Good morning, ladies and gentlemen and welcome to the 2018 Fourth Quarter and Year-End Results Conference Call for Russel Metals. Today’s call will be hosted by Mr. John Reid, President and Chief Operating Officer and Ms. Marion Britton, Executive Vice President and Chief Financial Officer of Russel Metals Inc. Today’s presentation will be followed by a question-and-answer period. [Operator Instructions] I will now turn the meeting over to Miss Marion Britton. Please go ahead Miss Britton.

Okay, good morning everyone. So John, our CEO is with us. I guess we had an [Indiscernible] we’re here. I’m going to start on page three, quickly run through our cautionary statement. Certain statements made on this conference call constitute forward-looking statements or information within the meaning of applicable securities laws, including statements as to our future capital expenditures, our outlook, the availability of our future financing and our ability to pay dividends. Forward-looking statements relate to future events or our future performance. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements are necessarily based on estimates and assumptions that, while considered reasonable by us, inherently involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. Our actual results could differ materially from those anticipated in our forward-looking statements. Please review the risk factors described below in our MD&A and in our Annual Information Form. While we believe that the expectations reflected in our forward-looking statements are reasonable, no assurance can be given that these expectations will prove to be correct, and our forward-looking statements included in this call shall not be unduly relied upon. These statements speak only as to the date of this call and, except as required by law, we do not assume any obligation to update our forward-looking statements. Just reference to on page four, we do give our definitions for non-GAAP measures that we use periodically throughout this presentation. Page five is where I’m going to start my comments. Comments are highlights for the quarter and year. We had an ETF of $0.74 to help us mark-off a very strong year at $3.53 or EPS earnings of $219 million compared to $124 million last year and $2 in EPS. So our $0.74 in the quarter compared to $0.45 produced in the Q4, 2017. Had strong free cash flow $300 million at December 2018 or $4.84 per share which compares to the prior year of $2.92 per share. Return on equity, 22% very strong for return. We also declared our dividend of $0.38 per share. Flipping over to page six in the deck, some market conditions that we’re seeing at this point in time, Q1 appears to be stable demand for our service center, although steel prices have peaked in most products. We did see a hot roll coil peak in Q4 and has come down since Q4. Metal service centers, average selling price in Q4 was 28% above what it was in Q4, 2017 but -- and it was consistent with Q3, 2018. So that implies selling price had peaked also at some point in Q3. Metal service center tons shipped were down in Q4 of 2018 versus Q4, 2017 on the same store basis. Year-to-date they’re up 2% for the company on a same store basis. Just remind people that we would have the bows and color still acquisitions both in this year April 2018, color still added in September 2017, which are year-over-year increases in our service center unit. Rig count year-over-year is up in the U.S. The U.S. continues to be strong, oil and gas production while Canada is down year-over-year at the time we put the slide together it was 33%. It still hasn’t improved; it’s improved slightly since then, but not to a number that is very good for 2019 versus 2018. Energy Products segment revenue did increase 44% in Q4 versus Q4, 2017 mainly driven by the U.S. line-type projects that were -- means they were completed or are being completed at this point in Q1, 2019 but were in our Q3 and Q4 results for2018. We also did have strong results in our oil field stores in the U.S. in the Q4. Tariffs, just have a comment, they are reminding people when the steel tariffs were put on, and then during the Q4, was when safeguards were added in Canada for shipments from outside North America. The decision on the safeguards is anticipated in April 2019. Page seven is our chart that shows our five year numbers, one of the numbers that is a new milestone. We had revenues for 2018. $4.2 billion, which is the highest since 2014 was the highest ever, but since 2014 when we reported $3.9 billion, so an increase over that [Indiscernible] and you can -- we can see all the numbers there with our EBIT and EBITDA representing high returns in 2018. Going down, you’ll note that our accounts receivable were in good shape at the end of the year. Very comparative numbers there, and then metal and to 2014, net net working capital was up slightly from 2014 with revenues increased. So our numbers are in line with what we would anticipate on our working capital numbers at this point in time. We do have a slight increase in our interest bearing debt for $47.8 million at the end of the year. Turning forward, I will turn to page 16 just before I comment on that page the one thing that you wanted to mention is that our full set of financial statements with the notes have been filed on SEDAR. So we've included here our quarterly and year-end summary pages. But, if you are interested in full set of statements you can obtain them on SEDAR. And they will be on our website also. If you turn to page 16 you will see our results for the year compared to 2017. You’ll see that all segments had a significant increase in revenues. We’ve also already talked about the fact that -- as much as selling price was up in the period. The increased energy though does relate to additional demand. The large one type order and activity going on. The segment producing the most improved or increase in operating profit was metal service centers at 112% of prior year. Looking down to the segment gross margin, you’ll note that the service centers are at 23.3% for the year versus last year at 20.7%. Energy is down slightly from last year, driven by the large order, which always carries a lower margin and there is some mix in there also. Steel distributors similarly it’s up from last year driven by rising and steel prices. Segment operating profit as a percent of revenue, so the company 7.9% great improvement over 6.3% produced for last year, and the metal service center and steel distributors segment are both up over last year with energy consistent. I’m going to just flip to page 27 at this point, so I can make a couple of comments on the quarter and then I’ll reference a few other pages in the deck. On page 27, you will see the metal service centers is up 25% and energy up 44%. And we’ve spoken mainly about that driven mostly by the large line type order that was complete in that period. The steel distributor’s revenue is up 50%. We’ve had more activity of in Canada, in particular driven by demand in Canada to source material outside of the U.S. Those shipments will continue into Q1, but then we will start to taper off as we go through the year as we have brought in less materials available for shipment. Segmented operating profits for metal service center 80% does continue to be strong compared to Q4, 2017. Segment gross margin, there was a decline from the year number at the metals service centers. The -- would anticipate somewhere between 21 and 22 in a normal margin, so we were close to that 21 as I mentioned earlier we had some products have their pricing under pressure at the end of the year. The segment operating profit as a percentage of revenue 6.4%, once again strong quarter number for the company. Now go to page 18. I just wanted to make a comment on under metal service center, the middle paragraph there, we talked about our average order size, and the transactions handled always interesting information, when you have that many transactions, 3274 a day. They are actually less than they were in the prior year or average order size went up this year. So the increase to 2422 for our average order size includes more tons or in each order and additional increase in selling price. Turning now to Page 21 just make a comment on our CapEx for the year. Consistent with comments made throughout the year, our CapEx for this year 41 million is higher than our depreciation is actually higher than last year, as we continue to add value added processing equipment, we expect to exceed depreciation to a number somewhere between the 36,41 number in 2019 also. In the next page, on page 22 we break out our inventory dollars by segment, and our inventory turns. You would note that our metal service center number is up quite a bit, but mainly selling price there is increased tons due to both being added in there, plus availability because demand is feeling fairly good going into 2019. Distributors also increased in doing deals -- in relation to the additional activity in Canada selling to the service centers. Those are my comments. I’m going to turn it back for questions.

Thank you. [Operator Instructions] And your first question is from [Indiscernible] from RBC. Derek, please go ahead.

Yes, good morning. Thank you for taking my questions. Just on the value add services, how much of a percent of revenue is now being driven by value-add services and what sort of the growth rate you’re seeing there. And do you have capacity to continue to grow or will it -- will require additional investments to continue to grow the value add services that you’re that you’re offering, maybe some color around that would be great.

They’re going to a service center side; it’s roughly 28% to 30% of our business right now if you exclude coiled process. And so we don’t count that number in there. There is some room to continue to grow, so we do have some availability on shift right now with existing equipment. But I would say that would be at 1% to 2% more room there to grow. So we will have to spend CapEx as we have budgeted for this year similar to last year in that same arena. So we’ll continue to add equipment there as we push forward with our goal, we get that 35% to 45% within the next two to three years.

And the payback on the new equipment that you’re purchasing is coming in as expected. And what could, could you quantify the payback period of new equipment?

It’s usually till -- years are left.

Okay, okay great.

Maybe meeting or exceeding expectations at this point.

Okay, thanks John. And that’s the margin profile on that is that is that a little bit is that margin accretive, when you do that as well or...

Yes. And it’s changing our margin profile in the service centers as we continue to add that. So we think it will continue to add there. Again being parts based business, it’s -- it’s a little bit more difficult to model, because it’s not strictly driven off of tons as you’re selling time. So you’re seeing a lot of labor components to that. So as we – I think we’ve talked before this part that may weigh the same may have dramatically different cost in the labor component of that. So it can skew that number. So it’s really a mix, it’s a mix based issue that you have to go through there.

Yes. Okay, got it. I have a bunch of questions, but I’ll just ask one more and then see if others as my other questions if not, I’ll circle back up. But I’d be curious to get your thoughts around the emergency measures, have they been working and are you concerned at all if they decide to remove those emergency safeguard measures?

Which country we’re talking about now?

The Canadian.

I think the Canadian again; I'm not too concerned if they decide to remove them. I don’t think they have a whole lot of option into the U.S. If they did remove and complete that the U.S. safeguard stayed in place there would be a concern, and Canada would become a dumping ground for materials. I don't think that’s going be an issue. I don’t think Canada will move without United States on that. Overall, the impact right now, I think been healthy for our service centers and for energy environment to maintain the pricing level that’s good for the mills and good for the service centers, good for energy distribution.

Okay. Now, that’s great. I’ll jump back in the queue. Thank you.

Thank you. Your next question is from Michael Tupholme from TD Securities. Michael, please go ahead.

Thanks. Good morning. Just a follow-up on that last question, John. So you’re expectation -- it would be fair to say, your expectation has come with the decision in April 2019 by Canada that they would I guess make the provisional safeguards more permanent for the time being?

I think they try to mirror more permanently what the U.S. is doing. Again, I don’t think they can disconnect too much from the safeguards. They just open up the world market through Canada with volume lines. We can't handle that. Our community [ph] can handle. So I think they’ll try to mirror or at least maybe even extend the time frame to review, so they understand only what the U.S. is doing.

Okay. And in the past in the last few quarters since those provisional safeguards have been put in place. I think there’s been some discussion about how -- on the whole its has sort of a normalizing effect in terms of the prices of steel between Canada and the U.S. although there are some differences I guess between hot rolled coil and plate which I think plate being at a premium in Canada and hot rolled coil being at a bit discount. Is that still the case?

The gap has narrowed, but they’re still there. And I think that’s more demand driven, because now you have both safeguards in place. So they haven’t account our balancing effect, but again I think it’s more demand driven. Right now, what’s coming in for hot rolled coil is having a more difficult time getting into the U.S. to be competitive with the U.S. mills and conversely plates having an actual effect in Canada.

Okay. Just in terms of the gross margin in the service centers segment just under 21% in the fourth quarter. Marion, I know you said normally that would be in terms of the stable pricing environment something in the 21% to 22% range. But I wasn’t totally sure if you’re 21% in the fourth quarter. But what is the outlook going forward particularly with prices rolling over and sort of having..?

Yes. I think it will start to stabilize as we go out of Q1. I’m not – I don’t want to be too comfortable – too confident. We’re going to be above 21% in Q1, but I think as we grow through the year, the 21% to 22% should be a valid number unless safeguards and all kinds of other things change the environment.

Hey, Michael, it’s going to – and again as long as we feel like we’re starting to stabilize flat rolled pricing. As long as the pricing stabilizing we think that 21% to 22% becomes a valid number, but again pricing drops or jumps up quickly then could change those.

So, the 21% – like what you did in the fourth quarter is a little bit understate relative to what you should be able to give in the normal environment, but has prices came under pressure?

That’s right. We’ve seen the decline and that’s correct.

And there seem to be a little bit of excess inventory around that seem to want to be move somewhere for some reason and I think people are getting concern about pricing or just comparing for year-end one or the other.

Just looking at the outlook comments you have in the MD&A, I just want to clarify couple of things. When you talk about stable demand in service centers and steel distributors, this is on a sequential basis like in the early part of 2019 versus the latter part of 2018 you’re talking?

And also year-over-year we were only up 2% year-over-year and we’re thinking that demand will be somewhat consistent 2% up, zero whatever in 2019. We don’t see any big up. We don’t any reason for to go down though.

Okay. I guess, I’m asking I guess sequential versus year-over-year because in the fourth quarter those service centers year-over-year same store tons were down about 5%. So, but you actually think there’s an opportunity to see some flat to maybe up slightly year-over-year full year 2019 tons in service centers?

That could be a flat to potential up. I think Q4 when you look at it specifically the last two weeks of the year really were just down compared to historic for us December especially. For the seasonality I think all service centers were the one they early ones reporting, but if you look at the MSCI numbers you’ll see inventories up and shipments were down for Q4. But I think that was related to December [ph] but the world pretty shift down at Christmas and came back January 6th that we saw shipments pay for all more so than normal. So, I think, you’ll see a resetting to that in January, inventory levels will come more back in latter in the service center industries as a whole and I think demand is one of the – we’re seeing this demand picking back at level very similar to that of the year for 2018.

Okay. That’s helpful. Just two other quick ones here. Can you talk a bit more about the energy products segment outlook and just generally what you see in energy sector? I know you’ve had these large line pipe orders benefiting you the last couple of quarters, but the outlook makes it sound like you're only sort are starting a modest decline. I'm not sure if that’s because you still got some line pipe orders coming through in the first quarter. But some of the CapEx budget from the energy companies on the conventional side seems fairly negative with the pullback in oil in the fourth quarter. So maybe just help us frame the outlook for energy little bit better?

You’re really dealing with the two sides of the board that are starting with Canada. We are seeing some pullback on E&P side as far as their capital budgets. What we’re been told from our customer base to somewhere on that 10% range. When the differential was getting up to $40 and we’re seeing $10, oh, that was that concerning, but now that shift is back to more of a normal level and they might be a little bit lighter than normal level for the differential. The budget seem to be solid, but we’re been told, how breakup going into Q3 as the people are again anticipating in Canada being now with 10% range from that budget. So overall we think that’s what we’ll see as a change. Looking south of the board of the U.S. they’re in full speed ahead right now. So we’re not seeing budgets get pickup there. And then -- that the price in the Permian especially if that can extract oil right now, but this is a very healthy level. Now, over $30 a barrel that changes, we guess the $75 a barrel will make changes. But as we stand today in that low to mid 50s I think we’re okay.

And just to be clear on the U.S. assuming no amount of changes in the price of oil posting ahead means, like its a natural growth there or just – I mean, I know you had a bit of a tough comp at the line pipe orders, but like can you grow year-over-year in energy in the U.S. or is that of more of a flat?

On the normal business we can – again I think you’re going to have the large line pipe projects that we will bid some others, but there’s no certainty that you win those. It sounds like you are posting one, when I said posting ahead, I’m talking about on normal type of business. But we do have a normal line pipe business. We don’t have any big projects in the hopper right now. And so that things will be working well.

And then lastly, in terms of free cash flow with steel prices having plateaued, so like there’s tremendous amount of demand growth, you think maybe get some but it would seem that you may have reduction in inventories I guess at least with the pricing coming down maybe just speak to that, but if that is the case presumably you’re going to have some pretty good cash flow generation in 2019. Just wondering how you think about capital allocation between dividends, buybacks if the board is considering buybacks and other growth initiatives?

We always look at every quarter. Again, I think you’re right, if all things stay even, the price seem stays where it’s at today that should see start see – you know, cash flow start to increase. We’ll review the dividend. I can tell you it was a fulsome discussion this quarter. We’ll continue to review it to see where we are, but as we reflect back on the dividend also we’re paying that over 100% there for two years, so I think people appreciated that that we didn’t cut the dividends and we look at as a long term approach to than what’s best for shareholders. Its still paying a pretty healthy percent over 6% to 7% depending on where share prices at the moment. So we feel like it’s in a good position. But we’re looking at again in 90 days. We’ll also continue to look at the value added processing growth and it acquisitions.

[Indiscernible] buybacks part of that discussion?

Yes. We talked about share buybacks in the past. We really want to look at those as stock gets down below. We don’t want to do anything that’s not credit for the shareholders. So again we don’t want to dilute the shareholder and reward the gas [ph] for leaving, but rather reward the people for staying. So we only really look at those typically when we get down below book value.

Got it. Okay. Thank you.

Thank you. Your next question is from Frederic Bastien from Raymond James. Please go ahead.

Hi. Good morning. Are you guys comfortable with the level of inventory that you’re currently carrying across [Indiscernible] ?

Yes, we came into the year just a little bit heavy on service center side. We’re resetting down the distributions, thus going that we have the opportunity last time in Canada that just created by the safeguard, so that’s rebalancing now our energy inventories and we’re in a very position. So, again we came in just a little heavy going into Q1 for service centers than we would like seen primarily based on this, but last two weeks of December basically the customer base to shutdown for the year. So we think that would rebounce very quickly. So, overall I think our turns will be back to normal levels or above ratio.

Thanks. And how would you describe sort of the inventory levels on the industry side in energy. As I recall few years back there was a lot excess and took some time for everything to work through the system. So I was wondering what the position is right on the across the board?

Really clean, and people have done a very good job going through, looking at that, continuing to push obsolescence in our each inventory to push that up, so we feel like we’re really clean and in a very good position right now.

Okay. Cool. Couple of more questions on the distribution side, I know it’s a small business, but it has been contributing nicely to profit. I noticed that there was fairly high-level of inventory. Its down from what you had at the end of September, but its still up significantly. Does that pertain pretty solid Q1 for that business?

So, what happens, Frederic is, particularly in Canada we have to bring in when the Great Lakes are open. So we do always woke [ph] up at year-end, but we did a lot of purchasing in the -- after these announcements of like June 1, July 1, those announcements shipments arrived. They were actually being delivered to our customers, not concern because lot of the Canadian is pre-sold.

Yes. Windows had open up there, Fred, that we could bring in specific product. Plate been one of that we could bring in. That was very advantages for us in Canada.

So, we’ll move back to the June level as we move through this first half of the year.

Okay. And then, separately I mean, you did mentioned in your comment that last year’s disruption in trade sources did positive impact to that particular business. What’s the outlook now that I guess those disruptions have gone from short term to pretty much being ongoing?

The pricing is starting to come back through what I would call most stable level and that if you look at North American pricing for coil products for example, if you take the world market, you add in tariffs and then you add in freight that come in, we’re at those levels we’re best, I don’t say we’re getting out balance where our price was well above that. I think the concern for people to [Indiscernible] and stability that starting to stabilize now. So we’re seeing pricing actually move now with input cost for its scrap or demand which I more normal for our industry. So I think we’ll move forward from that and we’ll stay at a more normalized level. So we think coil seems to be balancing out at appropriate price. So plates still a little heavier than the world market, but demand is very very strong in North America. So we think we may see plate drift a little bit in pricing. But again overall we think that’s a strongest product in the market right now. So, going forward, I don’t think we’ll see as much volatility, if there’s any significant changes that we’re just don’t foreseeing.

Okay. Working capitalized, I guess, with demand stable, I believe at least your outlook for demand to be stable and pricing softening somewhat from what you’ve experienced in 2018. How should we think about working capital? Are we done now with the investments and we should expect working capital sort of returning out for some cash?

Yes. So the first quarter we will use cash because of AR [Indiscernible] backup we had less revenue at the end of the year. And then we have pay bonuses and income taxes from last year which – but as we go through the year we believe that it should be relatively flat unless big changes in prices.

Okay. Thank you.

Thanks, Fred.

Thank you.

Thank you. Your next question is from Anoop Prihar from GMP. Please go ahead.

Good morning. I’m just curious to ask you, John, over the course of 2018 which of your products experienced the most price distortion if you can attributed only to the impact of the tariffs?

Probably the coil and closely followed by plate.

I’m assuming those were both positive variances?

They were, yes.

Was there any product that was negatively impacted by any of this activity?

Nothing that was significantly impacted; there was a little bit of pipe product in Canada only just there was a timing issue which I think that pretty quick to about 60-day.

I guess, as we look at the price of the stock relative to your financial performance, I mean, the markets obviously a big confuse overall, the noise surrounding the tariffs. Is there anyway we can peg what the EBITDA impact was last year was consequence of I guess it’s a positive tailwind from all this?

Your guess is good as mine. It would be very difficult to pin that out.

Yes. But it’s definitely your tailwind, right?

It was, yes.

Okay.

It’s definitely help. It lifted pricing and as we always said, at high price we do better.

Yes. So selling price we anticipate not to drop off as much, but we in the year we did get some of the lift in price which droves the higher gross margins particularly in service centers and steel distributors in the sort of first half to maybe Q3 in service center.

Thank you.

Okay. And then just secondly, Marion, in terms of Q4 the gross margin in steel distribution drop down a little bit. Is there were some different reason we contribute to that? Or is that just general business activity?

So the volumes that we bring in pre-sold don’t never carry as higher margin as when we take it inventories risk on them and more percentage was driven by both our Canadian operations and our U.S. operations and both tend to presell more so then that group as a total so that drove it down a bit.

Okay. Thank you.

Thank you. There are no further questions at this time. You may proceed.

Thanks everybody for attending. We’ll talk to you next quarter.

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