Metal Management Inc.: Staying Active During Challenging Times

Profit falls nearly 50% from previous first quarter, but company expands with acquisitions.

The good news for Metal Management Inc. is that the company is growing. On Aug. 2, the company said it had completed the purchase of Universal Recycling Inc. for an undisclosed amount. In May, Metal Management, an IndustryWeek Best 50 Manufacturer for 2007, acquired Mars Industries Inc., a full-service metals processor and supplier. And earlier in the year, the company entered into an agreement to buy TIMCO Scrap Processing Inc.

At the same time, the company is trying to recover from a first quarter in which profit dropped by nearly one-half from the year-earlier period. Net income for the period was $22.7 million, or 89 cents per share, compared with $44.9 million, or $1.70 per share, during the same period last year. The prior year's results were bolstered by a $16.2 million gain related to the sale of a joint venture interest. Net sales increased 32% to $654 million over the year-earlier period.

The company faced a "challenging operating environment," including a weak ferrous metals market during the quarter, according to CEO and President Daniel Dienst.

"Though we faced some volatility this quarter, we efficiently leveraged our resources to turn our inventories and meet the needs of our valued consumers," Dienst said in an Aug. 2 statement. "Markets were mixed in our first fiscal quarter, with weak ferrous conditions and continued strength on the nonferrous side."

Dienst added that the company demonstrated its "disciplined approach to create shareholder value through product growth" with its Mars Industries acquisition during the quarter. Mars Industries handled approximately 330,000 tons of ferrous scrap metal per year in the Detroit area. The Detroit business was fully integrated into Metal Management's operations and contributed to the company's results in the first quarter.

Through the Universal Recycling purchase, Metal Management receives three operating facilities in Indiana, which handle an estimated 80,000 tons of ferrous metals and 10 million pounds of nonferrous metals annually. The acquisition will strengthen Metal Management's presence in the Midwest region, Dienst says.

Metal Management Inc.
At A Glance

Metal Management Inc.
Chicago, Ill.
Primary Industry: Primary Metals
Number of Employees: 1,829
2006 In Review
Revenue: $1.6 billion
Profit Margin: 3.79%
Sales Turnover: 2.86
Inventory Turnover: 14.21
Revenue Growth: -6.63%
Return On Assets: 12.59%
Return On Equity: 19.28%

"Though the financial and strategic benefits of this transaction are compelling, most important is that the managers and all of the related talented employees of Universal Recycling share our values and will fit seamlessly into the Metal Management culture of integrity, safety and environmental responsibility," said Dienst in an Aug. 2 statement.

The company expects an expanded presence in the Southeast with its February buyout of TIMCO. The TIMCO operations serve the Houston area and process approximately 120,000 tons of ferrous scrap metals annually.

"The acquisition of TIMCO will broaden our already strong platform in the Houston area, which supports scrap generators and dealers throughout Texas," said Dienst in a Feb. 20 statement. "With its facility situated with access to the Intercoastal Waterways, TIMCO fits neatly into our portfolio of businesses that support consumers who receive scrap via water."


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