Reliance Net Income Declines from Second Quarter
Reliance Steel & Aluminum Co., Los Angeles, saw third-quarter net income that was an improvement from the same period in 2010, but a step back from the second quarter of this year. Reliance reported net income of $84.9 million, up 74 percent compared to last year’s third quarter, but down 14 percent from second-quarter 2011. Net sales of $2.14 billion were up 29 percent from a year ago and up 4 percent compared to the previous quarter.
“Overall, during the 2011 third quarter, we saw better demand from our customers than we anticipated. However, there was significant downward pressure on pricing and margins, especially during July and August, as mill prices for most all of the products we sell were declining,” said David Hannah, chairman and CEO, during the company’s quarterly conference call with investors and analysts. “Our strongest markets continue to be in energy, oil and gas, aerospace, farm and heavy equipment, and auto.”
For the year to date, Reliance’s net income totaled $275.9 million, up 78 percent compared with net income of $154.9 million for the 2010 nine-month period. Sales for the nine months totaled $6.10 billion, up 29 percent from 2010.
Reliance’s tons sold for the third quarter were up 13 percent from the same quarter in 2010 and up 4 percent from the second quarter. Average prices per ton sold in the third quarter were up 16 percent compared to the 2010 third quarter and were relatively flat compared to the second quarter.
For the third quarter, carbon steel sales represented 53 percent of Reliance’s business; aluminum sales were 15 percent; stainless steel sales were 15 percent; alloy sales were 11 percent; toll processing sales were 2 percent; and other sales were 4 percent.
During the quarter, Reliance had inventory turns of 4.7 times in terms of dollars and 4.8 times in terms of tons. Hannah believes the overall industry position on inventory is about right.
“Our customers’ inventories are at healthy levels. I think they are on the skinny side. We’re not over-inventoried like we were at times in the past. I don’t think there’s a lot of inventory to be taken out of the industry,” he said.
In August, Reliance acquired Continental Alloys & Services Inc. for a transaction value of $415 million. The Houston-based company and its affiliates comprise a global materials management operation focused on high-end steel and alloy pipe, tube and bar products for energy service companies in seven countries.
Hannah sees more opportunities for acquisitions today than earlier in the year, but still not many. “Most companies are making a reasonable amount of money, but none of us are where we would like to be. Until people get to that point, they are not as likely to want to sell their companies because they still have doubts about getting the price they want.”
Looking ahead, Hannah said, metals prices remain volatile. “We expect this to continue through the fourth quarter with a downward bias, resulting in overall slightly lower prices for our products. We also expect lower tons sold during the 2011 fourth quarter because of a reduced number of shipping days, which is our normal seasonal pattern.”