Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, January 21, 1992 TAG: 9201210123
SECTION: BUSINESS PAGE: A-3 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: LENGTH: Medium
STEEL COMPANY SAYS IT'S STRONG
Roanoke Electric Steel Corp.'s employees endured considerable hardship and frustration in 1991, "one of the most difficult years" in the company's history. But chairman Donald G. Smith assured stockholders Monday the company remains financially strong.Despite sharp drops in sales and earnings caused by the recession, Smith said at the company's brief annual meeting at the Appalachian Power Co. auditorium that a few of the 50 workers laid off a year ago have been recalled.
Poor economic conditions in the steel and construction industries "severely increased competition and made profitability most difficult to achieve," Smith said.
Earnings for 1991 came to $227,230, a fraction of the $8.4 million reported in 1990. Sales fell by 24 percent to $126.9 million.
In a cyclical industry, the Roanoke company is poised for "future growth and prosperity . . . although we cannot predict an improvement this year," Smith said.
When the company's new fiscal year began Nov. 1, business conditions were unchanged, he said, but he saw encouragement in a selling-price increase and widespread reports of a better year in 1992.
Raw steel production capacity was increased by a continuous caster added a year ago, he said, and rolling mill production "was at its most efficient level ever." Smith said interest rates were at their lowest in many years and customer inventory levels were very low.
As a result of lower earnings, the company froze wages and made no contribution to its profit-sharing plan. Reduced production led to lower incentive pay and lower executive bonuses, the chairman said. The company has a total of 1,050 employees, including 475 at its Roanoke plant.
The work force is about the same size as a year ago, except for 50 layoffs at the company's Salem rolling mill which closed, Smith said. That production was shifted to the Roanoke plant. Two reinforcing steel bar fabricating operations in Salem were consolidated, saving labor and overhead costs, and some employees whose jobs were lost in these moves have retired, he said.
Smith blamed the sales decline on a weak construction market, poor demand and lower selling prices. Most steel mills have had excess inventory, he said. Lower prices for fabricated steel were caused by overbuilding of commercial buildings and tight credit policies of banks and other financial institutions, Smith said.
Efficiency and productivity have been improved by the company's capital expenditure of $60 million in the past five years, he said, and improved equipment and plant additions helped achieve records in mill yield and tons produced per hour.
Working capital at the end of the fiscal year was a record $28.9 million. The company borrowed only $1.7 million last year, due to the curtailment of existing debt, Smith said.
Shareholders re-elected 10 directors and named Thomas L. Robertson, president of Carilion Health System, to succeed Carter L. Burgess on the board. Burgess, also of Roanoke, is the retired executive committee chairman of the Foreign Policy Association.