Schnitzer Steel Reports Q2 2010 Financial Results
04/08/2010 - Schnitzer Steel Industries, Inc. reported diluted earnings per share from continuing operations of $0.62 for its fiscal 2010 second quarter ended February 28, 2010, compared with a diluted loss per share from continuing operations of ($0.18) for the same quarter of fiscal 2009.
Schnitzer Steel Industries, Inc. reported diluted earnings per share from continuing operations of $0.62 for its fiscal 2010 second quarter ended February 28, 2010. This compares with a diluted loss per share from continuing operations of ($0.18) for the same quarter of fiscal 2009.
Revenues from continuing operations for second quarter 2010 were $564 million, compared to $407 million for the same quarter of fiscal 2009 and $394 million in the first quarter 2010. Operating income was $29 million for Q2 2010 vs. an operating loss of ($14 million) in the second quarter 2009 and operating income of $9 million in Q1 2010.
“This marks our highest level of earnings since the downturn began in the first quarter of fiscal 2009. Our second-quarter results reflect strong operational performance, as well as continued broad-based demand for recycled metals,” said Tamara Lundgren, President and Chief Executive Officer. “We achieved a second-quarter record for ferrous sales volumes, continued to tightly manage our variable costs and continued to fund our investments in capital expenditures and acquisitions that are designed to fuel future growth.”
The Metals Recycling Business successfully capitalized on ongoing demand from export customers. Total sales volumes of processed ferrous metals were at record levels for the second quarter. The business saw improvements in net sales prices and margins, with operating income of $29 million and an operating profit margin of $24 per ferrous ton, up from $21 per ferrous ton in the first quarter of fiscal 2010.
The Auto Parts Business generated record second-quarter operating income of $13 million, double the previous record of $6 million set in the second quarter of fiscal 2008. The 23% improvement in operating profit margin reflected strong operational performance and improved metal spreads. Vehicle purchases approximated the levels of the first quarter of fiscal 2010, excluding the benefit of the federal Cash-for-Clunkers program in the first quarter.
The Steel Manufacturing Business, with overall weak domestic demand for its finished steel products, continued its cost-containment programs and achieved price increases compared with the first quarter of fiscal 2010 to offset higher raw material costs. The unit’s operating loss of ($2 million) improved from the first quarter of fiscal 2010, which saw a loss of ($8 million), and from the second quarter of fiscal 2009, which had a loss of ($6 million).
“Market demand on the U.S. West Coast for manufactured steel products remained weak in the second quarter of fiscal 2010, leading to low levels of sales volumes,” said Lundgren. “We continued our successful cost-containment efforts and were able to pass through price increases to bring this business closer to breakeven while further positioning it to take advantage of improvements in demand as infrastructure spending resumes.”
Finished goods sales volumes decreased 4% from the first quarter of fiscal 2010 but increased 17% over the second quarter of fiscal 2009.
Average net sales prices for finished steel products increased by nearly 7%, or $36 per ton, compared with the first quarter of fiscal 2010 and declined by nearly 2% compared to the second quarter of fiscal 2009.
The negative operating margins for the second quarter showed a marked improvement over the higher negative margins on both a year-over-year and quarter-over-quarter basis. Margin improvement for the quarter resulted from continued cost control and increases in sales prices over the first quarter of fiscal 2010.
Steel Manufacturing Business: Outlook—While overall market demand is expected to remain weak in the third quarter of fiscal 2010 compared with historic levels, sales volumes are expected to improve by 10 to 20% compared with the second quarter of fiscal 2010. The business remains one of the few West Coast producers of manufactured steel products, which the company believes leaves it well positioned to capitalize on stimulus and infrastructure spending when it occurs.
The company expects a further improvement in average sales prices due to anticipated price increases. Third quarter fiscal 2010 operating profit margins are expected to improve to breakeven levels, reflecting higher sales prices and a full quarter’s benefit from previous cost-containment actions.
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 annual production capacity of nearly 800,000 tons, the company’s steel manufacturing business produces finished steel products, including rebar, wire rod, and other specialty products.
