Schnitzer Steel provides Q4 financial results

Schnitzer Steel Industries Inc., Portland, Oregon, has announced preliminary results for its fourth quarter of fiscal 2018 ended Aug. 31, 2018.

For the fourth quarter of fiscal 2018, Schnitzer Steel reports that its Auto and Metals Recycling (AMR) is expected to report operating income in the range of $32 million-$34 million, or operating income per ferrous ton of $31-$33, compared with operating income of $24 million, or operating income per ferrous ton of $28, in the same period of the prior year. 

On a sequential basis, Schnitzer Steel reports that operating performance in the quarter is expected to be adversely impacted by a decline in ferrous and nonferrous selling prices, the effect of average inventory accounting and seasonally lower retail revenues, partially offset by benefits of higher ferrous and nonferrous sales volumes, reduced purchase costs for raw materials and our continued focus on productivity, including nonferrous processing improvements. 

Compared with last year’s fourth quarter, average ferrous net selling prices are expected to increase approximately 23 percent and ferrous sales volumes are expected to be approximately 19 percent higher, according to a Schnitzer Steel report. Average nonferrous net selling prices are expected to increase approximately 8 percent from the prior year quarter, and nonferrous sales volumes are expected to be 11 percent higher. 

Schnitzer Steel reports that AMR’s expected higher fourth quarter performance compared with the prior year is driven primarily by expanded metal spreads, increased ferrous and nonferrous selling prices and volumes, and benefits from commercial initiatives, partially offset by higher selling, general and administrative expense due primarily to higher employee-related expenses and an adverse impact from average inventory accounting of $5 million, compared with a benefit of $3 million in the same period of the prior year.

Cascade Steel and Scrap (CSS) is expected to generate operating income of approximately $14 million in the fourth quarter of fiscal 2018, reflecting a significant improvement from the fourth quarter of fiscal 2017 operating income of $8 million, according to a Schnitzer Steel report. CSS’ average finished steel selling prices are expected to increase approximately 31 percent year over year. Finished steel sales volumes are expected to decrease approximately 14 percent compared with the prior year fourth quarter due primarily to lower production as a result of planned maintenance, including rolling mill upgrades aimed at improving productivity. Schnitzer Steel reports that the expected improvement in CSS operating performance is primarily driven by higher average net selling prices for finished steel products which significantly outpaced increases in the cost of steelmaking raw materials, higher export sales volumes and continued benefits of productivity improvements from the integration of its Oregon metal recycling and steel manufacturing operations.

For fiscal 2018, total ferrous volumes, including external sales by AMR and CSS, and transfers to its steel mill, are expected to increase by 17 percent compared with fiscal 2017, Schnitzer Steel reports. AMR’s operating income per ferrous ton is expected to be $46 for fiscal 2018 compared with operating income per ton of $29 for fiscal 2017.

Consolidated financial performance in the fourth quarter of fiscal 2018 is expected to include corporate expense of approximately $11 million, an increase of $1 million compared with the prior year quarter. For the fourth quarter of fiscal 2018, Schnitzer Steel reports that the company’s effective tax rate is expected to be an expense of approximately 20 percent. This rate for the company’s preliminary results for its fourth quarter does not include a potential discrete non-cash tax benefit associated with the realizability of certain deferred tax assets, which is still under review, Schnitzer Steel reports.

For the fourth quarter, Schnitzer Steel reports that the company expects to report operating cash flow in the range of $100 million-$105 million. According to a company report, total debt was $107 million as of Aug. 31, 2018, and debt, net of cash, was $103 million. This represents a total debt reduction of $65 million, or 38 percent, compared with May 31, 2018. 

Regarding its ongoing authorized share repurchase program, Schnitzer Steel reports that the company repurchased a total of 250,000 shares of its Class A common stock in open market transactions during the fourth quarter, bringing share repurchases for fiscal year 2018 to 516,013 shares.

According to a Schnitzer Steel report, Schnitzer expects fourth quarter earnings per share from continuing operations to be in the range of 95 cents to $1 and adjusted earnings per share to be in the range of 93 cents to 98 cents. For the fourth quarter of fiscal 2017, reported earnings per share from continuing operations were 65 cents and adjusted earnings per share were 63 cents. The ranges for the company’s preliminary results for its fourth quarter of fiscal 2018 do not include a potential discrete non-cash tax benefit associated with the realizability of certain deferred tax assets, which is still under review. 

According to Schnitzer Steel, the preliminary, unaudited information provided above is based on the company’s current estimate of its financial results for the fourth quarter and fiscal year ended Aug. 31, 2018 and remains subject to change based on management’s ongoing review of the company’s fourth quarter financial results and the completion of the company’s annual audit.

In addition, Schnitzer Steel says it plans to report the financial results for its fourth quarter and fiscal year ended Aug. 31 on Oct. 24, 2018. The company will webcast a conference call to discuss these results at 11:30 a.m. EST on the same day. The webcast of the call and the accompanying slide presentation may be accessed on Schnitzer’s website.