Los Angeles, California-based Reliance Steel & Aluminum Co. reported Thursday that for Q3, the company reported net income of $48.7 million, up 17 percent, compared to Q3 2009 net income of $41.8 million. Sales for the Q3 2010 also increased and totaled $1.65 billion, up 33 percent from Q3 2009 sales of $1.24 billion, and up 2 percent from Q2 2010 sales of $1.62 billion. Furthermore, for the nine months ended September 30, 2010, net income was up 176 percent compared to 2009 nine-month net income of $56.1 million.
Reliance boasted about excess tons sold during Q3 2010, which were up 11 percent from the 2009 third quarter and up 1 percent from the Q2, and noted that carbon steel sales were 52 percent of total net sales for the quarter.
Reliance elaborated further on the carbon steel market during the company's quarterly conference call when questioned about whether current actions (i.e. prices coming down on flat-rolled sheet) are enough to stabilize the flat rolled market, commenting that there is still more to be done, and prices "need to go down a little further because right now pricing is more important than producing steel."
David H. Hannah, Chairman and CEO of Reliance said that overall, Reliance is content with its performance during the quarter "in light of existing market conditions" and that "the operating environment during the 2010 third quarter was pretty steady with the 2010 second quarter. Mill pricing declined a bit more than we had anticipated during the quarter, pressuring our selling prices and causing our gross profit margins to narrow somewhat. Demand was a little better than we had expected as we typically see a seasonal decline in the third quarter compared to the second quarter."
When asked later regarding this comment on seasonality, Hannah explained that seasonal decline is expected to continue into the fourth quarter with less work and shipping days in Q4, and customers wanting to "skinny up their buying" at the end of the year because they don't want to pay taxes for product sitting on warehouse floors.
Reliance went on to discuss both recent and future acquisitions, citing that they were extremely pleased with the recent acquisition of the outstanding capital securities of Diamond Consolidated Industries, Inc. and affiliated companies on October 1, 2010. However, Reliance explained that they aren't necessarily trying to move into the value-added industry and that this is this new addition is different for the company, and the "first time we're poking holes in metal in lieu of just cutting it," and although this acquisition provides a higher margin business, Reliance has to be "careful going too far downstream because we don't want to get into the position where we're competing with our customers."
Regarding future acquisitions, Hannah explained that although "we won't see a lot of transactions being announced in the Q4" he still believes that "we'll see more acquisition activity" in the near future, and Reliance "will continue to grow internationally," going on to say that even though "returns are better, and risks are less here in the US...we'll look at anything anywhere."