CHICAGO Service center operator and energy products distributor Russel Metals Inc. recorded a narrower profit in the first quarter despite a boost in sales as the company saw decreased demand in some sectors as well as lower selling prices.
Mississauga, Ontario-based Russel posted net income of Canadian $21.7 million ($21.5 million) for the three months ended March 31, down 34 percent from C$32.9 million in the same period last year, on revenue that rose 2.4 percent to Canadian $821.8 million ($814.7 million).
Russel attributed the revenue improvement to its acquisition last year of oilfield equipment distributor Apex Distribution Inc., it said in commentary released with earnings results May 2.
Revenue by the companys metals service center segment fell 16.1 percent from a year earlier due to lower demand. Gross margins at its metals service centers improved vs. the fourth quarter of 2012 but were slightly lower than in the first three months of last year, reflecting a leveling off of steel prices, the company said.
"The volume decline experienced throughout the service center industry was also felt by Russel Metals," president and chief executive officer Brian R. Hedges said. "The decline in volume in the first quarter impacted most sectors and was exacerbated by fewer working days in 2013 due to the timing of the Easter holiday and inclement weather following the relatively mild weather experienced in 2012."
The drop in volumes in Canada was more severe than in the United States, reflecting "the impact on the Canadian economy of the energy slowdown in Alberta for both the oil sands and conventional gas drilling activities," he said.
Russels energy products segment saw a 42-percent jump in sales in the first quarter, while the divisions gross margins improved from the preceding quarter and a year earlier, the company said.
Tons shipped by Russels service centers segment fell 10 percent from a year earlier but were up 9 percent compared with the fourth quarter of 2012, according to a company presentation to investors May 3. The average selling price of metal declined 8 percent and 3 percent, respectively, in the same comparisons.
The reduction in tons shipped was a result of the economy stalling in 2013, the company said in the presentation.