Good Start to 2012
In their first-quarter conference calls with analysts and investors, executives from leading service centers reported strong sales and income growth.
Metals USA

Sales, Income Show Improvement
Metals USA Holdings Corp., Fort Lauderdale, Fla., reported improved sales and income during the first quarter compared to the same period in 2011. Net sales were up 22 percent to $525.3 million, while net income rose 32 percent to $16.3 million for the service center company.

“As we expected, the first quarter was indeed more profitable than the fourth quarter,” said Lourenço Gonçalves, the company’s chairman, president and CEO, noting that the results were achieved in a less than ideal business environment. “Our performance is a clear indication that Metals USA's cost-efficient, customer-focused business model is not only benefiting from, but outperforming, the current economic recovery.”

Compared to the previous quarter, Metals USA’s shipments increased 23 percent, revenues were up 15 percent and net income improved 16 percent. Metal shipments totaled 403,000 tons for the first quarter of 2012, up 10 percent from the first quarter of 2011. Toll processed tonnage declined 11 percent to 40,000 tons.

Gonçalves said the decline in toll processing tonnage was “the result of successful efforts to upgrade traditional toll activity into full service center type of business, which includes metal sales besides service provided.” He said the company pursues this conversion where “it makes sense for the customer and is more profitable for Metals USA.”

During the quarter, Metals USA announced the purchase of Gregor Technologies, its fourth acquisition since its IPO in April 2010. The company claims the integration of Gregor Technologies enhances Metals USA’s position and market share within important sectors, including aerospace, defense, homeland security and office equipment.

Gonçalves said the M&A market remains active. “We are seeing business owners more willing to engage, more willing to discuss, while being more realistic in terms of their price expectations.”

Demand improved across most of the company’s sectors, led by automotive, aerospace, and oil and gas field services. The company expected that trend to continue in the second quarter.

“We do not see steel mills interested in increasing prices, therefore we expect steel prices to remain range bound during the second quarter,” he said. “Nevertheless, based on our current order book and committed business, which is priced based on a delayed index mechanism, we reiterate our expectation that Metals USA Q2 results will be more profitable than Q1.”

Gonçalves also expressed no concern over mill lead times, noting that they have little to no bearing on Metals USA. “We buy what we need to buy. We don't buy excessive material and we don't speculate. You should see mill lead times as much more of an indication for the overall level of orders for mills. It doesn't change the way we operate our business.”

Reliance Steel & Aluminum

Sales Up 20%, Earnings Up 25%
Reliance Steel & Aluminum Co., Los Angeles reported first-quarter 2012 net income of $116.2 million, up 26 percent from first-quarter 2011 and 71 percent from the previous quarter. Sales for the 2012 first quarter totaled $2.29 billion, up 20 percent from the 2011 first-quarter and up 13 percent from the 2011 fourth quarter.

Reliance’s tons sold for the 2012 first quarter were up 13.8 percent from the prior-year quarter and 11.2 percent from the previous quarter. Average prices per ton sold in the 2012 first quarter were up 5.3 percent compared to the 2011 first quarter and up 1.3 percent compared to the 2011 fourth quarter.

For the 2012 first quarter, carbon steel accounted for 52 percent of Reliance’s net sales; aluminum sales were 15 percent; stainless steel sales were 15 percent; alloy sales were 12 percent; toll processing sales were 2 percent; and other sales were 4 percent.

“As we indicated in our earnings guidance update last week, the quarter overall was better than we originally anticipated. Demand was stronger, especially in January and February, aided in part by a more favorable pricing environment for most of our products. Sales dollars per day in March were down slightly from February due to a drop in tons sold per day, as the direction of carbon steel pricing became a little uncertain and stainless steel surcharges decreased,” said David H. Hannah, chairman and CEO of Reliance.

“Once again, the markets that continued to provide the most growth during the quarter were oil and gas, aerospace, farm and heavy equipment, and auto through our toll processing businesses. Semiconductor and general manufacturing also remained strong. We have seen improvements in our non-residential construction-related businesses, but it still lags the growth seen in other areas. We are very fortunate that Reliance has such a broad range of products and substantial customer diversification. Those attributes have helped our operating results to be less volatile,” Hannah said.

“Our balance sheet is in excellent shape, and the liquidity available on our credit facility provides ample room for continued growth both organically and through acquisitions, where we have seen increased activity recently.

“We expect real demand to continue its steady improvement from existing levels for most of our products with larger improvements in the aerospace and energy-related industries during the second quarter. There is still some uncertainty regarding the direction of prices for some of the metals we sell, with prices currently moving in different directions for different of our products, but all within manageable ranges,” he added.

Effective April 3, Reliance acquired National Specialty Alloys, LLC, a global specialty alloy processor and distributor of premium stainless steel and nickel alloy bars and shapes, headquartered in Houston, Texas. NSA was founded in 1985 and has additional locations in Anaheim, Calif.; Buford, Ga.; and Tulsa, Okla. NSA had net sales of approximately $96 million for the 12 months ended Oct. 31, 2011. NSA’s primary end market is the energy market, with aerospace, power generation, petrochemical and other major end markets.

Reliance also recently announced that it has signed an agreement to acquire Worthington Steel Vonore’s Tennessee plant, a processing facility owned by Worthington Industries Inc. Upon closing of the deal, the Vonore plant will operate as a location of Precision Strip Inc., a Reliance subsidiary, and will process and deliver carbon steel, aluminum and stainless steel products on a toll basis.

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Saturday, March 24, 2018