Russel Metals Reports 2009 2nd Quarter Loss
08/06/2009 - Russel Metals reports a net loss of $24.6 million on revenues of $462.5 million for the second quarter, and a net loss of $79.6 million on revenues of 1.105 billion for the first six months of 2009.
Russel Metals Inc. announced a net loss of $24.6 million on revenues of $462.5 million for the second quarter, and a net loss of $79.6 million on revenues of 1.105 billion for the first six months of 2009.
The $24.6 million net loss compares to net earnings of $79 million for the year-ago second quarter. Results include a pretax inventory write-down of $56 million primarily in the energy tubular products segment. Results were also impacted by volume declines in all three operating segments and lower margins due to pricing pressure from declining mill prices and excess inventory in the supply chain.
Russel’s metals service centers reported an operating profit of $2 million, which compares to an operating profit of $72 million for the year-ago second quarter. Volumes, which were 40% lower compared to 2008, were consistent with the first quarter of 2009. A $2-million inventory write-down was taken in this segment, an improvement form the first quarter reflecting a stabilization of pricing for most products in the second quarter.
Russel’s energy tubular products segment reported an operating loss of $49 million, which includes a $55-million inventory write-down. Before inventory write-downs, the segment’s operating profit was $6 million, which compares to an operating profit of $29 million for the year-ago second quarter. Revenues declined 45% vs. the year-ago second quarter due to lower drilling activity driven by the low price of oil and natural gas. Excess inventory in the industry has resulted in price pressures and based on current activity, the company took an inventory write-down.
The company’s steel distributors segment reported operating profits of $5 million despite a revenue decline of 53% compared to 2008. The segment’s operating profit was $26 million for the year-ago second quarter.
"I am encouraged by the results of our metals service centers as they have reported an operating profit for the quarter despite a 40% drop in demand from last year,” stated Brian R. Hedges, President and CEO. “As previously stated, we are managing operations as if the volume declines are permanent. Our managers are reacting to the challenging market and continue to reduce expenses in line with current volumes.
“In the third quarter of 2009, the steel mills have announced price increases, which should result in margin improvements. Demand levels remain unchanged and this needs to improve for us to achieve more normalized profit levels."
Marion E. Britton, Vice President and CFO, added, "Operating expenses are $40 million lower compared to the second quarter of 2008. Our highly variable compensation model has been a significant factor in reducing expenses in all segments."
Russel’s energy tubular products segment reported an operating loss of $49 million, which includes a $55-million inventory write-down. Before inventory write-downs, the segment’s operating profit was $6 million, which compares to an operating profit of $29 million for the year-ago second quarter. Revenues declined 45% vs. the year-ago second quarter due to lower drilling activity driven by the low price of oil and natural gas. Excess inventory in the industry has resulted in price pressures and based on current activity, the company took an inventory write-down.
The company’s steel distributors segment reported operating profits of $5 million despite a revenue decline of 53% compared to 2008. The segment’s operating profit was $26 million for the year-ago second quarter.
"I am encouraged by the results of our metals service centers as they have reported an operating profit for the quarter despite a 40% drop in demand from last year,” stated Brian R. Hedges, President and CEO. “As previously stated, we are managing operations as if the volume declines are permanent. Our managers are reacting to the challenging market and continue to reduce expenses in line with current volumes.
“In the third quarter of 2009, the steel mills have announced price increases, which should result in margin improvements. Demand levels remain unchanged and this needs to improve for us to achieve more normalized profit levels."
Marion E. Britton, Vice President and CFO, added, "Operating expenses are $40 million lower compared to the second quarter of 2008. Our highly variable compensation model has been a significant factor in reducing expenses in all segments."
Russel Metals, one of the largest metals distribution companies in North America, conducts business in three metals distribution segments: metals service centers, energy tubular products and steel distributors. The company operates under various names including Russel Metals, A.J. Forsyth, Acier Leroux, Acier Loubier, Acier Richler, Arrow Steel Processors, B&T Steel, Baldwin International, Comco Pipe and Supply, Fedmet Tubulars, JMS Russel Metals, Leroux Steel, McCabe Steel, Megantic Metal, Metaux Russel, Metaux Russel Produits Specialises, Milspec Industries, Norton Metals, Pioneer Pipe, Russel Metals Specialty Products, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis.
