Reliance Steel & Aluminum Co.
) profit sagged in the fourth quarter of 2013 as lower pricing
and higher costs dragged down its bottom line. The
California-based metals processor's profit fell roughly 23% year
over year to $61.8 million or 79 cents per share in the quarter
from $80.4 million or $1.06 per share a year ago.
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Barring one-time items such as impairment and restructuring
charges, earnings were 92 cents per share, down from $1.08 per
share a year ago. It missed the Zacks Consensus Estimate by 6
Reliance Steel saw its consolidated costs jump around 25% year
over year in the reported quarter, contributing to the lower
profit. The company also witnessed a seasonal slowdown in demand
during the quarter. It recorded an inventory adjustment related
credit of $12.7 million (included in cost of sales) in the
For full-year 2013, profit, as reported, slipped around 20% year
over year to $321.6 million or $4.14 per share. Adjusted earnings
fell to $4.40 per share from $5.35 per share a year ago, but beat
the Zacks Consensus Estimate by a nickel.
Revenues, Volume and Pricing
Revenues shot up roughly 22% year over year to $2,306.7 million
in the reported quarter, but missed the Zacks Consensus Estimate
of $2,375 million. Strength in the automotive market coupled with
Metals USA acquisition supported the top line. 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.
Overall sales volume jumped around 39% year over year in the
quarter while same-store sales volumes moved up 9.5%. Average
prices per ton fell around 11% year over year and 2%
For the full year, revenues rose roughly 9% year over year to
$9,223.8 million, but missed the Zacks Consensus Estimate of
Reliance Steel ended 2013 with cash and cash equivalents of $83.6
million, down 14% year over year. Total debt increased roughly
75% year over year to around $2.1 billion at the end of the year.
Reliance Steel repaid $43.5 million of debt during the quarter.
Net debt-to-capital ratio was 34.3% as at the end of the reported
quarter, up from 23.8% a year ago.
Reliance Steel's Board, on Feb 18, raised in its quarterly
dividend by 6% to 35 cents per share from 33 cents. The company
generated operating cash flows of $633.3 million in 2013, up
roughly 5% year over year.
Looking ahead, Reliance Steel expects metals pricing and demand
environment to improve in first-quarter 2014 amid a slow but
steady recovery in the U.S. economy. The company expects earnings
per share for the quarter to be in the range of $1.20 to $1.30.
This is below the current Zacks Consensus Estimate of $1.42.
Reliance Steel sees continued strength in the automotive market
and expects healthy operating results across end-markets such as
aerospace, energy, semiconductor/electronics and manufactured
goods in 2014.
While pricing is expected to remain under pressure, the company
expects aerospace demand to improve in 2014. Energy demand and
pricing have been forecast to be better this year while a modest
improvement is expected in heavy industry. Reliance Steel also
sees a modest recovery in non-residential construction market in
Reliance Steel made capital spending of $168 million during the
last year and its Board has approved capital expenditure of $220
million for 2014, a significant part of which will be spent on
internal growth initiatives.
Reliance Steel, a Zacks Rank #3 (Hold) stock, remains challenged
by weak steel industry fundamentals and contends with soft steel
and metals pricing environment. Moreover, non-residential
construction, its largest end market, still remains weak.
Nevertheless, Reliance Steel is well placed to leverage the
strong momentum across a number of end markets, including
automotive and aerospace. Strategic acquisitions and expansion of
existing operations should also aid to its results moving ahead.
Other metals companies having favorable Zacks Rank are
CIRCOR International, Inc.
Worthington Industries, Inc.
). While NSK holds a Zacks Rank #1 (Strong Buy), both CIRCOR and
Worthington retain a Zacks Rank #2 (Buy).