Los Angeles, California-based Reliance Steel & Aluminum Co., the largest metals service center in North America, announced Wednesday information regarding its July operating results, which showed that although July sales volumes and prices remained soft, profitability improved from June levels as the company focused on reducing debt and managing inventory.
The firm said its July sales, which include both steel and aluminum, were $401.9 million, down 2.5 percent from June. Tons sold per day declined 3 percent in July from June levels, and July FIFO (first in, first out inventory management method) gross profit increased to 21.4 percent of sales from 19.1 percent in June and 16.7 percent for the 2009 second quarter. Also, FIFO inventory levels decreased $52 million in July from June 30, 2009.
Reliance’s chairman and CEO David H. Hannah commented, “Our July results were in line with our expectations that demand may continue to soften somewhat but that our gross profit margins would improve. Because of our significant inventory reductions over the past several months in the face of rapidly falling demand and pricing, our inventory costs on hand are now more in line with current replacement costs allowing us to improve our gross profit margins from the historically low margins experienced in the most recent quarter. Also contributing to the improvement in our FIFO gross profit margin is the impact of mill price increases for many products that we sell.”
Hannah further commented, “Over the past few quarters we had shifted our focus to generating cash flow to reduce our debt levels and we were very successful, paying off over $1 billion of debt leaving no borrowings outstanding on our $1.1 billion revolving credit facility. We are now focused more on profitability and less on shipping volumes and cash flow. Our July FIFO gross profit margin was the highest monthly level we have seen so far this year.”
Last month, Reliance posted a second quarter loss, citing low demand and pricing for steel products. The company has not given any third quarter guidance other than to say it expects to be profitable. Reliance will announce its financial results for the third quarter and nine months ended September 30, 2009, on Thursday, October 22, 2009.