Reliance Steel & Aluminum Co.: Uncertain Days Ahead

April 2, 2009
Lower demand for steel and aluminum expected to continue through first half of 2009

In February, when Reliance Steel & Aluminum Co. announced its fourth-quarter results,

Chairman and CEO David Hannah said the 2008 IW 50 Best Manufacturer could not provide a forecast for the first three months of 2009 because of "continued uncertainty regarding economic conditions and the operating environment."

But as the recession deepens, the picture is getting a little clearer for Reliance Steel, and it's not the one the company had hoped to see. Speaking to Reuters Global Mining and Steel Summit March 12, Hannah said demand for the company's steel and aluminum products will remain weak at least through the first half of 2009, Reuters news service reported.

"Not until the mills give confidence that prices have hit bottom, will anyone do any significant buying," he told Reuters.

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At A Glance

Reliance Steel & Aluminum Co.
Los Angeles, Calif.
Primary Industry: Primary Metals
Number of Employees: 8,600
2007 In Review
Revenue: $7.27 billion
Profit Margin: 5.62%
Sales Turnover: 1.82
Inventory Turnover: 5.97
Revenue Growth: 26.39%
Return On Assets: 11.29%
Return On Equity: 23.36%
The news comes about one month after the Los Angeles-based metal processing and distribution company reported that fourth-quarter 2008 net income fell 17% to $66.3 million, or 90 cents per share, from the year-earlier period.

The drop was primarily related to lower metals prices and demand, Hannah said.

"Starting primarily in November and December, we experienced sudden declines in demand and accelerated mill pricing reductions that resulting in significant competitive pressures and deteriorating profit margins as metals service centers, including Reliance, focused on inventory destocking," said Hannah in a Feb. 19 statement.

During the quarter, the company responded to the downturn by reducing working capital expenses and cutting its workforce by about 7%.

For the year, profit hit a record $482.8 million up 18% compared with net income of $408 million in 2007. Earnings per share rose 22% to $6.56. Meanwhile, shipping volumes for January have dropped about 35% from a year earlier, Hannah told Reuters.

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