auto hulks bundled on a flat bed truck
Photo courtesy of Schnitzer Steel

Schnitzer releases preliminary quarterly, year-end results

The company says it expects the second-best fiscal year earnings in its history.

October 5, 2022

Schnitzer Steel Industries Inc., Portland, Oregon, has announced preliminary results for its fourth quarter and fiscal year, which ended Aug. 31, 2022.

The company, which operates scrap yards and auto recycling facilities and manufactures steel products, says it expects fiscal 2022 results to be the second-best year in its history. Diluted earnings per share from continuing operations are expected to range from $5.67 to $5.72, net income is expected to be in the range of $170 million to $172 million, adjusted diluted earnings per share are expected to be in the range of $6 to $6.05and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, are expected to range from $311 million to $313 million. Schnitzer says it also expects operating cash flow of approximately $238 million for the full fiscal year.

"We expect our full year fiscal 2022 results to be the second-best in our company's history, supported by high finished steel and recycled metal prices, successful implementation of productivity initiatives to partially offset inflationary cost pressures and progress on our strategic initiatives, including closing two acquisitions,” involving Encore Recycling in Metro Atlanta and Columbus Recycling, with operations in Mississippi, Tennessee and Kentucky, Tamara Lundgren, Schnitzer chairman and chief executive officer, says. “We also progressed our investments in advanced metal recovery technology systems and launched GRN Steel, a line of net zero carbon emissions products from our Cascade steel mill.

“Our fourth-quarter results were adversely impacted by a significant decline in ferrous and nonferrous sales prices and demand, tighter supply flows resulting from the drop in prices and the weaker economic environment and an extended operational outage,” she adds.

The extended operational outage involved Schnitzer’s Everett, Massachusetts, auto shredding facility and involved replacing equipment damaged by a fire in December 2021. This factor as well as the decline in ferrous and nonferrous prices and demand and tighter supply flows were partially offset by strong prices for its finished steel products, the company adds.

In terms of its fourth-quarter performance, Schnitzer says it expects diluted earnings per share from continuing operations to range from 31 cents to 36 cents, with net income to range from $9 million to $11 million and net income per ferrous ton to range from $7 to $9.

The company forecasts adjusted fourth-quarter EBITDA to range from $38 million to $40 million and adjusted EBITDA per ferrous ton to range from $30 to $32.

Schnitzer says the sharp decline in selling prices for recycled metals in the fourth quarter is expected to lead to a compression in metal spreads and an adverse impact from average inventory accounting of approximately $23 per ferrous ton.

The company says its operating cash flow for the quarter should be approximately $180 million.

Average net ferrous and nonferrous selling prices are expected to decrease from the third quarter by 28 percent and 7 percent, respectively, in the fourth quarter, Schnitzer says. Ferrous sales volumes are expected to increase 12 percent sequentially, reflecting the benefit from shipments delayed from the third quarter, and nonferrous volumes are expected to decrease 8 percent. Average net finished steel selling prices are expected to decrease by 1 percent, and finished steel sales volumes are expected to be down by 7 percent, sequentially.

The company says lower selling, general and administrative expenses resulting mainly from lower incentive compensation accruals and benefits from productivity initiatives are expected to partially offset inflationary pressure on operating costs, including rising costs of compliance to meet regulatory requirements and the Everett shredding operation outage since late June, net of insurance recoveries.

Schnitzer says it repurchased 500,000 shares of its Class A common stock in open market transactions during the quarter pursuant to its ongoing authorized share repurchase program, bringing share repurchases for fiscal 2022 to approximately 3.5 percent of outstanding shares.

Lundgren says, "Despite the current headwinds, we believe the long-term structural trends for recycled metal demand remain positive and are well-aligned with our strategy and investments. The transition to low-carbon technologies, which are more metal intensive; the increased focus on decarbonization; and the expected funding related to the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, including Buy Clean provisions, underpin anticipated increased future demand for ferrous and nonferrous recycled metals."

Schnitzer says its preliminary quarterly and year-end results are based on its current estimates and remains subject to change based on management's final review of fourth-quarter financial results and the completion of the annual audit.