Reliance reports record annual gross profit margin for 2016

Reliance Steel & Aluminum Co. (NYSE:RS) today reported its financial results for the fourth quarter and full year ended December 31, 2016.

Operationally, 2016 was a terrific year for Reliance as our focus on maximizing our gross profit margin resulted in our first ever annual gross profit margin above 30%,” said Gregg Mollins, President and Chief Executive Officer of Reliance.  “Although somewhat improved from 2015, the macro environment for our industry continued to be challenging with overall lower demand levels and pricing volatility resulting in a sales decline of $737 million in 2016 compared to 2015, due mostly to lower metal pricing.  However, the expansion of our FIFO gross profit margin to 29.8% for the 2016 year, a 380 basis point improvement over 26.0% in 2015, added $328 million more gross profit dollars, generally offsetting the reduction to our pre-tax income from our lower sales levels.  We believe our ability to increase our gross profit margin was made possible by the significant investments we have made in our value-added processing equipment to provide our customers with superior service and quality.  Our effective pricing strategy and discipline implemented by our managers in the field along with our continued focus on inventory management further contributed to this success.”

Mr. Mollins continued, “The positive metals pricing environment experienced in the second quarter of 2016 lost momentum as we progressed into the second half of the year. However, the environment recovered as multiple price increases were announced by the mills in late 2016 and have continued into 2017.  The trade cases filed by U.S. producers on various products throughout the year, along with production capacity discipline and price increases in raw materials, also continue to be supportive of domestic pricing. These factors have led to positive pricing momentum in early 2017.  Customer sentiment is also more positive than we have seen in some time, which we believe will materialize into higher metals demand in 2017.”

Mr. Mollins concluded, “2016 was a solid year for Reliance. We could not be more pleased with the strong operational execution throughout our Company that allowed us to thrive, even in challenging times.  We continued to profitably grow the Company, both organically and by completing three acquisitions, and ended the year with a strong balance sheet that provides us the ability to continue to execute our growth strategies and stockholder return activities, including an increase of our quarterly dividend.  We look forward to 2017, which we believe will feature a renewed enthusiasm for infrastructure and equipment spending, as well as improvement in the energy market, and we believe that Reliance is very well positioned to capitalize on these opportunities.”