Russel Metals Reports First Quarter Loss
05/13/2009 - Russel Metals reports a net loss of $55 million on revenues of $642.3 million for the first quarter of 2009.
Russel Metals Inc. reported a net loss of $55 million on revenues of $642.3 million for the first quarter of 2009.
The $55-million ($0.92 per share) net loss compares to net earnings of $29 million ($0.46 per share) for the year-ago first quarter. Revenues of $642.3 million compare to revenues of $712.3 million in the year-ago first quarter. Results included a $94-million pre-tax write-down of inventory to net realizable value due to the continued dramatic decline in steel prices in the first quarter.
The company’s metals service centers segment experienced a 37% decline in volume compared to year-ago first quarter and a 16% declines in volume decline compared to the previous quarter (Q4 2008). The company’s steel distributors were also impacted by declining volumes as OEM and service center customers responded to lower end-user demand. The lower volumes led to price reductions as the company’s service center competitors reduced their inventories and the mills cut production levels by over 50%.
The price reductions led to first-quarter inventory write-downs of $29 million in the company’s metals service centers and $49 million for the company’s steel distributors. Excluding the inventory write-downs, the company’s steel distributors segment’s operating profit would have been $3 million and its metals service centers’ operating loss would have been $7 million.
The company’s energy tubular products segment reported operating earnings of $5 million for the first quarter. The segment operating profit was $21 million before inventory write-downs as end-user pricing remained strong at the start of the quarter. Falling gas prices adversely impacted customer exploration activities late in the quarter, and pricing softness in commodity pipe products resulted in a $16-million inventory write-down.
"A decline in demand of 37% year-over-year in our metals service center segment has never been experienced before,” stated Bud Siegel, President and CEO. “Our decline is consistent with the metals service center industry in North America. The general economic conditions impacting the metals industry in North America and the world have resulted in significant inventory holding losses. The almost instantaneous change in demand for steel resulted in an equally rapid decline in pricing. Inventory write-downs in our metals service centers and steel distributors segments taken in the first quarter will improve gross margins in these segments as our average cost of inventory declines.
The company’s energy tubular products segment reported operating earnings of $5 million for the first quarter. The segment operating profit was $21 million before inventory write-downs as end-user pricing remained strong at the start of the quarter. Falling gas prices adversely impacted customer exploration activities late in the quarter, and pricing softness in commodity pipe products resulted in a $16-million inventory write-down.
"A decline in demand of 37% year-over-year in our metals service center segment has never been experienced before,” stated Bud Siegel, President and CEO. “Our decline is consistent with the metals service center industry in North America. The general economic conditions impacting the metals industry in North America and the world have resulted in significant inventory holding losses. The almost instantaneous change in demand for steel resulted in an equally rapid decline in pricing. Inventory write-downs in our metals service centers and steel distributors segments taken in the first quarter will improve gross margins in these segments as our average cost of inventory declines.
“We will continue to manage our operations as if the volume reduction is permanent,” continued Siegel; “however, we believe volumes will improve as the inventory levels of our customers shrink to support their sales levels and they begin to replenish their low inventory.”
Looking ahead to the coming quarter, Brian Hedges, Executive Vice President and COO, commented, "We are confident that demand for our products and those of steel producers will improve but the timing of the turnaround cannot be forecast with any degree of certainty. Our compensation expense reductions announced in the first quarter of 2009 will be in full effect for the second quarter."
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.
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.
