Reliance Steel Profit Slips 19% as Demand Falls
Metals processor Reliance Steel & Aluminum Co. said Thursday that its first-quarter profit fell 19% as pricing and demand for its products softened, but analysts remained upbeat about the company’s earnings potential.
Los Angeles-based Reliance, which processes carbon, aluminum and stainless steel products and distributes them to various manufacturers, reported net income of $13 million, or 50 cents a share, compared with $16 million, or 58 cents a share, a year earlier.
Wall Street analysts forecast the company would report earnings in the range of 52 cents to 55 cents a share with a consensus estimate of 53 cents a share, according to First Call/Thomson Financial.
Reliance warned in February that its first-half results would not match those in the same period of 2000 because of the slowing economy. But the firm said Thursday that it was comfortable with the low end of Wall Street earnings estimates for 2001, provided it doesn’t make any acquisitions during the remainder of the year. Analysts estimate the company will earn about $2.32 a share this year, according to First Call.
Sales were nearly flat for the quarter at $433 million, compared with $430.8 million a year earlier.
Analysts said Reliance’s first-quarter earnings were hurt by weaker demand in the steel service center business. Steel service centers buy steel from the producers, process it and distribute it to the end user.
The decline in demand growth for service centers probably will continue into the second quarter, but Reliance’s results should improve later in the year as automobile production picks up and the aerospace industry remains strong, said steel analyst Lloyd O’Carroll of BB&T; Capital Markets.
The company said it was pleased that inventory levels were beginning to decline and steel producers were cutting output, but it was not optimistic that those levels would even out in the second quarter.
“We’re optimistic we’ll see prices increase and demand rise sometime in the second half of the year,” Chief Executive David Hannah told analysts.
Hannah said the company also was cutting costs, including trimming its work force to be more consistent with its lower business level. The company cut 205 jobs, or 5% of its work force of 4,100, by March 31 because of a dramatic slowdown in sales in February, said Chief Financial Officer Karla McDowell in a conference call.
The company said those cuts might result in about $3.7 million in net income on an annual basis.
Reliance’s shares rose $1.25 to close at $27.95 on the New York Stock Exchange. The earnings were reported early in the day.
At a Glance
Other Southern California company earnings, excluding one-time gains and charges unless noted:
* Calabasas-based restaurant operator Cheesecake Factory Inc. reported first-quarter net income of $8.4 million, or 25 cents a share, compared with $6.0 million, or 19 cents, a year ago. Revenue rose 25% to $120.5 million. Analysts had expected earnings of 23 cents a share. Sales at stores open more than a year were up 2.4%.
* San Diego-based biotechnology company IDEC Pharmaceuticals Corp. reported sharply higher first-quarter profit as sales of its cancer drug Rituxan for non-Hodgkin’s lymphoma more than doubled. The company also said regulatory review of its next likely commercial product, a radioactive anti-cancer antibody called Zevalin, may be more complicated than first anticipated.
IDEC earned $20.8 million, or 12 cents a share, contrasted with a net loss of $4.3 million, or 3 cents, a year ago. IDEC noted that it previously restated earnings for its first quarter of 2000 to reflect changes in accounting standards. Analysts’ estimates ranged from 10 cents to 15 cents. Revenue more than doubled to $56.5 million.
* IndyMac Bancorp Inc., a Pasadena-based mortgage bank, reported first-quarter earnings of $25.0 million, or 39 cents a share, compared with $21.7 million, or 29 cents a year ago. Net interest income was flat at $43 million.
* Jacobs Engineering Group Inc. reported that fiscal second-quarter profit grew about 19% as backlog rose by about $1.5 billion from a year ago. The Pasadena-based company posted earnings of $21.6 million, or 79 cents a share, compared with $18.1 million, or 69 cents, a year ago. Analysts had expected the company to report earnings of between 77 cents and 81 cents. Revenue hit a record $1 billion in its second quarter, up 14%.
* Van Nuys-based automotive supplier Superior Industries International Inc., citing higher energy costs, said first-quarter net income declined 14% to $16 million, or 61 cents per share, compared with $18.5 million, or 70 cents, a year ago. Revenue rose 7% to a record $166.1 million.
