Radius Recycling’s preliminary Q2 results reveal net loss

Radius Recycling Inc., headquartered in Portland, Oregon, has announced preliminary results for the second quarter of its 2024 fiscal year, which ended Feb. 29.

The company is anticipating net losses to be approximately $35 million, with the loss per share from continuing operations to range from $1.19 to $1.24. Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be nearly $2 million, with the adjusted loss per share ranging from $1.05 to $1.10.

Radius says tight supply flows for recycled metals and unusually wet winter weather affected sales volumes and metal spreads for recycled metals and finished steel during its second quarter. Ferrous sales volumes are expected to decrease sequentially by 15 percent given the lower supply flows, including delays of certain bulk shipments at quarter-end. Nonferrous sales volumes are expected to be down 3 percent sequentially but up 7 percent year-over-year, supported by additional production from the company’s advanced nonferrous recovery technologies and expansion of its platform. 

“Without question, current market conditions remain challenging as cyclical headwinds are creating tighter supply flows and compressing metal spreads,” Radius CEO Tamara Lundgren says. “We have navigated effectively through these periods of tight scrap availability before, and we are focused on what we can control: costs, operating efficiencies and execution of our strategic priorities to increase our nonferrous production and expand our recycling services platform.”

Lundgren says scrap supply flows should improve with normal seasonality and as U.S. interest rates decline and global manufacturing activity recovers.

“On the demand side, decarbonization trends continue to be a positive driver for our products and services,” she says. “Many low-carbon technologies are more metal-intensive than the technologies they are replacing, and recycled metals require less carbon to produce than mined metals.

"With our 100-plus operating facilities producing recycled ferrous volumes of over 4 million tons and nonferrous volumes of over 700 million pounds annually, our low-carbon and net-zero carbon emission GRN finished steel products, and our 3PR [third party recycling] service and supply chain solution that enables our customers to increase their recycling rates, we are well-positioned to benefit from market improvements and these positive structural demand trends.”

Finished steel sales volumes are expected to increase by 5 percent year-over-year and steel mill use is expected to be 81 percent versus 75 percent in the prior-year period, Radius says, noting this reflects the continued strength of nonresidential and infrastructure demand in the western U.S. Sequentially, finished steel sales volumes are expected to decrease by 11 percent from seasonally lower construction demand exacerbated by a prolonged period of rain on the West Coast.

Radius expects average net selling prices for ferrous scrap to be up 8 percent sequentially, benefiting from strengthening global prices in the early part of the quarter driven by restocking. However, prices softened later in the quarter from lower demand and continued elevated levels of Chinese steel exports. Average net selling prices for nonferrous scrap are expected to increase by 3 percent sequentially and to be flat for finished steel products. Results for the second quarter are expected to include a benefit from average inventory accounting of approximately $2 per ferrous ton, the company adds.

During its second quarter, Radius says it implemented a plan to reduce selling, general and administrative (SG&A) expenses by 10 percent and increase production cost efficiencies to deliver $40 million in aggregate annual benefits, which are in addition to the $30 million in annual benefits previously announced that were implemented in the second quarter. The new measures include reductions in headcount and other employee-related expenses, as well as decreases in nontrade procurement spend, transportation and logistics and other outside services.

Approximately half of the targeted quarterly run-rate benefits from these initiatives are expected to be achieved in the third quarter, with substantially all the remainder by the end of its next fiscal year. The company says it expects to incur related restructuring charges and other exit-related costs in the range of $6 million, of which $3 million are expected to be incurred during the second quarter.

Radius will report its financial results for the second quarter of its 2024 fiscal year April 4.