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Schnitzer Steel Reports Highest Earnings since Q4 FY08
07/01/2010 - Schnitzer Steel Industries, Inc. reported diluted earnings per share from continuing operations of $1.43 for its fiscal 2010 third quarter ended May 31, 2010. This compares with a loss per share from continuing operations of ($0.01) for the same quarter of fiscal 2009.
Schnitzer Steel Industries, Inc. reported diluted earnings per share from continuing operations of $1.43 for its fiscal 2010 third quarter ended May 31, 2010. This compares with a loss per share from continuing operations of ($0.01) for the same quarter of fiscal 2009.
Revenue for Q3 2010 was $704 million, compared to $382 million in last year’s third quarter. Operating income was $64 million vs. a loss of $4 million last year.
“We delivered our best earnings performance since the downturn began, with improved operating profits in each of our three businesses,” said Tamara Lundgren, President and Chief Executive Officer. “Our sales volumes of ferrous metals in the first three quarters of fiscal 2010 have remained near the levels of the boom year of fiscal 2008, and we achieved record third-quarter ferrous processing sales volumes, underscoring the long-term strength of the global demand for recycled metals. Our business model and platform allowed our Metals Recycling Business to respond nimbly to the swings in prices for recycled metals during the third quarter.
“Our Auto Parts Business achieved record operating income and increased its purchases of vehicles to the level of the first quarter without benefiting from the Cash for Clunkers program,” she added. “Our Steel Manufacturing Business achieved operating profitability for the quarter, primarily driven by higher sales prices and increased mill utilization.”
The Steel Manufacturing Business achieved its best performance since the fourth quarter of fiscal 2008, with operating income of $4 million. This was primarily the result of higher sales volumes and sales prices, which offset higher raw material costs.
“Although demand for manufactured steel products on the U.S. West Coast remained weak, our team was able to capitalize on the mill’s diversified product line to grow its sales volumes,” said Lundgren. “The higher sales volumes allowed us to increase mill utilization to 64% in the third quarter from 51% in the second quarter, and our successful cost-containment initiatives aided the efforts to meet our goal of operating profitability.”
Finished goods sales volumes increased 36% over the second quarter, primarily reflecting modest improvements in the business environment at the beginning of the quarter.
Average net sales prices for finished steel products increased by 14%, or $79 per ton, compared with the second quarter and by 21% compared with the third quarter of fiscal 2009. The higher prices were the result of price increases that offset the higher costs of raw materials.
Margin improvement for the quarter resulted from higher capacity utilization, higher average sales prices, and a full quarter’s impact of cost-containment initiatives implemented during the second quarter.
Steel Manufacturing Business: Outlook — Overall market demand is expected to remain weak in the fourth quarter of fiscal 2010. Sales volumes are expected to decrease slightly from the improved levels of the third quarter of fiscal 2010. The business remains one of the few West Coast producers of long steel products, leaving it well-positioned to capitalize on stimulus and infrastructure spending when it occurs, the company says.
The company expects average sales prices to approximate or decline slightly from the third quarter.
Fourth quarter fiscal 2010 operating profit margins are expected to approximate or be slightly below breakeven levels.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 42 operating facilities located in 13 states and Puerto Rico, including seven export facilities located on both the East and West Coasts and in Hawaii and Puerto Rico. The company's vertically integrated operating platform also includes its auto parts and steel manufacturing businesses. With an effective annual production capacity of approximately 800,000 tons, its steel manufacturing business – Cascade Steel Rolling Mills – produces finished steel products, including rebar, wire rod and other specialty products.
