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Schnitzer Provides Outlook for Q3 of Fiscal 2012
05/18/2012 - Schnitzer Steel Industries, Inc. announced its market outlook for its third quarter of fiscal 2012, noting that margins have compressed from the second quarter as a slight increase in average gross ferrous selling prices has been more than offset by higher costs of both raw materials and freight.
Schnitzer Steel Industries, Inc. announced its market outlook for its third quarter of fiscal 2012, noting that the global demand for recycled metals has remained soft and the slow U.S. economic recovery, together with lower-than-normal spring scrap flows, has contributed to tighter supplies. Margins have compressed from the second quarter, the company stated, as a slight increase in average gross ferrous selling prices has been more than offset by higher costs of both raw materials and freight.
In its Metals Recycling Business, ferrous sales volumes are expected to be in line with the second quarter of fiscal 2012. The company expects nonferrous selling prices to increase 5-10%, offset by nonferrous volumes, which are expected to decline 10-15% due to high production levels in the second quarter. Operating income per ferrous ton is expected to be $8-11, approximately 35% lower than the second quarter of fiscal 2012.
In its Auto Parts Business, revenues are expected to increase 2-4% over the second quarter of fiscal 2012 and operating margins are expected to be 14-15%, approximately 350 basis points higher sequentially, as a result of seasonally higher admissions and parts sales.
In the company’s Steel Manufacturing Business, sales volumes are expected to decline slightly while average sales prices and utilization are expected to be in line with the second quarter, resulting in operating performance that is slightly below breakeven. Actual financial performance is subject to, among other factors, market conditions and the timing of shipments.
Cash flows from operations are expected to further reduce total debt to total capital. The company expects SG&A costs to approximate the level in the second quarter. The effective tax rate in the third quarter is anticipated to be approximately 34%.
As supply and demand conditions improve, the company believes it is strategically positioned to benefit from the long-term global demand for recycled metals and generate higher operating leverage from recent investments in its North American supply chain and in nonferrous separation technologies.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 57 operating facilities located in 14 states, Puerto Rico, and Western Canada. The business has seven deep water export facilities located on both the East and West Coasts and in Hawaii and Puerto Rico. With an effective annual production capacity of approximately 800,000 tons, the company's steel manufacturing business, Cascade Steel, produces finished steel products, including rebar, wire rod, and other specialty products.
