Russel Metals Reports Q3 2010 Net Earnings
11/03/2010 - Russel Metals Inc. announced third-quarter earnings of $17 million, or $0.28 per share, compared with $0.31 per share for the second quarter of 2010 and $0.21 per share for the 2009 third quarter. For the nine months ended September 30, 2010, net earnings were $52 million, or $0.87 per share, on revenues of $1.6 billion.
Russel Metals Inc. announced third-quarter earnings of $17 million, or $0.28 per share, compared with $0.31 per share for the second quarter of 2010 and $0.21 per share for the 2009 third quarter. For the nine months ended September 30, 2010, net earnings were $52 million, or $0.87 per share, on revenues of $1.6 billion.
Consolidated revenues for the third quarter of 2010 were $582 million, a 15% increase from the second quarter of 2010. Volumes increased sequentially from the second quarter of 2010 and the comparable third quarter of 2009. Margins of 18.2% were down from the second-quarter margins of 20.8%.
Metals service centers tons shipped increased 16% from the comparable quarter in 2009 and 1% from the second quarter of 2010, resulting in revenues for the quarter of $316 million. Gross margin dollars due to higher cost inventory declined and resulted in a segment operating profit of $13 million for the third quarter of 2010 compared to $13 million in the third quarter of 2009 and $20 million in the second quarter of 2010.
During the quarter, the company announced plans for the closure of its Port Robinson facility and to combine its Ontario structural steel and other long products operations at its Cambridge facility. Costs relating to the closure of Port Robinson, including severance and fixed asset write-downs of $3 million, or $0.03 per share, were charged to earnings in the quarter.
Brian R. Hedges, President and CEO, said, “We have reacted to reduced volumes and have produced earnings at current business levels to support our dividend. We believe that the short- and medium-term economic outlook is for modest growth in the markets that we serve. Our decision to resize, move, and combine our structural steel operations in Ontario with our long product operations was a proactive step to reflect the reduced activity of the Ontario manufacturing base.”
Energy tubular products revenues were $187 million in the third quarter of 2010, an increase from the second quarter of 2010 due to improved seasonal activity and from the third quarter of 2009. Operating profits in this segment were $15 million for the third quarter of 2010 compared to $11 million in the second quarter of 2010.
“In the first three quarters of 2010, we have been encouraged by the strength of the drilling activity in Canada and the U.S. as the shale drilling activity has increased and conventional drilling for oil has also been strong,” Hedges said. “For our energy operations, the next two quarters should be stronger than the last year despite weakness in oil country tubular product pricing due to low flat rolled steel pricing.”
Revenues for the company’s steel distributors operations increased to $76 million, reportedly the highest level for any quarter in the past year. Operating profits for the third quarter of 2010 were $5 million, down from $7 million in the second quarter of 2010 as gross margins decreased from 18.6% in the second quarter to 12.6% in the third quarter. A large volume sale at low margins contributed to the margin decline.
The company’s cash position remains strong with cash of $318 million at September 30, 2010. Cash generated from operating activities in the quarter was $57 million and $55 million for the nine months ended September 30, 2010. Cash generated from operations prior to working capital was $77 million for the nine months then ended.
“We are starting to see some earnings accretive acquisition opportunities,” Hedges said. “We have engaged in some discussions but, to date, the acquisition prices have exceeded our comfort levels. We will continue to be patient and evaluate each opportunity as it is presented.”
The Board of Directors approved a quarterly dividend of $0.25 per common share payable December 15, 2010, to shareholders of record as of November 23, 2010.
Russel Metals is one of the largest metals distribution companies in North America. It carries on business in three distribution segments: metals service centers, energy tubular products, and steel distributors, 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, 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.
