By Sandy Williams
Olympic Steel reported net income of $2.5 million in the second quarter of 2013, down from $4.5 million in the same period 2012. Net income for the first half was $7.7 million compared with $10.8 million in the first half last year.
Total net sales were $330.8 million, down 10 percent from $367.4 million in Q2 2012. Flat products sales totaled $267.4 million down from $307.9 million a year ago. Tubular and pipe product sales increased to $63.4 million from $59.5.
Weak spot prices and softer demand led to a 6.6 percent reduction in flat rolled tonnage, at 573,000 tons in the first half.
Chairman and CEO Michael D. Siegal commented, “The first half of 2013 was characterized by lower sales volume and average selling prices compared with last year. However, despite the external headwinds, Olympic Steel successfully improved consolidated gross margin, lowered inventory levels and generated strong free cash flow. A portion of the excess cash has been used to reduce debt by more than $34 million since the beginning of this year.”
Olympic reported a profit at all of its six new start up locations and successful reduction of aged inventory and a rebalancing of stock at its facilities. Siegal said other than an expansion of Chicago Tube & Iron in the second half, “we’re pretty much done with a lot of the capital projects beyond maintenance.”
During Olympic’s conference call, President and COO David Wolfort commented that demand will have to pick up to sustain recent price increase.
When asked to comment on conditions for the second half 2013 Siegal commented:
“Well, if I was that smart I’d be a richer man. But I’d say having Congress on 30 days break for the summer has certainly calmed down all the bad news out of Washington. So I think a lot of it, as you look at the actual numbers, I mean the obvious – the domestic GDP has not been strong. Obviously there’s great concern over what China demand really is or is not. You’ve seen the disruptions in Europe. And so I would tell you we have no great confidence that GDP in the United States is going to be much higher in the back half than it is.
Sequestration is still there. Certainly when Congress comes back into session we will expect all of the name-calling and the negative news that comes out of Washington about the world is coming to an end. And clearly the news in China is building no confidence for anybody either. So while there are signs of certain recoveries in the marketplace, you’ve got certain other issues like mining and other parts of the consumption market that gives us pause. So I would tell you the back half looks for us to be – whatever a normal steel market is, we’re looking at a normal steel market not a full recovery as some people are predicting.”
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