Schnitzer Tops Numbers for Quarter

For the fiscal year, Schnitzer Steel reported record net income of $111.2 million on record revenues of $688.2 million. These amounts compare to net income of $43.2 million on revenues of $496.9 million during the 2003 fiscal year.

Robert W. Philip, Schnitzer’s chairman and CEO, said, "Our fourth quarter 2004 earnings grew 125 percent over the 2003 period and exceeded our earlier guidance. The earnings growth was due primarily to continued improvement in both the steel and recycled metal markets. The Company's earnings growth was led by our wholly owned and joint venture metals recycling businesses that produced a combined operating profit of $40.7 million, which was 100 percent above the fourth quarter of last year. We also saw significant profit gains in the Steel Manufacturing Business and continued earnings growth in the Auto Parts Business segment. Looking ahead into the first quarter of fiscal 2005, we continue to see good market conditions for all of our products, which are expected to result in strong earnings growth over the prior year quarter."

The Metals Recycling Business' fourth quarter 2004 operating income amounted to $21.8 million representing an improvement of 54 percent over the fourth quarter of last year. The increase in profitability was largely driven by higher selling prices, offset in part by lower ferrous sales volumes and higher costs paid to procure unprocessed metal.

Ferrous selling prices averaged $199 per ton during the fourth quarter of fiscal 2004, which compares to $137 per ton reported in last year's fourth quarter and $237 per ton for the third quarter of fiscal 2004. Prices generally increased during fiscal 2004; however, markets experienced significant price fluctuations throughout the year. Fourth quarter 2004 ferrous sales volumes amounted to 490,000 tons, which were 8 percent lower than the same quarter last year, but met the Company's expectations. The modestly lower sales volumes were caused by normal variations in shipments resulting from the timing of when export orders are received and ultimately shipped.

Fourth quarter 2004 operating income from joint ventures amounted to $18.9 million, which included a $6.1 million charge to account for this year's LIFO charge. In comparison, last year's fourth quarter income from joint ventures amounted to $6.2 million and included a $2.2 million charge for LIFO inventory valuation. The joint ventures benefited from similar market factors and pricing as described in the discussion above relating to the Metals Recycling Business. In addition, sales volumes from the processing joint ventures grew 15 percent from the fourth quarter of last year to 993,000 tons caused primarily by timing variances between when export orders are received and shipped. Brokerage sales volume increased 12 percent from the prior year quarter, which came primarily from increased market share in Mexico and Latin America coupled with product line expansion into other scrap metal related commodities.

During the third quarter of fiscal 2004 ferrous recycled metal selling prices for new orders declined from the record highs that were achieved in March 2004. However, by early June prices began to firm and continued to rise throughout the fourth fiscal quarter. In August 2004 average market prices for ferrous metals actually exceeded the highs achieved in March 2004.

Ferrous selling prices are volatile and have since moderated, but today remain ahead of the average prices realized in fiscal 2004. Overall demand for recycled metal remains good. The Metals Recycling Business normally accepts export orders 60 to 90 days before shipment. Based upon the Metals Recycling Business' current order backlog, contracted selling prices that are expected to be shipped in the first quarter of fiscal 2005 are, on average, significantly above the price levels reported in the first quarter of last year and even higher than the averages realized during the fourth quarter of 2004.