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Schnitzer logs weaker profits as margins squeezed

Keywords: Tags  Schnitzer Steel Industries, quarterly results, Tamara Lundgren, steel, scrap, auto parts, Michael Cowden

TORONTO — Schnitzer Steel Industries Inc. saw fiscal third-quarter profits squeezed as economic woes in the United States and globally bit into profits.

The Portland, Ore.-based recycler, scrap exporter and steelmaker also offered a cautious outlook, noting that prices for recycled metals had "declined significantly" since the end of the quarter, a trend that could hurt fiscal fourth-quarter results.

Schnitzer posted net income of $11.2 million for its fiscal third quarter, down 66 percent from $33 million in the same period last year, on revenue that slid 10.3 percent to $879.9 million. For the nine months ended May 31, the company’s net income plunged 65.8 percent to $27.9 million from $81.6 million a year earlier despite an 8.4-percent increase in revenue to $2.58 billion.

"In our metals recycling business and steel manufacturing business, results reflected relatively stable volumes and a flat selling-price environment. However, all of our divisions continue to be impacted by challenging market conditions resulting from the global economic slowdown," Schnitzer president and chief executive officer Tamara Lundgren said in a statement Thursday.

Schnitzer’s recycling business generated operating earnings of $17.8 million in the fiscal third quarter, down 61 percent from $45.7 million a year ago, on revenue that slid 10.6 percent to $786.5 million from $879.3 million. Operating margins suffered because of a "weak economic environment" in the United States, Schnitzer said.

Ferrous scrap revenues dipped 11.5 percent to $621.9 million in the latest fiscal quarter from $702.8 million a year earlier as average ferrous scrap selling prices fell 3.6 percent to $424 per ton from $440 in the same comparison.

Operating earnings by Schnitzer’s steel manufacturing business plunged 92.7 percent to $253,000 in the fiscal third quarter from $3.5 million a year ago on revenue that slipped 13.5 percent to $78.6 million from $90.9 million.

The company’s auto parts business reported operating earnings of $12.5 million in the latest fiscal quarter, down 27.6 percent from $17.3 million a year earlier, on revenue that fell 4.5 percent to $82.9 million from $86.9 million.

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