Reliance 3Q Sales Up 33 Percent vs. Last Year
Reliance Steel & Aluminum Co., Los Angeles, reported net income of $48.7 million for third-quarter 2010, up 17 percent compared to the 2009 third quarter. Third-quarter sales totaled $1.65 billion, up 33 percent from the same period last year, and a 2 percent improvement from the previous quarter.
For the nine months ended September 30, Reliance saw a major jump in net income to $154.9 million, up 176 percent compared to the first nine months last year. Sales for the 2010 nine months totaled $4.73 billion, up 17 percent from 2009 nine-month sales of $4.04 billion.
Tons sold by Reliance in the third quarter were up 11 percent vs. third-quarter 2009, and up 1 percent vs. second-quarter 2010. Average prices per ton sold in the 2010 third quarter were up 20 percent compared to the 2009 third quarter and up 1 percent compared to the 2010 second quarter. For the 2010 third quarter, carbon steel sales were 52 percent of net sales; aluminum sales were 18 percent; stainless steel sales were 16 percent; alloy sales were 8 percent; other sales were 4 percent; and toll processing sales were 2 percent.
“The operating environment during the 2010 third quarter was pretty steady with the 2010 second quarter,” David H. Hannah, Reliance chairman and CEO, told analysts and investors during the company’s third-quarter conference call. “Mill pricing declined a bit more than we had anticipated during the quarter, pressuring our selling prices and causing our gross profit margins to narrow somewhat. Demand was a little better than we had expected as we typically see a seasonal decline in the third quarter compared to the second quarter. Overall we are pleased with our performance during the quarter in light of the existing market conditions.”
Commenting on specific markets, Hannah noted that the nonresidential construction market is still the weakest, below even last year’s poor levels. “It appears, though, that we have reached bottom. Business activity in most all of our other markets is better than a year ago,” he said, “especially in the semiconductor and electronics, energy, agriculture, and aerospace industries.”
Gregg Mollins, Reliance president and chief operating officer, noted that carbon steel pricing on most products began to decline in July. A significant amount of imports came in during the July through September time frame, ordered when the dollar was gaining strength. Imports, along with lackluster demand, helped drive prices downward, Mollins said. “However, to keep things in perspective, flat-roll prices today are very close to where they were in January 2010. If domestic mills continue to align production capacity with demand and scrap goes up along with raw materials, we could be close to the bottom of the pricing cycle and stay above the $500 a ton mark. That is a good thing” he added.
Aluminum has traded in a relatively healthy range all year, from 94 cents to $1.11 a pound. “This has had a positive impact on our common alloy aluminum sheet and extruded bar business. On the aerospace side, there is still an inventory overhang on heat-treat plate, but with any luck this will correct itself sometime in the second half of 2011,” Mollins said.
Reliance continues its quest to improve inventory turns. “Our turn in dollars for the first nine months of the year was 4.8 turns. In tons, we turned our inventory 5.1 times for the same period. Many of our companies have made significant improvements in this area, and we will continue to push the envelope,” Mollins said.
Reliance continues to work on internal growth initiatives funded through a $140 million capital budget. In August, the company opened a new Earle M. Jorgensen facility in Malaysia to support its oil tool customers. It is in the process of building two more facilities for EMJ in Memphis and Orlando. It opened a new facility near Philadelphia for Yarde Metals, which is also adding on to its existing facility in Southington, Conn. Liebovich Steel & Aluminum Co. is adding a new 80,000-square-foot plant to its Rockford, Ill., location, as well.
Hannah noted that acquisition opportunities also have improved. On Oct. 1, Reliance acquired Diamond Consolidated Industries Inc. and its affiliated companies, which specialize in the manufacture and sale of perforated metal products. He acknowledged that the Diamond acquisition is a bit different than the service centers it has historically acquired. “Diamond pokes holes in metal, I guess you might say, which is very similar to what we're doing in other parts of our business on the flat-roll side, where we buy coil and we cut it. It is a higher-margin business and we like it. We think it gives us another area for expansion. We will continue to look for other opportunities to do more value-added, but we'll be very careful not to put ourselves in a position to compete with our customers,” he added.
Reliance officials expect demand to decline somewhat in the fourth quarter due to normal holiday closures among customers.
“We still have a long way to go to restore confidence in our country’s economy. Until then, we are not worried about our performance. We will continue to grow and expect to perform at the top of our industry,” Hannah said.