Reliance's Income Grows in Second Quarter
By Metal Center News Staff
on Aug 3, 2020
North America’s largest service center company experienced a 30 percent decline in sales in the COVID-19-affected second quarter. Los Angeles-based Reliance Steel & Aluminum’s second-quarter sales declined to $2.02 billion, down from the $2.88 billion in the same quarter last year and off 21.5 percent from the first quarter.
Net income of $80.2 million was down significantly from the $183.1 million posted in the second quarter of 2019, but was up 30 percent from the prior quarter.
“The strength and resiliency of our business model produced solid results during an extraordinary and extremely challenging quarter. Because we support many customers deemed essential businesses, our tons sold declined only 17.5 percent compared to the first quarter of 2020,” said Jim Hoffman, president and CEO.
Demand in nonresidential construction, Reliance’s largest end market, softened during the second quarter as shelter-in-place orders resulted in the deferral of numerous projects. However, as restrictions began to lift across the country in May, the company experienced an increase in activity as customers focused on completing projects that had previously been put on hold. Reliance is cautiously optimistic that demand for nonresidential construction activity will continue to improve in the second half of 2020 based on healthy backlogs and positive customer sentiment.
Demand for the toll processing services fell sharply in the second quarter following the mid-March closure of many automotive OEMs and steel and aluminum mills due to COVID-19. This resulted in significantly reduced processing volumes at Reliance’s toll processing operations in both the U.S. and Mexico. Demand increased following the reopening of automotive OEM’s in early June.
While demand in the aerospace defense market remained fairly stable at solid levels during the second quarter of 2020, commercial aerospace demand declined considerably as a direct result of reduced air travel due to COVID-19. In response to reduced commercial airplane build rates, Reliance made significant workforce reductions and closed two of its smaller international locations supporting the commercial aerospace market. As Reliance’s outlook for the commercial aerospace market remains uncertain, the company will continue to assess the health of its remaining businesses and take appropriate cost reduction actions if and when necessary to ensure the continued long-term profitability of these businesses.
“Although our outlook for nearly all of our end markets remains challenging and uncertain, we believe our diversification of end markets, products and geographies as well as our decentralized operating structure will continue to serve us well through the recovery that will follow these extraordinary times,” Hoffman said.