Olympic Ups Sales, Teams with U.S. Steel on Temper Mill
Olympic Steel Inc., Cleveland, sold 32.5 percent more tons in the third quarter, netting sales of $209.2 million, a 72 percent improvement over the same quarter last year. Nevertheless, the company reported a net loss of $1.2 million for the quarter, due largely to a $2.1 million bad debt charge from the unexpected closure of a major customer, a private-equity-owned racking manufacturer, in September.
For the first nine months of the year, Olympic’s sales totaled $589.9 million, a 53.2 percent increase vs. the first three quarters of 2009.
“While we are pleased with the continued growth in our tons sold and sales in the third quarter, and our ability to be profitable prior to incurring the unexpected bad debt cost, the market proved to be highly competitive and is likely to remain so in the near term,” said Michael D. Siegal, Olympic chairman and CEO, in his third-quarter financial report.
Olympic’s shipments in the first nine months of 2010 increased year over year by 35.6 percent, significantly higher than the 19.8 percent increase for the market overall, as reported in the Metals Service Center Institute’s Market Activity Report, he noted. “Our balance sheet remains exceptionally strong, and our new $125 million loan facility, together with access to capital markets, provides Olympic with a favorable capital structure to strategically grow our business.”
Earlier this year, Olympic acquired Integrity Stainless in Cleveland and purchased land with a 100,000-square-foot building in Mount Sterling, Ky., where it plans to install equipment for plate burning, machining, forming and shot blasting. Officials expect the new facility to be operational in first-quarter 2011. The company anticipates selling stainless and aluminum products from this facility, as well.
“We have experienced the strongest demand from our automotive customer base, from our large industrial equipment customers, and in the specialty metals area of stainless and aluminum products,” said David Wolfort, president and COO.
Olympic’s growth plans include a new temper mill and cut-to-length line to be located at U.S. Steel's Gary Works facility in Gary, Ind. Terms of the agreement with U.S. Steel are being finalized and are subject to change.
Olympic expects to invest approximately $25 million in the new temper mill project, which includes the purchase of an existing 150,000-square-foot facility to house a Butech cut-to-length line, a four-high temper mill supplied by I2S LLC, and plate burning equipment. The new temper mill will be capable of processing 72-inch-wide coils up to 1/2-inch thick. The company expects the temper mill to be operational in the first half of 2012. Olympic has an option with the equipment manufacturers to purchase a second temper mill and cut-to-length line, as well.
“We are thrilled to announce this strategic growth initiative and its prime location on the U.S. Steel Gary Works site,” Siegal said. “Once fully operational, the new equipment annually adds 150,000 to 180,000 new tons of high-quality tempered sheet capacity for Olympic Steel.”
Olympic’s third temper mill in the Chicago market will allow its Cleveland and Iowa temper mills to expand their respective sales territories. “This new operation fits directly into our strategic plan of adding new footprints to serve and be logistically closer to our customers,” Siegal added.