Reliance Reports 2Q Earnings of $100 Million
By Metal Center News Staff
on Aug 3, 2016
Aug. 3, 2016 Reliance Reports 2Q Earnings of $100 Million Reliance Steel & Aluminum Co., Los Angeles, reported net income of $100.9 million in the second quarter, an increase of 11.9 percent from the same quarter last year and up 9.4 percent from the first quarter. For the year to date, Reliance’s earnings of $193.1 million are slightly better than 2015. Net sales in the quarter totaled $2.20 billion, a decline of 9.1 percent from second-quarter 2015, but up 1.9 percent from the first quarter. Year-to-date sales of $4.37 billion are 13.3 percent lower than the first six months of 2015. "I am extremely proud of our managers in the field and their outstanding execution, which contributed to our sixth consecutive quarter of FIFO gross profit margin expansion," President and CEO Gregg Mollins told investors and analysts during the company’s quarterly conference call. "Our team has done an excellent job providing higher value to our customers through our significant investments in cutting-edge, value-added processing equipment, and effectively managing our inventory. These efforts, along with recent mill price increases in the marketplace, resulted in further improvement of our gross profit margin in the second quarter of 2016." Tons sold by Reliance increased 0.7 percent compared with the second quarter of 2015 and 1.1 percent compared with the first quarter. The average selling price per ton sold declined 10.1 percent compared with last year’s second quarter, but increased 0.9 percent compared with the prior three months. The metals pricing environment for carbon steel products was more favorable in the second quarter, with price increases supported by stable demand, trade case filings by U.S. producers, disciplined production by the mills and increased raw material costs, Reliance executives said. Still, pricing remains behind 2015 figures and is well below peak levels. "Both strategic M&A opportunities and organic investments will continue to be integral drivers of future growth for Reliance. We've maintained a strong balance sheet and believe our managers have done a great job at right-sizing our inventory levels over the past 18 months,” Mollins said. Reliance's same-store tons sold in the first six months of 2016 were down only 2.1 percent compared to last year’s first half, and were better than the 6.9 percent decline in shipments that was the MSCI industry average. The company expects underlying demand to improve slowly, subject to the normal seasonality of lower shipments in the second half. Automotive demand, supported mainly by the company's toll processing operations in the U.S. and Mexico, remains robust and is expected to continue at current rates. Reliance has increased its toll processing volume through investments primarily to support the increased usage of aluminum by the auto industry. Aerospace demand improved further in second-quarter 2016 and is expected to continue at current demand levels this year. The company maintains a positive outlook on aerospace and expects to continue growing its market share as a result of key capital investments and acquisitions. Heavy industry demand was consistent with the first quarter, and Reliance expects activity to remain steady at low levels throughout the year. Nonresidential construction demand continues to gradually improve, but remains well below peak levels of 2006 and 2007. Overall, Reliance management forecasts tons sold in the third quarter will decline 1-3 percent due to normal seasonal factors. The company also expects its average selling price in the third quarter to increase 1-3 percent, assuming current mill prices remain in place for the full quarter.