Schnitzer Steel Industries Inc. reported net income of $12.2 million on revenues of $128.4 million for the first fiscal quarter ended Nov. 30, 2003. In comparison, the company reported net income of $2.9 million on revenues of $90.7 million the same time the previous year.
"It's a pleasure to report another strong quarter for Schnitzer Steel," said Robert W. Philip, president and chief executive officer. "Net income was up 321 percent from the first quarter of fiscal 2003 on a 42 percent rise in revenues.
“Overall, the company's first quarter results ended in the range we expected with average selling prices for both ferrous metals and finished steel rising above the levels reported in the first quarter of fiscal 2003 and the fourth quarter of last fiscal year.
“Operating profits in our various metals recycling businesses, as well as the Auto Parts Business, showed good improvement from the first quarter of last year. The Steel Manufacturing Business also showed improvement over last year's first quarter; however, the results were lower than we anticipated due primarily to a higher than expected rise in recycled metal costs."
"In early December, China's Bureau of National Statistics announced that with one month to go before year-end, China had already become the first nation ever to produce more than 200 million tons of raw steel in a single year," said Philip. "Looking back just three years to 2000, China produced an estimated 129 million tons of steel representing 16% of the world's production. Today, it's anticipated that China will produce approximately 215 million tons of crude steel in all of 2003 representing nearly 23% of the world's total estimated production. This growing steel production is directly increasing demand and prices for recycled ferrous metal."
The Metals Recycling Business reported operating income of $9.9 million in the first quarter of fiscal 2004, an improvement of $6.8 million or 221 percent over the same quarter last year. The higher operating profit was primarily caused by improvements in both sales volumes and average selling prices, which rose by 39 percent and 37 percent, respectively, over the first quarter of fiscal 2003.
First quarter sales volumes are normally lower than the other three fiscal quarters of each year due to seasonal variations in demand; however, last year's first quarter sales volume was unusually low due to an intentional delay in placing orders by certain Asian customers. Ultimately, the volume was sold in the second quarter of fiscal 2003. In comparison, first quarter 2004 quarterly sales volumes were more typical, considering normal seasonal variations in demand. Moreover, this quarter's sales volumes would have been higher except that one 30,000-ton export cargo that was anticipated for the first quarter of fiscal 2004 was delayed and shipped during the first week of December 2003.
The higher first quarter 2004 selling prices were caused by increasing Asian demand, primarily from China. The higher selling prices and sales volumes were partially offset by increases in the cost of unprocessed metal coupled with rising ocean freight rates, which were 50 percent higher in the fiscal 2004 first quarter as compared to the prior year quarter.
As for the outlook for its metals recycling business, Schnitzer noted that its Metals Recycling Business normally accepts orders 60 to 90 days before shipment. Based upon the Metals Recycling Businesses' second quarter 2004 order backlog, contracted selling prices are, on average, higher than the amount realized in the first quarter of fiscal 2004, and significantly higher than the amount reported during last year's second quarter. The higher selling prices are expected to be tempered by rising ocean freight rates as well as upward pressure on the cost to purchase metal from suppliers. Sales volumes are anticipated to be in the range of 520,000 to 550,000 tons. Similar market factors are expected to affect our joint ventures in the metals recycling business.