Sales Increase, Profits Slip in Olympic’s Second Quarter > Metal Center News

Sales Increase, Profits Slip in Olympic’s Second Quarter

Aug. 23, 2012

Sales Increase, Profits Slip in Olympic’s Second Quarter

Olympic Steel Inc., Cleveland, reported $4.5 million in net earnings for the second quarter, a decline from the $7.9 million during the same period of 2011. Net sales for the service center company jumped 22.9 percent to $367.4 million in the quarter, the product of the 2011 acquisition of Chicago Tube & Iron Company.

First-half 2012 net income totaled $10.8 million, down 40.9 percent from the same period of 2011. First-half net sales were up 26.3 percent to $593.4 million.

"We are pleased with our sales and market share growth in the second quarter. Earnings were impacted by degradation of pricing in both carbon and nickel products and costs associated with startups not yet fully operational,” said Chairman and CEO Michael Siegal during the company’s quarterly conference call with investors and analysts.

Volume in the company’s flat-rolled business totaled 614,000 tons sold in the first half, a modest gain from the 603,000 tons sold in the first six months last year. Tons sold in the second quarter increased 6 percent to 302,000 versus the same period last year.

On the other hand, gross margins were 19.5 percent, consistent with the 19.7 percent in the first quarter. Both were below the robust 20.9 percent in the first half of 2011, however, due to a decline in an active spot market and continued pressure on carbon and stainless prices.

“The current year of supply-side pressure continued in July, resulting in declining steel prices and lower margins, especially in carbon flat-rolled areas. Usually, the first half is the seasonal time for price increases, but 2012 is a non-traditional year,” said David Wolfort, president and chief operating officer.

Recently announced price hikes should bring some relief to the downward trend, he added, particularly as the mills dig in their heels to make sure they stick. “We do see traction on price increases. The producers are seeing some success, and we see that supported and fostered by an increase in scrap.”

Olympic has plans to take its inventory down in the second half. The company has been running at an average of 4.1 turns per year, but intends to get that number back to its typical 5.0 turns over the back half of the year.

Olympic has already spent $15.7 million of its estimated $30 million cap ex budget on expansion projects at facilities in Gary, Ind.; Mount Sterling, Ky.; and Streetsboro, Ohio. About $5 million has been used to expand capabilities at CTI.

The $27 million temper line at Gary is the company’s biggest project, and production continues to ramp up. The facility was running at about 47 percent capacity in July.