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Huge
2004 Earnings Set Stage for Strong 2005
Six of North America’s top metals distribution companies saw
their revenues and earnings climb to a stratospheric level during
2004. They anticipate solid demand for their products and services
this year.
Ryerson
Tull Inc.’s 2004 net sales increased 50 percent above 2003,
on shipments that rose 10.5 percent, cleaning up the red ink of
2003—a loss of $14 million—with earnings of $54.4 million.
Reliance
Steel & Aluminum saw its earnings grow nearly 400 percent on
sales that improved 56 percent. The company had its most profitable
year ever. Reliance saw a 4.3 percent increase in tons sold and
a 47 percent increase in its average selling price per ton sold.
Reliance—the
second-largest North American distributor (as rated by Metal Center
News in September 2004)—boasted inventory turns of 5.1 per
year, improved from 4.7 turns in 2003. Company executives’
long-term goal is six turns per year.
Russel
Metals, Metals USA Inc. and Earle M. Jorgensen Co. all had very
similar experiences, with revenue gains in the 60 percent range
and earnings gains between 800 and 1,333 percent. Metals USA and
Olympic Steel both reported that their shipments improved more than
15 percent year over year. Revenues at Olympic Steel last year jumped
nearly 90 percent, overcoming its 2003 loss of $3.2 million.
Of
course, a lot of this improvement was based on the escalating metals
prices of last year. For example, Ryerson reported that its 2004
average selling price per ton was $1,170, or 36.3 percent above
the $858 average selling price realized the year before.
Looking
forward, Ryerson Tull expects manufacturing activity and metals
demand to sustain slow to moderate growth this year. Company executives
are forecasting that 2005 profits, including the acquired Integris
Metals operations, will grow.
At
Reliance Steel & Aluminum, “Our average daily sales set
a new record high [as measured in dollars] in January 2005. We are
optimistic about business conditions and encouraged by the opportunities
we see. While we don’t expect the benefit of rapidly rising
prices like in 2004, we do expect 2005 to be another outstanding
year when compared to other years,” CEO Dave Hannah says.
Reliance
plans capital expenditures of $50 million to $60 million this year,
which will be used to expand certain operations—scattered throughout
the country—that are at or approaching capacity.
Hannah
says metals orders for applications such as railcars, truck trailers
and heavy trucks should continue to improve this year. “Nonresidential
construction was weak [in ‘04], but we look for a better market
this year. Electronics and semiconductor business was strong, and
we expect that to move forward this year. Aerospace activity has
increased, and we expect that to be ongoing through 2005.”
Certain
aerospace quality aluminum plate products have lead times of 26
to 40 weeks, and most supply is on allocation, Hannah says. “The
tightest commodity is aluminum heat treat plate going into the aerospace
industry. We cannot get as much as we would like to get, and we
are one of the largest heat treat plate distributors in the world.
It’s very tight.”
He
predicts carbon flat-roll price increases will take effect April
1. Domestic sheet was being quoted at $620 to $650 per ton in mid-February.
“There is more pricing discipline by domestic producers than
we have ever seen in the past. If prices fall in the second half,
we don’t expect them to fall very far from where they are today.”
As
of mid-February, the company was having no difficulty accessing
material, except for heat treat carbon steel plate. “ISG and
Oregon Steel are tied up quite a bit with government orders,”
and lead times are long. “We actually missed a month [of shipments]
from one of our major suppliers because the government came in and
took our tonnage,”
Hannah says.
Reliance’s
managers continue to look at acquisition opportunities, but won’t
pay for companies based on 2004 sales and earnings figures, because
it was an exceptional year. “We are willing to pay a fair price,”
Hannah says, “as long as we can justify it.”
Russel
Metals Chief Financial Officer Brian Hedges said Feb. 24 that inventory
levels at service centers in North America were high. “That’s
something that will work through the system. Inventory valuation
is starting to come down” as spot market prices flatten out.
Russel
expects to spend Cdn $20 million to $23 million this year on capital
projects, but leaders did not provide specifics. The company is
not looking too hard at acquisition opportunities until the valuations
for companies on the market get more realistic, President and CEO
Bud Siegel says.
Metals
USA President and CEO Laurenco Goncalves says that because the U.S.
economy is healthy, “we expect the current level of metal consumption
to continue. Recent announcements of increases in raw material prices
for integrated mills in Asia and in Europe have the potential to
push worldwide steel prices upward. But it is difficult to say just
when and how much further domestic prices will be affected.”
Regardless
of pricing, Goncalves says business is strong “and we are prepared
to deliver good results” in 2005.
At
EMJ, President and CEO Sandy Nelson says the company has managed
to pass most mill price increases along to its customers, but that
cost increases are affecting gross margins. EMJ had a solid shipping
volume during the seasonally slow December quarter, and began January
with strong sales order activity.
Olympic
Steel Chairman and CEO Mike Siegal says his company’s outlook
remains favorable for 2005. “We are optimistic about our ability
to meet customers’ anticipated increased needs for steel and
value-added services.”
Among
Olympic’s planned capital projects are the installation of
two new laser processing machines in Cleveland during the first
quarter, and two others in Central Region branches later in the
year.
Lawrence
Seeks Leadership in Exotic Metals
Lawrence Holdings Inc.—a new company formed for the sole purpose
of acquiring and operating exotic metal alloy distribution centers—has
acquired Supra Alloys Inc., Camarillo, Calif. Supra Alloys, a titanium
distributor, was founded in 1955. George Esseff Jr. will remain
in place as Supra’s president.
“We
are very pleased the Esseff family has decided to join the Lawrence
Holdings team. The Esseffs have a long, proud history in this industry
and we believe their desire to partner with us further validates
our [goal] to be the preeminent titanium distributor in the world,”
says Lawrence D. Buhl III, chief executive officer of Lawrence Holdings.
The
Supra business is being combined with Tico Titanium, acquired by
Lawrence Holdings last June. Tico, established in 1957, has locations
in New Hudson, Mich., and Houston. The combined businesses have
service centers in California, Texas, Michigan and Connecticut,
plus sales offices in Arizona, Delaware and California.
“The
combination of two independent titanium distributors in North America
truly provides us with a national footprint,” Buhl says. “This
is exciting because there is very little overlap in our respective
businesses.”
Historically,
each company has had a distinct customer base. Supra Alloys serves
the aerospace, medical devices and sporting goods industries. Tico
supplies industrial companies in the Midwest and South, especially
chemical processors.
Both
companies are now affiliated with Snappy Materials LLC, Wallingford,
Conn., under Lawrence Holdings. Snappy specializes in overseas high-temperature
metal markets, including titanium.
Briefs
McNichols Co., Tampa, Fla., has acquired assets from F.P. Smith
Wire Cloth Co., a 100-year-old company in Northlake, Ill. McNichols
acquired Smith’s wire cloth inventory, processing and material
handling equipment, office furniture and other intangible assets.
To house the additional assets, McNichols has temporarily leased
an 18,000-square-foot warehouse adjacent to its Elk Grove branch
and will install a new slitting line there.
Port
City Metal Services, Tulsa, Okla., has expanded its capabilities
during the past year. The company—begun as strictly a plate
burning operation almost 30 years ago—recently added several
machines, including a Mazak FabriGear 300 (a six-axis structural
pipe and tube laser) and a 2-D Trumpf Trumatic L6050, with plans
to acquire more equipment in the immediate future.
Russel
Metals has contracted Red Bud Industries to build a high-speed cut-to-length/blanking
line to process stainless steel at its Boucherville division in
Quebec. The line will handle material up to 72 inches wide and 1/4-inch
thick from coils up to 25 tons. The line will contain two Herr-Voss
roller levelers.
People
Jerry Gea has retired as regional vice president, Eastern Region,
at Olympic Steel Inc. Gea worked in the industry for 35 years, the
last 20 with Olympic. He is succeeded by Raymond Walker, vice president
of operations. Walker has been with the company 19 years and previously
was regional vice president, Central Region.
Feralloy
Corp. has promoted Tom Gavin to general manager of its Cleveland
Division. A 13-year Feralloy veteran, Gavin has served in a variety
of sales and management roles, along with recent responsibilities
for Feralloy’s national accounts.
Patrick
Revenew was promoted to vice president at American Douglas Metals
Inc., a distributor and processor of flat-rolled aluminum and steel
in New York, Georgia and Florida. Revenew has been with the company
since 1997. Before his promotion, he was special products manager
in New York.
Jim
Marx has joined Ohio Gratings Inc., Canton, Ohio, as controller.
He has more than 30 years of experience in the steel industry.
Obituary
David A. Gardiner, 73, former long-time president of Cerro Metal
Products, Bellefonte, Pa., died Jan. 30. He belonged to the Copper
and Brass Servicenter Association, and served on the boards of the
Copper Development Association and Copper and Brass Fabricators
Council.
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