Executive Summary / Key Takeaways

• Ryerson Holding Corporation is undergoing a significant strategic transformation, culminating in the announced all-stock merger with Olympic Steel, Inc. , poised to create the second-largest North American metals service center with over $6.5 billion in pro forma revenue.
• The merger is expected to generate substantial synergies of $120 million annually by the end of year two, driven by procurement scale, efficiency gains, commercial enhancements, and network optimization, with approximately one-third realized in the first year post-closing.
• Ryerson has invested over $650 million since 2021 in modernizing its service center network and digital capabilities, with these investments now transitioning from a capital expenditure cycle to an optimization phase, aimed at improving operational efficiency, customer experience, and ultimately, earnings quality.
• Despite a protracted industry downturn characterized by soft demand and margin pressure, Ryerson has demonstrated resilience through "self-help" initiatives, achieving market share gains in transactional business and maintaining healthy liquidity.
• The combined entity is expected to benefit from a more diversified product mix, Olympic Steel's higher-margin end product manufacturing capabilities, and a strengthened financial profile with reduced leverage, positioning it for enhanced profitability and growth in future market upturns.

A Transformed Metals Leader Emerges

Ryerson Holding Corporation, with a rich history dating back to 1842, stands as a leading value-added processor and distributor of industrial metals across the United States, Canada, Mexico, and China. The company's core business revolves around sourcing a diverse portfolio of approximately 75,000 metal products, including carbon steel, stainless steel, aluminum, alloy steels, nickel, and red metals, and distributing them to a wide array of industrial customers. A significant differentiator for Ryerson is its extensive value-added processing and fabrication services, with nearly 80% of its metal products undergoing customization to meet specific customer requirements. This focus on specialized processing, such as cutting, machining, and custom fabrication, allows Ryerson to offer tailored solutions, reduce customer operational complexities, and capture higher margins.

The industrial metals sector is highly fragmented, with numerous smaller players and a few large distributors. Ryerson operates in this competitive landscape alongside major players like Reliance Steel & Aluminum Co. (RS), Worthington Industries, Inc. (WOR), and Commercial Metals Company (CMC). Ryerson's competitive advantages stem from its established brand, extensive distribution network, and diverse product portfolio, which enable timely deliveries and strong customer relationships. While larger competitors like Reliance Steel & Aluminum Co. may possess greater scale, Ryerson differentiates itself through its comprehensive processing capabilities and customer-centric approach, aiming to provide a "one-stop shop" solution. The company's strategic emphasis on North America allows for optimized logistics and a deep understanding of regional market dynamics.

The broader industry has faced a challenging period, marked by a protracted manufacturing downturn. The Institute for Supply Management's Purchasing Managers Index (PMI) has indicated contraction for 33 of the past 36 months, including seven consecutive months below 50 in the third quarter of 2025. This environment has led to falling industry shipments, carbon steel margin compression, and manufacturing activity well below mid-cycle levels. Despite these headwinds, there is optimism for medium and longer-term secular demand trends, particularly in data center and public infrastructure projects driven by federal investment spending, as well as potential benefits from reshoring initiatives.

Technological Edge and Operational Evolution

Ryerson's strategic response to market dynamics and its commitment to enhancing its competitive position are deeply rooted in its technological and operational advancements. The company has embarked on a significant capital expenditure (CapEx) cycle, investing over $650 million since 2021 to modernize its network of "intelligently connected and technology-enabled service centers." This substantial investment aims to build operating leverage for future cyclical upturns and generate higher, less volatile earnings.

Key technological and operational differentiators include:

• Advanced Processing Facilities: Investments like the 900,000-square-foot University Park facility in Illinois, dedicated to long products and tube, and the Shelbyville, Kentucky, non-ferrous coil processing facility, are central to this modernization. The Shelbyville facility, for instance, is designed to process larger coils more efficiently, aiming for a 100% volume ramp-up to provide a better service and lower cost model to the market.
• Digital Commerce Expansion: The launch of ryerson.com 3.0 signifies the company's commitment to digital transformation. This platform has seen an increase in unique transactional customer visits, offering an "endless aisle" of products and value-added processing capabilities, thereby enhancing customer access and functionality.
• Specialized Value-Added Capabilities: The Atlanta tube laser center, which has grown from a nascent presence in 2016 to over 10 work centers, exemplifies Ryerson's focus on high-value-add processing. This capability, combined with other sheet lasering operations, creates powerful synergies in specialized fabrication.
• ERP System Integration: A major undertaking involved the conversion to a uniform SAP ERP system in the South region and Texas. While described as a "2- to 3-year trail of tears," this integration is now normalizing operations, improving service levels, shortening lead times, and enhancing on-time delivery across the network, ultimately contributing to a more consistent and superior customer experience.

These technological and operational investments are crucial for Ryerson's competitive moat. They enable faster quoting, more efficient material handling, and the ability to offer a wider array of custom solutions, from basic "pick-pack-and-ship" to complex finished parts. This enhanced capability allows Ryerson to capture market share, particularly in transactional business, by consistently meeting customer demands for speed, availability, and quality.

Financial Performance and Strategic Resilience

Ryerson's financial performance in 2025 reflects the ongoing challenges within the industrial metals market, yet also highlights the company's strategic resilience and operational focus. For the third quarter ended September 30, 2025, Ryerson reported net sales of $1.16 billion, a slight decrease of 0.7% compared to the prior quarter but an increase of 3.1% year-over-year. Average selling prices increased by 2.6% quarter-over-quarter and 3.1% year-over-year, supported by tariff policy and rising input prices, even as tons shipped decreased by 3.2% sequentially and remained flat year-over-year.

For the nine months ended September 30, 2025, net sales were $3.47 billion, a 3.5% decrease from the same period in 2024, primarily due to lower metal commodity prices. Gross profit for Q3 2025 was $199.5 million, contracting by 70 basis points to 17.2% compared to the prior quarter, as price pressure amidst a soft demand environment impacted margins. The company reported a net loss attributable to Ryerson Holding Corporation of $14.8 million, or $0.46 per diluted share, for the third quarter of 2025. Adjusted EBITDA, excluding LIFO, for Q3 2025 was $40.3 million, at the lower end of guidance.

Despite the net loss, Ryerson has demonstrated effective cost management. Warehousing, delivery, selling, general, and administrative expenses decreased by $3.1 million sequentially in Q3 2025 to $200.5 million. On a same-store basis, these expenses decreased by $11 million in the first nine months of 2025, driven by lower reorganization costs associated with the University Park facility and ERP conversion activities, as well as reduced payroll taxes from Employee Retention Credit refunds. The company successfully achieved its $60 million annualized cost reduction target in 2024.

Ryerson maintains a healthy liquidity profile. As of September 30, 2025, total debt stood at $500 million, with net debt at $470 million.

Total liquidity, comprising cash and cash equivalents and revolving credit facility availability, was $521 million, an increase from $485 million at the end of the second quarter.

The debt-to-capitalization ratio was 39% at quarter-end, and the leverage ratio was 3.7x, above the company's target range of 0.5x to 2.0x, but expected to improve with future cash flow generation.

Capital expenditures for the first nine months of 2025 were $30.7 million, with the company reaffirming its full-year target of $50 million, signaling a shift from a heavy investment cycle to an optimization phase.

The Olympic Steel Merger: A Transformative Leap

A pivotal strategic development for Ryerson is the definitive merger agreement to acquire Olympic Steel, Inc. (NASDAQ: ZEUS), announced on October 28, 2025. This all-stock transaction, targeted for closure in the first quarter of 2026, is set to create the second-largest North American metals service center. The combined entity is projected to have over $6.5 billion in pro forma annual revenue based on 2024 figures and will operate from an expansive network of over 160 facilities across North America.

The merger is expected to yield significant synergies, estimated at $120 million annually by the end of year two, with approximately one-third of these synergies anticipated to be realized within the first year post-closing. These synergies are expected from various sources, including:

• Complementary Product Mix: Olympic Steel's greater exposure to carbon steel, particularly in tube and plate products, will strategically balance Ryerson's current mix, which is approximately 50% carbon, 25% stainless steel, and 25% aluminum. This creates a richer, more diversified product offering across flat and long, stainless, aluminum, and coated carbon products.
• Procurement and Supply Chain Efficiencies: The combined purchasing power, moving from 2 million tons to an estimated 2.9-3 million tons, is expected to generate approximately $14 per ton in supply chain synergies through increased scale and more efficient logistics.
• Operational Optimization: Leveraging the combined asset footprint, including Ryerson's cut-to-length lines with Olympic's slitting capacity, and optimizing the utilization of facilities like Ryerson's nonferrous polishing and grinding capabilities with Olympic's specialty metals franchise, will drive efficiency gains. The industry's natural voluntary attrition rate (5-15%) also presents an opportunity for efficiency without forced reductions.
• Value-Added and End Product Manufacturing: Olympic Steel's strategic focus on end product manufacturing, such as industrial hoppers, stainless steel bollards, and metal canopies for HVAC applications, offers higher margins and a countercyclical earnings stream compared to traditional distribution. This capability provides a significant competitive advantage, as the combined company can offer internal purchasing and fabricating synergies that competitors at the end-market level may lack.

The merger is anticipated to be immediately accretive to shareholders of the combined entity and is expected to result in a reduced pro-forma leverage ratio of less than three times, assuming partial credit for synergies. This strengthened financial profile, coupled with enhanced scale, diversification, and improved margins, is expected to generate greater free cash flow and provide more opportunities for future growth.

Outlook, Guidance, and Risks

For the fourth quarter of 2025, Ryerson anticipates customer shipments to decrease by 5% to 7% quarter-over-quarter, reflecting typical seasonality and persistent soft manufacturing and industrial metal demand. Net sales are projected to be in the range of $1.07 billion to $1.11 billion, with average selling prices expected to be flat to up 2%, supported by the current tariff structure. Gross margins are expected to remain under pressure due to elevated input prices and the recessed demand environment. Adjusted EBITDA, excluding LIFO, is forecast between $33 million and $37 million, with a net loss per diluted share in the range of $0.28 to $0.22. LIFO expense is expected to be between $10 million and $14 million for the quarter.

The company's 2025 net capital expenditure target remains at $50 million, a significant reduction from prior years, as Ryerson focuses on operationalizing its recent investments. Management believes that the completion of this CapEx cycle and the integration of new assets will lead to improved cash flow and higher EBITDA, contributing to a reduction in debt and a return to the target leverage ratio of 0.5x to 2.0x.

The recently enacted One Big Beautiful Bill Act (OBBBA) on July 4, 2025, is expected to favorably affect Ryerson's cash tax liabilities and investment incentives. Key provisions include the restoration of 100% bonus depreciation for qualified property and permanent full expensing of domestic research and experimental expenditures.

Despite the compelling strategic rationale, several risks warrant investor attention. The Olympic Steel acquisition is subject to customary closing conditions, including shareholder and regulatory approvals, and there is no assurance it will be completed as contemplated. Failure to complete the acquisition or difficulties in integrating the businesses could adversely affect Ryerson's stock price and future financial results. The integration process itself will incur significant costs (up to $40 million to realize synergies) and could divert management attention and resources. Furthermore, the industrial metals industry remains cyclical and sensitive to economic conditions, commodity price fluctuations, and interest rate changes. A hypothetical 1% increase in interest rates on variable debt, for instance, would have increased interest expense by approximately $4.6 million for the first nine months of 2025.

Conclusion

Ryerson Holding Corporation is at a pivotal juncture, transforming its operational capabilities and expanding its market leadership through strategic consolidation. The company's substantial investments in modernizing its service center network, enhancing digital commerce, and integrating advanced processing technologies are now poised to yield returns, improving efficiency and customer experience. This internal optimization, coupled with a disciplined approach to cost management, has enabled Ryerson to maintain resilience amidst a challenging macroeconomic environment.

The announced merger with Olympic Steel (ZEUS) represents a significant leap forward, creating a formidable force in the North American metals distribution landscape. This combination promises substantial synergies from complementary product mixes, enhanced procurement scale, and the integration of higher-margin end product manufacturing. As Ryerson transitions from an intensive investment phase to an optimization and integration phase, the focus on realizing these synergies and leveraging its expanded footprint is expected to drive enhanced earnings quality, stronger cash flows, and a more robust financial profile. While the cyclical nature of the industry and integration risks remain, Ryerson's strategic vision and operational execution position it for sustained value creation and a stronger competitive standing in the evolving industrial metals market.