NEW YORK Schnitzer Steel
Industries Inc. plans to eliminate 300 jobs, or about 7 percent
of its work force, as part of a major restructuring and
cost-cutting exercise, the company said Tuesday.
In addition to the companywide
job cull, Schnitzer will look to further integrate its metals
recycling and auto parts businesses, streamline its corporate
structure and reduce "organizational layers," it said. These
initiatives are expected to lower annual operating costs by $25
million and should be "substantially complete" by the end of
the fiscal 2013 first quarter ending Nov. 30, the company said
as it announced its fiscal fourth-quarter outlook.
Restructuring charges are
expected to total some $12 million, with $5 million of that
expected to be incurred in the fourth quarter of fiscal 2012,
"The restructuring charges
primarily represent costs connected with the elimination of
approximately 300 positions, or 7 percent of our current work
force, and contract termination costs, including from the
consolidation of certain administrative offices," the company
cost-cutting efforts come at a time of challenging market
conditions. In its fiscal fourth quarter ending Aug. 31,
average ferrous scrap net selling prices are expected to fall
between 10 and 15 percent from fiscal third-quarter levels,
with ferrous scrap sales volumes expected to decline by the
same amount due to reduced flows of raw materials, the company
said. Nonferrous average selling prices and volumes are
forecast to decline between 5 and 10 percent from the fiscal
During the fiscal fourth
quarter, the supply of scrap continued to be constrained by low
U.S. gross domestic product growth, as well as by a lower price
environment and unusually hot weather, the company said.
"As a result of these
conditions, average inventory costs were not able to decline as
quickly as cash purchase costs for raw materials. Average
inventory costs are expected to adversely impact consolidated
operating income by approximately $25 million compared to the
third quarter, with approximately two-thirds of this impact
affecting our metals recycling business," it added.
Schnitzer expects operating
income per ferrous gross ton to be between $8 and $9, down
about 35 percent from its fiscal third-quarter performance (
amm.com, June 28). For fiscal 2012, Schnitzer said
its metals recycling business is expected to achieve operating
income per ferrous ton of about $12 on aggregate sales volumes
of about 5 million ferrous tons and 600 million nonferrous
In total, the company expects to
roughly break even on reported earnings for the quarter, before
The companys steel
manufacturing business, in particular, appeared to log a weak
"Volume increases of
approximately 15 percent are expected to be more than offset by
a decline in average selling prices of slightly more than 5
percent from the third quarter," the company said.
Lower selling prices, combined
with unscheduled downtime and an adverse impact of average
inventory accounting are expected to result in an operating
loss for the division of about $3 million. For fiscal 2012,
operating performance at the steel manufacturing business is
forecast to be slightly below breakeven, the company said.
In April, Schnitzers
Cascade Steel Rolling Mills subsidiary suspended production at
its McMinnville, Ore., facility after unionized workers
launched a strike, which lasted more than two weeks (
amm.com, April 24).
Meanwhile, Schnitzers auto
parts business has felt the sharp drop in commodity prices
during the quarter, and is projected to report a 15- to
20-percent drop in revenue from the fiscal third quarter.
However, operating margins in the fiscal fourth quarter are
expected to be about breakeven, the company said. For fiscal
2012, the auto parts business is expected to generate an
operating margin of about 10 percent on an aggregate of 340,000
cars purchased, it added.