MRC Global Inc. (MRC Quick QuoteMRC - Free Report) reported better-than-expected results for the fourth quarter of 2020. Its bottom line surpassed estimates by 44.4%, while sales exceeded the same by 6%. Notably, the quarter’s earnings beat represents the fourth consecutive quarter of impressive results. Reduced customer spending due to the pandemic adversely impacted results.

The company reported an adjusted loss of 5 cents per share for the quarter. This compares favorably with the year-ago figure of loss of 24 cents. Notably, the Zacks Consensus Estimate was pegged at a loss of 21 cents.

For 2020, the company recorded an adjusted loss of 21 cents per share, whereas the Zacks Consensus Estimate was pegged at a loss of 24 cents. However, the figure decreased from the year-ago adjusted earnings of 36 cents.

Revenue Details

In the reported quarter, MRC Global’s revenues totaled $579 million, reflecting a year-over-year decline of 24.4%. The results suffered from weakness across all segments, product lines and sectors served. It must be noted here that only gas products and gas utilities’ sales expanded on a year-over-year basis in the quarter.

However, the company’s revenues surpassed the Zacks Consensus Estimate of $546.1 million.

Based on MRC Global’s product line, revenues from carbon pipe, fittings and flanges declined 29.9% year over year to $141 million, and that from valves, automation, measurement and instrumentation decreased 30.1% to $216 million, while that from gas products grew 9.5% to $138 million. Sales for general products fell 40.9% to $52 million, and that for stainless steel, and alloy pipe and fittings declined 23.8% to $32 million.

Based on the sectors served, revenues from the Upstream production were approximately $126 million, declining 43.8% from the year-ago quarter. Midstream pipeline sales totaled $62 million, down 47.5% from the year-ago quarter, and Gas utilities sales totaled $217 million, increasing 20.6% year over year. Downstream & industrial sales were $174 million, reflecting a year-over-year decline of 28.7%.

The company has three reportable segments — the U.S., Canada and International. It noted that the results of the segments suffered from the adverse impacts of the coronavirus outbreak. Further information is given below:

Sales generated from the U.S. segment (representing 77.4% of the company’s fourth-quarter revenues) totaled $448 million, declining 26.3% year over year. The results were adversely impacted by weakness in spending in the downstream & industrial, upstream production, and midstream pipeline sectors. However, growth in spending in the Gas utilities sector favored results.

Revenues from the Canada segment (4% of the quarter’s revenues) moved down 46.5% year over year to $23 million due to the pandemic-related weakness in the upstream production sector.

Sales from the International segment (18.6% of the quarter’s revenues) declined 6.1% to $108 million. The results were adversely impacted by weakness in the upstream production sector. However, foreign currency translation had a favorable impact on results.

For 2020, the company’s revenues totaled $2.56 billion, decreasing 30.1% from the previous year. However, the top line surpassed the Zacks Consensus Estimate of $2.53 billion.

Margin Profile

In the quarter under review, MRC Global’s cost of sales declined 23% year over year to $489 million. Adjusted gross profit in the quarter moved down 24.5% year over year to $114 million. Margin at 19.7% was same as the year-ago quarter’s figure. Adjusted selling, general and administrative expenses were down 27.3% year over year to $96 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) declined 4.3% year over year to $22 million, while adjusted EBITDA margin was up 80 basis points at 3.8%. Interest expenses declined 33.3% year over year to $6 million.

Balance Sheet and Cash Flow

Exiting fourth-quarter 2020, MRC Global’s cash balance improved to $119 million from the previous quarter’s balance of $40 million. Then again, long-term debt declined 6.4% sequentially to $379 million.

Notably, the company repaid $819 million borrowings under the revolving credit facilities and $6 million of long-term obligations in the year. However, it raised $658 million through revolving credit facilities.

In 2020, the company generated net cash of $261 million from operating activities, up 7.9% from the previous year. Capital spending totaled $11 million, down from $18 million recorded in 2019.

During the year, the company used $24 million for paying out dividends and refrained from buying back any shares.

Outlook

MRC Global believes that healthy liquidity, improvement in the oil & gas market, and favorable cost structure will be beneficial in the quarters ahead.