Reliance Steel 4Q16 Earnings Call Notes

Gregg J. Mollins

Macro environment continues to be challenging

“Although somewhat improved from 2015, the macro environment for our industry continue to be challenging with overall lower demand levels and pricing volatility”

Encouraged by signs of life in energy

“we are encouraged by early signs of life in the energy market. In regard to energy, the general consensus from our customer base throughout the country is more positive today than it was 90 days ago. We’ve been seeing improved quoting activity and order flows, though order sizes have been much smaller. As the downturn in oil prices and drilling activity began toward the end of 2014, we proactively addressed the declines in this market through facility closures and asset write-downs at certain of our energy-related businesses and believe we are well-positioned to participate in any recovery.”

Pleased with results in January and Feb

“Well, we were pleased with our results in January, and February continues to be at a similar pace. So, we’re happy with that. Could things change? Yeah, they can always change. That’s the business we’re in. But so far so good and we’re hopeful. ”

Everyone anticipates spending

“I think everybody is optimistic. It’s just a matter of the timing. A lot of things are happening in Washington right now. It’s all really sounds great for the steel business in Reliance. I think everybody anticipates spending, just a matter of when does it come, does it come in 2017, that’d be great. I think that if you took a poll, most would say, it’d be more into 2018, because of just the length of the time to plan these projects from what have you. But overall, it sounds very optimistic to us.”

Everything is doing better than we would have thought

“Last year. Okay. So, on 8% to 10%, we just feel as though given that we were very pleased with our January results, we thought that the momentum was going to continue, which is why we gave the guidance that we did. But to answer your question, Aldo, it’s really not specific to one particular industry, okay. It’s really across the board and it’s across the country, whether it be if you’re on the East Coast, West Coast, the mid chapters, what have you, all of our companies are all simultaneously doing better than, frankly, we would have thought.”

We’re not seeing big pre-buys ahead of potential price increases

“It happens all the time when price increases go up, some of the companies, the end users, they buy ahead of it. But we don’t see huge buys ahead of it that’s going to impact our inventories and then future purchases. So, I think it’s going to – it’s nothing unusual. I think it’s pretty much business as usual.”