Schnitzer Steel Reports 23% Increase in First Quarter EPS
01/08/2008 - Schnitzer Steel reports net income of $25 million on revenues of $604 million for the fiscal 2008 first quarter ended November 30, 2007.
Schnitzer Steel Industries, Inc. reported net income of $25 million on revenues of $604 million for the fiscal 2008 first quarter ended November 30, 2007.
The $25 million net income ($0.85 per diluted share) compares to net income of $21 million ($0.69 per diluted share). Earnings per share increased 23% compared to the first quarter of fiscal 2007, while revenues increased 18% over the same period.
“We are pleased to report healthy increases in our financial results on a year over year basis,” said John D. Carter, President and CEO. “These results reflect strong revenue growth in all three of our operating businesses and operating income growth in our Metals Recycling and Auto Parts businesses. As expected, our Metals Recycling Business was impacted by both the high cost of ocean freight as well as the tight supply of ships to carry export cargos. The latter resulted in the delay of five shipments, which should be reflected in our second-quarter sales volumes. In addition, the positive long-term fundamentals for recycled metals of strong demand and a relatively tight supply appear to be resulting in upward price trends in both the domestic and export markets.”
“The Auto Parts Business showed impressive year-over-year improvement in revenues and operating income, which reflects the change in the purchasing model put in place at the end of the first quarter of fiscal 2007,” added Carter. “The Steel Manufacturing Business posted solid results despite softening West Coast demand for steel products, increased competition from domestic suppliers and continuing cost pressure on the raw materials, including scrap, used in the manufacture of steel products,” he concluded.
According to the company, its Steel Manufacturing Business continued to benefit from capital projects completed last year that increased the capacity of its mill. For the first quarter, the division reported operating income of $14 million on revenues of $110, which compares to operating income of $15 million on revenues of $96 million in the year-ago first quarter.
Regarding the outlook for its Steel Manufacturing Business, Schnitzer Steel expects low import activity and low customer inventories to result in significantly higher average net prices for the second quarter compared to the same period in 2007. However, the company also expects that slower business conditions for its West Coast customers and increased competition from domestic steel producers will partially offset the lower imports. As a result, says the company, average net prices should approximate the recently completed first quarter.
The company also expects soft demand to result in a slight decline in sales volumes of finished steel products from both the first quarter of 2008 and the second quarter of 2007. Higher costs for scrap and other raw materials combined with costs associated with planned maintenance shutdowns in the meltshop and rolling mill are expected to have a negative impact on margins during the quarter.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 34 operating facilities located in 11 states throughout the country, including six export facilities located on both the East and West Coasts and in Hawaii. The company’s vertically integrated operating platform also includes its auto parts and steel manufacturing businesses. With an annual production capacity of over 750,000 tons, Cascade Steel Rolling Mills—the company’s steel manufacturing business—produces finished steel products, including rebar, wire rod and other specialty products. The Company commenced its 102nd year of operations in fiscal 2008.
