Aug. 19, 2015

Russel Metals Profitable Despite Headwinds
 
Russel Metals reported net earnings of $16 million in its second quarter, about half the total from the same quarter in 2014. For the year to date, the Mississauga, Ontario-based service center company had net earnings of $35 million, 41.6 percent behind the previous year.

Russel’s net sales for the quarter totaled $761 million, 14.7 percent lower than second-quarter 2014. Year-to-date sales of $1.67 billion were 8.3 percent behind the first six months of last year.

“The current downturn is affecting steel and energy prices and their associated businesses. In our view, oil prices will remain at these low levels for at least the balance of 2015 due to oversupply,” said Brian R. Hedges, president and CEO, during the company’s quarterly conference call.

Hedges said the problem is particularly acute in the U.S. OCTG market. “There’s still a lot of inventory in the South and Houston, a lot of it imported. That will continue to be a problem and cause margin compression in the States at least for the balance of the year.”

The company’s metal service center segment revenues of $385 million were off 8 percent in the quarter, primarily the result of lower demand from customers in Western Canada serving the oil and gas industry. Tons shipped declined 7 percent, though selling prices remained consistent. Energy product segment revenues dropped 27 percent in the quarter due to reduced drilling activity. Distribution segment revenues were mostly flat from 2014, though margin compression reduced earnings.

Russel has taken steps to combat the low prices and industry oversupply, executives said, by quickly rightsizing its stock levels. “Our metals service center operations have corrected their inventory positions. While our other operating segments have reduced inventory, we expect further inventory reductions in those segments,” Hedges said. “We have implemented a number of strategies such as reduced work weeks, layoffs and other cost-containment measures to reduce costs in line with current business levels.”

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Tuesday, October 24, 2017