No. 1 Ranking Has a Nice Ring to Reliance
By Tim Triplett
on Sep 16, 2014
Reliance Steel and Aluminum’s senior management team rang the closing bell on the New York Stock Exchange Aug. 20 in commemoration of the service center giant’s 20th anniversary as a publicly traded company.
Reliance stock debuted at $14.50 per share at its initial public offering on Sept. 14, 1994. Twenty years and three stock splits later, shares of Reliance are trading near $70. Including quarterly dividends, shareholders have enjoyed a compound annual growth rate of 17 percent.
Few other companies have applied the growth-through-acquisition strategy more effectively than Reliance. It has bought up 58 companies since its 1994 IPO, cherry-picking the market’s strongest competitors to create a metals distribution and processing network of more than 300 locations in 39 states and 12 countries.
Not surprisingly, Reliance is once again ranked No. 1 in MCN’s Service Center Top 50, featured in this issue. With more than $9.2 billion in sales last year, Reliance is clearly taking advantage of its size and scale to continually capture more market share. Ryerson, its closest rival and less than half its size, reported 2013 revenues of $3.46 billion.
Reliance’s sales improved by 9 percent last year, but it was the exception to the rule. The Top 50’s combined revenues totaled about $51.1 billion in 2013, down 1.2 percent from the previous year. Of the 14 companies in this year’s ranking that took in over a billion dollars, only three reported a revenue gain versus 2012: Reliance, Russel and Alro. For the others, sales were flat or down.
With half of 2014 in the books, respondents to MCN’s Top 50 survey also were asked to forecast their revenues for the full year. Thirty-six of the 50 companies polled offered a prediction. On average, they anticipate nearly a 12 percent improvement over 2013 sales, which indicates a high level of optimism at the midyear point. Market conditions remain highly unpredictable, however, and the 14 large companies that opted not to share a forecast represent more than half the Top 50’s total volume. So the prospect of a double-digit gain for the industry this year may be overly optimistic. But a single-digit gain seems almost certain, given the economy’s momentum.
Of course, sales revenue is not the only gauge of success. Profitability is the ultimate measure. While privately held companies will rarely discuss their earnings, it’s entirely possible that many service centers outside the Top 50 are just as “successful” in terms of margin percentage.
Despite the notoriety of market leaders like Reliance and the others in the Top 50, and all the smaller players they have acquired over the years, it’s still the thousands of small, independent, family-owned service centers that command the majority of the metals distribution market.