Schnitzer Steel Industries Inc. ( SCHN ) has provided
its market outlook for the second quarter of fiscal 2013, ended Feb
28, 2013. The company expects results to improve sequentially in
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Excluding restructuring charges, earnings per share are expected
to be in the range of 20 cents to 26 cents in the quarter. The
company is expected to incur a pre-tax restructuring charge of
roughly $2 million or 4 cents a share.
In the Metals Recycling Business (MRB) unit, ferrous sales volumes
increased roughly by 15% to 20% sequentially in the second quarter.
Ferrous export selling prices were strong during the quarter
Non-ferrous average selling prices remained flat sequentially, but
non-ferrous sales volumes increased roughly by 10%. Increased sales
volume coupled with higher selling price are expected to raise
operating income per ferrous ton by around 100% sequentially to
roughly $12 in the second quarter.
For the Auto Parts Business (APB) unit, Schnitzer Steel expects
revenues to increase roughly 10% on higher commodity prices,
stronger car purchases and incremental volume contribution from
acquisitions. Ten new locations were added in this business
division during the second quarter, which is expected to result in
nearly $2 million of transaction, integration and start-up costs,
negatively impacting operating margin.
In the Steel Manufacturing Business (SMB) unit, sales volumes are
expected to reduce 25% sequentially on higher raw materials costs,
lower utilization rate resulting from planned maintenance and a
typical seasonal slowdown in demand in the quarter, which will
further result in an operating income of about $1 million.
Schnitzer Steel expects effective tax rate for the second quarter
to include tax credits and other benefits in the range of $1
million to $2 million.
The company envisions increasing synergies between its MRB and APB
units in the second quarter. Testing of the MRB's newly constructed
shredder started in Feb and is expected to be operational by the
third quarter of fiscal 2013.
Schnitzer Steel's APB division expanded its business with the
launch of two greenfield development projects in the second quarter
and completion of 8 acquisitions as declared previously. The
greenfield development projects are expected to increase APB's
stores by 20% and annual car purchase volumes by 15%. These new
extended locations are expected to boost APB's presence in core
markets by providing synergistic sources of supply to MRB.
Schnitzer Steel retains a short-term (1 to 3 months) Zacks Rank #5
Other steel producing companies worth considering are
Companhia Siderurgica Nacional ( SID ),
Commercial Metals Company ( CMC ) and
Gibraltar Industries, Inc. ( ROCK ). All of them
hold a Zacks Rank #2 (Buy).