Russel Metals Inc.

Good morning, ladies and gentlemen, and welcome to the 2026 First Quarter Results for Russell Metals. Today's call will be hosted by Mr. Martin Dorofsky, Executive Vice President and Chief Financial Officer, and Mr. John Reed, President and Chief Executive Officer of Russell Metals. Today's presentation will be followed by a question and answer period. At that time, if you have a question, please press star 1 on your telephone keypad. I will now turn the meeting over to Mr. Martin Dorofsky. Please go ahead, Mr. Dorofsky.

Great. Thank you, Operator, and good morning, everyone. I plan on providing an overview of the Q1 2026 results, and if you want to follow along, I'll be using the slides that are on our website. You can go to the investor relations section, and it's located in the conference call submenu, or alternatively, you can click on the link that is in the investor conference call paragraph of our recent press release. If you go to page three, you can read our cautionary statement. on forward looking information. To begin, I would characterize Q1 as a very positive inflection point for two primary reasons. One, a number of the strategic initiatives that have been discussed over the past year or so have translated into positive impacts within our Q1 results. In two, we are starting to see the benefits from favorable market conditions. In particular, the market conditions improved through Q1 with the end of the quarter being stronger than the start of the quarter. This sets the stage well for Q2. On page five, we've got a snapshot of our quarter. In Q1, we had record overall revenues and also record shipments for our steel service center segment. And this was the result of three items. One, the Klockner acquisition that we closed on December 31, 2025, a seasonal rebound in same-store volume versus Q4, and good pricing and market conditions. More specifically, on the last point related to market conditions, we saw a 111 basis point improvement in our service center same-store gross margins in Q1 versus Q4. The Klockner business generated about Canadian $8 million of EBITDA contribution, which was in line with our near-term expectations for the business as it currently is, but we have many incremental initiatives that will benefit the business over the next year or so. We completed the sale of our property in Delta, BC. And as most people know, this was an initiative that started quite some time ago. This resulted in proceeds of $39 million a pre-tax gain of $36 million, and an after-tax gain of $31 million. More importantly, it was the final piece in pulling capital out of Western Canada that was part of the Samuel acquisition strategy. In total, we have now taken out around $100 million worth of capital as compared to the original announced purchase price of $225 million. So it's a pretty meaningful change in the valuation metrics and implied multiple from that transaction. This real estate monetization also highlights another example of how the inherent market value for some of our legacy real estate is significantly higher than the book values. In this case, the realized cash proceeds of almost $40 million compared to the book value, which was only around $3 million. On the middle row of the diagram, Our Q1 CapEx was $18 million, which was a pickup from the last couple quarters, and I'll talk more about this later. But I expect the discretionary CapEx to increase in the later part of 2026 and into 2027, as John and I are seeing more projects being reviewed and approved. Capital deploys around $1.8 billion. Our capital grew from 1.3 at the end of 23 to 1.6 at the end of 2024, and there's additional opportunities on the come. we generated strong return on invested capital. Our annualized return on invested capital in Q1 was 22% versus 15% over the past two years, and these levels compare well against our industry peers and against our stated target of greater than 15% over the cycle. We grew in strategic ways. Our U.S. platform now represents 53% of revenues, and in Q1 it represented 58% of operating profit. And this is the first time that our U.S. business units contributed more revenue than our Canadian business units. Also, the market conditions in the U.S. are currently strong and have resulted in a higher relative profitability in our U.S. units versus our Canadian units, which is why there's a higher proportion of operating profits coming out of the U.S. than revenues coming out of the U.S. Our non-Ferris business was 10% of revenues in Q1, which was down from 11% in 2025. as the former Klockner branches were carbon-based and added to our total sales, but not necessarily to our non-Ferris mix. On the last row of the diagram, returning capital to shareholders, our balanced approach is pretty simple. In Q1, we returned $7 million via share buybacks, $24 million via dividends for a total of $31 million. In addition, we just announced an increase in our dividend to $0.44 per share. This is now the fourth consecutive year of a per-share dividend increase. which in aggregate totals 16% since we started to increase the dividend back in 2023. In the bottom right box on the page, maintaining capital structure is critical as we operate in a cyclical industry. We've talked about this a lot in the past, and it's a key tenet for us. As a result, our liquidity is strong. We have flexible bank covenants, no financial covenants in our term debt, and our maturities are several years down the road. Let's turn to market conditions on page six. Quick summary, market conditions are pretty good right now. We saw sheet and plate prices exhibit increases on a steady basis over the last six months. Hot roll coil and plate prices in the U.S. were up in Q1 versus Q4, and those prices are currently prevailing higher than the Q1 averages. Overall demand is solid and supply is tight, with mill operating rates tracking near 80%, which is a very healthy level. lead times are extended, and supply chain inventories are modest. This suggests continued optimism going into Q2. On page 7, you see a summary of our trend EBITDA, and we've talked a lot in the past about changing our EBITDA profile to raise the cycle floor, raise the cycle ceiling, and as a result, raise the cycle average in addition to focus on reducing the volatility through the cycle, and this chart represents those elements as each of the EBITDAs are on a trailing 12-month basis at various points in time. Two charts showing on the left, pre-COVID period, and the right being more of the post-COVID period. And the takeaways, if you look at the right-hand chart, our trailing 12-month trend results continue to improve. Our LCM EBITDA And our Q1 2026 annualized EBITDA, if we were to exclude some of the non-recurring items in Q1, like the gain on sale and the mark-to-market on our stock-based compensation, are both around $370 million, which is slightly above the recent multiyear average, as we are now realizing the benefits from our recent initiatives. This is another example of how the change in our business mix has really shaped our earnings profile over the cycle. and such that are now our average cycle EBITDA is trending higher than it has in the past, and our volatility is lower than it has been in the past. Page eight, a view of our EBITDA and working capital trends on a longer-term basis. And if I can focus more on the bottom chart, which is the working capital changes, and in particular, if you look at most Q1 periods over the past several years, we do use cash for working capital purposes. due to the seasonal items, including our company-wide annual incentive compensation payments. And this factor, plus the impact of higher product prices, led to the use of $46 million of cash for working capital in Q1, which you see in the far right-hand side of the bottom chart. That being said, the use of cash for working capital in Q1 26 was within the normal range for comparable Q1 periods from other years. On page 9, a little bit of a trend on some of our historical results. If we look across the various charts going from top left, revenues were a quarterly record at over $1.4 billion. EBITDA of $124 million was up from Q4-25 due to favorable conditions that I previously mentioned and the gain on the property sale. EBITDA margin came in at 8.7% for the quarter, which was a very nice level, including the property sale, or 6.2% if we exclude it. Either metric is very favorable in the context of the market that we've seen. EPS was $1.30 per share in Q1, which was a higher level than the comparable periods in the chart. Even if we exclude the gain on sale of property and the mark-to-market on stock-based comp, the Q1 EPS was noticeably higher in Q1 than Q4 2025 and the comparable Q1 of 2025. As I mentioned earlier, our return on capital for Q1 For Q1, annualized at 22%, and our three-year average remains above our internal hurdle of 15%. A few more details on the financials on page 10. From an income statement perspective, some of the high-level items I've already covered off, but a few other items to note. Revenues up 30% from Q4, up 21% from Q1 of 2025. I'll talk more about volumes later, but it was a record-shipping quarter in spite of some weather-related issues that impacted most of the eastern side of North America in late January. Our gross margin percent was up slightly in Q1 versus Q4. The margin profile from the former clockner branches was around 300 basis points lower than our equivalent same-store gross margins due to their product mix and the legacy business approach That being said, those former Klockner branches contributed around $8 million Canadian of EBITDA in Q1. And as I've mentioned already, there were a couple of non-operational items in the quarter, including our results, $36 million pre-gain, which was $31 million after-tax gain on the sale, and a positive. The mark-to-market stock-based comp was an expense of $5 million in Q1. It was also an expense, but of $3 million in Q4. But the comparative period to Q1 2025 was a $3 million recovery. One of the items that we have shown in both our press release and in our MD&A is a table that illustrates the quarterly EBITDA on an apples-to-apples basis to exclude both the gain on the property sale and the mark-to-market on stock-based comp. And if you look at that table, it shows that we generated $93 million of EBITDA in Q1 2026. which was a $21 million increase versus Q4 of 2025 and a $10 million increase from Q1 2025. So under any basis of measure, we are pretty proud of the results that came in in Q1. From a cash flow perspective, in Q1, we used $46 million of cash and working capital, which typically happens in Q1. As I mentioned earlier, Klockner acquisition closed and the final purchase price based upon refined working capital was US $94 million. As a result, we received an $8 million or about 11 million Canadian payment back from Klockner in April to adjust for what was otherwise paid on a preliminary basis in December. And to put that US $94 million purchase price into context, it equates to around $128 million Canadian. And the former Klockner branch has generated 183 million Canadian of revenues, $8 million Canadian EBITDA in Q1. And based upon the early results and our expectations going forward, this transaction should equate to a purchase price multiple of around four times EBITDA. Share buybacks were $7 million in Q1. Cumulative share buybacks since August 2022, 14% over. Then shares outstanding for $333 million. at an average cost of $38.13. So again, the theme of us being opportunistic in the past approach, I think has worked out very well. Our quarterly dividend was 43 cents that was paid in March. And as I said earlier, we've just declared an increase to 44 cents that will be paid in June. Our capex 18 million was up a bit from Q4. Balance sheet perspective will remain a strong position with only $130 million of net debt. and our book value per share is just above $30 per share. On page 11, EBITDA variance last quarter to this quarter, and starting at the left-hand side of the page, service centers, same-store volumes were up versus Q4, which translates to about a $15 million EBITDA pickup. Same-store margins showed an improvement of $36 per ton, which equated to a $14 million EBITDA pickup. Same-store costs were higher by $13 million, due to greater volumes and greater profitability. I said earlier the clock part of the business contributed about $8 million Canadian of EBITDA. Energy field stores had a nice quarter. Slow start to the year, but when we look at Q1 in totality, field stores were up $5 million, and it was a nice pickup in the tail end of the quarter. Steel distributors were down a little bit. but comparable to Q4 if we were to exclude the $2 million tariff recovery that we picked up in Q4 of 2025. In the other bucket, there was an increase in corporate expenses due to higher profitability, a negative variance from the mark-to-market on stock-based comp, which I mentioned earlier, and the seasonal dynamic at a Thunder Bay terminal operation. Page 12, segmented P&L. Service centers, I'll go through this in more detail on the next page, but it was a really nice and favorable improvement versus Q4. Energy field stores revenues were up and gross margins were flat, remaining at a very healthy level in Q1 versus Q4, and that translated into the higher profitability in the energy field store segment. Distributors revenue, as I mentioned earlier, revenues were up a little bit, gross margins, even though were very comparable in Q1 versus Q4. Page 13, a deeper dive into the metrics within our service center segment, and there's some really nice and noticeable changes quarter over quarter, starting with the top right graph is ton ship. Q1 was a record by a lot. Shipments were up 32% over Q4 and up 18% over Q1 2025. The Klockner branches contributed about 17% to our Q1 shipments, and on a same-store basis, Shipments were up 9% versus Q4 and very comparable with Q1 of 2025. Said another way, the market conditions are good, leading to increased demand. And the actions that we have taken in particular related to acquisitions have also translated into impactful results. Margins picked up in Q1 versus Q4. Margin dollars were up $25 per ton. and $36 per ton on the same store basis. As I mentioned earlier, the clocker margin profile is lower than our average that we had in our same store basis. And gross margin in percentage terms was up 60 basis points overall, but 111 basis points if we look at on the same store basis. So again, contributions and improved market conditions is part of the outcome that we saw in Q1. Page 14, inventory turns, overall inventory turns improved 4.2 in Q1. Inventories are tight as business conditions are strong. Page 15, we have illustrated our inventory dollars. Total inventory at March 31st was comparable to what it was at December 31st, which is a combination of lower tonnage, as our folks are doing a really nice job in managing through the environment we're in right now, but higher cost per ton within the service center segment. If we go to page 16, quick update on our capital structure. Liquidity is strong, which gives us a lot of flexibility. We recently had DBRS reaffirm our investment grade rating, which goes along with our investment grade rating from Standard & Poor's. Since last quarter, our net debt was reduced by $14 million, and liquidity remains right around a half a billion dollars. Page 17, last page. We have an update of our capital allocation priorities going forward. On the left part of the page, we show our investment approach, seek average returns greater than 15% over the cycle. And as I've mentioned a couple times already, we've delivered that pretty consistently, including this most recent quarter. On the right side of the page, we show our approach to returning capital to shareholders and continue to be that flexible approach. approach. And over the last two years, we have returned an average amount on an annual basis of about $99 billion to shareholders via the NCIB, while the annual run rate for a dividend is now $97 million after taking into account both the reduced share count and the increased dividend to 44 cents per share. So pretty balanced and very comparable amounts between both the historical NCIB and the dividend level. Page 18, provide a context on our capital reinvestment program. In Q1, we invested $18 million in CapEx, which is a slight increase in the recent quarters. And expect a pickup in discretionary projects to gain some momentum in the back half of this year, as there have been a series of projects that have crossed my desk and John's desk and others' desks in the last little bit and have been recently approved and should be underway shortly. These projects are spread across many of our operating divisions on both sides of the border. Page 19. This is now the last page. We show a deeper dive on returning capital to shareholders. Top left graph, our longer-term dividend profile, with the most recent dividend increase to $0.44 per share per quarter, and this represents, as I said earlier, the fourth increase in four years and represents about a 16% cumulative increase since the early 2023 dividend level. Bottom left chart, we show our quarterly NCIB activity since it was put in place back in August of 2022, it's an opportunistic way to buy back shares, and we've been aggressive at certain price points more so than others. In Q1, we acquired 150,000 shares, an average price of $47.42 per share. As I mentioned earlier, our cumulative NCIV since 2022 has been a 14% reduction in our share counts at an average cost of $38.13 per share. Top right chart, the aggregation of dividends in NCIB over the past two years shows pretty balanced approach. It's worth noting on the chart that even though our dividend per share has increased in a meaningful amount, our total dividend outlay, which is the darker blue part of that chart, has remained at around $24 million per quarter as a result of the continuing reduction in our share count, which is also illustrated in the bottom right chart on the page. In closing, on behalf of John and other members of the management team, just really like to express our thanks to everyone on the RUSLE team for their contributions. This has been a really nice start to 2026 and look forward to more opportunities on the come. Operator, that concludes my introductory remarks. You can now open the lines for questions, please.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any key. The first question comes from James McGregor from RBC Capital Markets. Please go ahead.

Hey, good morning. Thanks for having me on. Great. Thanks, James. Yeah, I just wanted to ask on the Q2 commentary on volumes. You mentioned kind of stable volumes quarter over quarter. So, you know, it seems like, you know, the early part of the Q1 was impacted by, you know, some tough operating conditions, things picked up into March. And then when we look at, you know, transportation reporting, it seems like that trend from March carried into April, which I assume is kind of consistent with what you guys are seeing. So, you know, why the commentary for, you know, flat volumes quarter over quarter when you know, all indications, you know, are that things kind of accelerated throughout the quarter and that that strength from March is continuing into April?

Yeah, James, your observation is pretty accurate, which is the tone today is better than probably the tone a month ago or two months ago, so we're continuing to see that positive trend. So your observation is not unreasonable. You know, so if we were to actually extrapolate that into Q2, you know, Yeah, flat volumes would be a conservative point of view. Slightly up volumes, which is probably a little bit more realistic the way we look at it right now.

Okay, perfect. And then this is the margin commentary. Again, you mentioned, you know, the improvement quarter over quarter. You know, it seems like there's still a little bit of a favorable pricing like on steel prices, you know, potentially higher volumes. So can you kind of help us you know, quantify that quarter-over-quarter margin improvement a little more just to help with our modeling of the Q2?

Yeah, thanks, James. Again, good observation. You do have a very steady demand from a steel mill perspective, especially in the U.S. right now. They're bouncing right around 80%. Keep in mind you also have scheduled mill shutdowns in Q2, which will tighten supply. Price increases throughout the quarter. We are seeing demand improve. It's strong in the U.S., steady and slightly improving in Canada. If you look at the architectural billing index, it's now above 50. If you look at the purchasing manager index, it's now above 50. So all those are good signs for our business going forward. We think we'll see continued margin improvement in our clockner acquisition. Again, they do not have a value-added component that our traditional server So, we think there'll be continued margin improvement in the service centers. I would say on the energy side and the steel distribution side, it would be more of the same on the margin.

Okay. I appreciate the caller, and I'll turn the line. Thanks. Thanks, James.

Thank you. This question comes from Maxim Suchak from National Bank Capital Markets. Please go ahead.

Hi. Good morning, gentlemen. John, maybe if you don't mind, if you can discuss the Klockner integration, maybe if you don't mind addressing sort of, you know, the operational sort of things you're focusing on kind of change management. And I guess the second part of the question would be in relation to Marty around sort of the margin normalization over which timeframe we should be modeling. Thank you.

Yeah, so, Max, on the Klotner integration, again, the first quarter was really a focus. Again, you're doing a shared services agreement with the computer system, so we make sure we're stabilized. We started to implement our approach to the market, and pricing is different than Klotner. So we've seen an increase throughout the quarter in the gross margin percentage. We think we'll continue to see that into second quarter. We'll move to our computer system late third quarter, early fourth quarter. Also, we'll be spending some CapEx in the latter part of the year. to introduce the value-added, the higher-end value-added products that we do and services that we offer. So we think that'll be a gradual improvement over the course of the year and early into next year to where they start to look and feel more like our service centers from a gross margin profile.

And, Max, does that last comment from John address the time horizon that you were asking? Yeah, for sure, for sure. Yeah. Thank you.

And sorry, I guess, Marty, like in terms of, I guess, the marginalization dynamic, is this sort of like at 12 months or 24 months type backdrop?

Yeah, I think the way you should think about that is there's probably two, if not three phases to marginalization. We're in the middle and the early stages of phase one, which is just business practices. And some of that is around procurements. Some of that is around customer approach and pricing in the market. And we're at the early stage, but actively in that phase one. Phase two will involve integrating into the rest of the Russell system in the regions. That's going to be happening later in 2026 and into early 2027. And so that will also have an additional component attached to margin normalization. And then the third phase is really triggered around CapEx opportunities. You know, as John talked about, we do a lot more value-add in our comparable operations than they do. And we're mapping out what those investment opportunities will be in the Klockner branches and And as a practical matter, just the lead time attached to putting equipment in and getting it up and running and getting the benefits of it, that's why I put that into that third phase. And that first phase will be happening in 2026. The second phase will be happening in late 2026 and early 2027. And that third phase is probably latter part of 2027 before we start to see the benefits of some of those investments.

Okay, super helpful. Thank you so much. And then last two questions in terms of, you know, real estate optimization. Obviously, you continue to sort of streamline your platform. Is there anything else that is sort of of hidden value that you can surface in the future? Maybe any thoughts there?

Thank you. Yes, good question, Max. And in some ways, the Delta monetization highlights there is a lot of inherent market value well in excess of our book value. And As I mentioned earlier, that was a deal where we ended up realizing close to $40 million on something that was on the books for free. That being said, we're always looking at the portfolio, and there's probably a couple smaller things that are in the works right now, nothing near close to that order of magnitude, but we're constantly looking at the portfolio. But as a minimum, whether we monetize some real estate or don't monetize some real estate, there is this notion of there's an awful lot of market value in excess of our book value, and the delta one highlights it, and we're always looking at stuff. Near term, though, there's a couple of situations that we're looking at, but they don't come anywhere close to the orders of magnitude attached to the delta one.

Okay, super helpful. Thank you so much.

Thanks, Max.

Thank you. Next question comes from Frederick Bastian from England James. Please go ahead.

Morning, guys. More higher level, I guess. The changes made in the past five years have obviously strengthened Russell, raised the ceiling, and floor on earnings growth profile, as you mentioned. But have these improvements enhanced your visibility on revenue and earnings? In other words, does your visibility stand beyond the current quarter and perhaps into Q3 and even Q4 now?

Let me tackle it from one angle. It's less about the revenue visibility and the profitability visibility because we are still a highly transactional business. I think if you look back at Russell's history over a longer term, it wasn't so much the revenue visibility that caused the volatility, it was the negative surprises. And the streamlining and changes to the business have substantially reduced, perhaps even, dare I say, eliminated some of those meaningful negative surprises. But the core of the business is still highly transactional, highly adaptable. That is part of the underpinning of how Russell is set up. Is that fair, Chuck?

Yes, I think that's very fair, Marty. And Fred continued, and again, Marty was, I think, alluding to the OCTG line type was something that was very volatile for us. There's some other areas that we have tightened up in. And so what that's done is it's actually given us more flexibility in that the ability to react to the market as it changes due to our transactional nature, we can now move very quickly with the market and mitigate any downside risk. We can also move to maximize upside risk quicker than we have in the past. So, again, long-term visibility is still that same two to three months out, but we can adjust so much faster now because we don't have that lagging risk that's over our head.

Okay, that's super helpful. And if we look maybe five years ago, you were less by around 30% US, you know, over 50. Where do you think that settles? I mean, presumably, you're going to continue to increase that proportion of revenue coming from coming out of the US pending some acquisition. So if you were to venture to say, where would you be in five years, or perhaps three years in terms of exposure?

I think logically, yeah, the U.S., there's a lot more opportunity for us. We're growing in the U.S. We're strong in the U.S. South right now. We've got some in the Midwest. We're starting on the East Coast, but there's just a lot more geographic opportunity in the U.S. We're pretty much number one or two in every market across Canada, so growth there is more targeted. That being said, we'll remain opportunistic. So if there are opportunities either in Canada or in the U.S., we'd remain opportunistic. More specific to your question, over the next five years, we'll probably move more towards the U.S. in growth just because there's so much more opportunity there. So, you know, it's a 60-40 mix. Could it go 70-30? We'll just play it opportunistically and see. But I think directionally, you know, the U.S. will continue to grow at a little bit faster clip.

Okay, and one of the – sorry, I'm going to throw in one more. One of the frustrations by a lot of our management teams is that multiples and private sector haven't really come down. There's still a lot of private equity competition. Are you feeling the same kind of environment? Are you still seeing some pretty hefty prices there, or is it reasonable?

Are you talking for M&A deals, Fred?

Yes. Yes.

There's surprisingly not that much private equity competition in the world that we operate in. I mean, it does pop up every now and again. But it is a group of the competitors that we find on M&A deals are technically strategics. And I think, you know, when we have been successful on M&A, it's because of the unique things that we can bring to the table. And it's not necessarily just paying more. In fact, a number of cases we haven't paid more. The way we've approached it is to be very targeted in our approaches. And private equity hasn't really been our competition.

Great. Thanks for that call, guys. Thank you very much.

Thanks, Rick.

Thank you. The next question comes from Michael Choupon of TD Talent. Please go ahead.

Thank you. Maybe to make the Hey, good morning. Just to pick up on that last line of questioning, just with respect to M&A, obviously you've recently closed in the last several years several larger transactions, a little more involved in terms of some of the work that needs to be done. Obviously lots of work to do still on clock here, but regardless, just wondering if you can comment on other potential M&A opportunities. Is this something you're focused on? What are you seeing in the market right now, opportunity-wise?

So, yeah, we're seeing opportunities that are out there right now. The pipeline is still steady, I would say. I think a lot of private investors are looking at this turn in the market and saying, how long is the run? What are they looking at? The separation in the two economies, be it Canada and the U.S. right now, people may be looking at things a little differently. So we are seeing some activity. We'll continue to look at opportunities that fit with us. But again, we're As you know from our past history, we are very selective and work very diligently to make sure it fits culturally with our company and also fits in our financial metrics model.

And if I could make one adjacent comment to that, when we look back, as John was alluding to, our acquisition history, there's been times where we've been active and there's times where we haven't completed any deals. And it's not for lack of looking. It's been remaining disciplined. And if we look back at was it 2022, 2023, we didn't close a single acquisition in those two years. And a primary component was not for lack of opportunity or for lack of looking, it was lack of stuff that met our criteria. Markets were really good and valuations were exceptionally high. And so there's times where you stay on the sidelines and there's times that you're active and it really is a function of being adaptable to whatever the market conditions are. So if expectations move up in conjunction with the market environment we're in right now, we're probably more likely to be on the sidelines than the periods of time where we've been aggressive, where valuations make a lot of sense.

Okay. Thank you for that. With respect to CapEx, you had previously talked about $100 million was the expectation for the year. The level you're at in Q1 is a little bit lower than level. Just wondering how we think about CapEx. Is it going to ramp from here? And if you can provide a little bit more detail on some of the projects that you're pursuing this year, that'd be helpful as well.

Yeah. Maybe, John, you can talk about the projects. But when I think about the $100 million, that's a multi-year average. And we don't really have it so hardwired of this is what it's going to be in this quarter or this year, even though technically there is a piece of paper somewhere that says that. because it's always ebbing and flowing, and a 12-month period of time is a little bit of an artificial frame of reference for us, at least to measure that. Think of that $100 million as a multi-year average.

Sir John? Just to be a little more granular, Mike, we've probably got right now roughly $40 million for the projects that are approved. We've probably got that plus some that are coming forward for approval that we're already aware of and starting to see information on. It really comes back to lead time on equipment, depending on what the project is. Does it require building? So some of those lead times can be six months, nine months, 12 months, 24 months. And so you can get some of this gets lumpy from time to time based on those lead times. But, again, we still have a healthy pipeline right now of projects coming forward.

Okay, that's the problem. Was a lot of that value added, or how does that sort of break down across different types of projects?

types of initiatives? I would say that it's probably 30%, 40% value add. Some of it is modernizations that's going to allow us to operate more efficiently that we're looking at out there right now, and that some of that may be expansion, that we're expanding, growing the market.

Okay, perfect. And then just last one. In terms of energy field stores, obviously saw some year-over-year growth in revenues in the first quarter. I think the outlook commentary is consistent with the way you've been describing that segment in terms of expecting solid activity to underpin the segment in the business. I'm just wondering if you can – elaborate a little bit on how we should think about that business. The segment was down year-over-year in revenues last year. Again, you started the year up here. I think the comp is a bit easier in the third quarter, so any assistance in terms of how to think about that business? Obviously, we've got strong energy prices right now as well. Any commentary on that would be helpful.

You're exactly right. We've got strong energy prices. Obviously, energy prices move up and down. Some of that's driven by what's going on with the U.S. war right now. But when we look at the energy field stores, there's a lot of projects going on in Canada. It looks like they're moving forward now in Canada, especially northern B.C., northern Alberta. So we're seeing more project-based business than we've seen in several years. So we think that's coming to fruition. We're starting to see things that we do on the front end of those projects now turn into order. So we're very optimistic about what's going to happen on the energy side for the energy fuel stores in Canada over the next year or two. Also on the U.S. side, we're seeing, again, high oil prices leading to high profits. That means repairing maintenance. There's nothing being held back there that they'll be running full bore on that side. We'll see project business pick up as well. The Permian is very busy, and we're obviously very strong in the Permian Basin. So we think it's a good year in the energy side with a lot of – potential upside barring a dramatic change in the oil price.

Yes, thank you. I will leave it there. Thanks, Mike.

Thank you. The next question comes from Avian Aurora with BMO Capital Budgets. Please go ahead.

Hey, good morning. This is Arnie . Are you able to provide any commentary on the disconnect between U.S. and Canadian steel prices, and if it varies more by product or category?

Yeah, so historically, Arian, it's been a U.S. price currency adjusted. With the tariffs that are out there, it's disconnected, obviously. Currently, you're seeing Canada currency adjusted on a lower price for the Canadian steel producers. Again, there's more steel being supplied in Canada than is being used right now, so that's keeping the price pressure on. with the tariffs being there, with the derivative tariffs now being there. So that is putting a lot of pressure on the Canadian steel mills, which has kind of put a top on the Canadian steel prices, catching up to the U.S. steel prices, if you will, currency adjusted. However, we are seeing increases now in Canada, and things are moving forward. Scrap prices are moving up, and we're starting to see demand pick up in Canada. So, again, I think as long as the tariffs remain where they are today, as long as the derivative tariffs remain in place, going to move product into North America, obviously, Canada would be a logical choice. And so, to help the Canadian steel mills and, again, maintain their demand inside of Canada, I think they're going to need some further assistance.

I appreciate the color on that. And just touching on the tariffs again, within this steel distributor segment, has there been a lot of disparity between the performance on the U.S.

and Canadian side? Not really compared to historical. There are opportunities there. There are certain products that are not made. So it ebbs and flows. Obviously, you have some weather conditions with the St. Lawrence Seaway freezing up, so we always have the seasonal downturn, if you will, in Canada because we just can't get product in during that time frame. But overall, both of those have remained remarkably steady throughout the tariff environment, and we're seeing unique opportunities that are different within the U.S. and Canada, and And some of that's working with domestic steel mills, and some of that's working with imports that can come in that are not made within the countries. Perfect. Thank you so much.

Great. Thank you.

Thank you. The next question comes from Jonathan Goldman with Scotiabank. Please go ahead.

Hey. Good morning, John. Hey, Marty. Thanks for taking my questions. Maybe just circling back to the conversation on tariffs. Do you see the new S-232 rules as an incremental positive net for your business? You talked about some of the dynamics in Canada and the U.S., but I imagine you have a benefit now with higher exposure to the U.S. So how do you see that overall holistically for your business?

Yeah, so from the U.S. side, again, it's obviously keeping pricing higher. It's helping demand grow. So that's helping demand in the U.S. side. We're very, very busy on the U.S. side, so we think it's very positive for us in that regard. On the Canadian side, again, still adjusting to the new world to some degree. So manufacturing is still adjusting. Can they send across snowmobiles and those things? What does the derivative tariff mean? So I think they're working through that, but I think the Canadian government is implementing That's going to really help us during this year. But, again, it's going to take some time to get that into play. The energy business is booming in Canada right now. It looks like it's in for a nice run. Again, big user of steel there, mining, big user of steel. Obviously, data centers benefits us on both sides, and that's a very steady component for us, both in Canada and the U.S. So the tariffs have definitely had an impact in Canada, a very positive impact in the U.S., a negative impact in Canada. But I think Canada is slowly adjusting to it.

Okay, that's good, Collin. Maybe thinking about some of the end markets a little more granularly, can you remind us how you play in data centers and your exposure there? And Asian building, you know, a couple of these positive thematics that keep coming up. It's fun to know how Russell is involved with those themes.

Yeah, so from data centers, we'll be involved obviously with structural steel, the facility itself, the racking that goes into them, a lot of conduit, galvanized pipe that uses hangers. So we'll be involved in those projects. extensively in both Canada and the U.S., the nation-building projects as well, depending on what you're looking into. Again, we're doing the Navy vessels right now with Urban Ship on the East Coast. We're participating in that project in a big way. When you look at things out there for the oil and gas or for the mining sector, again, we're participating in all those sectors, whether it's in the service centers or in the energy fields. So in Alberta, again, we're doing rig mats, we're doing tanks, we're doing those type of things that are out there for the service centers, obviously valve spinning, flanges, those type of things for the energy fill stores.

Okay, that's good, Collin. And then maybe one for you, Marty. You know, I get the focus this year might be on integration of Flockner, but with the capital allocation priorities you laid out, does it change the pace at which you deploy capital, you know, if bandwidth is taken up for the integration?

The short answer is no. We don't put an artificial timeline on we have to do this in this quarter and we have to do this in this year when it comes to capital allocation. We've built an inherent flexibility and a multi-year orientation around how we deploy capital. And so your point is well taken, which is our focus is very much on the integration right now. We do have a lot of flexibility, but it's not going to change our predisposition to accelerating things for the sake of it. And it's always, you know, M&A is probably a really good context for that and sort of what John was saying and what I was saying earlier. We don't really create artificial targets to say this is what we want to buy this year, period, full stop, no matter what. And I say that's true with all of our capital allocation decisions. We try to be flexible. We try and be adaptable. We try and be opportunistic. And there are some periods where more things come to the table as those opportunities, and there's some times where it's less. But we try not to put an artificial timeline on it. We're looking at the benefits that may accrue over multiple years. So long answers, no. The short answer is no to changing our orientation. Understood. Thanks for taking my questions.

I'll get back with you. Thanks, Jonathan.

Thank you. We have no further questions. I'll turn the call back over to Martin Juraski for closing remarks.

Great, and thank you, Operator. Thanks, everyone, very much for joining our call. If you have any follow-up questions, please feel free to reach out. Otherwise, we look forward to staying in touch during the balance of the quarter. Take care, everyone.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.