Feb. 20, 2013
Russel's Earnings Dip 16 Percent
Russel Metals Inc., Mississauga, Ontario, reported earnings of $20 million on revenues of $766 million in fourth-quarter 2012. This compares to earnings of $29 million on revenues of $712 million in fourth-quarter 2011. For the year, Russel’s earnings of $99 million on revenues of $3.0 billion were down 16 percent from the $118 million earned in 2011 on revenues of $2.7 billion.
Brian Hedges, Russel president and CEO, called 2012 an exciting year, highlighted by the purchase of Apex Distribution and two other companies. "Through these acquisitions, we believe we have strengthened the company's ability to generate earnings over the cycle, and we are well positioned to reap the benefits in 2013 and beyond."
Russel experienced weak demand in all its product segments in the fourth quarter, although its service centers outperformed the industry shipment volumes reported by the Metals Service Center Institute. "The stabilization of gross margins in the fourth quarter and the recent upward price movement by the mills should lead to higher margins in 2013," Hedges added. “We look forward to the expected materialization of a full year's benefits relating to the acquisitions we made in 2012."
Russel's fourth-quarter earnings included $6 million in operating income from the Nov. 8 acquisition of Apex Distribution. This positive contribution to the company's energy-related earnings was muted by price declines in pipe products, however. Operating earnings for the energy segment improved to $18 million in the quarter, versus $17 million in fourth-quarter 2011.
Fourth-quarter operating profits for Russel's service centers totaled $17 million, down from $21 million in the prior-year quarter. Results were affected by an industry-wide drop in volumes in November and December beyond normal seasonality. Gross margins improved slightly as steel mills attempted to raise prices, company officials said.
In September 2012, unionized employees at Russel’s Boucherville, Quebec, operation took strike action. The work stoppage, which was resolved on Feb. 7, reduced the company's operating income by approximately $2 million.
Fourth-quarter 2012 operating profits in Russel's Steel Distributor segment decreased to $7 million from $11 million in fourth-quarter 2011 due to soft demand and tightening margins. Gross margins improved slightly to 13.2 percent, consistent with the metals service center operations.