Russel Metals’ first-quarter results, while still profitable, reflect the downturn in the U.S. and Canadian economies and the weakness in the energy sector.
Russel generated net income of $11 million on revenues of $815 million in the quarter, compared to income of $34 million on revenues of $1 billion in the 2019 first quarter and a loss of $7 million in the fourth quarter of 2019 (all figures are Canadian dollars).
Revenues from Russel’s metals service centers business decreased 19 percent to $437 million for the quarter compared to $538 million in the same quarter in 2019. The average selling price declined 16 percent over the first quarter of 2019 and was 1 percent lower than the 2019 fourth quarter. Tons shipped were approximately 3 percent lower than the 2019 first quarter, but 8 percent higher than the 2019 fourth quarter. Operating profits were $18 million, down from $27 million in the 2019 first quarter.
Revenues in Russel’s energy products segment decreased 15 percent to $316 million compared to $373 million in the 2019 first quarter. On a same store basis, the decline was 24 percent. Price pressure on OCTG and line pipe operations continued due to low demand. Operating profits were $6 million compared to $30 million in the first quarter of 2019.
First-quarter revenues in Russel’s steel distributors segment decreased by 49 percent to $62 million compared to $122 million in the 2019 first quarter. Operating profits of $1 million for the quarter compared to $9 million in the same quarter last year.
“Steel prices began to decline late in the quarter and demand flattened. The increased oil supply drove down the price of oil and, coupled with the deterioration of the economy due to the pandemic, further pressured our energy operations as our customers rapidly reduced capital spending. As this unprecedented environment evolved, our operations have worked tirelessly to adapt,” said John G. Reid, Russel president and CEO, including establishing health and safety protocols for workers and customers.
Russel reduced its workforce to coincide with the reduction of business activity. “Our counter-cyclical cash flows will continue to generate cash in the 2020 second quarter,” Reid added.
Russel Metals is one of the largest metals distribution companies in North America. It carries on business in three metals distribution segments: metals service centers, energy products and steel distributors, under various names in the U.S. and Canada.
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