Aug. 21, 2013
Olympic Posts Profitable Second Quarter
Olympic Steel remained profitable during the challenging second quarter. The Cleveland-based service center company reported net earnings of $2.5 million, down from $4.5 million during the same period last year.
For the first half, Olympic reported net income of $7.7 million, down from the $10.8 million posted during the first six months of 2012.
Olympic’s net sales for the second quarter totaled $330.8 million, a 10 percent decline from second-quarter 2012. For the first half, net sales dipped 10.7 percent to $668.9 million.
“The first half of 2013 was characterized by lower sales volumes and average selling prices compared with last year. However, despite the external headwinds, Olympic Steel successfully improved consolidated gross margin, lowered inventory levels and generated strong free cash flow,” said Chairman and CEO Michael D. Siegal.
Tonnage of flat-rolled shipments declined to 573,000 tons in the first half, 6.6 percent lower than 2012, driven by the weak spot sales and softer demand from key customers, particularly in the mining sector. The company cut its inventory during the quarter from $290 million at the start of the year to $249 million on June 30. Olympic’s inventory turns improved from 4.2 to 4.5 during the quarter, with progress continuing toward the stated goal of 5 turns per year.
In response to the challenging conditions, Olympic began a cost-reduction plan in the second quarter, designed to find $4.0 million in annualized savings. The plan is expected to be completed in the third quarter.
The company’s Cleveland temper mill was brought back on line in May following damage to the shear incurred in the first quarter. While the temper mill was idled, the company handled all of its customer needs through its temper mill operations in Bettendorf, Iowa, and Gary, Ind.
While stagnant prices characterized most of the first half, steel saw some improvement in early summer, but Olympic executives are skeptical about the price hikes’ momentum. “We have some questions as to how sustainable they really are, until we really see some significant demand increase,” said David Wolfort, president and chief operating officer.
Fluctuating steel prices are declining in importance to the company’s bottom line, Siegal noted. “Our financial results are becoming less correlated with the industry’s pricing environment. We see tremendous opportunity in front of us to grow the higher margin processing and services we offer, and have even gained market share with our specialty metals and pipe and tube businesses.”