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Schnitzer Provides Market Outlook for Second Quarter of Fiscal 2013
02/28/2013 - Schnitzer Steel Industries, Inc. announced its market outlook for the second quarter of fiscal 2013 ended 28 February 2013, including higher costs for raw materials and a typical seasonal slowdown in demand in its steel manufacturing business, Cascade Steel Rolling Mills.
Schnitzer Steel Industries, Inc. announced its market outlook for the second quarter of fiscal 2013 ended 28 February 2013. The company expects to report a sequential improvement in its consolidated financial performance in the second quarter of fiscal 2013. For the second quarter, fully diluted earnings per share are expected to be in the range of $0.20 – $0.26 before restructuring charges. In the second quarter, it expects to incur a pre-tax restructuring charge in connection with the announcement in August of approximately US$2 million, which equates to $0.04 earnings per share. Actual financial performance may be materially different based on, among other factors, market conditions and the timing of shipments.
In its Metals Recycling Business, ferrous export selling prices strengthened throughout the quarter, with prices for February shipments approximately $40 per ton higher than shipments at the end of the first quarter, while domestic selling prices weakened slightly toward the end of the quarter. The supply of scrap continued to be constrained by low US GDP growth, resulting in high raw material costs which moderated the overall improvement to margins. During the second quarter, ferrous average net selling prices increased slightly from the first quarter of fiscal 2013 and ferrous sales volumes increased approximately 15% – 20%. Nonferrous average selling prices are in line with the first quarter while volumes increased approximately 10%. The combination of higher selling price and volumes trends are expected to generate operating income per ferrous ton of approximately $12, an increase of 100% from the first quarter of fiscal 2013.
In its Auto Parts Business, higher commodity prices, stronger car purchases and the incremental volume contribution of acquisitions are expected to result in an increase of approximately 10% in revenues from the first quarter of fiscal 2013. APB’s operating margin, excluding the impact of new locations added since the first quarter, is expected to be approximately 10%, a sequential increase over the prior quarter’s performance. During the second quarter, APB added 10 new locations which, as anticipated, will result in approximately $2 million of transaction, integration and startup costs which will impact APB’s reported operating margin, expected to be approximately 7%, in the quarter.
In its Steel Manufacturing Business, which operates as Cascade Steel Rolling Mills, average selling prices are expected to increase slightly from the first quarter while sales volumes are expected to be approximately 25% lower than the first quarter. Higher costs for raw materials, a lower utilization rate resulting from planned maintenance and a typical seasonal slowdown in demand during the quarter are expected to result in SMB operating income of approximately $1 million.
The effective tax rate for the second quarter is expected to include tax credits and other benefits in the range of $1 – $2 million.
The company continues to focus on cost reductions, strategic growth initiatives, and increasing synergies between its Metals Recycling and Auto Parts Businesses. In the first half of fiscal 2013, consolidated SG&A is expected to be approximately 10% lower as compared to the prior year period and is on track with its restructuring program announced in August 2012. In February, the Metals Recycling Business successfully commenced the testing of its newly constructed shredder near Vancouver, BC, which is expected to be operational in the third quarter. As previously announced, the Auto Parts Business completed eight acquisitions and commenced two greenfield developments in the second quarter, which will increase the number of APB stores by 20% and increase annual car purchase volumes by approximately 15%. These new locations, which include Western Canada, the Pacific Northwest and New England, strengthen APB’s presence in core markets while providing synergistic sources of supply to the Metals Recycling Business.
