Schnitzer’s Q1 performance reflects lower demand and average selling prices

Schnitzer Steel Industries Inc., headquartered in Portland, Oregon, has reported results for the first quarter of its 2023 fiscal year, which ended Nov. 30, 2022, that show a diluted loss per share for continuing operations of 64 cents and a net loss of $18 million. The company’s net loss per ferrous ton was $21.  

Adjusted diluted loss per share from continuing operations totaled 44 cents, which excludes charges of $7 million related primarily to asset impairments and restructuring charges and other exit-related activities, the company says. Its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $8 million for the quarter, while Schnitzer reported adjusted EBITDA per ferrous ton of $10.

In mid-December of last year, the company provided its preliminary quarterly results, indicating that it expected adjusted EBITDA to be in the range of $6 million to $8 million and adjusted EBITDA per ferrous ton in the range of $8 to $10.

The company says its results reflect an adverse impact of approximately $18 million, or $21 per ferrous ton, from extended operational disruptions at its Everett, Massachusetts, and Oakland, California, metals recycling facilities that were resolved in November 2022. The company’s auto shredder in Everett was offline for five months for repair, and its Oakland shredder was the subject of a lawsuit by the Oakland Athletics related to a proposed stadium expansion.

Additionally, Schnitzer’s Q1 performance reflected lower demand and lower average selling prices for recycled metals and finished steel products. Demand softened throughout the quarter, influenced by macro concerns, including slower growth, inflationary pressures and steel inventory destocking. Lower prices led to tighter supply flows and compression of metal spreads, the company says.

Ferrous and nonferrous sales volumes declined sequentially, reflecting the impact of the disruptions in Everett and Oakland, the tighter supply flows and several ferrous shipments slipping into December.

In the first quarter, Schnitzer says it achieved nearly the full run rate of benefits from the $40 million of cost reduction and productivity initiatives it announced in October 2022, which mitigated the impact of inflation on operating costs and has increased the full-year target of productivity initiatives by $20 million.

During the quarter, the company says it made progress on its strategic growth investments in advanced metal recovery technologies and began the commissioning of two primary nonferrous recovery systems in Massachusetts and California. In addition, Nov. 18, 2022, it purchased the operating assets of ScrapSource LLC, a recycling services business based in Dallas. ScrapSource provides metals recycling management services and solutions to more than 500 customers, representing manufacturers, fabrication facilities and service centers across North America. Combined with Schnitzer’s existing national accounts team, the company says the ScrapSource acquisition is expected to significantly expand its recycled services volumes and extend this business into additional regional markets across the U.S.

Schnitzer Chairman and CEO Tamara Lundgren says, “Although the past several months have been challenging as we faced weakening market conditions and short-term operational disruptions that are now resolved, we are continuing to progress our strategic initiatives centered on advanced metal recovery technologies, volume growth, and productivity improvements. Since the end of the quarter, we have seen a strengthening in selling prices and demand for recycled metals in both the export and domestic markets and we are expecting significant sequential improvements in our second quarter results.”

She continues, “Last month, we published our fiscal 2022 sustainability report, Recycled Metals for a Low-Carbon Future. We made significant progress towards our People, Planet and Profit goals, including achieving 100 percent net carbon-free electricity use across our operations for a second consecutive year and reducing Scope 1 and 2 greenhouse gas emissions from recycling operations by 24 percent against a 2019 baseline. We also launched GRN Steel, our line of net-zero-carbon-emissions steel products. By supplying our global customers with high-quality, low-carbon recycled metals that are critical to the production of sustainable products and infrastructure, we are continuing to deliver on our commitment to creating a more sustainable future.”