Steel Mills

Record Year for Olympic Steel

February 16, 2019

Olympic Steel reported record sales for the fourth quarter and full-year 2018. The metals service center saw net sales jump 29 percent in 2018 to $1.7 billion on higher year-over-year volume and higher average prices in all three of its report segments. Operating income more than doubled in 2018 to $57.1 million, up from $24.0 million in the prior year. Net income soared 78 percent to $33.8 million for Olympic Steel’s third-most profitable year in its history.

Fourth-quarter sales increased 39 percent to $30 million. Operating income for the quarter totaled $1.8 million compared to an operating loss of $2.0 million in Q4 2017. Net income, however, was impacted by higher LIFO expense of $3.7 million and other items resulting in a net loss of $1.3 million for the quarter.

“While 2018 had a number of notable accomplishments, it wasn’t without challenges,” said President David Wolfort. “During the fourth quarter, we experienced an acceleration of negative pricing headwinds that began in late third quarter, as Hot Roll CRU eroded by $100 a ton during the fourth quarter. The pricing headwinds impacted our gross margins in the fourth quarter and have continued into early first quarter 2019.

“We also face challenges from trade disputes and counter tariffs authored by the European Union, Canada and countries whose steel trade has been disrupted by the implementation of Section 232. To counteract these headwinds, we are improving inventory turnover, focusing on reducing operating expenses and planning for lower capital expenditures in 2019.”

Falling steel prices resulted in margin pressure accelerating from October to December, said CEO Richard Marabito. January was similar to December, but Marabito expects imminent margin improvement.

He commented, “We think that we will have a more stable pricing environment. Obviously we have come off from the highs of some of the Section 232-driven price spikes that we saw last year. We are settling in now at a pricing environment that will be a little more consistent and normalized, and I think our margins will be more consistent and normalized as we move forward.

Regarding demand, Wolfort said customers are signaling “high single-digit growth for 2019 to low double-digit growth.”

“In general, we are bullish on 2019 and our large OEM customers in construction, agriculture and industrial production are all signaling growth,” he said.