Despite a period of continued metal price volatility and broader economic uncertainty, Reliance Steel & Aluminum Co. Chief Executive Karla Lewis was pleased with the company’s fourth-quarter and full-year earnings.
The metals distributor relocated last summer to Scottsdale, Arizona, from downtown.
Lewis took over as head of the company in January, succeeding James D. Hoffman, who remains a member of the board of directors and a senior advisor to Lewis.
“The relocation of Reliance’s principal executive office to Scottsdale reflects our growth and expansion as well as our evaluation of post-pandemic business opportunities and related operating practicalities,” Hoffman said in October 2021 when announcing the move.
Founded in Los Angeles in 1939, Reliance operates metal services centers at which it takes the metal they buy in bulk from steelmakers and crafts it to the specifications of customers, including small manufacturers.
The company has a network of approximately 315 locations in 40 states and 12 countries outside of the United States from which it distributes more than 100,000 metal products to more than 125,000 customers in a variety of industries. Reliance has substantial operations throughout Southern California, including in Vernon, Pasadena and Manhattan Beach.
“Our product and end-market diversification and focus on servicing small order sizes with quick turnaround, 50.2% of which included value-added processing in 2022, supported a strong gross profit margin of 30.8% for the year, at the high end of our sustainable annual range despite declining prices for most products in the second half of 2022,” Lewis said in a statement announcing the quarterly results.
The company reported on Feb. 16 adjusted net income of $350 million ($5.87 a share) for the quarter ending Dec. 31, compared with adjusted net income of $434 million ($6.83) in the same period a year earlier. Revenue decreased from the prior year’s fourth quarter by 9% to $3.6 billion.
For the full year, however, Reliance reached a record in revenue by bringing in $17 billion, according to Lewis.
She attributed the amount as being “driven by solid demand in the majority of our end markets along with sustained higher metals pricing.”
The price of Reliance shares has been on the upswing as of late. The company’s stock closed at $260.17 on March 2, an increase of 29% since the beginning of the year.
At least two analysts who follow the company raised their target price on the stock, both taking it to $265.
Phil Gibbs, equity research analyst at KeyBanc Capital Markets, said in a research note on the steelmaker that he was encouraged by Reliance’s strong free cash flow to equity – a measure of how much cash is available to equity shareholders – underleveraged balance sheet and growth investments.
Katja Jancic, an analyst with BMO Capital Markets, wrote in a research report on Reliance published last month that in the bigger picture the company is well positioned to continue delivering resilient through-cycle performance with resilient (free cash flow) and healthy balance sheet supportive of continued margin-enhancing organic and/or inorganic investments and shareholder returns.
In its fourth-quarter earnings release, the company commented on the outlook for its business and outlined expenditures and other financial details.
“Reliance expects healthy demand trends to continue into the first quarter of 2023 despite prevailing macroeconomic uncertainty, along with ongoing supply chain disruptions and geopolitical matters,” according to the release.
In her statement, Lewis said the company spent $342 million on capital expenditures last year, the majority of which was growth oriented.
