Los Angeles-based metals service center Reliance Steel & Aluminum Co. has released its quarterly earnings report, which shows the company's first quarterly net loss since becoming a public company in 1994.
The firm's net loss for Q2 was $5.79 million, compared with a $156.6 million profit in the same quarter last year.
Sales in the second quarter were $1.2 billion, down 41 percent from last year and down 20 percent from the first quarter. Sales for the first six months of the year were $2.8 billion, compared with sales of $4 billion in the same period of last year. For the six months ended June 30, 2009, profit was $14.3 million, down from $264 million in the prior-year period.
The firm indicated that weak demand and a bigger-than-expected drop in steel prices harshly affected profits. "The 2009 second quarter was the most difficult operating environment that we have ever experienced at our company," said David Hannah, chairman and CEO of Reliance. "Carbon steel prices fell sharply during the quarter, much more than expected, which caused increased de-stocking activity and much lower gross profit margins than we had anticipated," he added.
The company declined to provide a third quarter outlook due to continued uncertainty over the economy. Concerning the future outlook, Mr. Hannah said, "We do believe that the worst is behind us, but overall we don't anticipate any meaningful improvement in demand for the balance of the year." He added, "There is some good news, however, on the pricing side where it appears that we have bounced off the bottom as pricing on most all our products is increasing some. That, coupled with a better inventory position, should lead us to better gross profit margins in the second half of the year."
Mr. Hannah concluded, "Due to the continued uncertainty regarding economic conditions, we are not comfortable providing earnings guidance for the 2009 third quarter, except to state that we do expect to be profitable."