Executive Summary / Key Takeaways

• Olympic Steel is undergoing a significant transformation, evolving from a traditional metals service center into a diversified, higher-margin enterprise through strategic acquisitions and substantial organic investments in value-added processing and fabrication.
• The recently announced merger with Ryerson Holding Corporation is a pivotal development, poised to create the second-largest North American metals service center, enhancing scale, capabilities, and market presence with anticipated annual synergies of $120 million by year two.
• Despite macroeconomic headwinds and volatile metals pricing in 2024 and 2025, Olympic Steel has demonstrated consistent profitability across all segments, driven by its enriched product mix, focus on countercyclical end products, and operational efficiencies.
• The company is making substantial capital investments of approximately $35 million in 2025 in automation and advanced processing equipment, expected to enhance throughput, safety, and margins, with benefits largely materializing in 2026.
• Olympic Steel maintains a strong liquidity position with over $300 million in credit availability and a recently extended asset-based revolving credit facility, providing ample capital for continued strategic growth initiatives and shareholder returns.

Setting the Scene: Olympic Steel's Enduring Strength and Strategic Evolution

Olympic Steel, Inc., founded in 1954, has long been a prominent U.S. metals service center, specializing in the direct sale and value-added processing of a wide array of carbon, coated, stainless steel, and aluminum products, alongside pipe, tube, bar, valves, and fittings. The company's strategic journey has been marked by a consistent drive towards diversification and higher-margin opportunities, fundamentally reshaping its business model. This evolution has positioned Olympic Steel to thrive even amidst the inherent cyclicality and volatility of the broader metals industry.

The industry itself is subject to numerous external factors, including fluctuating metals pricing, demand and availability, labor costs, global supply dynamics, and tariffs. For instance, 2024 presented significant challenges with hot rolled carbon pricing declining over 40% in the first seven months and nickel prices hitting a four-year low. Despite these headwinds, Olympic Steel demonstrated remarkable resilience, growing market share and maintaining shipping volumes within 1% of 2023 levels, outperforming overall industry shipments. This performance underscores the success of its long-term strategy to build a more robust and profitable enterprise.

Technological Edge and Operational Excellence

A cornerstone of Olympic Steel's strategy is its continuous investment in advanced processing technology and automation, which serves as a critical differentiator in a competitive landscape. The company's fabrication capabilities are extensive, encompassing cutting-to-length, slitting, shearing, blanking, tempering, stretcher-leveling, plate and laser processing, forming and machining, tube processing, finishing, and welding. These capabilities enable Olympic Steel to provide comprehensive solutions, from raw metal sheets to fully welded and painted sub-assemblies for OEMs.

The company's commitment to technological advancement is evident in its robust 2025 capital expenditure plan of approximately $35 million. These investments are primarily directed towards organic growth opportunities, including a new cut-to-length line in Minneapolis for coated products, a new white metals cut-to-length line in Schaumburg, Illinois, and a high-speed stainless slitter at its Berlin Metals operation. Crucially, the automation of its Chambersburg, Pennsylvania, fabrication operation is expected to improve throughput by over 30%. The Pipe and Tube segment, for example, boasts 19 high-speed tube lasers, actively serving diverse industrial OEMs and experiencing significant growth in data center-related work. These technological enhancements are designed to boost operational efficiency, improve safety, expand capacity, and strategically shift the product mix towards higher-margin, value-added offerings, with benefits largely expected to materialize in 2026.

Financial Performance: Resilience in Volatile Markets

Olympic Steel's financial performance in recent periods reflects the effectiveness of its strategic transformation, even amid challenging market conditions. For the third quarter of 2025, the company reported net sales of $490.65 million, a 4.4% increase year-over-year, surpassing analyst projections. Net income for the quarter was $2.15 million, or $0.18 per diluted share, compared to $2.7 million, or $0.23 per diluted share, in Q3 2024.

Adjusted EBITDA for the second quarter of 2025 reached $20.3 million, marking a 26% sequential increase from the first quarter of 2025. This was achieved despite a sequential volume pullback in Q2 2025, demonstrating the company's ability to improve flat-rolled margins and maintain profitability across all three segments.

For the nine months ended September 30, 2025, net sales were $1.48 billion, a decrease of 2.8% from $1.52 billion in the same period of 2024. Net income for the nine-month period totaled $9.90 million, or $0.84 per diluted share, compared to $19.09 million, or $1.64 per diluted share, in the prior year. Consolidated gross profit as a percentage of net sales improved to 24% in Q3 2025 from 22.7% in Q3 2024, and to 24.2% for the first nine months of 2025 from 22.7% in the comparable 2024 period. This margin expansion was primarily driven by average selling prices increasing more than the average cost of inventory, and the inclusion of MetalWorks' revenue without corresponding tons sold in the carbon flat products segment. Operating expenses, however, increased due to the MetalWorks acquisition and higher payroll, distribution, and warehousing costs.

The Carbon Flat Products segment, the largest contributor to revenue, saw net sales of $268.21 million in Q3 2025, up 1.3% year-over-year, with operating income of $1.28 million. The Specialty Metals Flat Products segment recorded net sales of $140.87 million in Q3 2025, an increase of 12.1% year-over-year, and an operating income of $6.41 million. The Tubular and Pipe Products segment generated net sales of $81.57 million in Q3 2025, up 2.7% year-over-year, with an operating income of $3.99 million. The company's effective borrowing rate decreased to 5.9% for the first nine months of 2025 from 6.5% in the prior year, reflecting prudent financial management.

Liquidity and Capital Allocation: Fueling Future Growth

Olympic Steel maintains a robust financial position, characterized by strong liquidity and a strategic approach to capital allocation. The company's principal capital requirements, including funding working capital, upgrading equipment, making acquisitions, and paying dividends, are primarily met through cash generated from operations and its asset-based revolving credit facility.

Net cash provided by operating activities for the nine months ended September 30, 2025, was $59.50 million, a significant increase from $19.10 million in the same period of 2024. This strong cash generation enabled a $37 million reduction in debt during Q1 2025, lowering total debt to $235 million.

On April 17, 2025, the company extended its $625 million asset-based revolving credit facility to April 17, 2030, providing approximately $312 million of availability as of September 30, 2025. This flexible, low-cost capital is crucial for funding strategic growth initiatives. The company also utilizes a fixed-rate interest rate hedge on $75 million of its SOFR-based borrowings, fixing the rate at 3.82% to manage interest rate variability. Olympic Steel has consistently rewarded shareholders, paying regular quarterly dividends since 2006, with the most recent approval for $0.16 per share.

Competitive Positioning: A Differentiated Approach

Olympic Steel operates in a highly competitive and fragmented metals distribution industry, facing rivals such as Reliance Steel & Aluminum Co. (RS), Ryerson Holding Corporation, Worthington Industries (WOR), and Commercial Metals Company (CMC). While larger competitors like RS may boast a broader geographic reach and greater operational scale, Olympic Steel differentiates itself through its specialized fabrication capabilities and a strategic focus on value-added processing. The company's ability to provide customized solutions, including laser cutting and welding, enhances its value proposition in niche applications requiring precision.

Olympic Steel's strategy of diversifying into countercyclical, metal-intensive end products, such as those from its Metal Fab and McCullough Industries acquisitions, provides a buffer against the cyclical nature of the broader metals market. The acquisition of MetalWorks in November 2024, which manufactures components for service station canopies and solar canopy systems, further strengthens this position by integrating into infrastructure and construction markets. The company's strong relationships with domestic mills are also a significant advantage, particularly in an environment of evolving tariffs and trade policies, as over 90% of its metal supply is domestically sourced.

Strategic Horizon: The Ryerson Merger and Beyond

A transformative event for Olympic Steel is the definitive merger agreement entered into with Ryerson Holding Corporation on October 28, 2025. This merger is set to create the second-largest North American metals service center, significantly enhancing the combined company's scale, capabilities, and market presence. Under the terms, Olympic Steel shareholders will receive 1.7105 shares of Ryerson common stock for each Olympic Steel share, owning approximately 37% of the combined entity. The transaction is expected to be immediately accretive to shareholders and generate approximately $120 million in annual synergies by the end of year two through procurement scale, efficiency gains, commercial enhancement, and network optimization. The merger is anticipated to close in the first quarter of 2026, subject to customary closing conditions.

Looking ahead, management anticipates a challenging environment for the second half of 2025, but remains optimistic for the longer-term outlook, citing positive emerging trends like the resolution of reciprocal tariffs and new tax legislation. The company expects improved demand for data center work in the Pipe and Tube segment and sees momentum in the Specialty Metals market, partly due to the doubling of Section 232 tariffs on steel and aluminum. The 2025 capital expenditures of $35 million are expected to fuel growth in 2026 and beyond as new equipment becomes operational. The effective tax rate for 2025 is projected to be between 28% and 29%.

Key Risks and Investment Considerations

While Olympic Steel's strategic direction is clear, investors must consider several key risks. The successful completion of the merger with Ryerson is subject to various conditions, and its failure could negatively impact Olympic Steel's business and financial results. The fixed exchange ratio in the merger means the value received by shareholders is subject to fluctuations in Ryerson's stock price. Furthermore, the merger agreement contains provisions that could limit Olympic Steel's ability to pursue alternative acquisition proposals.

The metals industry remains inherently cyclical and volatile, with rapid changes in pricing and demand posing ongoing challenges. Operating expenses have increased, raising concerns about operating leverage if industry volumes remain weak. While the company has diversified, it remains exposed to economic downturns in key end markets like heavy equipment. The company's growth strategy relies on both M&A and organic CapEx, and there is a risk that new investments may yield diminishing returns compared to past expansions.

Conclusion

Olympic Steel's journey from a traditional metals service center to a diversified, value-added processor underscores a compelling investment thesis centered on resilience and strategic growth. Through a disciplined approach to acquisitions, such as MetalWorks, and significant organic investments in advanced fabrication and automation technologies, the company has successfully enriched its product mix and expanded into higher-margin, countercyclical end markets. This strategic evolution has enabled consistent profitability even amidst the volatile macroeconomic conditions and pricing pressures that have characterized the metals industry in recent years.

The impending merger with Ryerson Holding Corporation (RYI) represents a pivotal moment, poised to significantly enhance Olympic Steel's scale and competitive standing as part of the second-largest North American metals service center. This, combined with ongoing capital investments designed to boost efficiency and capacity, positions the company for sustained value creation. While risks associated with merger completion and market cyclicality persist, Olympic Steel's strong liquidity, operational excellence, and commitment to a differentiated, technology-driven approach provide a solid foundation for long-term growth and shareholder returns in a consolidating industry.