Aug. 20, 2014

Russel's Earnings Improve in 2Q
 
Russel Metals, Inc., Mississauga, Ontario, reported second-quarter earnings of $31 million, an improvement on the $29 million earned in the previous quarter and the $20 million earned in the same quarter last year. Its net sales totaled $893 million, up 17.8 percent from last year’s second quarter, but down 3.3 percent from the first quarter.

"Our revenues, gross margins and operating profits improved in all three of our business segments versus last year. We have benefited from the strengthening economy in the United States and Western Canada," President and CEO Brian Hedges told investors and analysts during the company's quarterly conference call. "Our investments over the last three years in acquisitions, process improvements, new facilities and processing equipment have allowed us to strengthen and grow our market share."

Revenues in Russel's metals service center segment increased 11 percent to $419 million in the second quarter, compared to the year-ago period, due to stronger demand and higher steel prices. Gross margins improved to 20.9 percent from 20.4 percent.

Steel prices could be even higher if not for lower offerings from offshore. "Plate spreads and coil spreads on the world market are at numbers where they're attractive. It's creating a ceiling for the pricing environment right now," said John Reed, executive vice president and chief operating officer. "Foreign product is still very much available. I don't see anything changing dramatically in Q3 one way or another."

Revenues in Russel's energy products segment increased 17 percent to $366 million led by significant activity in the operations servicing oil and gas drilling in Western Canada. Revenues in the company's steel distributors segment increased by 63 percent to $106 million in the second quarter, fueled by stronger demand and higher pricing.

Through two quarters, Russel spent $16 million on capital expenditures. It plans to invest $40 million in upgrades this year.

The company remains interested in acquisitions, but opportunities have been limited. "We're poking around, but activity is not at the same level as this time last year. There have been some deals we've looked at and walked away from. People’s expectations about what they’re going to get are not realistic," Hedges said.

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