Schnitzer Reports Quarterly Figures

Schnitzer Steel Industries, Inc. reported net income of $3.0 million on revenues of $64.8 million for the fourth quarter of fiscal 2001.

These amounts compare to net earnings of $2.2 million on revenues of $91.8 million for last year's fourth quarter.

Earnings for the year-ended August 31 totaled $7.9 million on revenues of $291.9 million. These amounts compare to net income of $10.4 million on revenues of $333.8 million during fiscal 2000.

"Despite the continued slowdown of the world economy that contributed to our revenue decline, Schnitzer Steel was able to increase its margins and significantly improve fourth quarter results," said Robert Philip, president. "These improvements are a reflection of the extraordinary efforts made by the employees in both our wholly-owned businesses and joint ventures. These dedicated people focused on streamlining processes, improving the efficiency of our operations and producing and selling products that had the highest margins. We believe much of the improved focus was the result of our recent implementation of an Economic Value Added (EVA(R)) financial and compensation system."

Operating income for the company's joint venture businesses increased by 118 percent, from $4.5 million in fiscal 2000 to $9.8 million in fiscal 2001. The improved results came predominantly from the joint ventures with Hugo Neu Corp. that operate metals recycling facilities in the Northeastern U.S. and in Southern California. In these joint ventures, the company saw its share of the operating results increase 171 percent from last year.

For the year, the company's Metals Recycling Business reported operating income of $7.9 million, down from $12.9 million reported in fiscal 2000. The decrease in operating income was caused in part by lower selling prices. Sales prices for recycled ferrous metals declined 2 percent and 4 percent for the fourth quarter and year, respectively. Average nonferrous selling prices declined by 7 percent from last year for both the fourth quarter and year. Ferrous sales volumes were relatively unchanged from last year, however, sales volumes of higher-valued nonferrous products increased 19 percent from fiscal 2000. The higher sales of nonferrous metals were caused in part by improvements in the processes used to extract metal from the automobile shredding process.

The Steel Manufacturing Business' operating income totaled $4.9 million in fiscal 2001 compared with $7.2 million last year. The lower profits were primarily caused by an 18 percent decline in sales volumes, brought about by the continued importation of low priced foreign steel. To partially mitigate the lower sales prices caused by the dumping of imported steel, the company curtailed the production and sale of lower margin wire products and focused its efforts on producing and selling other higher margin products. For the fourth quarter and year, the average selling price of finished steel increased by 2 percent and 1 percent, respectively, which was primarily caused by improvements in product mix.

Looking forward, Philip commented, "While the recent tragedies in New York City and Washington D.C. have created uncertainty in our markets, we continue to experience relatively good demand in our recycled metals export business. However, domestic demand remains weak due to the sluggish U.S. economy as well as continued high imports of semi-finished steel, slowing the demand for recycled metal feedstock.

"Over the last month we have seen prices begin to firm for many of our recycled metal products. We attribute much of this firming to the reductions of supply coming out of the countries of the former Soviet Union. Late in the summer, both the company and our joint venture partners experienced a relatively sharp decline in ocean freight rates, which we expect will continue at these depressed levels in the short-term. These lower freight rates should help to support our margins on export sales in the ensuing quarter. Finished steel markets are expected to soften further as the summer building season ends.

Our Steel Manufacturing Business recently secured a new long-term electricity contract, which begins on October 1, 2001. Electricity rates under the new contract are expected to increase our cost of production by approximately $5 per ton. "