Tuesday, Schnitzer Steel Industries Inc. (SCHN), a manufacturer of recycled ferrous metal products, reported a loss in its third quarter, compared to prior year's profit, hurt by plunge in segmental revenues due to lower volume and prices. For the fourth quarter, the company expects Metals Recycling business to record sequential growth in volume and prices.
Portland, Oregon-based company's third-quarter net loss was $1.53 million or $0.05 per share, compared to a profit of $61.72 million or $2.14 per share in the year-ago quarter.
On average, eight analysts polled by Thomson Reuters expected the company to report earnings of $0.16 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the quarter declined to $411.83 million from $972.14 million in the previous year quarter, yet beat Wall Street analysts' consensus estimate of $381.97 million.
Segment-wise, Metals Recycling business recorded revenues of $317.52 million, down 61% from $810.42 million a year ago, primarily due to declines of 52% and 9% in average ferrous net selling prices and ferrous processing sales volumes, respectively.
Auto Parts Business revenues declined 35% year-over-year to $65.85 million, mainly as a result of a 26% decrease in self-service car volumes and lower per car sales of cores and scrap, which more than offset higher full-service parts sales.
In the Steel Manufacturing business, the company's revenues plunged 72% from last year to $46.82 million, as weak demand led to a 61% decline in sales volumes, together with 30% fall in average net sales prices.
Operating loss for the quarter was $5.87 million, compared to an operating income of $102.29 million in the prior year quarter.
For the nine months of fiscal 2009, Schnitzer's net loss was $42.49 million or $1.51 per share, compared prior year's profit of $122.30 million or $4.23 per share. Total revenues fell to $1.34 billion from $2.33 billion in the previous year.
Looking ahead, Schnitzer said that, in the Metals Recycling business, it expects average ferrous selling prices, net of freight, in the fourth quarter to increase sequentially, citing improvement in near-term demand for ferrous scrap. Nonferrous prices are also expected to improve. In the division, fourth-quarter ferrous processing sales volumes are expected to increase 100 thousand to 200 thousand tons over the volumes shipped in the third quarter, while nonferrous sales volumes are expected to rise 10% to 15% from volumes shipped in the third quarter. The company also expects divisional margins in the fourth quarter to improve sequentially, although the supply of raw materials is expected to continue to put pressure on metal spreads.
In the Auto Parts business, the company projects sequential growth in revenues, driven by higher prices for cores and scrap, improved parts sales and higher car volumes, which are also expected to result in improved margins.
In the Steel Manufacturing business, Schnitzer expects weak demand in the non-residential and infrastructure construction markets to continue through the fourth quarter, resulting in average prices slightly lower than third quarter, although prices are expected to increase from the low point in the markets at the end of May. Fourth-quarter sales volumes are expected to increase slightly compared to the third quarter, and higher production volumes would result in improved margins.
Tamara Lundgren, President and Chief Executive Officer, stated, "As we look forward, our strong balance sheet, positive cash flow and low leverage allow us to continue to undertake acquisitions and investments in technology as we have done throughout the year, enabling us to expand our access to supply and to improve our operating efficiencies."
SCHN closed Monday's regular trading session at $60.21, down $1.15, on a volume of 800 thousand shares.
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