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In their fourth-quarter and year-end reports to analysts and investors, executives from publicly held service centers reported improved revenues, largely from unexpectedly high steel prices.

By the Staff of Metal Center News

Metals USA
2010 Results ‘Consistent with a Continuing Economic Recovery’
Metals USA Holdings Corp., Fort Lauderdale, Fla., reported net sales of $323.9 million for the fourth quarter, an increase of 32 percent compared to net sales of $245.3 million for the fourth quarter of 2009, but 6 percent lower than the $345.3 million in net sales for the previous quarter.

Metal shipments for the fourth quarter totaled 267,000 tons, up 22 percent compared to fourth-quarter 2009 shipments of 219,000 tons and down 2 percent compared to the 273,000 tons shipped during third-quarter 2010. The average sales price during the fourth quarter was 11 percent higher than the same period last year, but 3 percent lower than in the previous quarter.

Net sales for the year totaled $1.29 billion, an increase of 18 percent compared to 2009 net sales of $1.10 billion. 2010 net income of $11.5 million compared favorably to 2009 net income of $3.5 million. Metal shipments in 2010 were 1,059,000 tons, a 16 percent increase compared to 2009 shipments of 913,000 tons. The average metal sales price in 2010 was 4 percent higher than in 2009.

Operating income for the fourth quarter of 2010 totaled $11.2 million, up from $5.2 million for fourth-quarter 2009 but down from $18.9 million for the previous quarter. On an annual basis, the company reported operating income of $60.2 million for 2010, an improvement from the $22.1 million operating loss for 2009. The year-over-year increase in operating income was driven by an 18 percent increase in net sales, partially offset by a 12 percent increase in cost of sales.

Fourth-quarter shipments were in line with the normal seasonal pattern that incorporates year-end holidays and fewer shipping days. Several steel price increases were announced by the mills in December, but their benefit will not be seen until the first quarter of 2011, said Lourenço Gonçalves, Metals USA chairman, president and CEO.

“Our customers’ metal demand in the fourth quarter was consistent with a continuing economic recovery, which has been occurring in parallel with a serious scrap shortage after more than two years of subpar industrial output in the United States. The combined effect of the economic recovery with steel price increases should continue to support the positive momentum we are seeing in our business in the first quarter of 2011,” he said.

In December, Metals USA finalized a new $500 million, five-year credit facility and completed the previously announced acquisition of Ohio River Metal Services, Inc.

“We continue to operate with a high sense of urgency as demonstrated with our new credit agreement and the acquisition of Ohio River Metal Services. Together with our IPO in April and our June acquisition of J. Rubin & Co., 2010 was filled with important events demonstrating Metals USA’s ability to continually strengthen and grow the company. We remain committed to our multi-pronged growth strategy that emphasizes tuck-in acquisitions and focused investments in existing facilities,” Gonçalves added.

Olympic Steel
Net Income Improves Dramatically
Olympic Steel Inc. reported increases in sales and tons shipped in its fourth quarter compared to the previous year, though it still ended with a modest loss for the final three months of 2010. The Bedford Heights, Ohio-based service center company reported a fourth-quarter loss of $1.6 million, a small improvement compared to the $2.6 million from the fourth quarter of 2009.

Net sales for the quarter increased to $215.2 million, up 55.4 percent from the $138.5 million during the same period in 2009. Tons sold during the quarter were up 31 percent to 254,000.

For the full year, net sales increased by 53.8 percent to $805.0 million. Tons sold in 2010 totaled 969,000, up from 721,000 the previous year. Net income for 2010 totaled $2.1 million, a dramatic improvement from the $61.2 million in losses posted during 2009.

“Our 2010 shipments increased by 34 percent over 2009, which is significantly greater than the total industry growth in steel shipments of 21 percent, as reported in the Metals Service Center Institute's Market Activity Report. We experienced strong momentum in material demand in the fourth quarter,” said Chairman and CEO Michael D. Siegal. “Along with announced price increases in all of our product lines beginning in November of 2010 and continuing still, our year-end inventory positions present additional opportunities for market share growth and profitability in the coming year.”

Siegal said Olympic’s strong balance sheet, plus a new $125 million, five-year loan facility, allowed the company to undertake several growth initiatives during the past year, including the ordering of a new temper mill and cut-to-length line to be located at U.S. Steel’s Gary Works facility. The company also plans to purchase and equip a new location in Mount Sterling, Ky., and expand its specialty metals product offerings. “These timely investments bode well for revenue growth and value creation in the recovering economic environment,” Siegal said.

Olympic made capital investments of $17.8 million in 2010. Officials anticipate capital expenditures of $35 million to $40 million this year. Siegal said these investments, plus possible acquisitions, “will provide both tonnage and revenue growth and real value creation in the recovering economic environment in North America.”

Entering 2011, Olympic officials said the company is well positioned to take advantage of an expected recovery. “We strategically bought heavier in advance of the price increases, anticipating growing customer demand we started to recognize at the tail end of 2010. We have a full complement of inventory, and we have experienced both volume and price increases for all products we sell,” said David Wolfort, president and chief operating officer.

2010 Sales Up 19 Percent, 
Income Up 31 Percent
Reliance Steel & Aluminum Co., Los Angeles, reported net income of $39.5 million for the fourth quarter and year ended Dec. 31, compared to 2009 fourth-quarter net income of $92.1 million, and net income of $48.7 million for the 2010 third quarter.

Sales for the 2010 fourth quarter totaled $1.58 billion, up 24 percent from 2009 fourth-quarter sales of $1.27 billion, but down 4 percent from 2010 third-quarter sales of $1.65 billion.

For the 2010 year, the company’s net income totaled $194.4 million, up 31 percent from net income of $148.2 million for the 2009 year. Sales for the 2010 year hit $6.31 billion, up 19 percent from 2009 sales of $5.32 billion.

Reliance’s tons sold rose 6 percent in 2010, while the average price per ton sold was up 12 percent compared to 2009. For the 2010 year, carbon steel sales represented 52 percent of revenues; aluminum sales 18 percent; stainless steel sales 16 percent; alloy sales 8 percent; toll processing sales 2 percent; and other sales 4 percent. Its 2010 inventory turn rate was 4.8 times, improved from 3.7 times in 2009.

“Our guidance for the 2010 fourth quarter did not anticipate the carbon steel price increases that were announced by the carbon steel producers consistently throughout December,” said David H. Hannah, Reliance chairman and CEO. “Demand during the quarter was seasonably lower than the 2010 third quarter, but not by as much as we expected, as some customers purchased a little more during December to get ahead of further price increases. As a result, we sold a little more steel at generally higher prices and margins that resulted in the quarter finishing up better than we originally expected.”

The company’s strongest markets in 2010 were energy, oil and gas, semiconductor and electronics, aerospace, agriculture and toll processing, which is primarily related to the auto and appliance industries. “Nonresidential construction was our most difficult area last year,” Hannah noted.

Reliance executives expect the prices of most metals to continue their upward trend and remain at strong levels at least through the 2011 first quarter. “The recent rapid price increases can cause changes in our customers’ buying patterns that can make it difficult to determine what real end-use demand is doing. While there is certainly some buying ahead of the announced increases, we believe that real underlying demand is steadily improving, but not at a large or rapid rate. We expect this slow and steady growth pattern to continue as the year progresses. Given these expectations, 2011 looks like a much better year than 2010,” Hannah said.

Reliance finalized the acquisitions of Diamond Manufacturing and Lampros Steel in the fourth quarter. It also spent much of the year focusing on internal growth initiatives, spending over $110 million on property, plant and equipment, added Gregg Mollins, Reliance president and COO. “We opened new facilities in Malaysia, Orlando and Philadelphia and are in the process of expanding several of our existing locations. Our board recently approved $200 million for our capital expenditure budget for 2011. We are excited about our future growth.”

Russel Metals
Turnaround Year Nets Positive Earnings
Russel Metals Inc., Mississauga, Ont., announced fourth-quarter 2010 earnings of $18 million (Canadian) on revenues of $562 million, reflecting a significant turnaround from the fourth-quarter 2009 loss of $25 million and a $1 million increase from the previous quarter.

For the year, Russel reported earnings of $70 million on revenues of $2.2 billion. This compares to a loss of $92 million for 2009.

Revenues in the company’s metals service centers increased 29 percent to $304 million in the fourth quarter, compared to the fourth quarter of 2009. Normally, the fourth quarter is seasonally slower than the third quarter, but fourth-quarter revenues were down only slightly, reflecting improved volumes and the start of steel price increases that have continued into 2011. Operating profits in the metals service centers of $13 million were almost double 2009 operating profits of $7 million, company officials reported.

Revenues in Russel’s energy tubular product segment increased 31 percent to $193 million in the fourth quarter, compared to the 2009 fourth quarter, and increased 3 percent over the previous quarter. Strong operating profits continued in the 2010 fourth quarter, increasing to $17 million from the $15 million profit in the third quarter and $1 million reported in the 2009 fourth quarter. For energy tubular products, the fourth quarter is a historically stronger quarter as the winter drilling season opens in Canada and continues into the first quarter.

Russel’s steel distributor segment had a 31 percent increase in 2010 fourth-quarter revenues to $61 million from the 2009 fourth quarter. In the fourth quarter of 2010, operating profits doubled over the 2009 fourth quarter to $5 million. Volumes were down from the 2010 third quarter, but stronger margins provided operating profits consistent with the third quarter.

“I am pleased with the results in our operations for the fourth quarter, which is traditionally a slower quarter,” said Brian R. Hedges, Russel president and CEO. “Our energy tubular products operations in particular had strong results as improved rig counts and advances in horizontal drilling technology resulted in increased activity in the energy sector. The increases in steel flat-rolled prices are starting to be reflected in other steel prices, and we remain cautiously optimistic that we will see continued improved results during the first half of 2011 from all three of our business segments.”

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Sunday, February 18, 2018