Open / Close Advertisement

Schnitzer Steel Reports Record 4th Quarter, Annual Results

10/29/2008 - Schnitzer Steel Industries reported record net income of $126 million on record revenues of $1.3 billion for the fiscal fourth quarter and record net income of $249 million on revenues of $3.6 billion for the year ended August 31, 2008.

Schnitzer Steel Industries, Inc. reported record net income of $126 million on record revenues of $1.3 billion for the fiscal fourth quarter and record net income of $249 million on revenues of $3.6 billion for the year ended August 31, 2008.

Schnitzer’s Steel Manufacturing Business
 
Schnitzer said that its Steel Manufacturing Business benefited in the fourth quarter from record high prices and strong sales volumes.
 
Revenues for the Steel Manufacturing business rose 56% compared to the year-ago fourth quarter and 9% from the third quarter of 2008. Average net sales prices increased significantly despite softening demand toward the end of the quarter, reflecting a continuing lack of competition from imported steel products.
 
Operating income increased slightly compared t the previous year as sales prices increased at a greater rate than raw material costs. On a quarter-over-quarter basis, lower sales volumes resulted in a slight decline in operating income.

Fourth Quarter Results—The record $126-million net income ($4.38 per diluted share) compares to net income of $38 million ($1.28 per diluted share) for the year-ago fourth quarter, reflecting a 242% increase in diluted earnings per share. Revenues of $1.3 billion compare to revenues of $749 million in the year-ago fourth quarter. The fourth quarter was the first time that quarterly revenues exceeded one billion dollars.
 
Fiscal Year Results—The $249 million record net income ($8.61 per diluted share) compares to net income of $131 million ($4.32 per diluted share) for the fiscal year 2007, a 99% increase in earning per share. Record consolidated revenues of $3.6 billion reflect a 42% increase compared to revenues of $2.6 billion in the prior year.
 
Management Comments—"The fourth quarter proved to be a very successful end to another outstanding year for Schnitzer Steel," said John Carter, Schnitzer’s President and CEO. "We turned in a strong operating performance and continued to invest in technology and infrastructure to prepare our company for future growth. Our operating platform and deep water port facilities allowed us to maximize the benefits from the robust markets in which we operated during the year, leading to record net income and strong operating cash flows. I'd like to thank all of our 3700 employees for their hard work in delivering these record quarterly and annual financial results."
 
"As we enter a new fiscal year, there is no question that the near-term market environment has changed,” continued Carter. “While we continue to be optimistic about the long-term forecasted growth in steel consumption around the world and the demand for recycled metals, the markets in the early part of fiscal 2009 have significantly weakened, and it is uncertain when we might see improvements. We believe, however, that our strong balance sheet, positive cash flows and many of the actions we have taken which contributed to an outstanding 2008 will serve us well in this challenging environment."
 
"During the year, we increased our focus on our continuous improvement program, continued to make capital investments in technology that provided greater recovery of nonferrous materials and improved operating efficiencies, and again delivered higher asset utilization and production volumes," added Tamara Lundgren, Executive Vice President and COO. "In addition, our global market visibility allowed us to maximize the benefits from rising markets and react swiftly to reduce our buy prices in the face of rapidly slowing worldwide demand. This allowed us to partially mitigate the impact of the significant decline in prices which occurred late in the fourth quarter and, along with our actions to adjust our production to match lower current demand, should help to maintain strong metal spreads and contribute to positive operating cash flow in the first fiscal quarter of 2009."
 
Outlook—Given the current extremely unsettled market conditions and limited forward visibility, the company is providing only limited qualitative guidance on first quarter results. The company cautioned investors that a great deal of uncertainty remains regarding near-term market conditions, and that the company does not assume responsibility for updating this guidance prior to the first-quarter earnings release.
 
Regarding its Steel Manufacturing Business, the company expects net sales prices for finished goods to remain 30-40% higher in the first quarter vs. the prices received in the first quarter of fiscal 2008, despite reduced demand from West Coast construction. However, the company expects that net sales prices will decline 10 to 15% from the record prices achieved in the recently completed fourth quarter.
 
The company also expects that lower demand and increased competition will result in first-quarter sales volumes declining to between 105,000 and 115,000 tons. Output in the meltshop and rolling mills has been reduced to reflect lower current demand.
 
Despite current period scrap costs that have declined more than average sales prices, the company expects the impact of average inventory costing to result in an operating margin per ton which approximates the first quarter of 2008 but is lower than the fourth quarter.
 
Schnitzer Steel Industries is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 39 operating facilities located in 12 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 nearly 800,000 tons, the company's steel manufacturing business—Cascade Steel Rolling Mills—produces finished steel products, including rebar, wire rod and other specialty products. The company commenced its 103rd year of operations in fiscal 2009.