Schnitzer Provides Market Outlook for First Quarter of Fiscal 2013
PORTLAND, Ore.--(BUSINESS WIRE)--Nov. 27, 2012--
Schnitzer Steel Industries, Inc. (Nasdaq:SCHN) announced today its
market outlook for its first quarter of fiscal 2013. During the first
half of the quarter, both export and domestic sales prices for ferrous
metals dropped approximately $50 per ton from August levels driven by
significantly lower domestic utilization rates and the weak economic
conditions globally which continued to adversely impact overall steel
demand. Domestic selling prices recovered toward the end of the quarter.
Export sales prices lagged the domestic market slightly, strengthening
in November for December shipments. Current export sales prices have
nearly recovered to August levels. During the quarter, the supply of
scrap continued to be constrained by low US GDP growth, and supply
volumes were negatively impacted by the lower price environment.
In our Metals Recycling Business, ferrous average net selling prices are
expected to decline approximately 5% from the fourth quarter of fiscal
2012. Ferrous sales volumes are expected to decline approximately 20%
due to softer demand resulting from the economic uncertainty, reduced
flows of raw materials and timing of shipments. Nonferrous average
selling prices are expected to increase approximately 5% while volumes
are expected to decline approximately 30% from the fourth quarter.
Operating income per ferrous ton is expected to be $4, approximately 60%
lower than the fourth quarter of fiscal 2012, due to the declining trend
in selling prices, the impact of constrained supply volumes on
production costs and the timing of shipments.
In our Auto Parts Business, the drop in commodity prices is expected to
result in a decline of 5% in revenues from the fourth quarter of fiscal
2012. First quarter operating margin is expected to increase to
approximately 8% due to lower average inventory costs and normal
seasonal improvements in our retail operations, including higher
admissions, which more than offset the impact of lower ferrous and
nonferrous selling prices.
In our Steel Manufacturing Business, average selling prices and volumes
are expected to be in line with the fourth quarter. Steady market
conditions, combined with reduced costs of raw materials, are expected
to result in operating income of approximately $3 million.
Strong progress on cost reductions is continuing and we are on track
with our restructuring program announced in August to lower pre-tax
operating costs by approximately $25 million annually. However,
corporate expense in the first quarter is expected to be slightly higher
sequentially as a result of $2 million of nonrecurring benefits in the
fourth quarter and higher intercompany profit eliminations due to the
timing of shipments. For the first quarter, net income is expected to be
in the range of break-even before pre-tax restructuring charges of $2
million. Actual financial performance may be materially different based
on, among other factors, market conditions and the timing of shipments.
Forward-Looking Statements
Statements and information included in this press release that are not
purely historical are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 and are made pursuant
to the “safe harbor” provisions of the Private Securities Litigation
Reform Act of 1995. Except as noted herein or as the context may
otherwise require, all references to “we,” “our,” “us” and “SSI” refer
to the Company and its consolidated subsidiaries.
Forward-looking statements in this press release include statements
regarding our expectations, intentions, beliefs and strategies regarding
the future, including statements regarding trends, cyclicality and
changes in the markets we sell into; strategic direction; changes to
manufacturing and production processes; the cost of compliance with
environmental and other laws; expected tax rates, deductions and
credits; the realization of deferred tax assets; planned capital
expenditures; liquidity positions; ability to generate cash from
continuing operations; the potential impact of adopting new accounting
pronouncements; expected results, including pricing, sales volumes and
profitability; obligations under our retirement plans; savings or
additional costs from business realignment and cost containment
programs; and the adequacy of accruals.
When used in this report, the words “believes,” “expects,”
“anticipates,” “intends,” “assumes,” “estimates,” “evaluates,” “may,”
“could,” “opinions,” “forecasts,” “future,” “forward,” “potential,”
“probable,” and similar expressions are intended to identify
forward-looking statements.
We may make other forward-looking statements from time to time,
including in reports filed with the Securities and Exchange Commission,
press releases and public conference calls. All forward-looking
statements we make are based on information available to us at the time
the statements are made, and we assume no obligation to update any
forward-looking statements, except as may be required by law. Our
business is subject to the effects of changes in domestic and global
economic conditions and a number of other risks and uncertainties that
could cause actual results to differ materially from those included in,
or implied by, such forward-looking statements. Some of these risks and
uncertainties are discussed in "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in our most recent annual report on Form 10-K and our
quarterly report on Form 10-Q. Examples of these risks include:
potential environmental cleanup costs related to the Portland Harbor
Superfund site; the impact of general economic conditions; volatile
supply and demand conditions affecting prices and volumes in the markets
for both our products and raw materials we purchase; difficulties
associated with acquisitions and integration of acquired businesses; the
impact of goodwill impairment charges; the realization of expected cost
reductions related to restructuring initiatives; the inability of
customers to fulfill their contractual obligations; the impact of
foreign currency fluctuations; potential limitations on our ability to
access capital resources and existing credit facilities; the impact of
the consolidation in the steel industry; the impact of imports of
foreign steel into the U.S.; inability to realize expected benefits from
investments in technology; freight rates and availability of
transportation; product liability claims; costs associated with
compliance with environmental regulations; the adverse impact of climate
change; inability to obtain or renew business licenses and permits;
compliance with greenhouse gas emission regulations; reliance on
employees subject to collective bargaining agreements; and the impact of
the underfunded status of multiemployer plans in which we participate.
Non-GAAP Financial Measures
This press release includes expected performance excluding expected
restructuring charges. Management believes that this non-GAAP financial
measure allows for a better understanding of our operating and financial
performance. This non-GAAP financial measure should be considered in
addition to, but not as a substitute for, the most directly comparable
US GAAP measures.
About Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and
exporters of recycled ferrous metal products in the United States with
58 operating facilities located in 14 states, Puerto Rico and Western
Canada. The business has seven deep water export facilities located on
both the East and West Coasts and in Hawaii and Puerto Rico. The
Company's integrated operating platform also includes its auto parts and
steel manufacturing businesses. The Company's auto parts business sells
used auto parts through its 51 self-service facilities located in 14
states and Western Canada. With an effective annual production capacity
of approximately 800,000 tons, the Company's steel manufacturing
business produces finished steel products, including rebar, wire rod and
other specialty products. The Company commenced its 107th
year of operations in fiscal 2013.
Source: Schnitzer Steel Industries, Inc.
Schnitzer Steel Industries, Inc.
Investor Relations:
Alexandra
Deignan, 646-278-9711
or
Media Relations:
Chip Terhune,
503-367-2568
Website: www.schnitzersteel.com
Email:
ir@schn.com