Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Reliance Steel & Aluminum Co. expects Q3 2020 demand to be marginally better compared to Q2 2020 in its non-residential construction end market. However, the cautiously-optimistic demand outlooks could be partially offset by continuing declines in the company’s aerospace and energy-related end-markets.  

 

The firm also forecasted further offsets in shipping volumes due to normal seasonal lags because of planned outages and employee vacations but expects the rate of decline to be less than the previous years.  Reliance estimates its Q3 2020 tons to be flat to up by 2pc compared to Q2 2020.   

 

Metals pricing in Q3 2020 is forecasted to remain within the ranges achieved in the latter part of Q2 2020, leaving gross profit margins near the high-end of its estimated sustainable range of 28-30pc. Concerns over the fluid nature of the COVID-19 pandemic and its impact on operations, supply chain, and customer relations will drive Reliance’s focus on elements within its control while carefully monitoring any impact the virus may have on its operations and financial conditions.

 

Reliance’s sales volumes in H1 2020 declined by 10.5pc to 2.68mn nt from 3mn nt during the same period last year. The company’s sales volumes in Q2 2020 declined by 19.6pc to 1.21mn nt from 1.50mn nt in the same quarter last year and fell by 17.5pc from 1.46mn nt in the previous quarter.

 

The drop in revenue was split between fewer tons sold and a decrease of 11.7pc in the average selling price per ton, which declined to $1,681/nt in Q2 2020 from $1,905mn nt in the same quarter last year. The decreases in tons and revenue were countered with reductions in capital expenditures, which declined to $41.2mn from $70.9mn in Q2 2019 and was down from 55.5mn during the previous quarter.

 

Reliance’s pretax income increased for Q2 2020 by 22.7pc to $102mn up from $83.1mn in Q1. However, when compared to Q2 2019 income was down by 58.5pc from $245.8mn.

 

Earnings per share increased by 34.8pc from $0.92/share to $1.24/share when comparing Q1 but dropped by 53.9pc from $2.69/share when compared to Q2 2019.

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