Steel Mills

Reliance Releases 1Q Earnings

April 21, 2016

Reliance Steel & Aluminum posted net income of $92.2 million on sales of $2.16 billion for first quarter 2016. Tons sold were up 8.9 percent from Q4 2015 with average selling price down 15.6 percent from a year ago and down 2.4 percent from the previous quarter.

Reliance sold 1,216,700 tons of carbon steel in first quarter, up 7.9 percent from Q4 2015 and down 3.2 percent year over year. Average selling price per ton for carbon steel was down 2.9 percent from Q4.

Gregg Mollins, President and Chief Executive Officer of Reliance Steel & Aluminum said, “Importantly, for the first time in well over a year, we’ve begun to experience rising metals pricing for all carbon steel products as well as stainless steel flat-rolled products. We believe this pricing improvement, which accelerated toward the end of the first quarter, is mainly a result of both the recent trade case filings by U.S. steel producers and increasing scrap costs, which contributed to our expanded gross profit margins in the first quarter of 2016.”

During the quarter Reliance acquired all the capital stock of Tubular Steel in St. Louis, Mo. As of April 1, Reliance acquired Best Manufacturing, a custom sheet metal fabricator of steel and aluminum. The company is constructing a new aluminum facility in Kentucky, expanding two existing facilities, and is nearing completion on a toll processing facility in Mexico.

In a discussion on aluminum processing during the earnings call, Gregg Mollins said it is important to realize there has been no decline in the carbon side of Reliance’s toll processing operations because of the expansion into aluminum.

Reliance was optimistic about metal pricing in the second quarter of 2016 given recent mill price increases and expects continued slow growth of the U.S. economy. As a result, Reliance management estimates tons sold to be flat to up 2 percent in the second quarter of 2016 compared to the first quarter of 2016. Average selling price in the second quarter of 2016 is estimated to increase 3 percent to 5 percent from the first quarter of 2016.

On the subject of imports the management team said there are a lot less Chinese offers in the carbon steel plate arena but that Japan and Russia imports have picked up.

“The offerings that we are getting on basically all the carbon outside whether it be structural or flat-rolled etcetera are very minimal,” said Mollins. “The spreads are not to the extent that you would even want to risk going forward and find tons from offshore, but the offerings themselves to your question are very few and far between as compared to even six months ago.”