Schnitzer Steel Industries Inc.
) saw its profit slip in the second quarter of fiscal 2013 (ended
Feb 28, 2013), hurt by restructuring charges associated with its
cost saving measures.
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The Ore.-based company posted a profit of $8.6 million or 32
cents per share in the reported quarter, down 10% from $9.6
million or 35 cents a share earned a year ago. Excluding
restructuring charges of $2 million (before tax), earnings came
in at 36 cents a share. The result surpassed the Zacks Consensus
Estimate by 12 cents.
Revenue and margin
Revenues slid 25% year over year to $662 million in the second
quarter, trailing the Zacks Consensus Estimate of $723 million.
Schnitzer Steel witnessed double-digit year-over-year declines
across its Metal Recycling Business (MRB) and Steel Manufacturing
Business (SMB) units in the quarter. Ferrous export selling
prices strengthened during the quarter.
Gross margin rose to 9.3% in the reported quarter from 7.8% a
year ago. Operating income tumbled 37% year over year to roughly
Revenues from the MRB division slipped 26% year over year to $576
million in the quarter. Ferrous sales volumes were 1,103,000
tons, down 18% from the year-ago quarter but up 16% sequentially.
Increased demand in the export market contributed to the
Non-ferrous sales volumes fell 26% from the prior-year quarter to
126 million pounds. However, the results improved 6% sequentially
on higher production levels and sales timing.
Sales from the Auto Parts Business (APB) unit remained flat year
over year at $78 million. Sales were up 12% sequentially on
higher commodity prices and volumes.
Revenues from Schnitzer Steel's SMB division clipped 16% year
over year to $71 million. Finished steel sales volumes fell 15%
year over year and 26% sequentially to 96,000 tons. Average net
sales prices for finished steel products declined 5% year over
year, but were up 1% sequentially.
Schnitzer Steel ended the quarter with cash and cash equivalents
of $34.5 million, down roughly 33% year over year. Long-term debt
declined 3% year over year to $400.7 million.
Schnitzer Steel, in Aug 2012, announced some restructuring
initiatives, including a reduction of about 7% of its workforce.
The restructuring program also involves integration of the metals
recycling and auto parts businesses. Schnitzer Steel expects
total restructuring expenses of roughly $13 million and
anticipates pre-tax cost saving of $25 million from the move.
Schnitzer Steel has already incurred restructuring charges of $8
million with the balance (of $5 million) expected to be incurred
during the remainder of fiscal 2013. The restructuring measures
delivered an 11% decline in selling, general and administrative
costs during the first half.
Schnitzer Steel's APB division added 10 new retail stores during
the second quarter through acquisitions and organic investments.
These new sites are expected to offer access to additional supply
in its core markets. On the MRB front, Schnitzer Steel has
completed testing of a new shredder, which will boost processing
capabilities in Western Canada during the third quarter.
Schnitzer Steel 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.
Schnitzer Steel retains a Zacks Rank #3 (Hold).
Other steel producing companies worth considering are
Gibraltar Industries, Inc.
Nippon Steel & Sumitomo Metal Corporation
Shiloh Industries Inc.
). All of them hold a Zacks Rank #1 (Strong Buy).