Service Centers See Positive Gains
Company Sees 50 Percent Increase in Net Sales
Metals USA, Fort Lauderdale, Fla., saw a 50 percent increase in its net sales in first-quarter 2011, to $432.3 million. Net income for the quarter hit $12.4 million, up from just $100,000 in first-quarter 2010.
Metals USA shipped 368,000 tons of metal in the first quarter, up 48 percent compared to the prior-year quarter. The company’s toll processing tonnage increased significantly due to contributions from its recent acquisitions.
“Our strong first-quarter results were enhanced by favorable business conditions throughout the quarter. Underlying demand continues to steadily recover, consistent with the last several quarters,” said Lourenço Gonçalves, Metals USA chairman, president and CEO. “Our Plates and Shapes Group experienced especially strong shipment volumes, given its higher percentage of spot transaction business and, in certain cases, customers buying ahead of escalating prices.
“Given the relatively stable pricing environment of late, we expect to see margins in our Plates and Shapes Group tighten a bit, as higher cost material flows through inventory. However, this should be more than offset by expanding margins in our Flat Rolled and Non-Ferrous Group, as the majority of its multi-month pricing arrangements react to price indices with approximately one quarter delay. It appears inventory in the supply chain remains relatively lean, and we believe our inventory is appropriately positioned for current market conditions,” Gonçalves added.
Reliance Steel & Aluminum
Increase in Volume, Prices Yields Big Gain
Reliance Steel & Aluminum Co., Los Angeles, reported net income of $92.3 million for first-quarter 2011, up 107 percent from the $44.7 million earned in last year’s first quarter and 134 percent from the $39.5 million netted in the previous quarter. Reliance sales for the 2011 first quarter totaled $1.91 billion, up 32 percent from 2010 first-quarter sales of $1.45 billion, and up 21 percent from 2010 fourth-quarter sales of $1.58 billion.
Reliance’s tons sold for the 2011 first quarter were up 12 percent from the 2010 first quarter and up 15 percent from the 2010 fourth quarter. Average prices per ton sold were up 18 percent compared to the 2010 first quarter and up 6 percent compared to the 2010 fourth quarter.
For the 2011 first quarter, Reliance’s carbon steel sales were 53 percent of net sales; aluminum sales were 17 percent; stainless steel sales were 16 percent; alloy sales were 8 percent; toll processing sales were 2 percent; and other sales were 4 percent.
“Our sales and earnings for the 2011 first quarter were better than we originally expected, primarily because pricing for all of our products increased during the quarter more than we had anticipated, which had a positive impact on both our gross profit margins and volume sold. Real demand continued its steady growth,” said David H. Hannah, chairman and CEO.
Reliance executives said they saw the most growth in the energy, oil and gas, farm and heavy equipment, mining, rail cars, barges and general manufacturing markets. Also remaining strong were semiconductor and electronics, aerospace and toll processing. “Demand for our carbon steel structural products, which is driven primarily by nonresidential construction activities, remains the weakest,” Hannah said. “However, we have seen some improvements in demand for those products in certain areas around the country.”
The company reported a strong balance sheet, with net debt-to-total capital at 25.7 percent and $715 million available on its $1.1 billion credit facility. “We continued to manage our working capital well, with an inventory turnover rate of five times based on tons and 4.8 times based on dollars for the 2011 first quarter,” Hannah continued.
“Prices for the various metals that we sell are fluctuating both up and down, and we expect this to continue through the second quarter, resulting in overall steady to slightly lower prices for our products. We expect real underlying demand to continue to improve during the second quarter, which is typically the strongest quarter of the year for most of our operations,” he added.
Quarterly Sales, Earnings Improve
Worthington Industries Inc., Columbus, Ohio, reported net sales of $569.4 million and net earnings of $26.3 million during its fiscal 2011 third-quarter ended Feb. 28. Both marked sharp improvements over the same time period last year.
Net sales for the third quarter were up 26 percent from the comparable quarter last year. An overall increase in volumes had a $79.1 million positive impact on net sales as both the company’s Steel Processing and Pressure Cylinders segments showed improvements.
Operating income for the quarter hit $28.0 million, up $63.3 million vs. last year’s operating loss. Increased volumes and better spreads between average selling prices and the cost of steel were the drivers for the increase in income, said company officials.
“We are very pleased with the excellent results this quarter and continue to see positive signs of recovery in many of our markets,” said John McConnell, chairman and CEO, during the company’s quarterly conference call with investors and analysts. “Our businesses have continued to perform well as we have remained focused on enhancing our earnings potential, improving our operating efficiencies and investing in businesses that will help us achieve our goals.”
Steel Processing’s net sales of $301.8 million were up 30 percent, or $69.5 million, over the prior-year quarter. The largest increase came from higher value-added processing for the automotive market, aided by the contribution from the Gibraltar strip steel acquisition, the company said.
“We remain optimistic about the current business environment. While the potential remains for some uneven results, we are confident that the overall trend will continue to be for positive year-over-year gains in our current businesses,” McConnell said. “We will also continue to build our international presence and explore opportunities to augment our current platform with acquisitions that meet our criteria of increasing our margins and decreasing the volatility of our earnings.”
Among four growth objectives undertaken in the quarter, the company agreed to form a joint venture with Marubeni-Itochu Steel America Inc. to combine Dietrich Metal Framing and ClarkWestern Building Systems. The agreement closed March 1. Worthington received a 25 percent interest in the new joint venture, ClarkDietrich Building Systems LLC, as well as the assets of three MISA Metals Inc. steel processing locations.
“This is another step in our overall strategy to improve margins, decrease volatility and strengthen our financial performance,” said George Stowe, president and chief operating officer. “The formation of the joint venture will allow us to better serve the customers and rationalize an industry plagued by overcapacity.”