NEW YORK — OmniSource Southeast, a division of scrap major OmniSource Corp., is in the midst of an organizational restructuring that will result in between 40 and 50 layoffs, sources familiar with the situation told AMM.
A weak business environment and related margin compression is the primary driver behind this "right-sizing," according to sources familiar with the development.
Sources estimated the layoffs will represent about 10 percent of the division’s work force and will occur across all areas of the business. The layoffs started last week, one source said.
"The organizational changes are just an outcome of business conditions. Omni is trying to get its business right-sized to meet the current market environment and demand," a second well-placed source said.
Fort Wayne, Ind.-based OmniSource, which is a wholly owned subsidiary of Steel Dynamics Inc., declined to comment.
In the most recent quarter, OmniSource generated operating earnings of nearly $16.57 million, up 44.8 percent from $11.44 million in the same period last year, but sales fell 23.9 percent to $766.1 million from just over $1 billion in the year-ago quarter (amm.com, Oct. 18).
Talk of restructuring comes at a time of increased margin compression for many domestic scrap companies. Executives across the industry have pointed to supply drawbacks from unpredictable weather conditions, a laboring economy and volatile pricing as chief reasons for dwindling margins.
As a result, other companies have executed similar staffing moves.
Earlier this month, employees of Mayfield, Ohio-based PSC Metals Inc. said the company had laid off more than 100 workers, although the company has not officially confirmed the talk (amm.com, Nov. 9). PSC Metals, division of Icahn Enterprises LP, announced an operating loss of $5 million for the third quarter ended Sept. 30 on revenue of $236 million.
In late August, Schnitzer Steel Industries Inc. announced plans to cut 300 jobs, or nearly 7 percent of its total work force, "as part of a major restructuring and cost-cutting exercise" (amm.com, Aug. 28). Two months later, the company reported a net loss in its fiscal fourth quarter ended. Aug. 31 of $485,000 on sales that fell 29.5 percent year on year to $762.2 million (amm.com, Oct. 25).
"There is no question that scrap companies are struggling to stay profitable and need to make hard decisions," a third market source said.