Schnitzer Steel Industries, Inc. reported results for its fiscal second quarter ended February 29, 2020.
The company reported earnings per share from continuing operations for the quarter of $0.14 and adjusted earnings per share of $0.31, a strong sequential improvement from the first quarter reported and adjusted loss per share of $0.26 and $0.17, respectively. Prior year second quarter reported and adjusted earnings per share from continuing operations were $0.46 and $0.50, respectively.
Auto and Metals Recycling (AMR) achieved operating income in the second quarter of $19 million, or $23 per ferrous ton, a significant improvement from an operating loss of $2 million in the first quarter. Cascade Steel and Scrap (CSS) achieved operating income in the second quarter of $4 million, in-line sequentially.
“Our strong second quarter results reflect the resiliency of our operations and the ability of our team to navigate well during an improving but still volatile quarter,” said Tamara Lundgren, chairman and chief executive officer. “Both divisions achieved higher sales volumes and benefited from strong execution of the productivity initiatives we implemented during the quarter. In addition, our strong focus on working capital management enabled us to deliver positive operating cash flow notwithstanding higher prices for raw materials.”
“During the COVID-19 national emergency, our facilities have continued operating, reflecting our inclusion in the critical infrastructure sector, as defined by the U.S. Department of Homeland Security. We have implemented additional steps to protect our employees and visitors to our sites and, where possible, our employees are working remotely. While near-term market conditions, including commodity prices and customer demand, remain subject to significant uncertainty and volatility, we have a strong balance sheet with low net leverage and significant cash on hand to weather declines in demand,” she added.
The company also announced that it will transition from its multi-divisional organizational structure to a functionally-based, integrated operating model. The company will consolidate its operations, sales, services and other functional capabilities at an enterprise level. This new structure will result in a more agile organization and solidify the productivity improvement and cost reduction initiatives announced at the start of this fiscal year that have been substantially implemented. The company expects to transition to the new operating model during the remainder of fiscal 2020 and to report its financial results in a single segment commencing with the first quarter of fiscal 2021.
AMR achieved operating income in the second quarter of $19 million, or $23 per ferrous ton, a significant improvement from an operating loss of $2 million in the first quarter. After reaching multi-year lows in October, ferrous selling prices rose significantly through mid-January, before softening in February. On a sequential basis, average ferrous net selling prices at AMR were 14 percent higher, outpacing the rise in purchase costs for raw materials and lifting operating results by expanding metal spreads. In the higher price environment, supply flows improved despite the adverse impact of winter seasonality, leading to a 2 percent sequential increase in ferrous sales volumes. Nonferrous sales volumes were down 14 percent sequentially due primarily to the timing of shipments.
AMR’s sequential performance reflected benefits from increases in the price of platinum group metals (PGM) products, as well as benefits from productivity initiatives implemented during FY20 which led to a reduction in selling, general and administrative expense. Second quarter operating results also included a benefit from average inventory accounting of approximately $4 million compared to an adverse impact of $4 million in the first quarter of fiscal 2020 and an adverse impact of $1 million in the second quarter of fiscal 2019.
Export customers accounted for 68 percent of total ferrous sales volumes for the quarter. Ferrous and nonferrous products were shipped to 20 countries in the second quarter, with Bangladesh, Turkey and Thailand representing the top export destinations for ferrous shipments.
