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While oil prices rebounded sharply in the second quarter, that didn't fuel an increase in demand for the pipes, valves, or fittings that MRC Global (NYSE: MRC) distributes to the sector. Because of that, its financial results continued to decline. That trend is not expected to reverseuntil its customers start spending again, which might not happen anytime soon.
MRC Global results: The raw numbers
Data source: MRC Global.
What happened with MRC Global this quarter?
The global oil market meltdown continues to sap demand for MRC Global's goods.
- While MRC Global's sales slumped significantly year over year, revenue was only down 5% from last quarter and matched its expectations.
- Sales to upstream customers took the biggest hit, down 51% from the year-ago quarter because of lower customer activity and the sale of the company's U.S. oil country tubular good product line. After adjusting for that divestiture, U.S. upstream sales slumped 40%, which actually outperformed the 53% decline in the U.S. rig count. Meanwhile, international upstream sales fell 13%.
- Midstream revenue was down 30%, driven by a 44% decline in sales to transmission customers.
- Finally, downstream revenue slumped 30%, led by a 31% decline in sales to U.S. customers.
- Sales, general, and administrative expenses remained elevated at 18.1% of sales, which is up from 13.3% of sales in the prior quarter.
What management had to say
CEO Andrew Lane discussed the company's results as follows:
While the oil market downturn is proving to be very challenging, MRC Global is meeting that challenge by managing costs so that it can continue generating cash flow. Because of that, the company's balance sheet remains in solid shape, which positions it to ride out the current storm.
At the moment, there's no telling how long that storm will last. Because of that, MRC Global does not have much visibility into the future, with Lane noting that "looking forward, we do not expect a significant change in activity until customers increase capital spending." Given the renewed weakness in oil prices over the past few weeks, it could be a while before customers loosen their purse strings and start spending again. This likely means that MRC Global's financial results will remain under pressure for the foreseeable future.
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Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends MRC Global. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.