Amid shaky and often pessimistic views, one company posts growth
January 2012 - For all the negativity flooding the news about businesses struggling to stay afloat, Olympic Steel, Bedford Heights, Ohio, offers a counterpoint.
Olympic Steel's sales jumped 67 percent in the third quarter 2011, and the company posted a $6.1 million profit after having lost $1.2 million a year ago. The company said it's investing those profits back into its businesses. Net sales for the third quarter of 2011 totaled $348.5 million, Olympic’s highest ever for a third quarter.
"We are offended at Olympic Steel when we hear the media and our government say no one is investing in growth and no one is hiring new employees," said Michael Siegal, chairman and CEO, during a conference call with reporters and analysts.
During the past nine months, Olympic acquired Chicago Tube and Iron (CTI) on July 1, 2011 and invested in new metal-processing facilities in Gary, Ind.; Mount Sterling, Ky.; Monterrey, Mexico; Kansas City, Mo.; and Roseville, Minn. It plans to start a processing and distribution plant for stainless steel and aluminum in Streetsboro, Ohio, early next year. The third quarter was the first that included CTI sales, which directly affected the company’s increased earnings.
“CTI accelerates our market-share growth and was immediately accretive to our third-quarter earnings,” said Siegal in a press release. “We also continue to successfully execute on our previously announced strategic investments. Through the first nine months of 2011, our capital spending has totaled $25 million, including new equipment, successful information system infrastructure rollouts and facility startups. We confidently look forward to our new Gary temper mill facility opening on time and on budget in early 2012, with 150,000 incremental tons of capacity once fully operational. Our balance sheet remains strong with our new five-year, $335 million credit facility providing a foundation for continued growth and value creation.”
Olympic Steel is not alone. Economic activity in the manufacturing sector expanded in November for the 28th consecutive month, and the overall economy grew for the 30th consecutive month, according to the nation's supply executives in the latest Manufacturing ISM Report On Business.
According to the report, the PMI registered 52.7 percent, an increase of 1.9 percentage points from October's reading of 50.8 percent, indicating expansion in the manufacturing sector. The New Orders Index increased 4.3 percentage points from October to 56.7 percent, reflecting the second month of growth after three months of contraction. Although the Prices Index, at 45 percent, increased 4 percentage points from the October reading of 41 percent, prices of raw materials continued to decrease (registering below 50 percent) for the second consecutive month. Respondents cite continuing concerns about the general economic environment, government regulations and European financial conditions but are cautiously more optimistic about the next few months based on lower raw materials pricing and favorable levels of new orders.
The positive news that has affected Olympic will lead to upcoming changes in the company. It plans to continue hiring, expanding and investing. "We're going to be relocating some people in the Streetsboro facility, some from Pennsylvania and some from here at our corporate offices" in Bedford Heights, said Richard Marabito, CFO. "We'll definitely add some jobs there next year."
In a written statement, Siegal said Olympic expects earnings to improve next year as a plant in Gary, Ind., opens. During the conference call, he said the company feels much more confident about next year's results than it did toward the end of 2010. MM