NEW YORK Schnitzer Steel
Industries Inc. is continuing to grow its auto parts business
through acquisitions and greenfield developments as it targets
expansion of its scrap supply chain, president and chief
executive officer Tamara Lundgren told analysts during an April
3 conference call.
Schnitzer invested in 10 new
auto parts sites during its fiscal second quarter ended Feb. 28
and now has a total of 59 operational facilities, with western
Canada a key growth area, the Portland, Ore.-based steel and
scrap company said.
Schnitzer also began operations
at its new shredder in western Canada during the quarter,
enabling it to export ferrous scrap directly from British
Columbia, Lundgren said.
The company now has 17 metal
recycling and auto parts locations in western Canada "in
various stages of development," she said, noting that the
expanded western reach gives the company a presence "in a
region where our products and services have not been available
As a result of the growth,
fiscal second-quarter vehicle purchases increased by 11
percent, with about half coming from the new locations,
according to Richard D. Peach, chief financial officer and
senior vice president.
But while the increased raw
material flow has contributed to improved margins in the auto
parts business, excluding the impact of new stores, the new
facilities continue to incur start-up costs, he said.
"We will see in the (fiscal)
third quarter something similar in terms of start-up costs in
auto parts because were converting some of the acquired
stores to self-service facilities and were also
developing our new greenfield locations. So we do have some
costs associated with labor, supplies, building of inventory
and the customer base in those locations. But that will quickly
pass, we hope," Peach said, noting that Schnitzer expects to
see a 15-percent boost in auto parts purchase volumes after the
integration of the new sites is complete.
Fiscal second-quarter sales of $78.1 million by
Schnitzers auto parts business were flat compared with
the same period a year earlier, while the companys
overall revenue dropped 25.3 percent to $662.2 million (
amm.com, April 3).