February 23, 2009 / 7:52 PM / in 9 years

UPDATE 2-Russel Metals cuts staff and costs, shares dive

* To chop 500 jobs, cut executive pay

* Cuts dividend by 44 percent

* Profit rises 14.6 percent

* Stock drops 10 percent

TORONTO, Feb 23 (Reuters) - Russel Metals (RUS.TO) said on Monday that it plans to cut 500 jobs, slash its dividend, and reduce executive salaries by 10 percent due to plunging demand for steel products.

Shares of Russel, which also reported a 14.6 percent rise in its fourth-quarter profit, dropped 10 percent on the news.

The Canadian metals producer and distributor said the moves should lower operating costs by more than C$25 million ($20 million) this year.

It said it could save up to C$70 million more if the company’s performance weakens to the point where certain performance-related bonuses do not kick in.

“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,” Brian Hedges, chief operating officer, said in a statement.

He said Russel has suffered a drop in demand of about 40 percent in the first two months of 2009, as the global economic slowdown has thrown many countries into recession and slashed demand for steel products.

The job cuts amount to 17 percent of the company’s total workforce of 3,000, while the dividend will be cut by 44 percent to 25 Canadian cents.

The moves come as Russel reported a fourth-quarter profit that rose to C$29 million ($20 million), or 48 Canadian cents a share, from C$25.3 million, or 40 Canadian cents a share, a year earlier.

Profit was hit by a $35.7 million writedown related to declining steel prices. Excluding the writedown, income would have been 87 Canadian cents a share.

The stock was down C$1.59 at C$14.55 on the Toronto Stock Exchange on Monday afternoon.

Revenue rose 41 percent to C$842.7 million, while costs of sales and operating expenses ballooned by 43 percent to C$800.7 million.

$1=$1.25 Canadian Reporting by Cameron French, additional reporting by Scott Anderson; editing by Rob Wilson

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