NEW YORK Weak ferrous scrap export sales continued to slam Schnitzer Steel Industries Inc. in its fiscal third quarter as export volumes dropped nearly 19 percent from the year-ago period.
Increased year-on-year revenues in the companys auto parts and steel manufacturing business did little to soften the blow from plummeting ferrous export and overall nonferrous sales volumes. Even a slight uptick in domestic ferrous scrap sales failed to boost revenue, as a significant sales price decline negated the volume increase.
For the overall company, net income dropped around 90.5 percent to $820,000 in the third quarter, down from $11.24 million in the same quarter a year ago. Meanwhile, revenues fell 19.3 percent to $710 million in the same comparison.
Revenue from ferrous scrap sales fell 25 percent to $465 million, while nonferrous sales revenue shed 16 percent to finish the quarter at $131 million.
Although revenues in Schnitzers steel manufacturing business grew to around $92.9 million in the quarter from $78.6 million a year ago, operating income for its steel product business tumbled to a loss of $72,000 from a profit of $253,000 a year ago.
The company reported a similar trend for its auto parts business, where third-quarter revenue rose to $86.4 million from $82.9 million a year ago, but operating income fell to $8.3 million from $12.5 million.
Schnitzer exported 849,991 long tons of ferrous scrap during its third fiscal quarter, down 18.6 percent year on year, with ferrous export sales prices averaging $367 per ton.
Due to poor offshore demand for ferrous scrap and better domestic prices, Schnitzer increased its domestic sales, with third-quarter domestic ferrous sales climbing nearly 2 percent year on year to 314,240 tons.
Meanwhile, nonferrous sales volumes dropped 12.2 percent to around 135 million pounds from 154 million pounds a year ago, with average nonferrous sales prices at 94 cents per pound, down about 3 percent from 97 cents per pound a year ago.
A significant increase in rebar sales helped lift Schnitzers steel manufacturing business into positive territory, with a 29-percent increase to 71,561 short tons during the third quarter contributing a large part of the business segments volume increase. Coiled product sales improved nearly 8 percent during the quarter to 46,088 short tons, while merchant bar and other finished product sales jumped nearly 53 percent to 7,358 tons in the same comparison.
Schnitzers auto parts business purchased 95,000 cars during the third quarter, up 6.7 percent from 89,000 cars a year ago. However, Schnitzer has increased its number of self-service locations by 19.6 percent since its third quarter of 2012from 51 to 61 locationsindicating that flows tightened during the quarter.
Ferrous export selling prices declined steadily throughout the third quarter, with market prices at the end of May approximately $50 per ton lower than at the end of the second quarter, primarily due to lower export demand.
"The combination of declining selling prices, constrained supply, adverse impacts of average inventory accounting and lower tax benefits resulted in sequentially lower consolidated net income," the Portland, Ore.-based company said.