Reliance Steel & Aluminum Co.
) saw lower profit in the third quarter of 2013 as decline in
metals' prices coupled with higher costs weighed on its bottom
line. The California-based metals processor's profit fell roughly
3% year over year to $95.1 million or $1.22 per share in the
quarter from $98.1 million or $1.30 per share a year ago. But it
beat the Zacks Consensus Estimate by a couple of cents.
In addition to weak pricing, Reliance Steel also saw its costs
jump around 20% year over year in the reported quarter,
contributing to the lower profit. The company recorded an
inventory adjustment related credit of $27.5 million (included in
cost of sales) in the reported quarter.
Revenues, Volume and Pricing
Revenues went up roughly 19% year over year to $2,443.5
million in the reported quarter, but missed the Zacks Consensus
Estimate of $2,519 million. Strength across automotive,
aerospace, energy and heavy equipment was partly ebbed by
sustained weakness in the non-residential construction
The acquisition of Metals USA (completed in Apr 2013) also
contributed to the sales gain. Metals USA, which makes steel and
aluminum components, is a strategic fit with Reliance Steel's
portfolio and complements its existing customer base, product mix
and geographic footprint.
Sales volume climbed 31.3% year over year in the quarter.
Average prices per ton slipped 9.5% year over year and 2.3%
sequentially. Price decline was seen across all products with
carbon and stainless steel price falling 7.1% and 13.7%,
Reliance Steel ended the quarter with cash and cash
equivalents of $104.9 million, down 13% year over year. Total
debt increased roughly 57% year over year to around $2.2 billion
at the end of the quarter. Reliance Steel repaid $183.1 million
of debt during the quarter. Net debt-to-capital ratio was 34.9%
as at the end of the reported quarter, up from 26.4% a year
Reliance Steel, in Jul 23, raised in its quarterly dividend by
10% to 33 cents per share. The company generated operating cash
flows of $229.1 million in the quarter, down roughly 7% year over
Looking ahead, Reliance Steel expects the uncertain economic
and political global environment to continue to affect the steel
industry in the fourth quarter. Moreover, lower shipping days
given the holiday season and closure at many of its customers'
facilities due to the holidays are expected to hurt sales volume
in the quarter, leading to a sequential decline in tons sold.
Overall pricing is expected to remain near the current low
levels for the balance of 2013. The company expects earnings per
share for the fourth quarter to be in the range of 90 cents to
Reliance Steel, a Zacks Rank #3 (Hold) stock, remains
challenged by weak steel industry fundamentals and contends with
soft steel and metals pricing environment. In addition, raw
material prices are expected to remain volatile. Non-residential
construction, Reliance Steel's largest end market, still remains
Other metals companies having favorable Zacks Rank are
Norsk Hydro ASA
). While NSK holds a Zacks Rank #1 (Strong Buy), both Timken and
Norsk Hydro retain a Zacks Rank #2 (Buy).
NORSK HYDRO ADR (NHYDY): Get Free Report
NSK LTD -UN ADR (NPSKY): Get Free Report
RELIANCE STEEL (RS): Free Stock Analysis
TIMKEN CO (TKR): Free Stock Analysis Report
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