Sales, Income Climb for Metals USA
Metals USA Holdings Corp. reported large increases in net sales and net income during its second quarter. The Fort Lauderdale, Fla.-based service center company reported net sales of $505.6 million, up 51 percent from the $335.0 million in the same quarter a year ago. Additionally, net sales were up 17 percent from the $432.3 million during the first quarter.
Net income during the quarter totaled $21.5 million, well ahead of the $2.5 million earned in the second quarter of 2010 and also up from the $12.4 million reported in the previous quarter.
“Metals USA's results continue to benefit from an improving demand for our products and services as the total market size increases with the uneven recovery of the U.S. economy and as we continue to grow Metals USA's market share. Our Flat-Rolled and Non-Ferrous Group experienced an increase in gross margins during the second quarter, as higher prices were realized in our multi-month indexed pricing contracts,” said Lourenço Gonçalves, the company's chairman, president and CEO. “Conversely, our Plates and Shapes Group experienced slightly compressed gross margins due to the more transactional nature of its business, but the effect was more than offset by overall stronger prices during the quarter."
Metal shipments totaled 360,000 tons for the second quarter, up 33 percent from shipments of 270,000 tons in second-quarter 2010. Metal shipments for the first six months of 2011 hit 728,000 tons, up 40 percent compared to shipments of 519,000 tons for the first six months of last year. Toll processed tonnage totaled 42,000 tons during the second quarter, a nearly fourfold increase from the 11,000 tons for the second quarter of 2010. Likewise, Metals USA toll processed 87,000 tons during the first half of this year, compared to 21,000 tons for the first six months of 2010.
Gonçalves said his company’s first-half performance was driven by four trends, most notably a strong inventory position, which stands in stark contrast to much of the industry. “We continue to maintain healthy and appropriate inventory levels where others in the market have been hesitant [to stock up]. As a result, we have benefited from repetitive stockouts experienced by our competition,” he said. “In a similar fashion, steel end-users have also been too aggressive with low inventory, forcing them to be less price sensitive when they buy metal.”
Other factors in Metals USA’s success, he continued, include a shift to serve healthier end markets—such as automotive, appliance, and oil and gas—and away from the weak non-residential construction market; operating with a profit mentality and staying away from low-margin sales; and the company’s ability to extract maximum benefits from its recent acquisitions.
“Each company successfully integrated into Metals USA’s IT and commercial platform,” he said. “As planned, we are cross-selling to different customer bases, expanding market reach and streamlining operations of acquired companies. Each acquired company has met or exceeded original targets for synergies.”
Though metals pricing has been moving downward in recent months, Gonçalves said the current fundamentals support a rising price in the third quarter. Most raw material costs are moving upward, which should help the mills stabilize prices at higher levels. Once the price begins to trend upward, a necessary restocking can begin, he said.
“We believe, through restocking, we can add approximately eight to 10 million tons of steel consumption in the U.S. during a 12-month period. Such extra demand coming from restocking would also help fix the current lead times from mills—which is the only reason several fly-by-night, desk-in-the-basement traders continue to survive and further aggravate the competitive landscape without adding a single ton of real demand,” he added.