Acquisitions Lift Reliance
to Record Sales, Earnings
Boosted by the sales of its recent Yarde Metals and Earle M. Jorgensen acquisitions, Los Angeles-based Reliance Steel & Aluminum Co. reported that its third-quarter revenues hit a record $1.6 billion, an increase of 87 percent compared with 2005 third-quarter sales. The company’s third-quarter net income hit a record $107.5 million, more than double the $49.4 million in the 2005 third quarter.
For the first nine-months of 2006, Reliance’s sales hit a record $4.2 billion, an increase of 67 percent compared with 2005 nine-month sales of $2.5 billion. Net income year-to-date amounted to a record $279.9 million, up 93 percent vs. the same period in 2005.
“Needless to say, the addition of Yarde Metals’ sales and profits in the months of August and September, along with EMJ’s contributions for the full third quarter, helped propel Reliance to record levels,” Gregg Mollins, president and COO, told analysts and shareholders during last month’s conference call. “Both companies are performing well, and EMJ has continued to improve its profitability since the acquisition was completed on April 3.”
Demand and pricing for Reliance’s products continued at a healthy pace during the third quarter, said CEO David Hannah, with the aerospace, energy and nonresidential construction markets showing the most improvement from the prior year. “Overall, our volume increased 43 percent and average pricing increased 33 percent compared to the 2005 third quarter,” Hannah said. “Volume decreased 4 percent with prices increasing 9 percent compared to the 2006 second quarter, reflecting the expected seasonal slowdown.”
Excluding acquisitions, Reli-ance’s “same store” volume increased 2 percent and prices increased 18 percent compared to the 2005 third quarter. Prices increased 4 percent, but volume decreased 4 percent vs. the 2006 second quarter, reflecting the expected seasonal slowdown. Year-to-date same-store volume increased 8 percent while prices increased 9 percent.
Reliance added six service center locations, strengthening its geographic coverage in the Northeast, with the completion of the Yarde Metals acquisition in August. Reliance paid $100 million in cash and assumed about $102 million in debt for Yarde, whose revenues for its last fiscal year totaled $385 million.
Hannah and Mollins noted some recent softening of prices, mainly in carbon flat-rolled, as well as talk of rising service center inventories industry-wide. “We are not overly concerned,” Hannah said, “especially given the recent announcements of production curtailments by the leading mills.”
Reliance’s inventory is “in good shape at about 2.6 months on hand,” Mollins said. The company’s year-to-date inventory turn was 4.6 times—5.2 times excluding Yarde and EMJ. “We are confident both EMJ and Yarde can improve their inventory turn going forward,” he added.
From a demand standpoint, Reliance saw continued strength in the nonresidential construction market throughout the third quarter. “Heavy machinery, rail car, shipbuilding, infrastructure, as well as electronics and semiconductor industries, are all doing well,” Mollins said. “Aerospace continues to be our hottest market, and oil and natural gas are also performing well.”
Carbon steel represented 50 percent of Reliance’s third-quarter sales. Carbon flat-rolled prices peaked in mid-summer and began to decline slightly in September. Mill lead times have come down and service center inventories are somewhat high, Mollins reported. “We were very pleased to see the recent announcements from the various producers on the closure of several blast furnaces for an indefinite period of time, as well as several maintenance outages planned in the fourth quarter. We anticipate prices to stay well above historical levels and decline only modestly from their existing levels.”
Wide-flange beams are still in strong demand, with mill lead times 12 to 14 weeks and some sections extending out to March 2007. Beam pricing has remained stable since June, while plate prices have softened slightly, though temporarily, as future end-use demand should be strong, Mollins said.
As for aluminum, the Midwest spot ingot price has been relatively stable, averaging $1.18 per pound in September, Mollins continued. Aerospace plate remains on allocation, and prices on this product have been stable since June. Commercial-grade stainless sheet and coil have loosened up in the last several months, but prices have remained well above historical highs, driven primarily from significant increases in surcharges. Stainless products supporting the aerospace industry remain in tight supply.
Asked about prices for the remainder of the year, the Reliance executives said the market typically slows as the year winds down. They expect declining hot-rolled steel prices to level around $600 per ton, plus or minus. “I think we’ll hit bottom here in the fourth and see prices firming late in the first quarter,” Mollins said.
Analysts expressed concern about imports and their potential effects on inventories and pricing. “We’ve been intrigued with the high level of imports this year, too, but they have not been problematic,” Hannah said. “There’s not a lot of metal stacking up in warehouses. Demand has been sufficient to consume the imports. We don’t see prices dropping like they did in 2004 when imports ended up in inventories.”
“We are pleasantly surprised that imports have not driven down prices in various marketplaces,” Mollins added. “We don’t know who’s buying it all, but whoever it is, we suggest they stop.”
Reliance is also intrigued by the continuing potential for growth through mergers and acquisitions, and expects consolidation to continue in the service center sector. “There are still great opportunities out there. Hopefully, we’ll be a part of that,” Hannah said.
Ryerson Buys Lancaster
Operations in New York
Chicago-based Ryerson Inc., North America’s largest metals distributor, got a bit bigger recently with the acquisition of Lancaster Steel Service Co. Inc., a service center based in upstate New York.
Lancaster Steel, which operates facilities in Lancaster and Liverpool, distributes carbon flat-rolled, plate, bars, tubing and structural steel. Its processing capabilities include precision blanking, leveling, slitting, plasma and oxyfuel cutting, as well as shearing and sawing.
Lancaster will be renamed Ryerson Lancaster. Financial terms of the deal were not disclosed.
AZCO Opening Alabama
Distribution Center
AZCO Steel, South Plainfield, N.J., will open a metals distribution center in Birmingham, Ala., to position the company closer to its customer base. The 130,000-square-foot plant will employ existing rail service, while its proximity to the Warrior River will enable barge shipments.
The facility will stock jumbo beams, heavy plates, large rounds and other hard-to-find items in the following grades: ASTM A-588, ASTM A992/ASTM A-572-GR 50 and ASTM A-36.
AZCO Steel is a division of Bushwick Metals, Bridgeport, Conn.
Marmon/Keystone Expands
Service Center near Montreal
Marmon/Keystone Corp. has announced plans to construct a 30,000-square-foot addition to its Boucherville, Quebec, long products distribution center. The company expects to complete the project by the end of the year.
The new service center, totaling 60,000 square feet, will allow for all processing to be handled in one location. Four automatic saws will be added to the equipment fleet.
“The consolidation of a warehousing facility in nearby Laval into Boucherville will provide improved customer service,” says Jean Leblanc, Quebec regional manager.
Marubeni-Itochu Steel America
Changes Name to MISA
Marubeni-Itochu Steel America Inc., New York, has changed its name to MISA five years after its creation as the result of a merger. The company cited growth and changes that have occurred since its formation as the reason for the name change.
Additional name changes will soon follow for MISA’s companies in Canada and Mexico. In Canada, Marubeni-Itochu Steel Canada Inc., has trading offices in Toronto and Vancouver. The Mexico City office is the trading location for Marubeni-Itochu Steel Mexico S.A. de C.V.
MISA’s processing capability is focused on its two major market areas, steel distribution and building products. MISA has 20 plants run by its wholly owned subsidiaries in the United States, plus additional affiliated joint venture operations. Its first processing plant in Mexico, a joint venture, is in the early construction phase with operations to begin in 2007.
PEOPLE
Canada’s Samuel, Son & Co. has made several management changes. Rick Balaz, president of Samuel Plate Sales, will become president of the Roll Form Group at sister company Samuel Manu-Tech Inc. Keith Mitchell was promoted to vice president and general manager of Samuel Plate Sales. Peter Karcz is now general manager of Samuel Plate Sales Sudbury. Samuel’s plate processing facilities in Stoney Creek, Buffalo, Detroit and Johnstown will be moved into the company’s Processing Group headed by Tom McGrogan.
Joseph A. Kaczka was named chief financial officer for Republic Engineered Products Inc., Fairlawn, Ohio. He had been the company’s vice president of finance.
Lawrence J. Bogner has been named vice president of operations for Kenwal Steel Corp., Dearborn, Mich. Bogner had been serving as general manager of Kenwal Pickling.
The Steel Supply Co., Rolling Meadows, Ill., has announced five changes to its sales force. Teresa Dorsey is the new senior buyer for bar products; Colleen Ossler is a senior inside sales representative; Melissa Ewing was hired as purchasing assistant; and Jorge Chilian and Adam Barrons were appointed to inside sales positions.
Service Center Metals, Prince George, Va., has announced three appointments: Bob Ramage as director of quality and technical services; Dennis Walker as shipping manager and plant industrial engineer; and Pam Argast to customer service manager.
Jim Ellis has been hired as director of operations at Vulcanium Metals Inc., a global distributor of titanium mill products.
Ronald Carlucci has been promoted to controller at Marmon/Keystone Canada Inc., Burlington, Ontario.
Briefs
Brown Metals Co., Rancho Cucamonga, Calif., has added a new 28-inch Coil Pro slitting line to its warehouse of seven full-size slitters. The new slitting line can run materials from 0.0005 inches through 0.035 inches thick at up to 500 feet per minute. It is capable of slitting material as narrow as 0.060 inches and handling coil IDs from 2.750 inches through 20 inches.
The United Steelworkers have ratified a 4-year collective bargaining agreement with A. M. Castle & Co., Franklin Park, Ill. The agreement, which runs through Sept. 30, 2010, covers employees at Franklin Park; Bedford Heights, Ohio; and Kansas City, Mo.
