Schnitzer Q3 financial report reflects ‘stronger’ market

Schnitzer Steel Industries Inc., headquartered in Portland, Oregon, has reported its fiscal results for the third quarter of 2023, ended May 31. 

The company reports $14 million in net income for the quarter, up from $4 million in the second quarter, and net income per ferrous ton of $12 in the third quarter against $3 in the second quarter. 

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $56 million, or $48 per ferrous ton. Adjusted diluted earnings per share from continuing operations totaled 67 cents, excluding charges of $5 million, or 18 cents per share, which the company says is related primarily to legacy environmental matters. Ferrous sales in the third quarter were down to 1.157million long tons (1.296 million tons) from 1.263 million long tons (1.415 million tons) in the second quarter. However, nonferrous sales volumes increased to 208 million pounds (104,000 tons) in the third quarter from 165 million pounds (82,500 tons) last quarter. Schnitzer attributes this increase  to more purchases and higher recovery yields associated with its advanced nonferrous technology investments.  

The company says demand for recycled metals was stronger, which led to an increase in average net ferrous sales prices: $413 per long ton in the third quarter against $367 per long ton in the second quarter. While the finished steel average sales price was down, sales volume was up to 142,000 short tons (128,820 long tons) in the third quarter against 109,000 short tons (98,883 long tons) in the second quarter, which the company says is because of seasonally stronger construction demand.  

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Schnitzer says metal margins also benefited from shipments contracted before market prices began to soften in the second half of the quarter. Additionally, supply flows improved seasonally but remained tighter than a year ago.  

“Our financial and operating performance this quarter reflects stronger market conditions than we experienced earlier in the fiscal year, improved operating efficiencies from our productivity initiatives and benefits from the advanced metal recovery technology systems which have been commissioned to date,” says Tamara Lundgren, chairman and CEO of Schnitzer.  

“While the near-term economic environment is showing some signs of slowdown, the long-term structural demand for recycled metals remains positive, supported by the increased focus on decarbonization, the transition to low-carbon technologies and the anticipated demand associated with the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, including Buy Clean provisions,” Lundgren continues. 

Schnitzer says its third-quarter performance reflects the full achievement of the $10 million quarterly run rate of productivity initiatives announced last October and the quarterly run rate of $5 million of selling, general and administrative expenses savings initiatives announced in January. Results for the third quarter also include a benefit from average inventory accounting of approximately $2 per ferrous ton compared with $8 per ferrous ton in the second quarter, the company says. 

The third quarter had an operating cash outflow of $21 million. Total debt at the end of the third quarter is $351 million, and debt, net of cash, is $346 million. Capital expenditures were $27 million in the quarter, including investments in advanced metal recovery technologies, maintaining the business and environmental-related projects.