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Russel profit shrinks as steel demand ‘sluggish’

Keywords: Tags  Russel Metals, Brian Hedges, Marion Britton, earnings report, Corinna Petry

CHICAGO — Russel Metals Inc. posted net income of Canadian $98.8 million ($98.61 million) last year, down 16.5 percent from C$118.3 million in 2011 despite an 11.4-percent jump in sales to just over C$3 billion ($2.99 billion).

The company’s fourth-quarter net income of C$20.4 million ($20.36 million), down 28.4 percent from C$28.5 million in the same period a year earlier, included income from oilfield equipment distributor Apex Distribution Inc., which contributed $6 million in operating earnings after Russel acquired it in November 2012 (, Nov. 9). But the positive contribution to Russel’s energy-products segment was muted by C$4 million in inventory write-downs by other energy operations due to price declines in pipe products.

Fourth-quarter operating earnings by Russel’s metal service centers fell 21 percent due to an industrywide drop in volumes in November and December that went beyond expected seasonality. Operating earnings by the steel distributor segment tumbled 40.5 percent due to soft demand and tightening margins.

For metals distribution and service centers, "markets are not giving a lot of direction on demand and pricing," chief financial officer Marion Britton said. "I would describe demand as sluggish." However, she added that she expects both demand and pricing to improve in the first quarter compared with the fourth quarter.

One thing that could change the landscape, particularly for Russel’s Canadian operations, would be approval of the Keystone XL pipeline, president and chief executive officer Brian R. Hedges said.

For hot-rolled coil, the market "is close to the bottom now," he said. "Right now, there is no pricing power in the industry. Mills are struggling." He cited margin compression in oil country tubular goods sales as well as sheet. "It probably can’t get any worse, so things can only come up from here," he said.

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