Service Centers
Russel Reports Earnings Down from Last Year
Written by Tim Triplett
August 8, 2019
Russel Metals, Inc., Canada’s second largest metals distributor, reported revenues of $937 million in the second quarter. Net income totaled $31 million, about half the $66 million the company earned in the same quarter last year (figures are in Canadian dollars). The company’s gross margins in this year’s second quarter averaged 18.8 percent, well below the 24.2 percent in the prior-year period due to the U.S. Section 232 tariffs, which led to higher selling prices.
“We achieved solid second-quarter results as we navigated declining steel prices and modest demand following an exceptional 2018,” said, Russel President and CEO John G. Reid. “The removal of North American Section 232 and retaliatory tariffs in May 2019 lowered North American prices. Steel prices appear to be nearing the bottom early in the third quarter of 2019. Overall demand, while lower than 2018, remained steady in all three [of Russel’s] segments. World trade uncertainty tempered manufacturing growth particularly in the agricultural, heavy equipment, transportation and construction industries.”
Reid added: “WTI oil prices continue to be range bound and rig counts are trending below last year’s level in both Canada and the U.S. Areas which should provide positive momentum to our energy products segment include growth in the Permian Basin in the U.S. and LNG projects in Western Canada.”
Revenues in Russel’s service center business decreased 5 percent to $535 million for the quarter. Tons shipped were 7 percent lower than in the second quarter of 2018, though the average selling price was up 2 percent aided by the company’s continued growth in value-added processing. Quarterly operating profits hit $23 million, down from $57 million last year.
Revenues in Russel’s energy products segment decreased 7 percent to $298 million compared to $320 million in the 2018 second quarter due in part to reduced year-over-year North American rig counts. The segment had operating profits of $24 million, down from $28 million in the same quarter last year.
Revenues in Russel’s steel distributors segment increased by 8 percent to $100 million, an improvement on the $92 million in the 2018 second quarter. The company’s Canadian operation experienced higher demand from customers due to opportunities presented by the trade disruptions. Operating profits of $7 million were down from $15 million in Q2 2018, the company reported.
For the first half of 2019, Russel’s revenues increased by 3 percent to $2.0 billion, up from $1.9 billion for the same period in 2018 due to higher selling prices. Year-to-date earnings of $65 million lag the $105 million the company took in during the unusually strong market in 2018.
Tim Triplett
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