Reliance Steel and Aluminum suspended its guidance for Q2 2020 but reported a strong start to the year after posting a gross profit margin of 30.3pc in Q1 2020 and increased generation of cash flow from operations.
The company reported a relatively healthy demand in Q1 2020 led to a 6.8pc increase in shipments compared to Q4 2019. However, it closed three business units that supported the energy markets because of low demand in the oil and gas markets due to drilling technology changes and the rise in global oil production.
In the first quarter, Reliance shipped 1.47mn nt, a 2.2pc decrease from 1.5mn nt in Q1 2019, but an increase from 1.38mn nt shipped in Q4 2019.
The company’s carbon steel sales dropped 1.1pc in Q1 2020 to 1.18mn nt from 1.2mn nt in the same quarter last year. Its aluminum sales also declined 3.9pc to 85,400nt in Q1 2020 from 88,900 nt in Q1 2019. Reliance sold 79,200nt of stainless steel in Q1 2020, 0.6pc above Q1 2019’s sales of 78,700nt, while its alloy sales decreased by 17.7pc to 45,700nt last quarer from 55,500nt in Q1 2019.
Reliance’s consolidated net sales declined by 13pc to $2.57bn in Q1 2020from $2.96bn during the same quarter last year but increased by 5.1pc from Q4 2019’s net sales of $2.45bn.
The company’s gross profit decreased by 9.9pc to $780mn in Q1 2020 from $867mn in the same quarter last year and by 1.7pc from $794mn in Q4 2019. The steelmaker’s net income also declined by 67.5pc to $61.7mn in Q1 2020 compared to $190.1mn last year and fell 62.7pc compared to $165.6mn in Q4 2019.
Adjusted earnings, excluding some items fell to $164.8mn in Q1 2020 from $190.1mn in the same period last year and from $165.6mn in Q4 2019. Reliance’s net cash generation from operating activities in Q1 2020 was $170.8mn, a 45.7pc increase from $117mn in Q1 2020, but a 50.8pc decrease from $347mn in Q4 2019.
Reliance had total debt outstanding of $1.84bn on March 31, 2020 with $831.5mn available to borrow from its $1.5bn revolving credit facility.
The company also reported actions taken in response to COVID-19 that includes reducing workforce and operations. Reliance’s chief executive officer said the company’s strong balance sheet and counter cyclical cash flow will allow operations to continue and believes the company is in a good position to come out strong from the current crisis.