Schnitzer reports quarterly loss

Portland, Oregon-based metals recycler and steelmaker Schnitzer Steel Industries Inc. has reported a money-losing first quarter to its 2020 fiscal year, which ran from Sept. 1 to Nov. 30, 2019.

Schnitzer has reported an $8 million (26 cents per share) loss from continuing operations and what it calls “an adjusted loss per share of 17 cents.” The adjusted figure partially removes losses stemming from the “adverse impact from average inventory accounting of approximately 11 cents,” and “a charge of five cents [per share] related to resolution of an environmental matter,” according to the firm.

In its previous quarter—the fourth quarter of Schnitzer’s 2019 fiscal year—the firm reported earnings per share from continuing operations of 41 cents. In the year-ago first quarter of fiscal year 2019, Schnitzer earned 57 cents per share from continuing operations.

“During the first quarter, the scrap markets were challenged by weaker export and domestic markets and a continued structural shift in demand for certain nonferrous products,” says Tamara Lundgren, Schnitzer’s president and CEO.

“Our plans to offset these cyclical and structural challenges are well underway and include an increase in our targeted productivity improvements; a significant investment in advanced metal recovery technologies; and a continued drive to increase our total ferrous shipment volumes,” adds Lundgren. “These strategic initiatives can improve our through-the-cycle margins and cash flow, providing us with additional opportunities to grow and to return more capital to our shareholders.”

According to the Schnitzer news release announcing its quarterly results, “Volumes and margins in both operating divisions [recycling and steelmaking] were impacted by the sharp decline in ferrous selling prices during the first two months of the quarter. Ferrous selling prices reached multi-year lows in October, and supply flows tightened considerably. The rise in ferrous selling prices in November led to an easing in supply flows, but contributed to margin compression against sales contracted earlier in the quarter.”

The company’s Auto and Metals Recycling (AMR) segment thus reported an operating loss in the first quarter of $2 million, or $3 per ferrous ton, and an adjusted operating loss of $1 million, or $1 per ferrous ton. “The sharp decline in average selling prices outpaced the reduction in purchase costs for raw materials and adversely impacted operating results by compressing metal spreads and generating an approximately $4 million, or $5 per ferrous ton, adverse impact from average inventory accounting,” states the firm.

Schnitzer further reports, “The tighter supply flows resulted in a year-over-year decrease in ferrous and nonferrous sales volumes by 10 percent and 14 percent, respectively. AMR’s operating results also included an adverse impact of $2 per ferrous ton from the environmental-related charge.”

A footnote in the company’s quarterly results indicates the environmental charge was “related to the Portland Harbor Superfund site and to other legacy environmental loss contingencies.” Schnitzer was named as one of four partially responsible parties in a United States Environmental Protection Agency Portland Harbor and Willamette River cleanup plan that has been a subject of negotiation for several years.

The company’s Cascade Steel and Scrap (CSS) segment “achieved operating income in the first quarter of $4 million, in an environment of declining prices for finished steel and ferrous and nonferrous scrap,” states the company. “Operating results were adversely impacted by margin compression due to the decrease in average net selling prices for finished steel products, particularly wire rod, outpacing the decrease in the purchase cost of steel-making raw materials,” adds Schnitzer.