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Aug. 21, 2013

Russel Remains Consistently Profitable
 
Russel Metals Inc., Mississauga, Ontario, reported second-quarter earnings of $20 million, a modest decline from the $23 million posted during the same quarter last year and the $22 million earned in the first quarter. Net sales for the second quarter totaled $758.1 million, 5.4 percent better than the second quarter of 2013, but down 7.7 percent from the previous quarter.

“The weakness in demand levels experienced since the start of 2013 continued in the second quarter. We expect volumes to continue at current levels in our Metals Service Center and Steel Distributor segments in the second half,” said Brian R. Hedges, president and CEO, during the company’s quarterly conference call with analysts and investors.

Revenues in Russel's Metals Service Center segment slipped 13 percent to $378 million in the second quarter due to a combination of lower demand and lower pricing. Gross margins at Russel’s service centers were consistent with the same quarter last year, but were slightly lower than the first quarter, reflecting modestly lower steel prices.

Revenues in Russel's Steel Distributors segment decreased by 29 percent in the second quarter, to $65 million, due to lower demand and pricing. Industry-wide demand declines and pricing pressures resulted in customers delaying their purchases, Hedges said.

In Russel’s Energy Products segment, second-quarter revenues increased 63 percent, to $121 million, due to the acquisition of Apex Distribution. Operating profit improved to $17 million, in part due to a strong quarter from Russel’s Comco Pipe and Supply operation servicing the Canadian oil sands. The weakness that group traditionally experiences in the second quarter was muted by the Apex Distribution acquisition, Hedges said.

“We believe we are at or near the bottom of the pricing curve and expect some price improvements in the upcoming quarters. The typical seasonality in our energy products operation in the second quarter was extended by the flooding in Western Canada and the year-over-year drop in North American rig counts,” he added.

Looking ahead, Russel executives don’t see conditions improving much in the second half. “We continue to focus on cost reductions and managing inventory levels in all of our segments to generate stronger results as we do not anticipate any meaningful improvement in shipments,” he said.

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