Lower Prices Dent Reliance’s Margins But Cut Costs

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Reliance Steel & Aluminum Co. said Friday its profit margins deteriorated in the first half of November as selling prices fell and economic uncertainty eroded demand. But shares rose 5.5 percent after the company said lower inventory costs reduced working capital, producing substantial cash flow.

Los Angeles-based Reliance, which sells products to aerospace, energy and construction companies, recorded October sales of $918 million, its second-highest monthly sales amount ever. The company has declined to give guidance for its current quarter due to the uncertain economy.

Shipments per day fell 1.7 percent compared with September, and the company’s average selling price per ton slipped 3.8 percent. The company’s gross profit margin slid 2.2 percent in October compared with the previous month.

Steel mill price decreases so far this month have been more substantial, said Chief Executive David Hannah in a statement. “Looking forward, we expect the business climate to become more difficult over the next couple of quarters,” Hannah said. “The 2001 to 2003 period was much more difficult for our industry than it is currently. We successfully managed through that period and we expect to do so again.”

Shares were up 70 cents to $13.13 in morning trading on the New York Stock Exchange.

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