Olympic Reports Profitable Quarter, New Facilities
Olympic Steel Inc., Cleveland, enjoyed a 75 percent increase in sales during this year’s first quarter, compared to the same period in 2010. The sales jump resulted in profits of $10.3 million, well ahead of the $1.7 million during the same quarter of last year. The quarter was a turnaround from the $1.6 million loss in the previous quarter.
"We are extremely pleased with our strong first-quarter sales and earnings, our best quarterly results since the third quarter of 2008,” said Olympic Steel Chairman and CEO Michael Siegal. “We continue to gain market share, and we are experiencing strong momentum as the industrial recovery continues.”
Olympic reported a 43 percent increase in quarterly shipments—well ahead of the 23.5 percent jump in industry steel shipments reported by the Metals Service Center Institute—which it attributes to a substantial gain in market share. “We quantify that as a flight to quality. The large OEMs recognize the strength of Olympic’s balance sheet and our willingness to locate factories close to them,” said David Wolfort, president and chief operating officer.
About 14 percent of the company’s revenues came from its value-added processing in the first quarter. Olympic is committed to growing its fabricating processes. “We have a metric of trying to get our fabrication processing up to close to 20 percent of the mix over time,” Wolfort said.
Olympic’s sales performance has been strongest in Middle America and slightly weaker on the East Coast. “The customers in the Midwest—farming and mining manufacturers and earth movers—are very strong. Our facilities in Iowa and Minnesota are pushing the limits of their capacity,” Siegal said. “The Southeast is a little weaker in terms of demand, and we have some capacity availability in the New England markets, as well.”
In other news, Olympic is buying one new facility and leasing several others, expanding its operating space by approximately 300,000 square feet. The company recently completed the previously announced purchase of a new facility at the site of United States Steel Corp.’s Gary Works in Indiana. The new location, which totals approximately 177,000 square feet, will house the company’s new temper mill and cut-to-length line, and is expected to become operational by year-end 2011.
"We are pleased to execute on our geographic growth strategy and provide more timely delivery options and a greater range of services to our customers," says Siegal. "It is our intention to continue to seek opportunities to increase our national supply chain. Being closer to our customers, with more timely deliveries and smaller quantities, is even more critical when distribution fuel cost constraints exist.”
Olympic Steel also completed leasing agreements for approximately 43,000 square feet of warehouse and staging space in Kansas City, Mo., “a new foothold in the important farm belt,” company officials say. The Kansas City facility will serve as a satellite for existing operations in Bettendorf, Iowa, and is part of Olympic’s temper mill product expansion strategy.
Another 8,000 square feet of warehouse space was added in Quincy, Wash., while Olympic intends to execute a lease agreement soon for 57,000 square feet of warehouse space in St. Paul, Minn. The Quincy and St. Paul locations will further support operations and customers currently served by Olympic’s Minneapolis operations.
Additionally, the company entered into a lease agreement in April to operate 15,000 square feet of warehouse space in Monterrey, Mexico. Extending the company's international reach, Olympic has leased sales office space in Miami to grow existing markets in South Florida, the Caribbean, and South and Central America.
“The fact we’ve been in Mexico a long time without brick and mortar speaks well to our ability to penetrate the market from a long distance. Even though it’s a small facility, having the brick and mortar in Mexico is probably the most profound of the investments we’re making in terms of real long-term growth opportunity,” Siegal said.