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Reliance Steel & Aluminum Reports 2nd Quarter Results

08/01/2011 - Reliance Steel & Aluminum reported net income of $98.7 million on sales of $2.05 billion for the second quarter and net income of $191.0 million on sales of $3.96 billion for the six months ended June 30, 2011.

Reliance Steel & Aluminum Co. reported net income of $98.7 million on sales of $2.05 billion for the second quarter and net income of $191.0 million on sales of $3.96 billion for the six months ended June 30, 2011.
 
Second Quarter Results — The $98.7 million net income reflects a 60% increase from net income of $61.5 million for the year-ago second quarter, and up 7% from $92.3 million in the previous quarter (1Q2011). Earnings per diluted share were $1.31, up 58% from earnings per diluted share of $.83 in the year-ago second quarter and up 7% from $1.23 for the 2011 first quarter.
 
Sales were $2.05 billion, up 26% from sales of $1.62 billion for the year-ago second quarter, and up 7% from sales of $1.91 billion in the previous quarter. Financial results include in cost of sales a pre-tax LIFO charge, or expense, of $25 million compared with a pre-tax LIFO charge of $10 million for the year-ago second quarter, and a charge of $20 million for the previous quarter.
 
Reliance’s tons sold for the second quarter were up 10% from the year-ago second quarter and up 1% from the previous quarter. Average prices per ton sold were up 16% compared to the year-ago second quarter and up 6% compared to the previous quarter. Carbon steel sales were 54% of net sales; aluminum sales were 16%; stainless steel sales were 15%; alloy sales were 9%; toll processing sales were 2%; and other sales were 4%.
 
Six Month Results — Six month net income amounted to $191.0 million, up 80% compared with net income of $106.2 million for the comparable 2010 period. Earnings per diluted share were $2.54, up 78% compared with earnings of $1.43 per diluted share for the first six months of 2010.
 
Sales were $3.96 billion, up 29% from 2010 six-month sales of $3.07 billion. Financial results include in cost of sales a pre-tax LIFO charge, or expense, of $45 million compared with a pre-tax LIFO charge of $15 million for the 2010 six months. The LIFO adjustments, in effect, reflect cost of sales at current replacement costs.
 
Management Comments — “We are pleased with our 2011 second quarter results, which were slightly better than we originally expected given our somewhat higher LIFO charge in the quarter,” said David H. Hannah, Chairman and CEO of Reliance. “Sales volume and average pricing held up reasonably well given that mill prices for most of the metals we sell declined as the quarter progressed, which also caused our gross profit margins to contract a bit, as we expected. Consistent with the first quarter of 2011, our strongest markets were in energy, oil & gas, farm and heavy equipment, mining, general manufacturing, aerospace, semiconductor and electronics. Non-residential construction was still weak, but showed some signs of life with spotty improvements. Our auto-related toll processing volumes were negatively impacted by the crisis in Japan but are now recovering nicely.”
 
“As mentioned earlier, prices for most of our metal products have softened from the recent highs early in the 2011 second quarter, and may decrease a little more during the 2011 third quarter, but not to the extent that we are overly concerned. Also, we do not expect any significant changes in demand other than some normal seasonal third quarter slowing. Given these expectations, we anticipate earnings per diluted share in a range of $1.05 to $1.15 for the 2011 third quarter,” said Hannah.
 
“Our balance sheet is in excellent shape, with net debt to total capital at 25.2% at June 30, 2011. Effective July 26, 2011, we renewed our credit facility for a five year term and increased the size to $1.5 billion from $1.1 billion, providing even more capital to fund the growth of our existing operations as well as anticipated acquisition opportunities. We are very excited about our agreement to acquire Continental Alloys & Services and look forward to completing that transaction soon. Continental brings a great management team and expands our exposure to the attractive energy, oil and gas markets with new products, processing capabilities, and international locations,” concluded Hannah.
 
Headquartered in Los Angeles, Calif., Reliance Steel & Aluminum Co. 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, Malaysia, 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.