Steel Mills

Olympic Steel Sees Margin Improvement in Q2 and H1

August 6, 2015

Olympic Steel net sales fell to $316.3 million in second quarter and dropped 9.8 percent to $661.1 million for the first half of 2015. Declines in both periods were attributed to lower shipments and lower average selling prices due in part to the impact of subsidized imports on the market.

The company reported a net loss of $21.2 million and took a goodwill impairment charge of $24.5 million on its tubular and pipe segment. The write down was an accounting requirement related to future cash flow and declines in the market and “not because the business has gone backwards,” said chief financial officer Rick Marabito. The segment remains profitable and in the upper quarter of the market for performance.

Olympic has been focused on reducing inventory, paying down debt and lowing operating costs. Year to date inventory is down 22 percent or $68 million. President and chief operating officer David Wolfort said Olympic met its objectives and the inventory is now balanced. Inventory turnover improved to 4.4 times for Q2 and in June reached 4.7 times.

Gross margins have improved to more historical levels. At the end of Q2 consolidated gross margin decreased to 18.8 percent of sales from 19.3 percent a year ago. Marabito noted that Olympic Steel’s pricing contracts reset each quarter and that third quarter margin decline was not as steep as second quarter.

Olympic Steel praised the recent coated and cold rolled trade suits that have been filed. “We are free market advocates at Olympic Steel and applaud these actions,” said Wolfort. “If free market forces determine winners and losers, we are confident North America can survive. We are not advocating unfair protectionist policies, just a level playing field for everyone.”

Chairman and chief executive officer Michael Siegal said that the cases still need to be acted upon by the Commerce and USITC. “All of this will take time and actual duties will not be in effect till next year. Therefore, we do not expect immediate impact on prices, however, the tide of illegal imports may slow and subsequent petitions are also likely to be filed on hot rolled and stainless steels. Until an outcome is determined, said Siegal, he doesn’t think customers are paying attention to it.

Olympic executives said they are not worried about possible labor strikes at US Steel or ArcelorMittal and think the automotive labor negotiations will have “more teeth.”