Reliance Reports Sales Up 30 Percent in Second Quarter

Reliance Steel & Aluminum Co., Los Angeles, reported net income of $61.6 million during the second quarter, a reversal of fortune from the same quarter last year. In the second quarter of 2009, North America’s largest service center company reported a rare loss of $5.8 million.

Sales for the quarter totaled $1.62 billion, a 30 percent increase from the same three months of 2009. Sales were also up 11 percent from the first quarter’s $1.45 billion.

For the six months, net income amounted to $106.2 million, compared to a net income of $14.3 million for the first half of 2009. Sales for the 2010 six months were $3.07 billion, up 10 percent from 2009 six-month sales of $2.8 billion.

“Business conditions continued to improve at a modest rate, as we had anticipated. Overall, we were pleased with the quarter’s results. Our earnings improved 38 percent from the 2010 first quarter due to improved demand and metal pricing, with our expenses remaining fairly steady,” said David H. Hannah, chairman and CEO.

Reliance sold 951,000 tons during the second quarter, up 9 percent from the same quarter in 2009 and a 4 percent improvement from the first quarter. Average prices per ton sold in the second quarter were up 19 percent compared to second-quarter 2009 and up 8 percent compared to the first quarter. For the second quarter, carbon steel sales were 52 percent of net sales; aluminum sales were 18 percent; stainless steel sales were 15 percent; alloy sales were 8 percent; other sales were 4 percent; and toll processing sales were 3 percent.

Hannah noted that metals prices softened during the second quarter and may decline further in the third. However, he doesn’t expect the declines to cause major issues for the supply chain.

“Carbon steel prices over the past few months have softened in all products, but are still at higher price levels compared to the first of the year. This was no big surprise as the dollar strengthened and imports increased during the second quarter. We believe the domestic suppliers have done a good job managing the pricing side and exercising discipline. We do not expect any significant discounts, like the ones we experienced in 2009, and feel confident we can manage our way through whatever conditions exist,” he said.    

Among end markets, Hannah said agricultural equipment, infrastructure rebuild, bridge construction, barge manufacturing, and electronics and semiconductor were performing well, while power, transmission towers and alternative fuel projects were improving.

“The one market that is still very weak is the one that everyone talks about, the nonresidential construction market. We wouldn't even say that it has gotten any better, but the weakness seems to have leveled out, or at least we are close to the bottom,” Hannah said.

Reliance, one of the prominent players in the consolidation of the service center industry, has not made any major acquisitions this year, but anticipates some deal making. “I think there is some consideration for the anticipated increase in tax rates the first of the year. If they wait, they may be able to sell their business for a little bit more, but they may net a little bit less because of the increase in taxes. So people are thinking about that. I think [activity] is going to pick up and we should start to see some opportunities.”

In contrast, during the quarter, Reliance shut down its unprofitable Delta Steel facility in Morgan City, La. Reliance had acquired the operation four years ago to get into the shipbuilding market.

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Sunday, August 28, 2016