Olympic’s Sales Jump 41 Percent
Olympic Steel Inc., Cleveland, reported huge sales increases in its second quarter even without contributions from its most recent acquisition. The service center company reported net sales of $299 million in the quarter, up 41 percent from the same period of 2010. Tons sold in the second quarter increased 13 percent to 285,000. Net income in the second quarter increased 144 percent to $7.9 million.
Net sales for the first half of 2011 totaled $493.4 million, up 56 percent from the first six months of 2010. Net income more than tripled to $18.3 million. Tons sold in the first half increased 27 percent to 603,000.
Those figures do not include numbers from Chicago Tube & Iron Company, the Romeoville, Ill.-based tubular specialist that Olympic Steel acquired at the start of the third quarter.
“We are pleased with our strong 2011 sales and earnings results and our consistent gain in market share since 2010,” said Michael D. Siegal, chairman and CEO of Olympic Steel. “We have made timely investments during the economic downturn in new products, geographies and equipment to service our growing customer demands. Our acquisition of CT&I accelerates our market share growth and is expected to be immediately accretive to our earnings.”
CT&I President and CEO Don McNeeley was equally excited about the prospect of joining one of the nation’s largest service center companies.
“We embrace the industry trends of customers seeking purchasing efficiencies through more one-stop shopping opportunities and believe the expanded product offering of flat-rolled, plate, tubing, bar and pipe will provide a compelling value proposition for our customers,” he said. “OSI and CT&I have successfully partnered in the past on several major accounts and know that going forward we will be able to better serve our customers together. Chicago Tube and Iron and Olympic Steel’s products and service offer an ideal complement, as while there is no value-added product overlap whatsoever, there is a beneficial overlap of key customers and prospects.”
Chicago Tube & Iron expects projected revenues in 2011 of $225 million. CT&I was No. 40 in last year’s Metal Center News’ Top 50 service center ranking, while Olympic was No. 21.
In addition to acquiring CT&I, Olympic added locations in Gary, Ind., Mount Sterling, Ky., and Monterrey, Mexico, during the quarter. The Gary facility, which will include a new temper mill, represents the largest investment.
Olympic will decide in 2012 whether to bring on a fourth temper mill, says David Wolfort, president and chief operating officer. “We had the same opportunity in 1995 when we put on the first temper mill in Cleveland. Our bent is to be successful enough to add that fourth temper mill.”
Olympic also is adding locations in Roseville, Minn., and Streetsboro, Ohio. In Streetsboro, Olympic recently concluded a lease-to-buy transaction for 66,000 square feet, which will house the first owned physical facility for the company’s stainless steel division.
While the results for the second quarter were an improvement, there were some challenges. The falling material price put some pressure on the company’s profitability.
“We’re dealing with an environment where the psychology is worse than the reality. A lot of guys believe that in a falling price environment you should liquidate inventory as fast as possible,” Siegal said. “That puts pressure on the margin as people start to lower their inventory in the belief they can replace it at a lower level. There is certainly competition out there in the spot market that is squeezing some of the margins.”
Looking forward, Olympic officials said the outlook remains favorable, despite a lull in second-quarter shipping activity as a result of seasonal slowdowns. Importantly, they see conditions ripe for improving prices.
“The catalysts for an improving steel market are aligning nicely. Inventories are low, imports are shrinking, raw material costs are moving up and scrap is holding steady. We see a resolve to the U.S. political wrestling and improvement in the GDP,” Wolfort said. “These market dynamics should create the proper climate for producers to elevate pricing. We may see producers start to move transaction prices as early as next month.”