Reliance Steel & Aluminum Co has reported its financial results for the third quarter and nine months ended September 30th 2011. For the 2011 third quarter, Reliance reported net income of USD 84.9 million, up by 74% YoY from the 2010 third quarter net income of USD 48.7 million and down by 14% from USD 98.7 million in the 2011 second quarter. Sales for the 2011 third quarter were USD 2.14 billion, up by 29% YoY from 2010 third quarter sales of USD 1.65 billion and up 4% from 2011 second quarter sales of USD 2.05 billion. The 2011 third quarter financial results include in cost of sales a pre tax LIFO charge, or expense, of USD 22.5 million, compared with a pre tax LIFO charge of USD 9.75 million for the 2010 third quarter and a charge of USD 25.0 million for the 2011 second quarter.
For the nine months ended September 30th 2011, net income amounted to USD 275.9 million, up by 78% YoY as compared with net income of USD 154.9 million for the 2010 nine month period. Earnings per diluted share were USD 3.68 for the nine months ended September 30th 2011, up by 77% YoY as compared with earnings of USD 2.08 per diluted share for the nine months ended September 30th 2010. Sales for the 2011 nine months were USD 6.10 billion, up by 29% YoY from 2010 nine month sales of USD 4.73 billion. The 2011 nine month financial results include in cost of sales a pre tax LIFO charge or expense of USD 67.5 million compared with a pre tax LIFO charge of USD 24.75 million for the 2010 nine months. The LIFO adjustments, in effect, reflect cost of sales at current replacement costs.
Reliance's tons sold for the 2011 third quarter were up 13% from the 2010 third quarter and up 4% from the 2011 second quarter. Average prices per ton sold in the 2011 third quarter were up 16% compared to the 2010 third quarter and were relatively flat compared to the 2011 second quarter. For the 2011 third quarter, carbon steel sales were 53% of net sales, aluminum sales were 15%, stainless steel sales were 15%; alloy sales were 11%; toll processing sales were 2% and other sales were 4%.
Mr David H Hannah chairman & CEO of Reliance said that "Overall, during the 2011 third quarter, we saw better demand from our customers than we anticipated; however, there was significant downward pressure on pricing and margins, especially during July and August as mill prices for most all of the products we sell were declining. Our strongest markets continued to be in energy, oil & gas, aerospace, farm and heavy equipment, and auto (through our toll processing business). The quarter also benefited from the strong earnings of our most recent acquisition and a lower than anticipated tax rate; however, this was partially offset by foreign currency losses due to the strengthening of the US dollar."
He added that "Effective August 1st 2011, we acquired Continental Alloys & Services Inc, for a transaction value of USD 415 million, subject to adjustment. Continental, headquartered in Houston, Texas, and its affiliates comprise a leading global materials management company focused on high end steel and alloy pipe, tube and bar products and precision manufacturing of various tools designed for well completion programs of global energy service companies and has 12 locations in seven countries including the United States, Canada, United Kingdom, Singapore, Malaysia, UAE and Mexico."
Mr Hannah further stated that "Our balance sheet continues to be in excellent shape, with net debt to total capital of 31% at September 30, 2011. Even after borrowing to fund the acquisition of Continental, we have substantial remaining borrowing capacity with only USD 790 million of outstanding borrowings on our USD 1.5 billion credit facility at September 30th 2011."
Mr Hannah concluded that "Prices for the various metals that we sell remain volatile, and we expect this to continue through the fourth quarter, with a downward bias, resulting in overall slightly lower prices for our products. We also expect lower tons sold during the 2011 fourth quarter because of a reduced number of shipping days, which is our normal seasonal pattern. Given these expectations, we currently estimate earnings per diluted share in a range of USD 0.70 to USD 0.80 for the 2011 fourth quarter."
On October 26th 2011, the board of directors of Reliance declared a regular quarterly cash dividend of USD 0.12 per share of common stock.
The dividend is payable on December 20th 2011 to shareholders of record November 29th 2011. The company has increased its dividend 16 times since the IPO in 1994 and has paid regular quarterly dividends for 52 consecutive years.
