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Reliance Steel (RS) Closes Buyout of All Metals Holding

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Reliance Steel & Aluminum Co. (RS - Free Report) recently completed the purchase of all of the membership interests of All Metals Holding, LLC, including its operating subsidiaries, All Metals Processing & Logistics, Inc. (“AMPL”) and All Metals Transportation and Logistics, Inc. (“AMTL”) effective Nov 1. The financial terms of the transaction were not divulged.

AMPL specializes in toll processing for automotive, construction, appliance and other diverse-end markets while AMTL offers value-added transportation and logistics for metal products from six terminals throughout the southeastern United States.

All Metals had combined net sales of around $26 million for the fiscal year ended Dec 31, 2017. Reliance Steel noted that the buyout complements its growth strategy and meets its criteria of buying high quality businesses that are immediately accretive to its earnings. All Metals’ focus on high return, toll processing and logistics services further bolsters Reliance Steel’s solid position in these areas. The buyout marks Reliance Steel’s third acquisition of 2018.

Reliance Steel saw higher profit in the third quarter of 2018. It logged a profit of $148.3 million or $2.03 per share in the quarter, up from $97.3 million or $1.32 in the year-ago quarter.

Adjusted earnings of $2.42 per share went up around 86% from $1.30 in the prior-year quarter. However, it missed the Zacks Consensus Estimate of $2.70.

Reliance Steel recorded net sales of $2.97 billion, up roughly 21% year over year. It beat the Zacks Consensus Estimate of $2.95 billion. The company gained from favorable pricing conditions and consistent healthy demand environment.   

The company saw strong demand for its stainless steel flat products. Moreover, its average selling prices for stainless steel products increased in the quarter, driven by the price hikes announced by the mills related to Section 232 trade actions and higher input costs.

The Trump administration’s Section 232 actions have provided much-needed protection to the American steel producers including Nucor Corporation (NUE - Free Report) , United States Steel Corporation (X - Free Report) and AK Steel Holding Corporation (AKS - Free Report) which had long struggled to cope with a tide of subsidized foreign imports. The tariffs are leading to lower imports into the United States and have provided a boost to U.S. steel prices.

Reliance Steel, in its third-quarter call, said that it is optimistic about business conditions for the fourth quarter. It expects demand to be healthy, excluding the impact of normal seasonal patterns, which includes fewer shipping days and a decline in shipping volumes due to holiday-related shutdowns. As a result, it projects tons sold to decline 5-7% in the fourth quarter, sequentially.

The company expects pricing fundamentals will remain steady-to-slightly up based on current demand levels, ongoing trade actions and raw material costs. Accordingly, it expects average selling price per ton for the fourth quarter to be flat-to-up 1% compared with third-quarter tally. Additionally, the company expects earnings per share in the band of $1.75-$1.85 for the fourth quarter.

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