Russel Metals Reports 3rd Quarter Earnings
11/01/2007 - Russel Metals reports net earnings of $28 million on revenues of $624 million for the third quarter of 2007.
Russel Metals Inc. reported net earnings of $28 million on revenues of $624 million for the third quarter of 2007.
Third Quarter Results—Net earnings of $28 million ($0.44 per common share) compares with second-quarter 2007 earnings of $29 million ($0.47 per common share), and net earnings of $45 million ($0.72 per common share) reported in the third quarter of 2006. Revenues of $624 million compare to revenues of $672 million for the third quarter of 2006, and revenues of $653 million reported in the second quarter of 2007.
Management Comments—"Although demand in the quarter was soft in metals service centers and steel distributors, our concentration on obtaining inventory levels that were consistent with forecasted demand, led to a meaningful reduction in inventory levels,” said Bud Siegel, President and CEO. “In energy tubular products, lower drilling activity in Alberta was offset by strength in our Canadian operation servicing the oil sands as well as our U.S. operation in this segment.”
"We are very excited that during the 2007 third quarter we were able to close our acquisition of the JMS Metal Services group of companies,” continued Siegel. “As I have stated previously, we waited for a company whose culture would fit with Russel Metals, had an operation that would be immediately accretive to earnings and that would serve as a platform for future growth, both organic and through acquisitions, in a new geographical region, the southeast United States."
Segment Results—Metals service centers operating profits were $23 million (6.9% of revenues of $340 million). Siegel said that metals service centers results were weaker than the previous quarter due to lower demand levels. Metals service center operating results do not include any results from the recent acquisition of JMS Metal Services, as it was purchased on the last business day of the quarter. The preliminary allocation of the opening balance sheet has been reflected on the company’s consolidated balance sheet.
The company’s steel distributors segment, which sells primarily to third-party service centers, had operating profits of $10 million (9.5% of revenues of $108 million). Operating profits and margins were both below the same quarter last year and the second quarter of 2007. Siegel said steel distributors' revenues were adversely affected by demand softness at North American service centers (due to overstocking) and the decline in the U.S. dollar, which has reduced the demand for offshore steel.
The company’s energy tubular products segment had operating profits of $16 million (9.1% of revenues of $175 million). Operating profits of $16 million approximate those reported in the third quarter of 2006 but are up from the second quarter of 2007 operating profit of $11 million on revenues of $167 million. This segment continues to provide strong operating results led by the company’s U.S. operations and the Canadian operation that services the oil sands in Alberta. Siegel said that low drilling activity levels continue to exert downward pressure on margins in the operations that service the oil and gas drilling industry in Canada.
The company holds an investment of $11 million in non-bank Asset Backed Commercial Paper that was not repaid at maturity. Limited information is available on the quality of the trust's underlying assets, however, during the quarter, a $1.0-million unrealized loss was recorded to bring the investment to fair value, considering the uncertainty on timing of recovery and the time value of money.
Nine-Month Results—Net earnings for the nine months ended September 30, 2007 were $86 million ($1.37 per common share), which compares to net earnings of $128 million ($2.17 per common share) for the comparable period in 2006.
"We are very excited that during the 2007 third quarter we were able to close our acquisition of the JMS Metal Services group of companies,” continued Siegel. “As I have stated previously, we waited for a company whose culture would fit with Russel Metals, had an operation that would be immediately accretive to earnings and that would serve as a platform for future growth, both organic and through acquisitions, in a new geographical region, the southeast United States."
Segment Results—Metals service centers operating profits were $23 million (6.9% of revenues of $340 million). Siegel said that metals service centers results were weaker than the previous quarter due to lower demand levels. Metals service center operating results do not include any results from the recent acquisition of JMS Metal Services, as it was purchased on the last business day of the quarter. The preliminary allocation of the opening balance sheet has been reflected on the company’s consolidated balance sheet.
The company’s steel distributors segment, which sells primarily to third-party service centers, had operating profits of $10 million (9.5% of revenues of $108 million). Operating profits and margins were both below the same quarter last year and the second quarter of 2007. Siegel said steel distributors' revenues were adversely affected by demand softness at North American service centers (due to overstocking) and the decline in the U.S. dollar, which has reduced the demand for offshore steel.
The company’s energy tubular products segment had operating profits of $16 million (9.1% of revenues of $175 million). Operating profits of $16 million approximate those reported in the third quarter of 2006 but are up from the second quarter of 2007 operating profit of $11 million on revenues of $167 million. This segment continues to provide strong operating results led by the company’s U.S. operations and the Canadian operation that services the oil sands in Alberta. Siegel said that low drilling activity levels continue to exert downward pressure on margins in the operations that service the oil and gas drilling industry in Canada.
The company holds an investment of $11 million in non-bank Asset Backed Commercial Paper that was not repaid at maturity. Limited information is available on the quality of the trust's underlying assets, however, during the quarter, a $1.0-million unrealized loss was recorded to bring the investment to fair value, considering the uncertainty on timing of recovery and the time value of money.
Nine-Month Results—Net earnings for the nine months ended September 30, 2007 were $86 million ($1.37 per common share), which compares to net earnings of $128 million ($2.17 per common share) for the comparable period in 2006.
Russel Metals, one of the largest metals distribution companies in North America, conducts business in three 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 Metal Services, Leroux Steel, McCabe Steel, Megantic Metal, Metaux Russel, Milspec Industries, Pioneer Pipe, Russel Metals Williams Bahcall, Spartan Steel Products, Sunbelt Group, Triumph Tubular & Supply, Wirth Steel and York-Ennis.
