Schnitzer Steel sees improved performance across all business units in third quarter

Schnitzer Steel Industries Inc., headquartered in Portland, Oregon, has reported financial results for its fiscal 2015 third quarter ended May 31, 2015.

The company says its third quarter results reflect benefits from the cost reduction and productivity initiatives it announced in early April, leading to improved sequential operating performance across all of its business units.

Tamara Lundgren, president and CEO, says, “Our ability to deliver on a wide range of cost savings and productivity initiatives contributed to improved sequential financial results in the third quarter. We expect the benefits from these initiatives, combined with more stable market conditions, to provide momentum for further improvements in our performance. In addition, we expect to complete the consolidation of our auto parts and metals recycling businesses during the fourth quarter, creating the opportunity to benefit from further commercial and operational synergies.”

Relative to the second quarter of fiscal 2015, the company’s ferrous volumes increased 29 percent and nonferrous sales volumes increased 21 percent in the company’s metals recycling business. Because of the rapid decline in ferrous selling prices in February, which affected shipments in the third quarter, average inventory costs did not decline as quickly as selling prices, which led to an estimated $14 per ton, or $13 million, adverse impact of average inventory accounting, which approximated the adverse impact in the second quarter, Schnitzer reports.

Higher seasonal retail activity and early benefits achieved from productivity improvements led to significantly improved profitability in the company’s auto parts business, Schnitzer says.

The company’s steel manufacturing business generated higher sales volumes and increased operating income from steadily improving demand in West Coast construction markets.

Schnitzer announced break-even adjusted earnings per share from continuing operations for the third quarter, which compares with second quarter adjusted loss per share of 30 cents and prior year third quarter adjusted earnings per share of 19 cents. Adjustments included charges for restructuring and exit-related costs and asset impairments, the company notes. Third quarter adjusted results included an adverse impact from average inventory accounting of approximately 40 cents per share, which compares with a second quarter adverse impact of 36 cents per share and a prior year third quarter adverse impact of 9 cents per share. Based on current market trends, Schnitzer says estimated adverse inventory effects are expected to be substantially reduced in the fourth quarter.

The company saw a loss of 31 cents per share, which includes $6 million in restructuring and exit-related costs and $1 million in asset impairments, in the third quarter from continuing operations. This compares with the second quarter reported loss per share of $7.08 and third quarter fiscal 2014 reported earnings per share of 13 cents.

Schnitzer says it realized positive operating cash flow in the third quarter of $64 million, which allowed it to reduce its total debt to $263 million, the lowest level since first quarter of fiscal 2011.

During the quarter, the company says it made significant progress on the execution of its targeted $60 million in annual cost savings and productivity improvements, generating approximately $10 million in benefits. Schnitzer says it expects to achieve an additional $5 million of quarterly benefits by the fourth quarter of fiscal 2015, which is ahead of schedule and equates to a targeted quarterly run rate of approximately $15 million.