April 19, 2015
Reliance First-Quarter Income Exceeds $100 Million
Reliance Steel & Aluminum Co., Los Angeles, reported first-quarter net income of $101.3 million, an improvement on both the previous quarter and the same quarter in 2014. Income at North America’s largest service center company increased 9.8 percent from the fourth quarter and 16.2 percent compared to the prior-year period.
Net sales in the quarter totaled $2.61 billion, a 1.5 percent increase from the fourth quarter and up 2.4 percent from first-quarter 2014. Tons sold increased 5.1 percent from the fourth quarter and 0.8 percent from the comparable quarter. The average selling price per ton sold increased 0.9 percent from last year’s first quarter, but was down 3.6 percent from fourth-quarter 2014.
"Our first-quarter results were well ahead of our expectations, reflecting the resiliency of our operating model and the strength of our local management teams, which allowed us to maintain solid gross profit margins in spite of continuing industry headwinds from the challenging metals pricing environment," said David H. Hannah, chairman and CEO. "We benefitted from normal seasonal improvements in demand during the first quarter as compared to the fourth quarter, as well as expanded market share, with a 5.1 percent increase in our same-store tons sold, which exceeded the MSCI industry average increase of 3.6 percent.”
Declining prices throughout the quarter were responsible for Reliance’s 3.6 percent decline in average selling price. The company was able to maintain its margins by quickly turning inventory and its focus on value-added processing, Hannah said.
With the exception of energy, Reliance experienced steadily improving customer demand across most of its end markets in the first quarter, and expects that to continue as 2015 progresses. Automotive demand, supported mainly by the company's toll processing operations in the U.S. and Mexico, was very strong and is expected to maintain current production rates throughout the year. The increase in aluminum usage in the automotive industry represents a growth area for Reliance, executives said.
Reliance management expects the U.S. economy to improve modestly throughout 2015. With the exception of the company's businesses directly servicing the energy markets, estimated at 8-10 percent of Reliance’s sales, overall volume continues to strengthen. However, the company expects the historically high levels of metal being imported into the U.S. and the strong U.S. dollar to continue to put downward pressure on most metal prices.
Also during the quarter, Hannah announced plans to transition from his role as CEO to executive chairman, with plans to retire from the company in 2016. Current President and Chief Operating Officer Gregg Mollins will succeed Hannah as president and CEO.
Additionally, Executive Vice President and CFO Karla Lewis will be promoted to senior executive vice president; William Sales and James D. Hoffman will become executive vice presidents, operations; and Michael Shanley will become senior vice president, operations.