DNOW, MRC Sales Slide Ahead of Merger

DNOW and MRC Global each reported declines in second-quarter sales on Wednesday — their first earnings reports to be issued following the announcement of their $1.5 billion merger agreement.

DNOW, which is poised to acquire its fellow Houston-based distributor later this year, saw revenue slip from $633 million in the previous second quarter to $628 million in the latest three-month window. Operating profit dipped from $33 million to $32 million over that span, while net income was flat year-over-year at $25 million. Earnings attributable to DNOW shareholders climbed from $0.21 per diluted share to $0.24 in the latest quarter.

DNOW President and CEO David Cherechinsky, who will lead the combined DNOW-MRC business, said that the revenue total came in at “the top-end of our guided range,” and that its EBITDA of $51 million set a new record for the distributor as a publicly traded company. DNOW maintained its earlier projections for full-year revenue, EBITDA and free cash flow.

“Our team remains focused on advancing our strategy while planning for our future together with MRC Global,” Cherechinsky said in a statement.

MRC, meanwhile, reported Q2 sales of $798 million, down slightly from the $799 million posted last year. Gross profit, operating income and net income, however, were down sharply year-over-year, and earnings dropped from $0.28 per diluted common share down to $0.15.

MRC President and CEO Rob Saltiel noted that his company’s revenue also approached the top of its projections for the quarter, and highlighted the performance of its production and transmission infrastructure segment, which saw an 8% year-over-year sales gain after its international operations offset business in the U.S.

MRC also reaffirmed its earlier full-year outlook, although Saltiel said that the company would not be providing future financial guidance due to its pending acquisition. The company noted that the sale of its operations in Canada closed in mid-March.

“We expect sequential revenue and adjusted EBITDA growth in the third quarter, driven by our DIET and gas utilities sectors,” Saltiel said in the earnings release.

DNOW reiterated that the MRC deal is expected to close in the fourth quarter of the year, pending approval by regulators and shareholders. DNOW is the no. 14 distributor on ID’s latest Big 50; MRC ranked no. 10.