Schnitzer Steel Reports Record Third Quarter
07/02/2008 - Schnitzer Steel Industries reports record quarterly net income of $62 million on record quarterly revenues of $972 million for the third quarter, and net income of $122 million on revenues of $2328 million for the nine months ended May 31, 2008.
Schnitzer Steel Industries, Inc. reported record quarterly net income of $62 million on record quarterly revenues of $972 million for the third quarter, and net income of $122 million on revenues of $2328 million for the nine months ended May 31, 2008.
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Schnitzer’s Steel Manufacturing Business
Schnitzer’s Steel Manufacturing Business utilized its increased production capacity to produce and ship record sales volumes for the second consecutive quarter.
A 36,000-ton (20%) increase in sales volumes, coupled with a $148/ton (25%) increase in average net sales prices, boosted revenues for the Steel Manufacturing Business by 49% on a year-over-year basis. Compared to the second quarter of 2008, revenues increased 17% as average net prices during the quarter increased $128/ton. Higher overseas prices and a weak U.S. dollar continue to limit the volume of finished steel products imported for sale in the U.S., resulting in price increases despite soft domestic demand.
Operating income, which was a quarterly record, increased 30% year-over-year as the higher sales volumes offset higher costs for scrap and other raw materials.
For this segment, the company expects finished steel products prices to remain strong in the near term despite soft domestic demand as the level of import activity continues to remain low. Higher raw material costs, particularly for scrap, are also expected to contribute to higher selling prices. As a result of these conditions, prices for steel products on the West Coast should continue to rise, with average selling prices during the fourth quarter increasing 15 to 20% compared to the recently completed third quarter.
The company expects steel sales volumes to remain at relatively high levels with a slight increase over the fourth quarter of 2007, although declining modestly from the record volumes in the recently completed third quarter. The company also anticipates that scrap prices will rise at a comparable rate to sales prices, resulting in margins that should approximate the third quarter of 2008.
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“We are pleased to report the strongest quarterly financial results in the company's history, as each of our three operating divisions posted record revenues and operating income,” said John D. Carter, Schnitzer Steel’s President and CEO. “Global demand for recycled metals remained robust, driven by economic growth in developing countries. In the Metals Recycling Business, our worldwide market visibility and flexibility to sell both domestically and internationally allowed us to take advantage of strong markets and significantly expand margins and operating income.
“In the Steel Manufacturing Business, tight domestic supply conditions resulting from a low level of imports affecting our product lines contributed to record quarterly sales volumes and record selling prices for finished steel products,” added Carter. “The Auto Parts Business continued its focus on increasing vehicle purchases, which led to its sixth consecutive quarter of year-over-year operating income growth.”
Commenting on the third quarter results, Tamara Lundgren, Executive Vice President and Chief Operating Officer, said all three of the company's operating divisions were able to “maximize the benefits of the strong markets in which we operate through operating efficiencies and higher throughput. In the Metals Recycling Business, our capital investments to increase capacity allowed us to process the strong inflow of raw materials at all our major locations. Increased production capacity enabled the Steel Manufacturing Business to produce and ship record sales volumes, and in the Auto Parts Business our ability to process the increased car purchases while extracting more value from every car was a major factor in achieving record operating income.”
Schnitzer Steel Industries is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States, with 36 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. The company's auto parts business sells used auto parts through its 35 self-service facilities and 18 full-service facilities located in 15 states and in western Canada. 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.
