Reliance Steel & Aluminum Reports 2nd Quarter, Six Months Results
07/24/2009 - Reliance Steel & Aluminum reports a net loss of $5.8 million on sales of $1.2 billion for the second quarter, and net income of $14.3 million on sales of $2.8 billion for the six months ended June 30, 2009.
Reliance Steel & Aluminum Co. reported a net loss of $5.8 million on sales of $1.2 billion for the second quarter and net income of $14.3 million on sales of $2.8 billion for the six months ended June 30, 2009.
Second Quarter Results — The $5.8 million net loss ($.08 per diluted share) — the company’s first quarterly net loss since becoming a public company in 1994 — compares to net income of $156.6 million ($2.12 per diluted share) for the year-ago second quarter, and net income of $20.1 million ($.27 per diluted share) for the previous quarter (1Q09).
Sales of $1.2 billion represent a 41% decrease from year-ago second quarter sales of $2.1 billion, and a 20% decrease from previous quarter (1Q09) sales of $1.6 billion. Results include in cost of sales a pre-tax LIFO income amount of $75 million, compared with a pre-tax LIFO expense amount of $40.0 million for the year-ago second quarter, and $75 million of LIFO income for the 2009 first quarter.
Six Month Results — The $14.3 million net income compares with net income of $264.0 million for the same period in 2008. Earnings per diluted share were $.19, which compare with earnings of $3.58 per diluted share for the six months ended June 30, 2008.
Sales were $2.8 billion, compared with 2008 six month sales of $4.0 billion. Results include in cost of sales a pre-tax LIFO income amount of $150 million, compared with a pre-tax LIFO expense amount of $57.5 million in the 2008 year-to-date period.
Management Comments — “The 2009 second quarter was the most difficult operating environment that we have ever experienced at our Company,” commented Reliance Chairman and CEO David H. Hannah. “Carbon steel prices fell sharply during the quarter, much more than expected, which caused increased destocking activity and much lower gross profit margins than we had anticipated.
“Our tons sold for the 2009 second quarter were down 7% and our average price per ton sold was down 35% compared to the 2008 second quarter,” continued Hannah. “However, on a ‘same-store’ basis, excluding our 2008 acquisitions, our tons sold were down 39% and our average price per ton sold was down 21% for the 2009 second quarter compared to the 2008 second quarter. Comparing our 2009 second quarter to the 2009 first quarter, our tons sold were down 7% and our average price per ton sold was down 14%. For the 2009 second quarter carbon steel sales were 57% of our revenues; aluminum sales were 19%; stainless steel sales were 12%; alloy sales were 6%; other sales were 4% and toll processing sales were 2%.”
“During the 2009 first half, we generated record cash flow from operations of $681 million. We repaid $194 million of debt during the quarter and had accumulated about $180 million of cash as of June 30, 2009. The balance on our $1.1 billion unsecured revolving credit facility as of June 30, 2009 was zero and our net debt-to-total capital ratio was 30.7%. We have also aggressively reduced our expenses with same-store expenses for the 2009 first half down $138 million, or 24%, compared to the 2008 first half,” commented Hannah.
Outlook — “We do believe that the worst is behind us, but overall we don’t anticipate any meaningful improvement in demand for the balance of the year,” commented Hannah. “There is some good news, however, on the pricing side where it appears that we have bounced off the bottom as pricing on most all our products is increasing some. That, coupled with a better inventory position, should lead us to better gross profit margins in the second half of the year.
“Due to the continued uncertainty regarding economic conditions, we are not comfortable providing earnings guidance for the 2009 third quarter, except to state that we do expect to be profitable,” noted Hannah. “We will, as the quarter progresses, communicate any meaningful information regarding our operations as it becomes available,” he concluded.
Reliance Steel & Aluminum, headquartered in Los Angeles, Calif., is the largest metals service center company in North America. Through a network of more than 200 locations in 38 states and Belgium, Canada, China, Mexico, Singapore, South Korea, and the United Kingdom, the Company provides value-added metals processing services and distributes a full line of over 100,000 metal products to more than 125,000 customers in a broad range of industries.
