike Burbach. Thank you.
Metal matters To a more modern, sustainable society. Every transaction, every interaction. Right now, Ryerson is stepping up to this challenge, ready to support the effort to make and build.
As a critical link
in the manufacturing supply chain, we understand our responsibilities to ensure the material is Available, ready to add value and to deliver on time. These are the things that matter to the doers, The creators, the visionaries and that matters to us. It's the catalyst behind our deep inventory, advanced Processing capabilities and interconnected network. The backbone to it all is our dynamic team with an intrinsic pride to deliver when it matters We know that our job is never done. It's why we continue to invest in our people, in
Good afternoon, everyone. My name is Mike Brubach, Chief Operating Officer for Ryerson, and I want to thank you for being here today. I really look forward to taking this opportunity to walk you through Ryerson's operating model. And we'll spend some time talking a little bit at depth about the products and services we offer, The end markets that we support as well as the supply chain expertise that we provide. When I'm finished, I'll turn things over to John Orth, our EVP of Operations to walk through operational excellence.
So to get started here, Here's a high level view of our operating model. Earlier, you heard from Jorge and Eddie talk about different aspects of Ryerson, painted a Picture of who we are, what we do and the value proposition that we bring. It was an impressive story. Eddie, fantastic job, you sold me. But what I'd like to do now is bring it down a level and talk about the 3 basic tenets of our model.
And so the way I think about these three things is As I view it as a roadmap to drive improvement throughout our network. So Eddie touched on customer experience, customer experience, customer experience. You're going to hear a few of those terms today, okay, because this is truly how we think about the business and everything that we do today is more or less earmarked to make that better, okay? In this particular model, a lot of details here, we'll get into some of this in subsequent slides. But what I want to point out here is when we think about making an acquisition, when we think about making an investment, if we start talking about Putting new tools in place with our digital expertise, does it make this better?
Okay. Does it improve efficiency? Does it expand our margins? Does it help us grow? If the answer is no, we're probably not going to do it.
So this is really how we think about things and we keep checking back here to So we're not losing sight of what's truly important. So for starters, I want to spend a second talking about our products. Jorge mentioned that we have products in carbon, stainless and aluminum, but half in carbon, the other half in the stainless aluminum or bright metals as we like to call And within that, and we're not going to get into too much detail here, but we do sell multiple different shapes of each of these products. In each one of the different metal types, we do sell flat products, plate products as well as long products, Okay. So when you take those different metals, those different shapes, you put it all together, what does that add up to?
We've got over 75,000 different Item opportunities across our network, okay? That's available with our network. All of our people can see all of it at any point in time, But it goes beyond that. We touched on the virtual warehouse. We're real proud of this.
This is something we built over the last number of years. And what that effectively has done is More than doubled the offering that we have available for our people to see and to offer to customers. So at any given day, We will be approached by someone somewhere in North America looking for something, okay? We have a big opportunity right in front of us In one of our plans to start with, okay. But in the event that it's different than that, more than we have, We can use this virtual warehouse and we can move quick, we can move with speed and this is really going to put us in a position to Take some opportunities and do something with it quickly.
But having the inventory really is just step 1. It's really about solutions. And so when we talk about this, yes, we have a lot of SKUs. Yes, we've talked to stock a lot of different types of things. More importantly, it's how do our customers want to buy them from us.
Today, we provide products as is, Okay. More like you would think from a typical distributor. But the public and our customers, they're really looking for more than that more often than not. So we also have the capabilities throughout our network to process these, cut them, burn them, shear them, whatever that is, anything that's Going to make it easier for our customers once they get the product to get it to their facilities. Also, we fabricate and we'll spend a little bit more time on that coming up.
To add a little complexity to it, our customer base is really broken into 2 big buckets, program type customers, contract customers and transactional. Contract customers might be what you expect, larger in nature. They buy products from us over a set period of time at a set pricing arrangement. The transactional is the one that's interesting and exciting going forward. This is ring of the phone spot type business for Ryerson.
The orders, they can range in size. They can be incredibly small. They could be very large. But the key to this is speed. And speed is the name of the game.
And Speed is really all about what we're building at Ryerson today. What we've put in place with our tools, with our network, with the capabilities we have within our network, Really everything is engineered to take that inquiry from a customer and it could be happening right now, okay. Somewhere in our network, One of our phones ringing, emails coming in saying I need this tomorrow, okay, and we didn't know about it 5 minutes ago. And we have got to Handle that quick. We got
to quote it fast. We got
to fill it fast. We got to deliver it fast. And so this is really what we're engineering right now. And the reason I'm excited about the transactional piece, I like all business, okay. I'm not picking on 1 or the other, but the margins tend to be higher in the transactional side of Matters.
And so with our analytics, with our tools to price, it's really an attractive growth opportunity for us. So you put that all together, A lot of opportunities to grow our margins. I want to spend a little bit more time because one of the best ways to grow our margins is by adding value, okay? This chart very, very simple depiction of some of the enablers to add value, okay? Lower left, Think about that as a traditional distributor selling as is products, nothing wrong with that.
People buy that way. We're happy to do that, okay? But as you move up the value chain, you start selling more than metal. In the middle, we're doing some processing. We're shearing, we're sawing, we're burning, Whatever that might look like, whatever the customers need, we do that because more and more people want to take our products off a truck, put it in their lines And they want to get things done.
This speeds up processing for them. It eliminates waste, frees up their capital, and they get to focus where they want to spend their time. Good. On the far to the right, you're really talking about where the fun starts. And this is really complex fab and we'll talk some more about that.
First stage, I think I covered this already, but think about this, like I mentioned, customers are demanding, I don't want a full bar, I want a half bar. I don't want a full sheet. I want a sheet that's a different length than what you stock. Yes, yes, yes. You saw the say yes figure it out, okay.
We say yes a lot. And we have the capability to say yes, okay. It's not just say yes and say, oh my god, how we're going to do it. It's say yes, we got a process to do it and it's a good story. So we're doing more of this.
We like it and this adds value. So every time we do something that puts more Value into something, we're not really selling metals so much anymore. We're selling a solution, which was really What we're talking about here with advanced processing. So this is an exciting piece for us, okay. Now you're really Stepping away from selling metal, you're selling parts, you're selling solutions, you're selling kits and the picture is worth a 1000 words.
The pictures here, these are real life examples of equipment where we've made parts that go on to these machines. So on the front end loader, The lift arms for instance, our plants make those quite frequently, okay. Out of plate, we drill, We blast, we double, we do whatever the customers need. We can make it, they take it, they put it right on their assembly line and boom, you got a front end loader coming out the door quickly. But you have charging stations for EVs.
You've got aerial lifts, scissor lifts, parts there, big, big opportunity. You've got some packaging equipment and processing equipment on the bottom. All of those are just brief examples of what we're trying to do, which is we'll work with our customers, Try to figure out how we can help them make parts for them that A, they don't want to do it anymore, maybe for supply chain reasons, for labor reasons. They're all good reasons. We're here to help, okay.
And the beautiful thing about this is if you're selling as is inventory, there's a pretty big universe of people that can do that, Okay. If you're making parts engineered, we helped engineer, we helped them design something to be good fit. The switching costs on that is a little harder. We use the term sticky, okay. We think that business is stickier and it's not really scientific and I doubt you Find it in a book, but it's in our mind, it's really what we're striving to do more and more of.
To give you a little more flavor of this, What I'm going to do is run a video right now to show what we're doing for advanced processing. Well, thank you for that. So hopefully that video put a little color around what we're trying to do and we're pretty excited about this. This is a big opportunity for us. So Switching gears, going to talk a little bit about our diverse end markets.
And here's just a quick view. The takeaway from this when I look at this is we have very diverse Set of customers in end markets, very attractive, good markets, but we're not overly dependent in any one area. Our largest end market happens to be metal fabrication machine shops, which in itself is actually a highly diversified Market because the customers in that area are actually making parts for virtually every industry you can think of. So really good, well positioned. We've got the equipment, the network, the products to grow, the expertise and we're going to.
The thing that's Exciting today is when you start looking at some of the secular trends that are in store and getting coming down the pipeline quickly, when you start thinking about EVs, Automation, Renewable Energy, Infrastructure Bills, there's growing demands that we expect to participate in because we are well positioned with everything we've discussed so far. So we're very excited about this. What I'd like to do is just take you quickly through a few of our end markets just to give you a sense of what we're looking at. First one is our industrial machinery end market and the format will be similar in some of these slides, so I'll move quickly. But basically what's exciting here is the customers really match up nicely with our capabilities.
General machinery, you might think of it as Electric equipment manufacturers, power gen, chemical industries, whatever the case may be, whatever industry and equipment they're using Really ties in nicely with what we're doing today. And their industry forecasts are strong. We're talking about good growth over the next few years, Up 6% per year is the forecast. 2 things, as they grow, we'll grow, but we're going to grow in addition, hopefully, just with our efforts and activities. Another attractive market here for us is commercial ground transportation.
We're highlighting Class 8 Trucks on these charts which are showing nice growth over the next number of years. But we're also participating in areas besides commercial Class 8, excuse me. We're in buses. We're in rails, emergency vehicles, truck trailer. You name it, anything commercial ground, we've got a good presence there.
Our relationships in the Class 8 truck are deep. We've been doing this a long time. We set up nicely to enjoy that 8% growth that they're forecasting. Our products or services or capability, our expertise is all there. So it's a good market for us.
Durables, another good market. It's about 10% of our business historically. Durables to us are appliances, it's automotive, it's recreational equipment. Maybe the Growth forecast for appliances are a little bit more modest than what we talked about, but it's still a good market for Ryerson, well positioned, A lot of stainless used in the appliances and
a lot
of the different things going on here really set up nicely. HVAC sound like a broken record, but it is a good market for us. Good history here. We have relationships with a number of the top producers in the country. We're excited because the opportunities for clean air don't seem to be getting any lesser today, okay.
Over the pandemic, many of our customers jumped to the cause to come up with solutions when we're trying to figure out how to get Clean air in different environments with the pandemic. I think the future is bright here with some of the green changes that are happening and all the demands that are out there For more efficient equipment, this is going to be a nice area for us going forward. Lastly, I'd like to finish with emerging markets. This is the game changer going forward. So big changes coming down the pipeline.
We all read about them, we all hear about them, EVs, charging station for EVs, the battery boxes, all these things are areas that we're targeting to grow. And it goes beyond What's on here? You got solar, you got the infrastructure bill. I mean, there's just a lot of things teed up for the days to come, weeks to come, years to come. And Ryerson really has a nice portfolio to leverage that and turn that into growth.
I'm going to finish with a couple of slides on our supply chain. And so What we're talking about here is, I think we've all witnessed what happened to supply chains the last few years and complexity has got a new word for us, new meaning For us, there was pre pandemic, you could find any steel, any aluminum, anything you wanted pretty quickly, pretty easily. There is plenty of full of it. You could import it. You could do anything.
You could find it. Walk across the street, you'll find it. Overnight, we all know this because it didn't happen just in metals. It happened virtually everything. Flight chain seized up, spike in tight.
Our lead times more than doubled. We put on allocations. Thank goodness, we've got some long lasting relationships. So we've weathered that storm pretty darn good. But it was challenging to say the least.
Things got complicated. Let's just say that that producing end of the Metal Supply Chain hitting lead times isn't necessarily one of the strong suits that we see day in and day out. Okay, this is a benefit for us. This is why we stock products. It got worse, okay.
So very, very convoluted, very challenging. We had to keep up with our customers. We had to work through everything just to make sure that we are Keeping them in supply of product and we did it. But this complexity really forces us to Double down on our efforts to get better, okay. We're proud of what we do.
We do feel we have some of the best working capital management in our industry, okay. But we're not going to settle on our laurels, okay. So we're going to put a process in place to make sure that we remain the best and get better yet. So we're building tools. You'll hear about some of these later today.
But it starts with our partners too. We have the best of the best partners. Long term, People have a slide coming up, just give me a name of who some of them are, but really proud of this. They helped us through the pandemic. They've helped us through good times.
They've helped us through bad times, I make great products and support us and we have a great partnership in that respect. But the pandemic opened our eyes and said this wasn't a new thing, but it Reinforced it. We need better tools. We need better analytics. We need things that can help us manage the supply chain with our vendors better.
So we've built vendor We've added new analytics to take a look at our inventory to figure out what is it that we should be stocking and where should we be stocking because we have 100 locations. But not everything is needed the same in every market. So we have tools to say it's an A in Los Angeles, But it might not be an A in Minneapolis, okay? That's fine. We'll put this puzzle together and we'll put the right products in the right geographies to take care of our customers.
SIOP tools. SIOP probably shoot, this has gotten more airtime than anything in recent years just as we partner with our customers to figure out what it is that their demands are going to look like, what are the requirements going to be, so we can plan accordingly, okay? Working great and but it's going to work better on a go forward basis. We stratify our inventory. We touched on this.
We know what's a good item, what item maybe we don't need to stock everywhere because it doesn't sell quite so much. The virtual warehouse you've heard about this and it's all about the network, okay. So the beautiful thing of us is we don't need to have everything everywhere, Okay. So we can pull things from different parts of our network to take care of any customers' requirements. And It's what we do routinely and it's something we're proud of and something we're building to make better.
And I'll leave it here. This is sort of the who is who in metals Production. These are our friends. These are our partners. Great companies.
We've been around 180 years. Maybe Someone's close to that on here, but a lot of them haven't been around that long. I can tell you we've probably been partners with them for almost as long as they've been in business. And so in many cases that goes back decades. So we're proud of this.
We enjoy them. We enjoy working with them. And with that said, I'm going
to turn it over to
my friend, John Worth, who's going to walk through operational excellence. Thanks.
Good afternoon.
My name is John Ort. I'm the Executive Vice President Operations for Ryerson. And I am humbled and honored to be here On behalf of all of the operations employees in Ryerson, who for over 180 years, day in, day out, through not one, but 2 pandemics, Answer the bell every day tirelessly to take care of our customers and provide value to them and solutions. I'm really excited today to share with you our journey of operational excellence. I'll cover safety And in particular, the benefits of having this as a core value for our company, it leads to engagement of our employees and continuous improvement.
I'll cover the tools that we've developed to enhance, identify and drive operational efficiency across the enterprise. And then I'll hit on automation and what we are doing to improve the operator experience, to improve the customer experience, to improve the quality experience By using automation. And then I'll try to wrap all that up and share 3 specific examples with you where we are investing In our network, we are monetizing and modernizing. We are optimizing our footprint and we are growing value add. First things first.
Safety is the tool that enables us to work safely every day, To have a safe workplace and to service our customers. It all begins there. Maintaining a safe workplace and a safe work environment Actually is the key tool to engage employees, to empower employees to work safely. Focusing on health and safety and wellness of our employees, first off, it's simply the right thing to do. But what it does is it creates a positive environment where people know it's safe to work, it's safe to come to work.
We can share ideas. We can challenge each other. We can grow the business. Ryerson is investing in our people, Our plants and our processes, and this is all part of how we create general physical and mental health through our company to service our customers. How does this show up in reality?
Our incident rate as measured by OSHA in 2021 was significantly lower than the industry average. Our rate was 2.1. The industry average was 3.5. In 2021, over 60% of our facilities Worked incident free for the entire year. That means our employees, and this is going to sound so simple, but our employees are able to work.
Our operators want to work to service our customers. Now operating efficiency is easy to say, but sometimes hard to do. And we created and are continuously improving the Ryerson production system is our tool to enable that. It is a 3 tiered site certification system. Think about it good, better, best, Built on standard work and best practices with a focus on safety, productivity, Expense management, on time delivery and eliminating waste.
Scrap improvement, scrap reduction It's a powerful tool. When you understand and know your process capabilities and reduce scrap, you increase 1st pass yield, which means for every pound of metal you buy, you're able to process and ship more of it to your customers. We have found that sites that are certified demonstrate improved performance against the Ryerson average, both operationally and financial metrics. Certified sites positively impact the P and L And this certification program gives us the opportunity to recognize sites, to recognize employees. And once again, it creates the continuous improvement flywheel, we call it, to where people get involved, we identify best practices, We improve best practices.
We share those across the enterprise. And the beauty is, we can have a small location with 5 employees Our large location with 400 employees and we can always find best practices to share to help us improve. The other major component in our journey of operating efficiency has been our digital transformation and investment in what we call ROAD. ROAD is our acronym for Ryerson Operations Analytics Data Network. This work focuses on being able to go in to the PLCs of our operating assets in real time And understand true machine based data, how that machine is running, what we do to maintain it, The performance of it and when we're able to collect all of that data, both on the edge and in the cloud, We put it into our operators' hands so that they can use data and we can all use data to drive productivity improvements, Process Efficiencies.
We're pulling live data out of our machines that are linked to our work orders and to our customers, So that we know our true cost to serve and our asset performance and capability. This provides a visual management tool and practice and process For us, we're at our daily shift huddles. Every day, we are looking at real process information coming off of our current lines And we empower our operators to use that data to solve problems. And then the beauty of that is They solve problems. We learn how to generate a more efficient schedule to utilize our assets better.
We identify problems with equipment when it's just a bearing that is going bad, as opposed to a bearing, a shaft and a motor And massive downtime. So once again, if we can improve the operators experience through that, And this is the path that we improve the customer's experience and our financial performance. There are a lot of additional benefits Through having this level of analytics, we understand our cost, we can understand and manage our inventory better. And most importantly, it allows us to identify good metal versus bad metal, good processes versus bad processes. And we've created a monthly operating review where this creates the improvement cycle where we cover what is working, what can work better And identify those best practices, recognize teams and push them out through the organization.
Benefits of automation are significant. We all know that. We see it in our lives every day. But specifically, in the Heavy industrial manufacturing environment, we want to create a better operating environment, a safer operating environment, a more productive Operating Environment by making these key investments in automation. We know that we will gain process efficiencies.
We are gaining Process efficiencies through using automation provides savings. This automation is scalable throughout the enterprise. And additionally, automation provides better insight into working capital management, working capital control. Mike mentioned that. It's so important to know where your material is.
Is it the right material for the customer? What work needs to be done? How do I process it? And automation of material handling and processing and manufacturing processes enables that. And then lastly, it provides an opportunity for our operators to grow, to become higher skilled, to have the opportunity to make a greater impact.
So now I'm going to try to take everything that I've shared with you around Operating efficiencies and our journey there and really try to pull that in and share three examples with you. But before I do that, I want to talk about our network optimization pillars. This is really the strategy Of how we optimize our network. And there are 3 main components. The first is we monetize and modernize Our operating assets.
What does that really mean? We have some aged facilities In industrial real estate that is very valuable, we have been able to monetize that and use that to reinvest In new facilities, state of the art facilities, greater value add capabilities, better places to work to grow and really have state of the art processing and value add operations. Footprint Optimization, The tools I mentioned earlier around the Ryerson production system and road, it's years of work that the team Have developed and put into that. But we are now able to run digital twins of our end to end supply chain And look at our operating asset capabilities, we know the cost to move material from location to location. We know the cost to serve And we can optimize those assets in our footprint to meet the customer expectations on products and quality while maximizing margins.
And then the last pillar for us is value add investment. Mike likes this a lot because it's Sticky business, it's transactional. I like it a lot because it is truly complex in a way that we can provide sustainable Competitive advantage and provide services that other service centers cannot. We understand our customer supply chains. And then in doing that and then having our network of assets across the enterprise That allows us to make the investments in the right equipment so that we can further expand what we do to provide more value to our customers.
So we've got 3 slides here that I'm really excited about. The first one to share with you is our automated laser and fabrication center investment in our Portage, Indiana facility. This is a brownfield expansion of an existing facility that is a coiled processing location. And The key here is we are investing in an automated storage retrieval system, an automated flat laser to process that material And then additional value add fabrication capabilities, all in an integrated automated work cell. So the key here is the feedstock for this cell comes from our Tempur Mill in Portage, Indiana producing best in class flat consistent materials.
So we are now vertically integrated And how we are going to go to market here. That allows us once again, we're optimizing that supply chain. We're taking waste associated with Material handling out of the process. We will deliver high quality short lead time parts and we'll utilize our logistics network To service the upper Midwest, that connected logistics network to service various end markets, Customers and Industries. You put all that together and we'll be providing a greater than 40% internal rate of return as we gain market share.
This is another great investment for us and this really goes to the heart of The monetize and modernize and network optimization. So this investment It's funded through the sale of one of our legacy facilities in Renton, Washington, that is a suburb of Seattle, But over time that facility had become aged and Seattle had grown around it, not a great place To bring metal in and out of on flatbed trucks, we were able to monetize that industrial real estate And utilize those proceeds and partial to fund this new state of the art facility in Centralia, Washington. It's a 214,000 square foot facility, outstanding logistics serviced by rail, easy access to the interstate. But what's so unique here is we are investing in true state of the art capabilities to service our customers. This facility is currently beginning to operate on sheet processing side right now.
And over the next two quarters, We will be installing and commissioning a highly automated high precision plate processing cell and Long Products. So once again, this will allow us to provide greater service and greater value to our customers. Last but certainly not least, this is truly a flagship facility and significant investment for Ryerson. We are building right now a new 900,000 square foot facility in University Park That is just south of Chicago. This will be the new headquarters for our central steel and wire operations and business And it will be a long products hub and a long products processing hub.
What is significant about this investment is We will have a fleet of fully autonomous side loaders that will be utilized to receive material, move material, store material, Once again, creating better operating conditions, reducing workplace injuries and greater throughput to drive process efficiencies. And then this what is really cool here, this is our first facility. We will have a clean power solar farm. It's currently under construction And on-site to where we will have the ability to generate all of our clean power through the solar farm And that solar farm will be operational in Q4 of 2023. And last but not least for the University Park investment, once again, This is going to provide value and service through our network of interconnected service centers because we'll service CS and W customers and the Ryerson family of companies throughout the Midwest.
And with that, That concludes the portion of the presentation on operating efficiencies. But before I depart, we're going to Share a video with you and take you to our Norcross, Georgia Service Center. So let's cue that video and then we'll take a 10 minute break.
Welcome to Norcross. I'm Daniel Lopez, the Operations Manager for the Atlanta Complex.
We sell everything from carbon, stainless aluminum, long products,
We have a total of 3 buildings here. The Atlanta General line is the bigger of the 3 and this is the shipping point for the entire Southeast. Then we have what is called the Coal building, coil processing and 2 mill, they are together since coil processing handling all the coils for the 2 mill. And then the 3rd building is the tube laser facility. This facility loads anywhere in between 45 to 60 trucks a day.
We have a total of 9 saws, A 3000 cassette cast of system, 3 tube lasers, and 6 tube lasers. The only 3 tube mills that we have in the entire What makes us so special is the way we fabricate the tubing. We technically buy master coils at 60 45,000 pound coils. We slip them to size and we can create on tubing from 5 8 round all the way up to 2.5 square or 3 inch round. We have a total of 4 quality employees in our quality department within the complex, 1 manager and 3 reps.
They technically checking on pretty much all the orders that we cut, all the orders that we process and they also help with Creating work instructions and quality process throughout the entire complex.
The Atlanta sales team is made up of 7 of the best individuals I ever met. They're Reliable, dependable. They've got my back. I've got theirs. We're number 1 for a reason and we challenge everybody in the
rest of Ryerson to come beat us. Thanks for visiting us. I hope you enjoy your time on Norcross.
Thank you. Thank you for that. Love the fresh smell of metal in the morning. So with this work for the online audience and those in the room, we're
A long time ago, in the city of Chicago, Joseph T. Ryerson opened a little iron store along the banks of the Chicago River. With a $200 annual rent agreement and just $1500 in inventory, Ryerson was determined to make his father proud. Thomas Ryerson was a businessman and politician of Dutch descent. Thomas' business partner, Robert Morris, was a statesman, Financier and signer of the Declaration of Independence.
Joseph had some big shoes to fill. Fortunately, business was very good for To defend his fledgling company. In fact, within the 1st 10 years, Ryerson quickly expanded twice into larger locations. The Great Chicago Fire in 18/71 didn't slow business for Ryerson, whose warehouse was destroyed. Joseph reopened immediately and proceeded to rebuild, bigger and better than ever.
It was a testament to Ryerson's resolve. I shall do everything in my power to serve my customers as usual in my line of goods. I still live and intend to do business, Notwithstanding the awful calamity that has befallen our city and the citizens generally, I am ready for the fight against misfortune, And I trust my old friends and customers will stand by me. Railroad expansion helped drive the booming industrial age And the rapidly expanding Ryerson business. Ryerson soon became a major supplier of iron, steel and machinery for locomotive boilermakers.
The adoption of the telephone helped further expand the company's reach. An early foreshadow of the company's integrated communication network would eventually Come to employ. By this time, Ryerson Metal Business had become a full family affair. In 1903, A brand new automobile company came knocking on Ryerson's door with an order for quite a lot of steel. Joseph T.
Ryerson II went to check out the Ford Motor Company and reported back that in my opinion, it would be April of 1912 was a challenging month for the Ryerson family. Arthur Junior, grandson of Joseph T. Ryerson, Was killed in a car accident. Following the news, his family boarded the first boat they could to return home from a vacation in Europe. That boat happened to be the Titanic.
Arthur senior, then 61 years old, perished on board the sinking ship. His wife, Emily, and their 3 other children survived in lifeboats. Despite the family tragedies, The early decades of the 20th century saw tremendous company expansion and growth. Mergers and acquisitions became a key component to Ryerson's success, And the company always found ways to evolve with the changing times. In 1926, Ryerson was the 1st distributor of stainless steel, Just 2 years after the material was developed, in the 19 thirties, the company established the industry's 1st certified quality system.
During this period, Ryerson also solidified its commitment to serving the community, funding employees' education, Supporting important causes and paving the way for equality in the workplace. By the time Ryerson celebrated 125 years in business, It was the nation's leading distributor of metal, processing up to 75% of all orders shipped. As the 20th century progressed, So did the company's expansion. By the 21st century, Ryerson was an international company with approximately 100 locations Across North America and beyond. Ryerson, honoring a history of industry, honoring those who came before,
We spend a lot of
time at work, a great deal of our time at work and it has to be fun. It's important. Building that relationship and strengthening that relationship is to go out and have some fun.
We've developed a lot of long standing customer relationships That are the test of time. It's significant because you're proud of the successes you earned together as Ryerson and our customer is.
Our people get involved with our customers. So it makes for a strong bond between Ryerson and our customer. The commitment is even bigger than just supporting the middle.
We were just, you know, probably over lunch one day, and we said we should get A hockey game together.
It's just another step
in the relationship of creating not just business relations, but personal business friendships.
It becomes a family now. It's not just a family of Ryerson. Our customers have certainly become our family. That's a special relationship.
I've handled Walinga personally for
We're a big family and we work together and it's also time to enjoy some fun together, right? The play as a team goes beyond just hockey. It works into your everyday life. And to be able to work together We're
We're very much appreciative of all of
the efforts that Ryerson puts into us. Customers
The best of Ryerson across all locations.
All right, 10,000 then. We can do that.
We don't say no. Anything that comes across Our desk, we either have it, we find a way to make it happen or we find it.
If you can find out, Jorge, quickly, it is literally on
You can just hear the pain in customers' voices and the needs that they want when they call in. And then if we're able to say yes and just figure it out on the back end, it just really relieves a lot of stress on them and makes their job easier. And then For the future, obviously, they're going to call us and we're going to capitalize on that in ever so win win situation for us and the customer. I've been with this company for 29 years. And this is the best version of Ryerson that I've ever seen in terms of from leadership, in terms of Commitment to customers in terms of investing in our business and being able to offer more and really to separate ourselves from the competition.
Future is bright.
Ryerson, metal on demand. Ryerson customer appreciation Get out to our customers, put in a full day delivering metal. Most of the time when we deliver, we don't have a food truck with us. It's a beautiful day to deliver steel. Get rolling.
70,000 items across North America.
I have been with Ruan About 4 years now.
Appreciate that. Yes. I'm loving it.
I'm really glad to hear that.
All right. We're here. Closing in on the Yes,
we are.
Hey, Tim. I'm Eddie Lehner. I'm the CEO of Ryerson. And you can go about getting to what we're making. The quality of the feedback you get when you're in In a formal setting, you've got a food truck.
People are willing to give information we can use to improve the customer experience. Let's go. We got to schedule the key. Nothing bigger than delivering this deal to our customers. Nice to meet you.
It's a pleasure. How long has HomeAdvisor been in business? Since 78. 78. We do We're a sheet metal fabrication.
We're And Mike Gordon. And that's Mike. We should be here. We're a sheet metal fabrication plant. We have 65 plant employees.
Ryerson, that's it. That's it. Enjoy, guys. Hey, fill up, all right? I With the chorizo.
Chicken taco. I got one of these because they look so good. Thanks for having us today. No, we appreciate it. We're here in Cleveland taking supply, Showing our appreciation.
Hi, Ryerson.
You learn about the type of equipment they employ, how they manufacture, you get a sense of the workforce. A lot coming into process, but it's all good. Final stop on the Ryerson customer appreciation tour. That's a beautiful 3042B Statement
of
the feedback we got was activity levels are strong. In some cases, this has been up 15%, 20%, 25%. Good tidings. Hopefully Mortacommi.
Okay. Welcome back, everyone. I'll let you get in your seats again. You may have heard about the customer experience. We're going to talk about it even a
little bit more. We're going
to break it down for you and give you some concrete examples of things we're doing to enhance that customer experience and what that means for our organization. Hi, I'm Frank Williams. I'm our General Manager of E Commerce, Marketing and Communication, And I'll be joined up here in a few minutes by Srini Sundarajan, who is our Chief Information Officer, and he's going to talk through how the apps are developed. But what we want to talk about first is, Why are we talking about digitalizing our business and what does that mean and why is that important? And you've heard us talk a little bit about the customer experience And what that translates into is the more we can offer, the better experience we can offer to our customers, especially in the transactional business, That's where the differentiation is going to come from.
That's where we're going to return the value to the organization is through those transactional customers and offering a great experience Really, truly, that's the road to differentiation for us, where we can really add value. So that's why we're doing it. If we look We say, well, why do we care about the customer experience so much and why do we talk about it all the time? Buying metal is not easy, believe it or not. When you think about what goes into procuring material and making sure that you have it on time ready to do whatever job is coming your way, it is really hard Because every metal company talks about metal in different ways, describes it differently, typically you need things very quickly, especially in the transactional business.
You need that material maybe even the next hours or days. So it is critically important. And often, it's the backbone of what a customer is making. It is the first thing they need. So no metal, no product.
And so that's what makes this such an important thing for us. Why we're obsessed with it? Why we talk about it all the time? Because that's how important it is to our customers and that's where we're going to add value. Okay.
So I'm going to talk a little bit and then I'm going to talk about our friend, Jill, who works for a fictitious company that's an account of ours. We're going to talk through her experience. Before I introduce Jill, I'm going to talk a little bit about the things that make up the customer experience and why we've broken this down into little parts so that we can improve every step along the way. So If you think about it, Mike mentioned earlier, we get a quote right now that we didn't know anything about 5 minutes ago. The important thing about that is we need to return and answer quickly and completely in order to satisfy the need of the customer.
And so for us to do that, we've got to be prepared to take that on. We need to be efficient. When the order is put through our system, customers not willing to wait days or weeks, It may be hours before they need that material. And certainly, they're not going to be willing to pay for any of your inefficiencies. So we look at that and break it down On a part by part basis, we want transparency.
We see it all the time in our personal lives. When you look at apps, you can see where your order is, You can see where it is in production. We want to offer that same B2C experience for our customers. It's what they're coming to expect. And then we need insights.
We deal with a lot you saw Mike's slide earlier, how many different organizations we buy from. We sell to tens of thousands of customers. We have a lot of insights. We can share that and help our customers run their business. And so those are the key tenets of what we're looking for in the customer experience.
We got to deliver that though by offering things through our employees. So we have to put these 2 together. And what our employees need in order to make that happen Come down to a few things. First, they need tools that are customized to our business. Srini is going to talk about this when he gets up here in a few minutes.
But that means that when we create things, we're not just creating or taking things off the shelf, we actually are creating them specifically to the purposes of delivering metal. Very important for us to do that. Real time information. In order for us to respond quickly and accurately to customers, we need to have that information at the tips of our fingertips for all of our Employees, they need to be able to tell with accuracy and certainty what is happening in our system. In simplicity, You can imagine with all the customers and all the orders we ship every day, there are things we do 100, if not 1000 of times a day.
If we can shave seconds or minutes off of that, massive improvements to our customer experience and our employee experience as well. And simply, we just want more ways to say yes. If we can do that for our customers, we'll win more orders, we'll drive more value. So I've been with Ryerson for almost 20 years. So I've seen the customer experience change firsthand.
Believe it or not, when I started on the sales desk for Ryerson, we were still taking orders via mail. So to go from that 20 years ago to now being able to instantaneously enter an order, it's a big difference. We keep evolving with the times. So I'm finally going to introduce you to Jill. I know I promised she works for a customer.
They have a new account, Collegial Atmospherics, and they are going to be making some new product And they are not at all familiar with this product. And Jill, she's got a rough day ahead of her. Just put on her desk 3 items that she's never seen before. So these three items, she's just beside herself Because she knows this could be nothing but a hassle. These three items, she's going to have to go to many vendors, probably have to get 3 of them to deliver.
It's going to take up
all of her week.
They need this material now to satisfy the customer. So Jill pops a couple of Tylenol and decides it's time to send out the RFQ to the suppliers. Luckily, Ryerson is on that list. So it ends up on our desk and we started to employ one of our new tools that's re engineered our thought process around quoting. Gone are the days where we go through the gory details of looking for all these things throughout our network.
It is brought right front of the salesperson's eyes. Now, we're able to quote 2 of the items out of our stock, but there's a third one that we don't have. No problem, because we're going to employ our secret weapon, the virtual warehouse, which is a network of tens of thousands of additional items That are right there available for the rep to sell. But Jill, 15 minutes after setting it, gets the quote back and she's relieved. She's excited.
Of the hundreds of things she has to do, this one's crossed off the list. So she's happy, goes on with her day and this is when the work starts for us. And this is where the efficiency comes in. Well, we've had that material in stock for a few weeks now. We got it.
We received it in right on the floor with a scanning app, Brand new, it's helped us cut down our receiving time. We know it's going to be processed. It's gone up on the processing machine, which is working perfectly Because we're doing preventative maintenance that we've managed through our proprietary in house maintenance app. And the last step of the process when we confirm the order, We just developed a new tool that will help cut down the time seconds, if not minutes in some orders, something that we do thousands of times a day. So we're very confident we're going to get the order.
Now Jill, in this time, she's gone out to lunch and she's having a wonderful lunch until she gets a text from her boss, I want to meet about the project this afternoon. I need an update. Jill panics, but then realizes, oh, I can just go log into ryerson.com. I can check out where my order is, which she does and finds out everything's in process and underway. And in the future, she'll be able to see where that truck is as it gets delivered.
Jill is happy. She's very happy, in fact, so much so that the customer and their customer have decided to go into a long term agreement And we're going to get the business. And Ryerson has done that through these different tools. Now as they go to look at this long term agreement, Jill needs to get educated on this new product that they're working on that they've never used before. So they go in and get some insights from ryerson.com to our blog.
She even signs up for our monthly The metals webinar, Cuppa Joe, where she can get educated and take that back and share her insights with her organization to help them run that business. We want to show you something. We want to show you one of our apps. Jill didn't use this, but she could have. This is available now.
This is the emissions illuminator. It's a simple tool where you use a few different steps, few different inputs And you can get comparative supply chains based on carbon emissions estimates. And so it's a new tool. It helps to show What we're looking for when we create these apps, something that is engaging, fun and informative. And so with that, we'll turn it over to the video and then over to Srini.
Produced and shipped matters to our environment. Introducing the Ryerson Emissions Illuminator The first of its kind in the metal industry. It is designed to help you make sourcing decisions while considering the environment. Select the Destination, metal you're buying, quantity and how it's delivered. And the emissions illuminator calculates carbon emissions for each scenario, so you know the
Thank you, Frank. My name is Srini Sundarajan. I'm the Chief Information Officer for Ryerson, Been with the company 4 years now. And you have heard these definitions before, The types of companies, digital natives, 1 on the cloud, digital adapters. We have been around for 180 years.
We are digital adopters. When customers call us, think about Ryerson, they have 4 main questions. I'm going to cover some of the themes that you heard consistently from my colleagues. Our customers have 4 main questions. I need metal, do you have it?
I'm looking for a competitive price. How much does it cost me? I need to quickly how quickly you can send it to me. Finally, can I do all of that digitally? So we start with mobile apps.
It's part of the digital transformation business, this digital transformation. It's just not digital transformation, it is business, digital transformation. That's the journey we are on. I'll walk you through some of our approaches. Let's start with mobile apps.
I don't have to talk about how Good mobile apps are how convenient they are. Our employees expect the same. Our customers expect the same. So when we build apps, you heard Frank talk about many apps. We make sure they work on mobile.
They are fast, easy to use, just like the emissions eliminator you saw. Full service is for customers. Our customers get to choose how they want to work with us. They're welcome to call. You're welcome to email us.
You're welcome to go to ryerson.com, place an order, track an order, in the future pay invoices. You heard about virtual warehouse, metal universe. We have been building our virtual warehouse, that's our metal universe for the last few years. It continues to grow. It is a digital catalog of all the metal Available inside Ryerson and outside Ryerson.
So our employees can find the metal the customers are looking for very quickly regardless of where it is. It could be in the local plant, nearby plant, supply plant. So we take the data, that digital catalog and power all the applications we build. So I talked about 4 questions customers have, main questions. We have 2 questions.
How do we ensure our existing customers keep coming back to us for more metal? Not only that, how do we get new customers so we can grow market share? How do we do that? That's the experience everybody talked about, all my colleagues before me talked about. How do we create the convenience?
How do we create a convenient, Consistent customer experience, all the technology work we do is centered around achieving those things. How do we create that consistent, convenient customer experience? So we are building many tools. You heard about different tools, all the digital work we do. So we are tool builders.
There is a 3 pronged approach. We have a 3 pronged approach. I'll start with the ERPs. All the companies, every company has an ERP. It can be bulky, but we need them to run our business.
Having been around for so many years, I have to say we have more than one. So we have a primary ERP. We have other ERPs. So we are currently migrating all locations that are not on the current ERP to our primary ERP. While we are going through this consolidation, we are also based on user feedback, continue to improve our primary ERP, Reducing clicks, combining screens, make it easy for our employees to do their job, increase their efficiency, increase their Increase the accuracy, productivity.
So we consolidate, we modernize the ERP. Why is that important? In addition to Having a single system that provides the visibility and controls, you can share metal easily. It's easy for management to see the data together. It's a lot of benefits.
The other benefit is, as we are building All the tools around our ERP and making sure they all work with ERP, it's a lot easier if we just have one. We don't have to repeat integrating with multiple ERPs. So that is our first approach. 2nd is adopting cloud based software solutions. Where we need, we go look for the best in class solution and use it, Whether it is truck transportation or financial consolidation, many things.
There are good solutions out there. They're used by a lot of customers. We adopt them. You don't have to reinvent the wheel when somebody has already done it, which enables us that takes us to the 3rd point, which enables us to develop purpose built applications for Ryerson To solve a specific problem or to improve a complicated process or a critical process, That enables our developers to focus on identifying things that we need to do that provides the best benefit for the company and focus on those. That's our intellectual property.
So we are trying to create things that others don't have. We talked about few already. The coding tool, It's a purpose built app for Ryerson that enables our salespeople to generate a quote In minutes, if not seconds, receiving as a company, we sell metal. To sell metal, we might buy metal, we receive metal, We stock metal, process metal, ship metal. So I just hit all the critical functions of the company.
That's where we start. The other app I can give an example as an example is the receiving app. We receive metal every day, all locations, 100 of 1000 of times. So we have created an interface. We used to use the ERP, takes a lot of clicks, a lot of pages.
It is a chore, Right. Now we have a very simple interface. It provides all the information, the receiving Employee needs in one place, it makes their job enjoyable, less burdensome, then multiply that by 100 locations And all the receipts, we get benefit at scale. While we build all these tools And modernize the one we already have, we don't want them to work in silos. They need to talk to each other.
They need to share data. They need to reuse components, so we integrate them using APIs. Ryerson has embraced the agile development framework for a number of years now. The way we form teams, Agile helps us have this mindset of product development versus Project Management, right, project start and end on specific dates. Product's slow, they continue to be enhanced.
Agile enables the organization to have that product development mindset. So once we identify what to create, We take the product owner from the business, could be someone from operations, could be someone from accounting. We take experts from the field. They know what they need. They know what is deficient.
They know what is better. They lead. They lead the initiative. They bring the functionality. They are responsible for the requirements.
So we take the product funnel from the business, and it's also the chain management goes a lot smoother and effectively If an operation manager tells all the other locations that how cool this tool is, how effective it is versus somebody on my team saying how cool the tool is. It needs to come from the field, from the users. So we take the product owner from the business, Then we take Ryerson developers. We embed them in every project. Sometimes they do all of it, sometimes they do some of it.
Then we bring agencies because they can help us ramp up very quickly and expedite help expedite the process. So product owners from the business, Ryerson developers, because that knowledge needs to stay in Ryerson. That intellectual property Needs to stay within Ryerson. Then we combine them with agencies. We use DevOps, we build things on the cloud.
So we get the benefits of DevOps, continuous integration, continuous delivery, That speed, we build things on the cloud. We use modern frameworks, modern technologies, modern programming languages. Cloud provides the provides scalability and resiliency. We also use low code. So we like to do things.
Our customers want things fast. We like to do things fast. So low code development helps us create prototypes And MVPs. Ryerson knows what an MVP is. They understand 2 weeks' fronts.
So we create MVPs on prototypes using low code, launch it into the field, get feedback and repeat the cycle, enhance in 2 week increments. There's a lot of tools. We have a lot of opportunity to modernize, Right. There is a risk of boiling the ocean. We don't have to change everything.
So We look at the 20% of the systems and the processes that are used by 80% of the people. That's why that's how we identify what is going to scale, What is going to bring the most benefit? Then we use expertise from the field, and we Pay good attention to design, UI, UX, user interface, user experience, We want to try we try to make them consistent across all applications. We have data. We have evidence.
People tell us To train a new employee on one of the legacy tools, how hard it is, how long it takes for them to memorize what they need to do, They have to develop a muscle memory to know exactly where to how many keys they have to hit. We know when we develop a new tool, People tell us the new employees, even existing employees, they take to them easily because they are used to the mobile apps, They use in their personal life, it just translate, no more use of manuals. So by doing all this technology work, Modernizing, implementing new technology solutions, we are reducing steps, We are automating. We are removing friction. We need to have a great employee experience to be able to have a great customer experience.
Our goal is, I'll go back to the 2 questions for us. How do we make sure our existing customers keep coming back to us for more metal? How do we attract new customers to grow market share? With that, I'll turn it over to Molly Kanan, our Corporate Controller and Chief Accounting Officer.
Thank you, Srini. How's everyone doing? We're in the home stretch. I have good news. We're inside of an hour Until cocktails.
And the other good news is we're at finance and I know a lot of you are finance background, so this is exciting. All right. So I'm Molly Cannon. I'm the Controller and Chief Accounting Officer. I'm going to talk about environmental, social and governance and then also Talk about our current financial highlights, but I'm going to kick it off first with a video.
The circular economy sounds like a perfect fit for a product that's infinitely recyclable. Metal, It's the most sustainable material at scale and in mass in the world. At Ryerson, we process and distribute more than 2,000,000 tonnes of it annually. And that With a responsibility, a big responsibility to ensure the material is being actively recycled, recovered and reused. And that the carbon footprint goes down across the supply chain.
Some call it being a good corporate citizen. We simply call it the only way we know how to Perhaps that's why we're considered a leader when it comes to environmental, social and governance practices. And it starts with our people, roughly 4,000 people to be more precise. They are the dynamic doers, the ones who embody our values And execute our mission, both at work and in the communities we serve. So we like to keep them safe and healthy.
And to ensure everyone has a say in our future, because we know the rewards of building a diverse, And we're building towards an even better one for tomorrow.
All right. So talking a little bit more about our ESG initiative at Ryerson. So we have established an ESG committee at the highest levels within the organization. So it's a very important strategic initiative for us and we regularly update Our Audit Committee and Board of Directors on the progress we're making towards those goals. We're very focused on the circular economy.
I think Heard from almost every speaker that metal is infinitely recyclable. No metal that we produce as scrap It is wasted. It all goes back to a scrap dealer and ultimately goes back through the manufacturing process. We've also heard how In order to have clean air and clean water, you need metal. And Ryerson is going to be there to help decarbonize the planet.
We're also very focused on diversity, equity and inclusion as well as our talent and future workforce. We're always looking for ways to becoming more of an employer of choice. And we've also baselined our emissions As of 2021, so we have identified the sources of our emissions and we have confirmed that we are very low emitter And the main sources of our emissions are our delivery trucks and the electricity and natural gas that are used to power and heat Our service centers. And we have plans in place for all three of those large segments to continue to reduce emissions in those Particular areas. This is a slide that shows how we benchmark against others within the industry.
So You heard Jorge talk about how we are classified as a metals and mining company. When you look at other metals producers, we're nowhere near The level of emissions of a metals manufacturer. So we don't produce metal, we distribute it and process it. So we're very low on that Spectrum, when you look at other distributors within our industry and even outside of our industry, we're also very low on the spectrum when you compare us to those Other Companies. So we're a very strong investment when you look at the emissions front for Ryerson.
So I'm going to switch gears. I'm going to get to the numbers now. So if you didn't listen to our earnings call last week I read our release. I have the Cliffs notes for you here. So we released last week our year to date financials.
So we have Generated just over $5,000,000,000 in revenue as of September 30, that's 22% up from where it was last year. Our gross margin is very strong year to date at 22.8%, up 300 basis points. And you can see net income and diluted PS are both up over 100%. We've utilized those profits to reduce our net debt And net debt is down over $200,000,000 from where it was in prior year. So we have generated $320,000,000 in cash flows year to date and that equates to nearly a 27% cash flow yield.
So not only have we used those cash flows to reduce net debt, we've also utilized that cash to invest in the business. We have had CapEx of $71,000,000 year to date. We're on track for our $100,000,000 Budget that we set for ourselves and again we're investing in automation and digitalization efforts and modernizing our facilities. So just talking about Q3 specifically. So Q3, we did generate $55,000,000 of net income and adjusted EBITDA excluding LIFO of $79,000,000 And we generated record Operating cash flows, if you look in the last 10 years of $152,000,000 Half of that was related to working capital release And the other half was generated from just profits from the quarter.
We used that cash flow to redeem the final $50,000,000 of our high yield 20 28 notes. So as of the Q3, we're officially a high yield debt free company. We're very excited about that. Net debt continues to go down sequentially. It's down to 426 $1,000,000 that's only encompassing our ABL facility that we have.
We also announced our 5th consecutive quarterly dividend increase. So the 4th quarter dividend is at $0.16 per share, and we also announced 2 additional acquisitions That we have added to the Ryerson family of companies and Jim Claussen is going to talk a little bit more about those coming up. So Q3 financials, net sales were at $1,540,000,000 That was down sequentially about 12% really Primarily because of prices, prices are starting to reverse and those were down about 9%. Gross margins, we're also seeing that margin compression. Margins were at 17.6%.
So let's talk a little bit more about that. So this is our commodity pricing environment and the 3 main products that we sell, Carbon, aluminum and nickel, which is aligned with stainless metals. So you can see the volatility That we've seen in the last couple of years. But if you had a regression line on this chart, you can see that the prices are From 2017 baselining at a higher level. And then if we look at this slide, this really Puts that previous slide in that purple line, it's the weighted average against our metals mix, the commodity index and how that It relates to our average selling price being that dark blue line and then our cost of materials sold in the yellow line.
So you can see when prices rose, Our gross margins really expanded greatly. And now that commodity prices are reversing, we're getting that squeeze. But it really is a transitory effect That will reverse itself once the inventory costs get more in line with replacement costs. So full year guidance. So this is really our year to date Q3 numbers plus the Q4 guidance that we issued last week.
So we are expecting the full year adjusted EBITDAX ex LIFO to be just shy of $600,000,000 Which equates to midpoint on the diluted EPS of $11.52 For Q4 specifically, we are Expecting that margin compression to continue into the 4th quarter and adjusted EBITDA excluding LACO in the range of $40,000,000 to 44,000,000 So I wanted to touch on the targets that we set for ourselves 4 to 5 years ago. We wanted to have gross margins excluding LIFO at 20%, days of supply between 70 to 75 days And then net debt leverage at 2x. And I'm happy to announce that we have met all three of these targets And Jim Claussen is going to show you that in the coming slides and also talk about our future and current financial priorities.
I'll turn
it over to Jim Clausen.
Thanks, Molly. Jim Claussen, Chief Financial Officer of Ryerson. I've been with the company over 20 years. Had the pleasure of meeting most of you at least virtually until today, so it's glad to see everyone in person. Really happy to be here, really excited to Kind of walk you through the financial transformation the company has gone through, talk about our capital allocation and then talk about our next Base targets.
So really, the way I think about this is all the initiatives you heard about, where do they hit the bottom line? Where do they hit the numbers? How do they play through?
But first,
I do want to step back because it really is all about our financial priorities. What are our key financial priorities at Ryerson? For several years, you heard a lot about delever the balance sheet. We're going to be mindful of our balance sheet. We have a range we want to stay within 0.5 times to 2x EBITDA leverage.
We're going to stay within that range. We know we exist through cycles, so we're going to stay in that range. But now with the cash we freed up, the cash that we're generating from a continually improving operating model, we have more money to reinvest in the business and a return to shareholders. Going through the financial transformation, When I talk about the financial transformation, I'm talking about really moving value from the debt side to the equity side. I'm talking about structurally improving our margins, reducing our fixed costs, lowering our annual fixed cash commitments and really making it a Stronger business at any point in the cycle.
We've generated over $600,000,000 in the last 3 years in free cash flow. And as I said, we really earmarked a lot of that to delevering the company and paying down the high yield debt. This is that high yield debt story. Why is this so important to us? Why do you hear about this from us?
Because 10 years ago, We had to pay $110,000,000 of our cash flow to service that debt. That number going forward right now is 0. We still have our ABL and it's going to move with our working capital as it does through the cycle. It's a really good Way to manage the business is a way for the debt to come up and down with pricing in our business, but we don't have the high yield debt going forward. Again, getting back to the leverage ratio, getting into a really comfortable range between that 0.5x and 2x.
Came through it as we paid off the high yield debt through 'twenty one and 'twenty two. We're comfortably at the low end of that range. We've talked about going into the counter cycle. We know that's what we're headed into. We know there's potentially A release of cash off the balance sheet, but we're going to continue to be mindful of where we sit within these targets against The profits we're generating.
How do we look at a strengthened balance sheet For better transformation, we talked about analytics, we talked about systems, we talked about Mike talked about our supply chain and the complexity and how we use tools to manage that. This is where we see it in the result as you look through the last three cycles, 2014 to 2016, 2017 to 2019, 2020 to 2022, that average Cash conversion cycle went down throughout that cycle from 88 days in 2014 to 2016 to 73 days in the last 3 years. So taking 15 days out of that working capital requirement. Taking those 15 days out as we go through the cycle allows us to not just generate cash Off of a balance sheet release when we're having a working capital build, it allows us to generate cash through the cycle. Through the up cycle, we generated cash.
In the counter cycle, we generated cash. So throughout the pandemic and coming out through the last 2 years, Generated cash annually and as Molly said, record quarter since the IPO with $152,000,000 generated from operations During that period, so we're talking I'm talking about generating cash through our operations. On that P and L front, on that business, on that operating model front, Again, we go through cycles. Things move up and down. Molly talked about the margin compression that we experienced in Q3.
But on par, all the initiatives going forward continue to trend line that margin up. John, Srini, Frank talked about taking friction out of our system, taking costs out. It's all about trending that expense line down over time, continuing to take costs out and I'll talk about it in a little bit, continuing to variabilize our expense structure. On the margin front, couple of targets we look at, Percent of our portfolio business looking to increase the transaction of that spot day to day business from 53% to 60% of our business. As Mike said, it's not because we don't like any type of customers.
We like all our customers. This is a higher profit business for us. So we want to go where we can increase those margins structurally, the same thing on value add, Adding value add, adding capabilities, doing things to continue to make the customer sticky, you've heard. It also is an opportunity for us to expand margins for that value we create and generate for that customer base. So targeting increasing our value added percentage To 20%.
Again, we talked about it, that's that advanced processing piece, that's that precision fabrication, that's not Just cutting a sheet. Our expense profile, Variabilizing the structure, so this is taking a look outside the metal, what do we spend money on our SG and A on our warehousing and delivery. You can see from the pie, we've got the majority of our expenses, the largest share of our expenses in comp and benefits. So aligning Our pay structures, the profitability, the margin generation, to growth allows us to continue to variabilize that And then continuing to work fixed costs out of the system, whether it's through automation, whether it's through better efficiencies, Better ability for our plants and our sales offices and our back offices to operate. So again, it's all about Continuing those trend lines through the cycle of variablizing and reducing the fixed component of our expenses.
We can't just benchmark against ourselves. We've got to look at ourselves against our peers, against the industry, against External factors, looking at our days of supply, looking at our expense percentage, continuing to stay above the head of the peers, Continuing to work towards improvement in that area, it's not we can't stand still. It's a continuous improvement. And he touched on underinvestment. We've talked about it.
We've talked about where we've seen underinvestment. This is Ryerson versus Industry. Still outpacing on a growth side, not growth for growth, but growing in value, Growing in those spot transactional businesses, growing with our long term customer partners, but continuing to outpace The market, whether it's a challenging environment or whether it's a great environment. So working through that transformation, continuing to improve the operating model Has not only allowed us to generate more cash from operations, it's taken away that debt service burden on the high yield debt. So we're able to focus our capital allocation plan really on 4 key pillars.
1, CapEx, modernization, automation and just making our facilities better, making our systems better. M and A, targeted, disciplined, strategic M and A, Due to the dividend policy last year, we've progressively raised it each quarter. Having the dividend, having the share buybacks, We had our first authorization of $50,000,000 that we exhausted 1 year early. We received authorization for a new 2 year $75,000,000 authorization, we'll execute that opportunistically. On the dividend, we talked about it, Continuing to progress up, introduced last year, but a key component of our capital allocation plan.
Capital expenditures, this gets back to being able to invest in the business, invest to grow, invest in good high return projects, Continue to develop improvements through the operating model. So if you look at the blue line, the blue line is basically our depreciation and amortization. Call it a baseline for annual reinvestment in the business, not just maintenance CapEx, but just reinvestment in the business. It can flex up and down with where we're at in the cycle and where cash flows are, but that will provide you a baseline. Then there's obviously growth opportunities, large projects that come along, really good return investments that we can use to augment that when the time is right.
Our M and A Has basically for the past several years been focused on value added M and A targets, Bringing in capabilities, expertise, really good companies with really good business models, Serving customer bases that we can then bring into the Ryerson network and leverage across. We've also done a couple of acquisitions that were product line expansions and we did the Central Steel and Wire, which was more of a market share add. So Central Steel and Wire purchased in July of 2018, intimately familiar with it. It's great business, great customer base, great companies, just needed to do some structural improvements, Really worked through the business. So, we spent $164,000,000 on Central Steel and Wire.
We took out $100,000,000 in working capital. We monetized $50,000,000 in assets. We've generated over $100,000,000 in EBITDA since the acquisition, which over the past 4 years gives us a return and ROI of over 35%. It's been a really good business. John spoke about the next step.
The next step is creating that University Park facility really to allow not only the CSW franchise to Our two latest additions are going to fall in that value add fabricator, More tuck in acquisition that I talked about, very targeted, very good businesses. Howard Precision Metals, aluminum plate processor In Wisconsin, they do a wonderful job. Opportunity for us to leverage that aluminum franchise, that processed aluminum franchise plate in the Upper Midwest. Excelsior, California, large scale fabricator, weldments, parts, Millwright Services, really a full line fabricator, again, attractive customer base, allows us So as touched on a little earlier in opening comments, but really the lower interest expense Frees up cash, freed up cash for us to have returns to shareholders. The improved operating model cash flow Generates cash for us to continue to reinvest in the business.
So what does the capital allocation look like versus the historical? That was the amount of money we've spent in the last several years repaying the debt. We're going to be mindful of our balance sheet, but this is what the future capital allocation looks like for Ryerson. It's reinvesting in our business and it's providing returns to shareholders. There's not a percentage determined for each component of the pie.
We're going to look at investments as they make sense. We're going to use the money for the right return in that given year. But this is where the money is going to be focused. So all that said, More money to invest in the business, better operating model, transform balance sheet. What's next?
What are our next targets? What are we looking to do We want to continue to grow, outgrow our industry, outgrow the MSCI, outgrow the Metal Service Center Institute, But we want to do it in the areas where we can continue to increase our margins. We want to do it in that transactional book of business. We want to do it in that value added sale. We want to continue to pursue high margin growth.
Talked about being 300,000,000 For the last 10 years, dollars 350,000,000 to $400,000,000 driving that gross margin up to 21% to 23% and keeping that expense structure down in 13% to 15% range. And we're going to publish our ESG report as Molly talked about. We're developing our long term plan about reducing our Scope 1 and Scope 2 emissions 80% from the baseline by 2,040. With that, I'm going to we're going to show you a quick video of where some of that investment goes, I'm going to turn it over to Eddie for closing remarks.
Right. That's for Kevin Richardson, by the way. Kevin, if you're out there listening, it's an inside IPO roadshow joke. So how are we doing? How are we doing so far?
Are you feeling good? All right. All right. So as John Wooden used to say, the famous coach of UCLA back in the day, repetition, repetition, repetition, we Are purposely bombarding you with consistent messages, points we really want to get across around the Ryerson story. So to bring it home, we're going to bring it home now For the fantastic glorious dismount and what we have is Ryerson CAGR versus the S and P 500.
CAGR 50% better since our IPO than the S and P. And then of course, we look at our peers in the service center sector and when we go back When we IPO ed in August of 2014, we see a Ryerson CAGR at 12% and a service center CAGR of 7%. So Why Ryerson? You can read the bullet points. You can look at the return on invested capital versus our peer group.
But it's really the future that we're most excited about obviously because we came through a difficult transformation, restructuring of the balance sheet And really walking the talk and doing the things that we said we were going to do. A lot of that's behind us. There's a lot of great stuff in front of us and not forgetting, Not forgetting for a second where we came from, but also knowing intentionally where we're going. Now bringing it back home to why metal matters. Why am I so passionate about this?
Why am I passionate about the middle class? Why am I passionate about manufacturing? Why am I passionate about the infinite recyclability and reusability of industrial metals? If you thought you needed more cowbell, you really need more industrial metals. We need more industrial metals.
It is the material of our time. Now if you don't believe that, let me just give you one more Anecdotal story before I conclude, forget about metal defending the nation, feeding the nation, keeping us inhabitable areas on earth and getting us into space. This industry is perennial, okay, not old, perennial, perpetual. But I want to leave you with this story about why metal matters. If you've ever been snorkeling and you happen to notice that The coral reef you were looking at, if you could see one at all and it hadn't vanished or disappeared yet, you would have noticed that if you were snorkeling or diving 5 or 10 or 15 or 20 years ago, you would have noticed that that coral reef was beautiful in its color and its marine diversity.
But over the last 20 years, it's been well chronicled and documented that those coral reefs have dulled in color, disappeared and vanished. Now you know where this is going, metal to the rescue. The way that one of the best ways To regenerate coral reefs is you build a metal structure in the ocean And you tack on some sand and you tack on some coral and bam, you start to regrow the reef and you bring back Marine Diversity. So if I haven't convinced you by now, there will be another Investor Day and I will finish the job. I really want to thank you for being with us today.
Thanks for being such a great audience and hanging in there with us. I hope you were able to tell the Ryerson story in a compelling way. I want to thank all my fellow presenters who I think did outstanding job, but most of all, I want to thank you the audience for being with us through the whole thing. We're going to turn it back over to our master of ceremonies, Jorge Barristain, and then we're going to have some time for some Q and A. So thank you.
Right. Great. Thank you. Thank you, Eddie. So at this point, we're just going to open up for question and answer.
Again, just a reminder for anyone in the virtual audience to you can submit a question through our virtual stage on our Ryerson Investor Day website. Additionally, if you can't get that to work, you can try investorinforryerson.com. But we'll open it up first with Q and A in the room. And are there any questions? We can bring a microphone over to you and then we'll try to repeat the question for the benefit of the online audience.
Okay. There's a question back there, I believe it's Alan Weber.
Thank you very much for the event today. I'm Lucas Pipes with B. Riley Securities. My first question is on the value add for 2023 and beyond. You showed some targets in the near term.
How would you expect that to evolve over time? And then you have been very active On the M and A front in the past there, what's the return profile looking forward? We're getting to a point of diminishing returns on that or are we in fact seeing the opposite with increasing returns on Capital.
Yes, Lucas, thank you. It's a great question. Let me give you some more perspective kind of on Ryerson and the industry. So last year, we quoted, Say 4,000,000 order opportunities. So we gave out 4,000,000 quotes.
We took 1,200,000 orders in an industry that we believe has more than 100,000,000 quoting opportunities per year available, if not more. So bringing that back to the acquisitions and the value add, if we go down through the whole list of deals we just did this year or even go back to Specialty Metals Processing last year, which is stainless polishing, grinding and titanium grinding. You can see every acquisition Really fits really, really well within a priority that we articulate. So, Howard Precision Aluminum, aluminum plate value add, Excelsior, really, really high margin fabrication and Alan did a phenomenal job Reeling that deal in. Apogee fabrication in Canada, all value add.
Some of you might have seen that we made investment, our first investment in Additive Manufacturing with Freeform Technologies in St. Mary's, PA. So that takes care of 1 of the SWAT risks That we identified back all the way back in 2015, but making measured smart intelligent investments in additive, so we can go ahead and be on time As we start to see that become a more dominant processing technology, so I would say we've made really prudent, but smart targeted investments in value add, Getting to that 20% target, where did diminishing returns set in? Hard to say when you start looking at that $2,400,000,000,000 opportunity that I referenced, which is really in bill of materials spot contract manufactured parts even beyond 1st stage processing And Metal Wholesaling and Distribution. Alan?
So Eddie, when you talk about the digitalization and like that and the network, can you talk about As you look out 5, 10 years in terms of the fragmentation of the industry and how the smaller players are really going to compete or can they compete And as you kind of move forward, as somebody said earlier jokingly, 20 years ago, the orders were by mail or something. So It's a big change.
Yes, it's a great question. I can try to tie the 2 together this way. First of all, we're going to be prudent with CapEx. I want to just tell the audience that It would be smart for us because we're not burdened by legacy liabilities and debt, it would be smart for us just to start with a baseline of CapEx investment at the rate of GAAP depreciation, it's not a perfect benchmark, but it's a good benchmark. But then in the case of Centralia University Park, understand that we had an asset sale that we beneficiated That industrial real estate to help fund that new service center.
So we'll continue to find sources of capital To augment our CapEx budget where it makes sense. Now coming back to the digitalization, we've made investments because we feel we have to. We're seeing a lot of small service center companies either not participate in that digitalization or They are starting to experiment with marketplaces and platforms. And the way that we Address that risk and that opportunity is with the virtual warehouse and the investments that we're making In our ability to map that metal genome, so if any of you use Spotify, for example, they were the ones that map the music genome. We want to bring in all these item codes.
We want to bring in all not just our owned inventory, but third party inventory mapped to that so that we can identify That metal that we can transact it digitally to be able to service that opportunity. But I think every small competitor has to make a very conscious decision, which is, Am I going to participate? Am I going to front that cost to get into that game? Or am I going to experiment with marketplaces and platforms? Or am I going to sit it out?
And I do think that will be a catalyst it will be a catalyst for consolidation. Bill. Hey, Eddie. How are you? Good, buddy.
Good. So the new 900,000 Square Foot Facility, can you frame up your thought process there in terms of efficiency or returns? It's obviously a major investment for you, part of a transition you're making with that part of the business. So I'm trying to understand what that gives you and if A solid return there as part of your new target for mid cycle?
Yes. No, it's a great question. And If you've ever driven in that part of Chicago, if you've ever experienced trying to get a truck in and out of Kedzie, which is just pretty much a couple of clicks down from Midway, You understand the difficulty of getting logistics in and out of a service center that was state of the art in 1951 And time just passed it by. This is a classic case where you've got 1,400,000 square feet in 3 or 4 buildings. It really had a fantastic ride and a wonderful time.
We have to get To a modern service center to realize our objectives and goals for the CS and W brand, which is to continue to Exercise and work out that value that we acquired into products in srypinal plate and in long products, because as you know, Those components of shape and shape mix in Industrial Metals, you know those carry higher margins Then cut the late sheet. So that's I do expect really, really good synergies and really, really strong returns from That depot and distribution center when it comes online gets through its commissioning and really starts to get that throughput and generate those cash flows.
We have a virtual Few virtual questions coming in online, but one of them is, to what extent, if any, have the business margins been affected by inflation, Tightening measures, rising rates and geopolitical crisis.
Yes. So So here's what I can tell you, most of you that have followed some of the material and input curves, you know that lumber prices Have fallen below their pre pandemic levels. You also know that metal has Already begun to disinflate. I wouldn't call it deflation as much as I think the proper term is disinflation. So you're starting to see Key parts of the initial inflationary curve start to revert.
And again, nothing to be afraid of, it's countercycled, it's healthy. We'll go through that period of whatever it is, 4 to 6 quarters, we think it started in May. And we'll go through that counter cycle and we'll reset margins and then we'll come out Really well on the other side, but inflation to a service center company can be helpful for a period of time and then really what you want to see is you want to It's settled in to the range that I think we all understand to be Most optimal, which is between 2% and 3%, but I would say on balance inflation is good, a certain amount of inflation is good for a service center company. And it hasn't affected us. I think if anything it affected us in a very enhanced way.
I think we took maximum advantage of the opportunities we have had in an inflationary environment. And now even though we're coming back down on the other side a little bit, This is very familiar terrain for us.
Thank you. Another online question. Can you talk about virtual Locations, their benefit and how they are different from your standard company operating locations. But I think what he's asking is can we just explain What it means when we say
virtual warehouse?
Yes, absolutely. I mean, you whenever you buy something from Amazon, you may buy That they inventory that they own, that's a linear inventory item. They own it, it's in their distribution center, you order it, you get it. They also offer you choices From 3rd party sellers, but only usually after they qualify those sellers and they really understand the products That are going to be transacted and then delivered to you as a customer in the service center space. There's a lot of redundant capacity the service center space, I mean, IBISWorld defines the whole service center population of more than 7,000 Metals Distributors and Processors 7,000.
So you can imagine that every one of those service center companies has inventory And has equipment. And what we want to do is, it's to our mutual benefit that if we have a commercial opportunity and we know somebody In our network that does something we don't do, maybe it's roll forming, maybe it's a certain kind of weldment, Maybe they have a certain kind of material that we don't carry, it's to their advantage and ours to make that sale, but for us to know Virtually to a high degree of specificity, what their tolerances are, what their equipment can do and what kind of inventory they carry, then we have to Have it visible, have it available and have it transactable. And that's what we mean by virtual inventory, virtual equipment And virtual locations. And we just keep mapping to more and more of those.
So last call in the room, if there's any last questions? Okay. Well, I think we will be on time. Okay. Well, thank you very much to the speakers and for everyone who's joined us online today and in person.
And I just wanted to emphasize just again as Eddie said repetition, repetition. I can't emphasize enough the network effect. I think that is just an absolute differentiating factor for Ryerson, our physical and digital backbone that is differentiating us, scalable and allowing us to enhance the customer experience on a North American basis. And with that, we will be concluding today's presentation. I wanted to emphasize that for those of You who've attended in person for us, we have a little gift bag for you to grab on your way out.
And in it, and this ties to the theme of today's presentation, But we have a great metal bottle, which in and of itself Doesn't seem like a big deal. It is recyclable. It's environmentally friendly. I don't know personally how many times you guys go to the gym and lose your gym bottles. I've lost many.
This now actually comes with a GPS tracker that we've embedded on it. So the idea is it's all about tracking your metal and that's where we think Ryerson is moving as a company, the merger of the physical and the digital transformation of this company. So