Schnitzer Steel Industries, Inc. reported results for its first quarter of fiscal 2018 ended November 30, 2017. The company reported earnings per share from continuing operations of $0.64 and adjusted earnings per share of $0.63, both of which include an adverse impact of $0.14 per share related to a legacy environmental liability of $4 million. These results compare to fourth quarter fiscal 2017 earnings per share from continuing operations of $0.65 and adjusted earnings per share of $0.63, and the prior year first quarter loss per share from continuing operations of $0.05 and adjusted loss per share of $0.03.
Auto and Metals Recycling (AMR) achieved its best first quarter performance since fiscal 2011 with operating income of $35 million, or operating income per ferrous ton of $44, both of which are more than double the results of the first quarter of fiscal 2017. AMR’s higher year-over-year operating income and operating income per ferrous ton reflect the benefits of operating leverage from 11 percent higher ferrous sales volumes and expanded metal margins.
Cascade Steel and Scrap (CSS) delivered first quarter operating income of $8 million representing a significant improvement from the prior year first quarter operating loss of $3 million which included an adverse impact of approximately $2.5 million from downtime associated with a major equipment upgrade.
Consolidated financial performance in the first quarter included corporate expense of approximately $17 million, an increase of $8 million compared to the prior year first quarter primarily due to the recognition of the legacy environmental liability and higher incentive compensation accruals from improved operating performance.
“In the first quarter of fiscal 2018, we delivered our strongest first quarter performance since fiscal 2011. AMR’s operating income per ferrous ton exceeded $40, a level last reached during fiscal 2011 when both volumes and scrap prices were significantly higher than today. This performance demonstrates our continuous focus on increasing productivity and efficiency in our core operations which, combined with the success of our commercial initiatives to grow volumes, allowed us to take full advantage of the stronger market conditions,” commented Tamara Lundgren, president and chief executive officer. “Our Cascade Steel and Scrap business also achieved significantly improved performance compared to the prior year first quarter, with operating margin expansion driven by higher volumes, reduced pressure from low-priced rebar imports, and continuing productivity improvements.”
Volumes: Ferrous sales volumes in the first quarter increased 11 percent compared to the prior year first quarter, and decreased 8 percent sequentially driven primarily by seasonal impacts on demand. Nonferrous sales volumes were 3 percent higher compared to the prior year first quarter, benefiting from higher production, while decreasing 14 percent sequentially primarily due to seasonality.
Export customers accounted for 70 percent of total ferrous sales volumes.
Pricing: Average ferrous net selling prices increased $98 per ton, or 51 percent, compared to the prior year first quarter, reflecting stronger market conditions, and were up $30 per ton, or 11 percent, sequentially. Average nonferrous net selling prices increased 26 percent compared to the prior year quarter, and 14 percent sequentially, reflecting the stronger markets.
Margins: Operating income of $35 million increased $11 million, or 47 percent, sequentially, and operating income per ferrous ton of $44 increased 59 percent sequentially, both of which were more than double the prior year first quarter. The improved operating income was driven by stronger market conditions including metal margin expansion from higher priced shipments, increased supply flows, initiatives focused on broadening their supplier base, and sustained benefits from our productivity initiatives. First quarter operating results did not include a material impact from average inventory accounting, which compares to a favorable impact in the fourth quarter of fiscal 2017 of $3 million and an adverse impact in the prior year first quarter of $2 million.
Published in the February 2018 Edition
