Reliance Steel Acquires Haskins Steel

Zacks

American Metals Corporation, a fully-owned subsidiary of Reliance Steel & Aluminum Co. (RS), recently acquired all of the capital stock of Haskins Steel Co Inc. for an undisclosed amount. Haskins will function as a wholly-owned subsidiary of American Metals Corporation while its present management remains unchanged.

Haskins, headquartered in Spokane, Washington, processes and distributes primarily carbon steel and aluminum products of different shapes and sizes, to a wide customer base in the Pacific Northwest. The company provides shearing, punching, sawing, burning and forming, drilling, and delivery services. With this acquisition, American Metals will be able to penetrate into locations where it did not have a presence earlier.

Reliance Steel, the largest metals service center company in North America, recently released its third quarter 2013 results. The company saw lower profit in the third quarter as decline in metals' prices coupled with higher costs weighed on its bottom-line. The California-based metals processor’s profit fell roughly 3% year over year to $95.1 million or $1.22 per share in the quarter, from $98.1 million or $1.30 per share a year ago. However, earnings beat the Zacks Consensus Estimate by a couple of cents.

In addition to weak pricing, Reliance Steel also saw its costs jump around 20% year over year in the reported quarter, contributing to the lower profit. The company recorded an inventory adjustment related credit of $27.5 million (included in cost of sales) in the reported quarter.
 
Revenues increased roughly 19% year over year to $2,443.5 million in the reported quarter, but missed the Zacks Consensus Estimate of $2,519 million. Strength across automotive, aerospace, energy and heavy equipment markets were partly offset by sustained weakness in the non-residential construction market.

Reliance Steel, a Zacks Rank #4 (Sell) stock, remains challenged by weak steel industry fundamentals and contends with soft steel and metals pricing environment. In addition, raw material prices are expected to remain volatile.
    
Other metals companies having favorable a Zacks Rank are NSK Ltd. (NPSKY), Dynamic Materials Corp. (BOOM) and Mitsui & Co. Ltd. (MITSY). While NSK and Dynamic Materials hold a Zacks Rank #1 (Strong Buy), Mitsui carries a Zacks Rank #2 (Buy).

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