May 13, 2015
Russel Profitable Despite Energy Slowdown
Russel Metals, Mississauga, Ontario, reported net income of $19 million during the first quarter, a decline of 34.5 percent compared to the same period in 2014. Net income was also off 38.7 percent compared to the prior quarter.
Russel’s net sales during the quarter totaled $904 million, a 2.2 percent decline from first-quarter 2014. Compared to the prior quarter, Russel’s net sales were down 10.7 percent.
“Our disciplined business approach gives us the flexibility to rationally adjust our operations in the face of a drop in steel prices, rig counts and oilfield activity. The depth of the change in the price of oil and steel was not foreseen by the industry, causing both energy and steel inventories to be overstocked throughout the distribution channel. Based on these economic conditions, our inventory position and operating costs are being proactively managed to ensure that we minimize the impact on the business and maximize our earnings,” said Brian Hedges, president and CEO.
In the company’s metals service center segment, revenues of $400 million were slightly ahead of first-quarter 2014. Tons shipped from service centers declined by 3 percent. Exchange rate gains on the translation of U.S. operations offset volume declines. Additionally, gross margins in the segment were behind the same quarter the previous year as a result of difficult conditions, primarily the softening of demand in Western Canada and declining steel prices, the company said.
In the energy products segment, first-quarter revenues declined 14 percent to $385 million, the product of dramatically lower activity in the sector.
In the steel distributors segment, revenues increased by 36 percent to $119 million. Russel executives expect the high inventory levels in the segment to decrease over the course of the second quarter.
“Our clean balance sheet and flexible operating cost structure will allow us to take advantage of acquisition opportunities that will arise in this challenging environment. We are prepared for a sustained trough in commodity pricing and will be strongly positioned when the inevitable recovery begins,” Hedges said.