Reliance Steel & Aluminum Co. reported a 13 percent dip in third quarter profit due to higher costs and weaker prices for metal products.

Reliance reported third-quarter net income of $94 million ($1.22 per share) a dip from $108 million ($1.41) from the same period a year earlier, missing analysts’ predictions of $1.34 per share, according to Thomson Financial.

Sales for the Los Angeles-based steel and aluminum distributor rose 11 percent to $1.8 billion, but the company also said that the cost of sales rose 15 percent, shrinking gross margins two percentage points to 24 percent.

Chief Executive David Hannah said in a statement that the drop in margins was due to a “significant and rapid drop” in prices for stainless steel products.

Reliance also reported fourth-quarter guidance of 95 cents to $1.05 per share, well below the $1.27 average estimate of analysts polled by Thomson Financial.

“We expect demand may soften further in the fourth quarter due to the normal seasonal holiday slowdown as well as cautious buying from our customers, leading us to anticipate relatively flat pricing,” Hannah added.

Despite the seemingly bad news, shares in Reliance rose 2.7 percent, or $1.36, to $52.76 in afternoon trading Thursday on the New York stock Exchange.