These amounts compared to net income of $4.0 million on revenues of $94.9 million for the third quarter last year.
For the first nine months the company reported net income of $4.9 million on revenues of $227.2 million. For the same period last year Schnitzer reported net income of $8.1 million on revenues of $242.0 million
"Despite the difficult market conditions facing both our metals recycling and steel manufacturing businesses, we along with our joint venture partners were able to remain profitable during the third quarter", said Robert Philip, president. "Maintaining profitability was a significant achievement as many of our competitors reported sizable losses or were forced into bankruptcy proceedings during this same period."
To remain profitable in these difficult markets, the company focused on a number of areas including:
Optimizing product mix. The slowdown in the U.S. economy along with the continued importation of subsidized foreign steel continued to impact demand for all of the company's finished steel products, which resulted in lower sales volumes and, thus, lower revenues for the quarter. During the quarter, however, the company focused on producing and selling products for which its customers were willing to pay prices that allowed it to remain profitable. Further, the company curtailed the production of products that it could not produce and sell at a profit;
Scrutinizing and reducing costs. Recently, the company's steel manufacturing operations curtailed its rolling mill production and reduced its hourly workforce by approximately 15%. Further, the company eliminated annual merit increases for this year for substantially all of its mid-level and higher managers in its wholly owned businesses;
Improving operational efficiency. Despite the difficult market conditions, the company continues to focus on improving the efficiency of its operations. For example, its melting operation in its Steel Manufacturing Business set production records for seven months in a row;
Taking steps to encourage future financial improvement. The company has nearly completed the implementation of an Economic Value Added financial and compensation system both at its wholly owned businesses as well as at its Hugo Neu joint ventures, as previously announced.
The Metals Recycling Business reported operating income of $0.9 million for the third quarter, compared with $3.8 million for the same quarter last year. Both sales volumes and prices were down from last year's third quarter. An increase in shipments to the company's wholly owned steel mill partially offset a reduction in sales to third parties, but, overall, volumes were down 5%. Selling prices in both the domestic and export markets were down slightly, resulting in an overall decline in the average selling price.
"Demand outside the U.S. remains relatively firm", commented Philip, "However, prices continued to be negatively impacted during the quarter by the significant amount of recycled metals flowing from the countries of the former Soviet Union. We understand that Romania and some of the Baltic countries have implemented export tariffs to try to quell the flow of recycled metals out of their countries. We have yet to see any significant increases in prices from these measures, but prices in our export markets appear to be firming of late."
Unlike many other manufacturers of steel products, the company's Steel Manufacturing Business remained profitable in the third quarter. Operating income totaled $1.8 million in the most recent quarter, which approximated the level in the prior year quarter. These profits were achieved despite a 30% decline in sales volume from the third quarter of last year. The decline in volume was in part due to the slow-down in the US economy, but also due to the fact that management chose to curtail the production and sale of lower margin wire products. The importation of foreign steel has continued to adversely impact the domestic markets. Partially as a result of the improved efficiency of its melt shop, the Steel Manufacturing Business was able to sell $0.4 million of electricity and natural gas during the quarter that was not needed to support the current level of rolling mill production. Improved product mix and an increase in reinforcing bar pricing earlier in the year caused the average selling price to increase modestly. The third quarter also benefited from the receipt of an electrode price fixing settlement, which totaled $0.4 million.
Operating income from the company's joint venture businesses was $1.7 million. Reductions in selling prices and the timing of shipments have resulted in a decline in operating income from its Schnitzer -- Hugo Neu joint ventures. The joint ventures operating in the metals recycling business have been impacted by the same factors impacting the company's wholly owned Metals Recycling Business. Income from the company's joint venture which operates self-service used auto parts yards increased $0.6 million over the same period last year largely due to improved market conditions and efficiencies.
"Net income is expected to be lower than last year's fourth quarter. In both our wholly owned and joint venture metals recycling business, we are focusing on reducing excess capital invested as well as the cost of unprepared materials and processing costs. We are beginning to see selling prices firm in this segment and expect a modest decline in freight rates to Asia, which should also benefit our margins. Additionally, our fourth quarter recycled metals production is already almost fully committed," stated Philip. "Beginning in June, the company curtailed production of one of its rolling mills to better match production with sales volumes. Although we do foresee a modest seasonal increase in sales volumes during the fourth quarter in our Steel Manufacturing Business, at this point we expect volumes to be below the level seen in last year's fourth quarter. We also hope to see a favorable impact on domestic finished steel demand should interest rates decline further.