NEW YORK Schnitzer Steel
Industries Inc. expects operating earnings from its ferrous
scrap division to plunge some 60 percent to about $4 per ton
during its fiscal first quarter ending Nov. 30 compared with
the preceding three months, the company said in a market
The anticipated drop is "due to
the declining trend in selling prices, the impact of
constrained supply volumes on production costs and the timing
of shipments," the Portland, Ore.-based steel producer and
scrap recycler said.
Schnitzer expects average net
selling prices for ferrous scrap to drop about 5 percent during
the period compared with the previous quarter, and "ferrous
sales volumes are expected to decline approximately 20 percent
due to softer demand resulting from the economic uncertainty,
reduced flows of raw materials and timing of shipments."
During the first half of the
current quarter, both export and domestic sales prices for
ferrous scrap dropped about $50 per ton compared with August,
"driven by significantly lower domestic utilization rates and
weak economic conditions globally, which continued to adversely
impact overall steel demand," Schnitzer said.
Meanwhile, the company
anticipates average selling prices for nonferrous scrap will
increase around 5 percent, although volumes are on course to
decline nearly 30 percent from the fiscal fourth quarter ended
recycling arm posted operating earnings of $13 million in its
fiscal fourth quarter, down 74.9 percent from $51.7 million a
year earlier, on revenue that declined 32.2 percent to $651.8
million from nearly $962 million in the same comparison (
amm.com, Oct. 25). Quarterly ferrous scrap revenue
fell 34.4 percent to slightly more than $485 million on the
back of average selling prices that eased 14.7 percent to $378
per long ton.
In its auto parts business,
Schnitzer expects a drop in commodity prices to result in a
5-percent softening in revenue compared with the previous
quarter. However, its operating margin is expected to rise to
nearly 8 percent "due to lower average inventory costs and
normal seasonal improvements in our retail operations,
including higher admissions, which more than offset the impact
of lower ferrous and nonferrous selling prices."
Average selling prices and
volumes in Schnitzers steel production division should be
in line with the previous quarter. "Steady market conditions,
combined with reduced costs of raw materials, are expected to
result in operating income of approximately $3 million," the
business posted revenue of $90.2 million in the fiscal fourth
quarter on shipments of 125,737 short tons at an average
selling price of $685 per ton.
For the fiscal first quarter,
Schnitzer expects net income to "be in the range of break-even"
before pre-tax restructuring charges of $2 million. It
cautioned that the actual financial performance could be
"materially different" based on market conditions and the
timing of shipments, among other factors.