CHICAGO Pricing was the
largest headwind against earnings power for Reliance Steel
& Aluminum Co. for most of last year, and has yet to gain
real strength, given demand and capacity utilization and
Global economic and domestic
political uncertainty will continue to affect metal sales in
2013, chairman and chief executive officer David H. Hannah said
during the companys Feb. 21 earnings conference call.
demand standpoint, the Los Angeles-based service center chain
will see growth from a number of major end use industries,
president and chief operating officer Gregg J. Mollins said,
including automotive for its toll processing operations,
commercial aerospace, and heavy industry, such as rail cars,
barges, tanks and transmission towers.
Mollins also believes there will
be an uptick in demand from the North American energy
Reliance plans to expand two of
its toll processing plants and add new equipment to keep up
with automotive steel demand. It expects to spend $180 million
on capital projects this year vs. $214 million last year.
This year is starting off more
slowly than last year, Hannah said. In terms of tons sold per
day, January was off 4 percent from 2012 and pricing was down
5.4 percent, which is having more of an impact on
Reliances guidance than tonnage.
"Keep in mind that last
years first quarter was our best in terms of earnings,
tons and pricing. This year, we expect to return to a more
normal pattern, with the second quarter being our best," he
said, but the third quarter could be good if the nonresidential
construction business improves.
"We are seeing an improvement in
quoting. ... We are doing a lot more quoting. We just toured
several large steel suppliers and their inclination is similar
to our own. They are seeing more quotes and they think some
projects will be let," Mollins said.
The federal budget issues are
what "has a foot on the brake," Hannah said. "If youre
building a stadium or strip mall, you want to know whats
going on with the economy. And we dont know that. We need
to get the folks in Washington moving in the right
Reliance posted 2012 net income
of $403.5 million, up 17.4 percent from $343.8 million the
previous year, on sales that improved 3.8 percent to $8.44
billion. Fourth-quarter net income of $80.4 million was up 18.4
percent from $67.9 million a year earlier despite a 7.1-percent
decline in sales to $1.89 billion.