Schnitzer Steel Industries, Inc. reported results for its fiscal third quarter ended May 31, 2020. Reflecting the impact of the COVID-19 pandemic, the company reported a loss per share from continuing operations for the quarter of $(0.18) and adjusted earnings per share of $0.05, compared to second quarter reported and adjusted earnings per share of $0.14 and $0.31, respectively. Comparatively, prior year third quarter reported and adjusted earnings per share from continuing operations were $0.56 and $0.65, respectively.
Auto and Metals Recycling (AMR) achieved operating income in the third quarter of $3 million or $3 per ferrous ton and adjusted operating income of $5 million or $6 per ferrous ton, both of which include an adverse impact from average inventory accounting of approximately $3 per ferrous ton. The COVID-19 pandemic and subsequent measures introduced by local and national governments resulted in an economic slowdown which reduced supply flows and caused a sharp decline in scrap prices before prices partially recovered later in the quarter. Reflecting the success of AMR’s global sales diversification strategy, AMR’s ferrous and nonferrous sales were shipped to 21 countries despite the weaker global markets.
Cascade Steel and Scrap (CSS) achieved operating income in the third quarter of $7 million, almost double the operating income achieved in the second quarter. The improved CSS operating performance was primarily driven by margin expansion due to the lower cost of raw materials, higher utilization and the benefits of productivity initiatives. Construction demand in the West Coast markets continued to show strength during the quarter despite the negative impact of COVID-19 on general economic activity.
“During one of the most challenging quarters in recent times, we kept our focus on optimizing our sales, both wholesale and retail, aligning our operating costs with supply and production volumes, and moving ahead with our strategic investments. As a result, CSS almost doubled its operating income sequentially, and AMR delivered solid results in a market environment where ferrous scrap prices dropped to levels not seen since 2016,” said Tamara L. Lundgren, chairman and chief executive officer. “We kept a strong focus on our strategic priorities, delivering ahead of schedule the full run rate on the targeted productivity initiatives we announced last October, and achieving early benefits from the ongoing transition to our One Schnitzer model that we will be completing in the fall. In addition, effective working capital management enabled us to deliver strong operating cash flow and reduce our net debt. While the near-term environment remains subject to uncertainty, we are encouraged by the gradual re-start of economic activity in the U.S. and globally.”
The company is transitioning from its multi-divisional organizational structure to a functionally-based, integrated operating model. This reflects the culmination of a multi-phase organizational development strategy over the last several years. The company will consolidate its operations, sales, services and other functional capabilities at the 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 complete this transition and report its financial results in a single operating segment in the first quarter of fiscal 2021.
During the third quarter, the Schnitzer returned capital to shareholders through its 105th consecutive quarterly dividend. Capital expenditures were $22 million in the quarter and $59 million year to date, including investments for advanced metal recovery technologies and other growth projects.