Scrap Industry News

Newell Industries Shuts Down

The assets of Newell Industries Inc., San Antonio, are being sold off in what may be the final chapter of the auto shredder manufacturer’s history.

The company has been unable to reach a settlement with either creditors or with potential acquirers, most notably John R. Newell, brother of former company owner Scott Newell.

Creditors were skeptical of sales projections that had been offered by Scott Newell, while John Newell was unable to bail out the company in part due to fears that State of Texas environmental clean-up claims against the company would be too burdensome.

According to Newell Industries human resources director and foundry general manager Ed Yawn, the company began winding down operations and offering assets up for bid in early August.

A first bid package consisting of “the intellectual assets of the company,” including mechanical and engineering drawings and specifications, customer lists, and foundry technology was put up for bid in a process that ended Aug. 25.

According to Yawn, proceeds from the sale will go to the bankruptcy court toward settlement of Newell Industries’ Chapter 7 filing. Bidding parties have all been from within the recycling equipment industry, Yawn says.

The winning bidder will own the assets but not be liable for any Newell Industries debts or obligations.

A second bid for physical assets is possible, although acceptable terms will have to be reached with different heirs within the Newell family estate who own the land and buildings.

Newell Industries Inc. filed for Chapter 11 bankruptcy (the filing was later converted to a Chapter 7 filing) in November of 1999. The company spent much of the past three decades as the leading automobile shredder manufacturer in North America, employing more than 150 people in the manufacturing, marketing and installation of shredder plants and replacement parts.

Second Quarter Tough on Scrap

Three publicly-traded scrap recycling companies cited tough market conditions for the disappointing results for the quarter ending June 30.

Metal Management Inc., Chicago, reported a $6.7 million net loss for the quarter, more than double its loss for the same quarter (the first of its fiscal year) of 1999. “We are disappointed with our results for the first quarter,” says chairman and CEO Albert A. Cozzi. “Although revenues for the quarter improved from the first quarter of fiscal 2000, they were 11% below the fourth quarter of fiscal 2000 and significantly less than our business plan,” he notes. “We had expected market conditions to strengthen as we started fiscal 2001, however, our results were negatively affected by decreases in both ferrous scrap metals prices and nickel prices."

Philip Services Corp., Hamilton, Ontario, Canada, reported a net loss of $4.9 million for the quarter ending June 30 (its second), with company officials noting scrap recycling operations were a primary culprit. “The net loss in the second quarter of 2000 was primarily attributed to the sharp decline in ferrous scrap prices during the quarter, as well as seasonally lower revenue and profitability for certain of the company’s industrial services,” a company press release states. “While ferrous scrap prices appear to have stabilized, seasonal shut downs in steel mills and metalworking plants are expected to delay any potential price recovery until the fall.”

Imco Recycling, Irving, Texas, cites woes in the aluminum segment for a quarter in which its profitability did not match analysts’ expectations. Imco Recycling chairman, president and CEO Don Ingram says a $4 million decline in earnings compared to a year ago “was due to lower profit margins in our aluminum business.”

Ingram adds “these lower margins are a result of excess capacity in the specification alloys industry and weak volume at facilities that serve the packaging and construction markets.”

He says the company’s U.S. Zinc Corp. subsidiary set new records for volume processed and operating income in the second quarter. Imco reached $226 million in revenues and $1.5 million in net income in that period.

Birmingham Exits California Partnership

Birmingham Steel Corp., Birmingham, Ala., has ended its role as a partner in the Pacific Coast Recycling (PCR) venture, located in Long Beach, Calif.

According to Birmingham Steel chairman and CEO John Correnti, the company reached an agreement this summer with Mitsui & Co. USA to end its role in the partnership. Under terms of the agreement, Birmingham Steel received $2.5 million from Mitsui and was relieved of any associated liabilities.

"Upon becoming CEO last December 1, I began discussions with Mitsui concerning termination of Birmingham Steel’s interest in PCR, a scrap exporting operation which was non-strategic to our primary business,” says Correnti.

"Termination of our participation in PCR allows our management to focus all of its attention on continuing the turnaround of Birmingham Steel,” adds Correnti, who added that the company’s investment in PCR had been previously written off and that the termination agreement would have no adverse impact on Birmingham Steel’s financial statements.