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TORONTO — Toronto-area steel distributor Russel Metals Inc. (TSX:RUS) is eliminating 500 jobs, reducing executive and white collar salaries by 10 per cent and cutting its dividend nearly in half to deal with what the company called an abrupt and severe drop in steel demand.
The Toronto-area steel distributor said Monday the cuts affect about 16 per cent of its workforce of 3,000 people. The layoffs will be done by the end of March and will reduce operating costs by more than $25 million a year.
The company cited lower steel prices, rising energy costs and the plunging steel market so far this year for the moves.
“The company’s management has taken these actions because the decline in steel prices, energy prices and demand experienced during the last two months has exceeded anything previously experienced,” said Brian Hedges, Russel Metals’ executive vice-president and chief operating officer.
“The company has experienced demand declines in the first two months of 2009 similar to the 40 per cent declines announced for January by the Metals Service Center Institute.“
In a related matter, Russel said it will cut its quarterly dividend to 25 cents a share for the first quarter from 45 cents a share in the 2008 fourth quarter.
“We have reduced the dividend due to the drastic and unprecedented decline in our business levels,” Hedges added.
“It continues to be our intention to reward our shareholders at a level our earnings and cash flow justify. Our shareholder base includes a large number of individual investors and the Company is aware of how important the dividend is to these owners. We have made this change with great reluctance.“
Russel Metals is one of the largest metals distribution companies in North America and operates under various brands, including Russel Metals, A.J. Forsyth, Acier Leroux, Arrow Steel Processors, B&T Steel, Comco Pipe and Supply, Leroux Steel and several other companies.