Houston-based pipe, valves, and fittings distributor MRC Global – No. 7 on Industrial Distribution's 2014 Big 50 List – reported its 2015 second quarter financial earnings on Tuesday.
The numbers were highlighted by a 20 percent year-over-year decrease in sales at $1.2 billion, which was also 7.3 percent below Q1 2015. The company said the decline was driven primarily by reduced upstream activity, as well as the strong U.S. dollar, which reduced sales by $40.8 million.
MRC Global reported a Q2 profit of $16.3 million, a 78.5 percent plummed from last year's $39.3 million.
"The second quarter results reflect the impact of the unfavorable commodity environment and related decline in our customers' activity," said Andrew Lane, MRC Global CEO. "We have taken actions to reduce our costs, lower our working capital levels and pay down our debt, the impact of which is reflected in our results."
MRC repayed $606 million of debt in the quarter, bringing its net debt balance down to $815 million. It expects full year debt reduction to be between $700 million and $775 million.
"These steps have strengthened our business, and we are well positioned to continue our global expansion," Lane said about the debt reduction. "Despite the volatile commodity environment, MRC Global is successfully executing on its core strategy of building long-term relationships with companies in the energy industry. We are gaining market share and solidifying our position as the global leader in PVF distribution."
The company said it reduced selling, general, and administrative expenses by 14.2 percent in the quarter vs. last year, with cost savings measures including a employee headcount reduction of 680 since a peak in 2014. MRC Global reduced headcount by 180 in Q2. It did not say what positions were eliminated.
The Houston Chronicle's FuelFix.com blog quoted an email response from Lane saying "Many of the cuts have come in the U.S. as rig counts plummet," adding that most of the additional job cuts are in Canada, Australia, and Norway.
By geographic segment, MRC's Q2 sales in the U.S. were $956.3 million, down 14.3 percent from last year. Sales declined 2 percent from Q1, and the company noted there was a 35 percent decline in average U.S. rig count in the same period. Canadian sales were $77.6 million, down 48.3 percent from last year. International sales were $164.2 million, a 29.1 percent decrease.
By sector, upstream sales in Q2 of $434.7 million were down 37.9 percent from last year. Midstream sales of $418.7 million were approximately equal to last year, with sales to transmission customers down 17 percent, and sales to gas utility customers up 30 percent. Downstream sales decreased 8.6 percent to $344.7 million.