Reliance Steel & Aluminum Reports Third Quarter Results
10/31/2011 - Reliance Steel & Aluminum reported net income of $84.9 million on sales of $2.14 billion for the third quarter and net income of $275.9 million on sales of $6.10 billion for the nine months ended September 30, 2011.
Reliance Steel & Aluminum Co. reported net income of $84.9 million on sales of $2.14 billion for the third quarter and net income of $275.9 million on sales of $6.10 billion for the nine months ended September 30, 2011.
Third Quarter Results — The $84.9 million net income reflects a 74% increase from net income of $48.7 million in the year-ago third quarter, and a 14% decrease from net income of $98.7 million in the previous quarter (2Q-2011). Earnings per diluted share were $1.13, a 74% increase vs. the year-ago third quarter’s earnings per diluted share of $.65, and a 14% decrease from $1.31 in the previous quarter (2Q-2011). Sales of $2.14 billion reflect a 29% from sales of $1.65 billion in the year-ago third quarter, and a 4% increase from sales of $2.05 billion in the previous quarter. Results include in cost of sales a pre-tax LIFO charge (expense) of $22.5 million, compared with a pre-tax LIFO charge of $9.75 million for the year-ago third quarter, and a charge of $25.0 million for the previous quarter (2Q-2011).
Tons sold were up 13% from the year-ago third quarter and up 4% from the previous quarter (2Q-2011). Average prices per ton sold were up 16% compared to the year-ago third quarter and were relatively flat compared to the previous quarter (2Q-2011). Carbon steel sales were 53% of net sales; aluminum sales were 15%; stainless steel sales were 15%; alloy sales were 11%; toll processing sales were 2%; and other sales were 4%.
Nine-Month Results — The $275.9 million net income reflects a 78% increase compared with net income of $154.9 million for the comparable year-ago period. Earnings per diluted share were $3.68, up 77% compared with earnings of $2.08 per diluted share for the comparable year-ago period. Sales were $6.10 billion, up 29% from 2010 nine-month sales of $4.73 billion. Results include in cost of sales a pre-tax LIFO charge (expense) of $67.5 million compared with a pre-tax LIFO charge of $24.75 million for the 2010 nine months. The company noted that LIFO adjustments, in effect, reflect cost of sales at current replacement costs.
Management Comments — “Overall, during the 2011 third quarter, we saw better demand from our customers than we anticipated; however, there was significant downward pressure on pricing and margins, especially during July and August as mill prices for most all of the products we sell were declining,” said David H. Hannah, Chairman and CEO of Reliance. “Our strongest markets continued to be in energy, oil & gas, aerospace, farm and heavy equipment, and auto (through our toll processing business). The quarter also benefited from the strong earnings of our most recent acquisition and a lower-than-anticipated tax rate; however, this was partially offset by foreign currency losses due to the strengthening of the US dollar.
“Effective August 1, 2011, we acquired Continental Alloys & Services, Inc., for a transaction value of $415 million, subject to adjustment,” continued Hannah. “Continental, headquartered in Houston, Texas, and its affiliates comprise a leading global materials management company focused on high-end steel and alloy pipe, tube and bar products and precision manufacturing of various tools designed for well completion programs of global energy service companies and has 12 locations in seven countries including the United States, Canada, United Kingdom, Singapore, Malaysia, U.A.E. and Mexico.”
Hannah noted that the company’s balance sheet continues to be “in excellent shape”, with net debt-to-total capital of 31.0% at September 30, 2011. “Even after borrowing to fund the acquisition of Continental, we have substantial remaining borrowing capacity with only $790 million of outstanding borrowings on our $1.5 billion credit facility at September 30, 2011.”
Looking ahead, Hannah commented, “Prices for the various metals that we sell remain volatile, and we expect this to continue through the fourth quarter, with a downward bias, resulting in overall slightly lower prices for our products. We also expect lower tons sold during the 2011 fourth quarter because of a reduced number of shipping days, which is our normal seasonal pattern.
“Given these expectations, we currently estimate earnings per diluted share in a range of $.70 to $.80 for the 2011 fourth quarter,” concluded Hannah.
Headquartered in Los Angeles, Calif., Reliance Steel & Aluminum 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, the U.A.E. 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.
