Houston-based MRC Global, which brands itself as the largest global distributor of PVF products and services, reported its 2020 second quarter financial results on Tuesday, showing accelerated declines in sales and a major net loss due to restructuring and impairment charges.
The company posted total Q2 sales of $602 million, down 39 percent year-over-year and down 24 percent from Q1. The company said the sequential decline was across all segments and sectors except gas utilities, which was up $3 million, while the heavy year-over-year sales decline was across all sectors and segments amid pandemic impacts and lower commodity prices that significantly reduced customer spending.
As part of its cost savings efforts in Q2, MRC closed 11 facilities during the quarter and reduced headcount by 300.
MRC took a net loss of $287 million in Q2, compared to a $18 million profit a year earlier and a $3 million in Q1. However, Q2 included a restructuring and impairment charge of $284 million, after tax. Factoring that in, MRC had an adjusted Q2 net loss of $8 million. MRC's Q2 operating loss was $289 million.
"Due to the incredible demand destruction brought on by the coronavirus pandemic, the second quarter was our most challenging to date, but I am very pleased with the rapid and proactive response of our employees and management team, who remain fully committed to our long-term strategy to enhance shareholder value," said Andrew Lane, MRC president and CEO.
MRC's Q2 gross profit of $79 million was 13.1 percent of sales, compared to $174 million and 17.9 percent in Q1 and and $174 million and 17.7 percent in Q2 2019, respectively. Q2 2020 gross profit includes $34 million of pre-tax inventory-related charges, with adjusted gross profit at $118 million or 19.6% of revenue, a 30-basis point improvement year-over-year.
"From a supply chain perspective, the effects have moved around the globe as the virus has spread," MRC said Tuesday. "Given the company’s inventory position and the reduced demand, the company has fulfilled orders with little disruption. However, if shutdowns are re-established in our suppliers’ locations, order fulfillment risk could increase."
The company added that it has had 27 reported cases of COVID-19, they haven't led to closures to any facilities since the pandemic began.
By MRC business segment in Q2:
- US sales of $474 million were down 41 percent year-over-year and down from $648 million in Q1. MRC said upstream production sales fell by 65 percent due to reduced customer spending and a 62 percent reduction year-over-year in well completions. Downstream and industrial sales fell 41 percent year-over-year as many customers delayed maintenance spending and idled facilities. Midstream pipeline sales fell 49 percent year-over-year, and gas utilities sales were down 18 percent.
- Canadian sales of $28 million were down 52 percent year-over-year and down from $50 million in Q1.
- International sales of $100 million were down 17 percent year-over-year and down from $106 million in Q1.
By sector in Q2:
- Upstream production sales of $134 million fell 53 percent year-over-year and were down from $222 million in Q1.
- Midstream pipeline sales of $87 million were down 50 percent year-over-year and down from $119 million in Q1.
- Gas utilities sales of $205 million were down 17 percent year-over-year and up from $202 million in Q1.
- Downstream and Industrial Sales of $176 million were down 37 percent year-over-year and down from $251 million in Q1.