Schnitzer Steel Industries Inc.
) turned to a loss in first-quarter fiscal 2013 (ended November
30, 2012) as weak economic conditions hurt demand for steel in
the quarter. Its bottom line was also hit by restructuring
charges associated with cost containment measures.
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The Oregon-based company posted a net loss of $2 million or 6
cents per share in the first quarter versus a profit of $7
million or 25 cents a share recorded a year ago. Barring
restructuring charges of $2 million, adjusted loss came in at 2
cents a share. Analysts polled by Zacks were expecting earnings
of 4 cents a share on an average.
Revenue and margin
Revenues tumbled 27% year over year to $593 million in the first
quarter, missing the Zacks Consensus Estimate of $627 million.
Sales were hurt by lower selling prices. Moreover, constrained
supply of scrap due to low domestic economic growth and weak
consumer activity impacted the results.
Gross margin remained stable year over year at 8.6% in the first
quarter. Operating income slid 92% year over year to roughly $1.2
Revenues from the Metal Recycling Business (MRB) division slipped
32% year over year to $494 million in the quarter. Ferrous sales
volumes were 955,000 tons, down 19% from the fourth quarter,
impacted by a weak pricing environment. Non-ferrous sales volumes
were 119 million pounds, down 30% sequentially. Average net
ferrous selling prices dropped 17% year over year in the quarter
on low demand. Moreover, nonferrous prices fell 5% year over
Sales from the Auto Parts Business (APB) segment clipped 17% year
over year to $70 million. Sales fell 3% sequentially due to lower
commodity prices and volumes.
On a positive note, revenues from the Steel Manufacturing
Business (SMB) climbed 15% year over year to $92 million.
Finished steel sales volumes rose 22% year over year and 3%
sequentially to 130,000 tons. Average net sales prices for
finished steel products declined 6% year over year and 1%
Schnitzer exited the quarter with cash and cash equivalents of
$24.4 million, down roughly 10% year over year. Long-term debt
declined 28% year over year to $345.7 million.
The company, in August 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. The company expects total
restructuring expenses of roughly $11 million and anticipates
pre-tax cost saving of $25 million from the move.
Moving ahead, the company sees modest improvement in market
conditions. It expects ferrous and non-ferrous shipments to
increase in the second quarter on improving demand for recycled
metals. The company's APB division recently added 10 new retail
stores through acquisitions and organic investments. It expects
to incur startup and transaction costs of up to $2 million
related to these stores in the second quarter.
Schnitzer also remains focused on increasing value through
expansion of its metals recycling export platform and auto parts
business and boost performance through sustained operational
Schnitzer, which competes with
Commercial Metals Company
), retains a short-term Zacks Rank #4 (Sell).