Nov. 13, 2013
Russel's Sales Up, Earnings Down
Russel Metals Inc., Mississauga, Ontario, reported net earnings of $18.9 million during its third quarter, down 15.6 percent from the same period last year. Year-to-date earnings totaled $60.5 million, down 22.2 percent from the first nine months of 2012.
Revenues increased 11.8 percent to $796.8 million during the quarter. For the year to date, revenues were up 6.4 percent to $2.38 billion.
"The business environment continues to be uneven, challenging and the future direction uncertain. The steel market is showing a modest recovery in terms of volumes shipped, but the steel mills continue to run at suboptimal levels," said Brian Hedges, president and CEO, during the company’s quarterly conference call with investors and analysts.
Revenues in Russel's metals service center segment slipped 4 percent to $367 million in the third quarter compared to the previous year due to lower pricing. Demand at the metals service centers increased by 6 percent over the 2012 third quarter. Third-quarter metals service center operating profits totaled $20 million, compared to $23 million in the 2012 third quarter.
Revenues in the company's energy products segment increased 42 percent to $353 million, primarily due to the acquisition of Apex Distribution. On a same-store basis, the company's energy products segment revenues were up 10 percent, while operating profit was consistent with 2012 as the strong results from Apex were offset by inventory charges at Russel’s other energy products operations.
"Energy activity in the U.S. is down from last year based on rig counts; however the number of wells remains at healthy levels. Growth in North American tube mill capacity, which will come on stream over the next two years for both line pipe and OCTG, will lead to an oversupply of product based on current activity," Hedges said.
Revenues in the company's steel distributors segment decreased by 6 percent in the quarter to $74 million, due to lower demand and pricing levels. The continued depressed steel-pricing environment in North America has made customers reluctant to take inventory positions, Hedges said.
"Our 2013 results have been enhanced by the Apex Distribution acquisition in late 2012. In the 2013 third quarter, we completed two small acquisitions adding four field stores to the Apex Distribution network. We expect to complete a more substantial acquisition to add to the Apex operations in the next couple of months," Hedges added.