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Schnitzer Steel Industries Reports Third Quarter 2015 Financial Results
07/09/2015 - Schnitzer Steel Industries, Inc. reported financial results for its fiscal 2015 third quarter ended May 31, 2015.
The company's third quarter results reflected benefits from the cost reduction and productivity initiatives they announced in early April which led to improved sequential operating performance in all of our businesses. In Metals Recycling, ferrous volumes increased 29% and nonferrous sales volumes increased 21% versus the second quarter. Due to the rapid decline in ferrous selling prices in February, which impacted shipments in the third quarter, average inventory costs did not decline as quickly as selling prices, which led to an estimated $14 per ton, or $13 million, adverse impact of average inventory accounting which approximated the adverse impact in the second quarter. In their Auto Parts Business, higher seasonal retail activity and early benefits achieved from productivity improvements led to significantly improved profitability. The Steel Manufacturing Business generated higher sales volumes and increased operating income due to steadily improving demand in West Coast construction markets.
Consolidated Financial Performance
The Company announced break-even adjusted earnings per share from continuing operations for the third quarter, which compares to second quarter adjusted loss per share of $0.30 and prior year third quarter adjusted earnings per share of $0.19. Adjustments included charges for restructuring and exit-related costs and asset impairments. Third quarter adjusted results included an adverse impact from average inventory accounting of approximately $0.40 per share which compares to a second quarter adverse impact of $0.36 per share and a prior year third quarter adverse impact of $0.09 per share. Based on current market trends, estimated adverse inventory effects are expected to be substantially reduced in the fourth quarter.
The Company reported third quarter loss per share from continuing operations of $0.31, including $6 million in restructuring and exit-related costs and $1 million in asset impairments. This compares to the second quarter reported loss per share of $7.08 and third quarter fiscal 2014 reported earnings per share of $0.13.
Strong Positive Operating Cash Flow and Significant Progress on Cost Reductions and Productivity Initiatives
The Company generated positive operating cash flow in the third quarter of $64 million which enabled the Company to reduce total debt to $263 million, the lowest level since first quarter of fiscal 2011.
During the quarter, the Company made significant progress on the execution of its targeted $60 million in annual cost savings and productivity improvements, generating approximately $10 million in benefits. The Company expects to achieve an additional $5 million of quarterly benefits by the fourth quarter of fiscal 2015, which is ahead of schedule and equates to a targeted quarterly run rate of approximately $15 million.
"Our ability to deliver on a wide range of cost savings and productivity initiatives contributed to improved sequential financial results in the third quarter. We expect the benefits from these initiatives, combined with more stable market conditions, to provide momentum for further improvements in our performance,” said Tamara Lundgren, President and Chief Executive Officer. “In addition, we expect to complete the consolidation of our Auto Parts and Metals Recycling Businesses during the fourth quarter, creating the opportunity to benefit from further commercial and operational synergies,” added Lundgren.
For a detailed breakdown of Schnitzer Steel's third quarter performance, read the full press release here.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled metal products in the United States with operating facilities located in 24 states, Puerto Rico and Western Canada. Schnitzer has seven deep water export facilities located on both the East and West Coasts and in Hawaii and Puerto Rico. The Company's integrated operating platform also includes auto parts stores and steel manufacturing. With an effective annual production capacity of approximately 800,000 tons, the Company's steel manufacturing business produces finished steel products, including rebar, wire rod and other specialty products. The Company began operations in 1906 in Portland, Oregon.
Consolidated Financial Performance
The Company announced break-even adjusted earnings per share from continuing operations for the third quarter, which compares to second quarter adjusted loss per share of $0.30 and prior year third quarter adjusted earnings per share of $0.19. Adjustments included charges for restructuring and exit-related costs and asset impairments. Third quarter adjusted results included an adverse impact from average inventory accounting of approximately $0.40 per share which compares to a second quarter adverse impact of $0.36 per share and a prior year third quarter adverse impact of $0.09 per share. Based on current market trends, estimated adverse inventory effects are expected to be substantially reduced in the fourth quarter.
The Company reported third quarter loss per share from continuing operations of $0.31, including $6 million in restructuring and exit-related costs and $1 million in asset impairments. This compares to the second quarter reported loss per share of $7.08 and third quarter fiscal 2014 reported earnings per share of $0.13.
Strong Positive Operating Cash Flow and Significant Progress on Cost Reductions and Productivity Initiatives
The Company generated positive operating cash flow in the third quarter of $64 million which enabled the Company to reduce total debt to $263 million, the lowest level since first quarter of fiscal 2011.
During the quarter, the Company made significant progress on the execution of its targeted $60 million in annual cost savings and productivity improvements, generating approximately $10 million in benefits. The Company expects to achieve an additional $5 million of quarterly benefits by the fourth quarter of fiscal 2015, which is ahead of schedule and equates to a targeted quarterly run rate of approximately $15 million.
"Our ability to deliver on a wide range of cost savings and productivity initiatives contributed to improved sequential financial results in the third quarter. We expect the benefits from these initiatives, combined with more stable market conditions, to provide momentum for further improvements in our performance,” said Tamara Lundgren, President and Chief Executive Officer. “In addition, we expect to complete the consolidation of our Auto Parts and Metals Recycling Businesses during the fourth quarter, creating the opportunity to benefit from further commercial and operational synergies,” added Lundgren.
For a detailed breakdown of Schnitzer Steel's third quarter performance, read the full press release here.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled metal products in the United States with operating facilities located in 24 states, Puerto Rico and Western Canada. Schnitzer has seven deep water export facilities located on both the East and West Coasts and in Hawaii and Puerto Rico. The Company's integrated operating platform also includes auto parts stores and steel manufacturing. With an effective annual production capacity of approximately 800,000 tons, the Company's steel manufacturing business produces finished steel products, including rebar, wire rod and other specialty products. The Company began operations in 1906 in Portland, Oregon.
