) has unfurled its outlook for the fourth quarter of fiscal 2013
(ending Aug 31, 2013). The company envisions a loss in the
quarter as it witnessed lower pricing and demand and expects to
take restructuring, impairment and other charges. Schnitzer
expects to post fourth-quarter results in the second half of
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The Ore.-based steelmaker saw weak export demand for recycled
metals during the quarter compared with the third quarter,
manifested by a decline in shipping volumes and average selling
prices. It witnessed a slower fall in average purchase prices for
material shipped than selling prices during the fourth quarter,
leading to margin compression on a sequential basis.
In the Metals Recycling Business (MRB), average ferrous sales
prices are expected to fall 8-10% from the third quarter. Ferrous
sales volumes are forecast to decrease 5-10% sequentially.
Nonferrous average sales prices are expected to decline roughly
5% while sales volumes are expected to be at par with the third
quarter. The division is expected to post an operating loss in
the quarter on lower pricing and higher unit costs.
The MRB unit is also expected to record a non-cash goodwill
impairment charge and non-cash deferred tax valuation allowance
associated with overseas operations.
In Schnitzer's Auto Parts Business (APB), car purchase volumes
are expected to be essentially flat in the fourth quarter
compared with the third. The company expects volumes for the full
year to rise 5% year over year in a weak operating backdrop,
driven by new stores.
Sales volumes in Schnitzer's Steel Manufacturing Business (SMB)
are expected to rise roughly 10% sequentially, aided by higher
demand for finished steel in the Western U.S. Higher volumes are
expected offset a modest decline in average selling prices,
resulting from lower scrap costs.
Schnitzer, which currently retains a Zacks Rank #4 (Sell),
remains focused on increasing value through expansion of its
metals recycling export platform and auto parts business,
optimizing costs and boost performance through sustained
operational improvement initiatives.
The company expects positive cash flows from operations (boosted
by strong working capital management) to result in a decrease in
total debt outstanding in the fourth quarter, after paying
quarterly dividend. Schnitzer completed the construction of its
major capital projects in Canada and Puerto Rico during the
fourth quarter, which is expected to meaningfully cut its capital
expenditures in fiscal 2014.
Other steel producing companies with favorable Zacks Rank are
Nippon Steel & Sumitomo Metal Corporation
Kobe Steel Ltd.
). While Nippon Steel maintains a Zacks Rank #1 (Strong Buy),
Kobe Steel and Ternium each hold a Zacks Rank #2 (Buy).