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Reliance outlook bullish despite lower profit

Keywords: Tags  Reliance Steel & Aluminum, David H. Hannah, earnings report, service center, Kaiser Aluminum, Michael Cowden

CHICAGO — Reliance Steel & Aluminum Co.’s net income slid 20.3 percent last year as higher sales volumes could not make up for lower prices, particularly in the fourth quarter.

But the Los Angeles-based service center, the largest in North America, thinks metal pricing and demand this year should benefit from a steadily improving U.S. economy, according to commentary released with earnings data Feb. 20.

Reliance’s sales volume increased 21.4 percent to nearly 5.4 million tons in 2013 but average selling prices dropped 10 percent to $1,713 per ton from $1,903, the company said. Sales for the three months ended Dec. 31 jumped 38.7 percent from a year earlier to 1.4 million tons, but average prices slid 11.4 percent to $1,645 per ton from $1,857.

The drop in fourth-quarter prices was unexpected, "significantly reducing our overall profitability in both the fourth quarter and the year," Reliance chairman and chief executive officer David H. Hannah said in the earnings commentary.

The fourth quarter also saw a typical seasonal slowdown, although less pronounced than in the past, Hannah said, suggesting that overall demand continues to improve.

Reliance does not expect any end markets to experience "outsized" growth in 2014, although it forecasts continued strength in the automotive sector. Solid results also are expected in sectors as diverse as energy, semiconductors and aerospace, Reliance said. But while aerospace demand is forecast to improve, prices could drop because of "excess mill capacity" and a glut of aluminum plate in the sector.

The company’s aerospace outlook echoed Kaiser Aluminum Corp.’s concerns about an inventory overhang of aerospace plate dragging into 2015 and pushing down prices (, Feb. 19).

While aerospace plate prices may take a hit, the long-beleaguered nonresidential construction market should see a "slow but steady recovery" and modest improvement in 2014, Reliance said. In addition, heavy industry is performing "reasonably well" and should also see better times in 2014.

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