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Schnitzer warns of loss in fiscal 4th qtr.

Keywords: Tags  scrap, Schnitzer Steel Industries, fiscal fourth quarter, earnings outlook, scrap exports, scrap sales, scrap prices, Sean Davidson

NEW YORK — Schnitzer Steel Industries Inc. expects weaker sequential scrap exports to drive it to post a net loss for its fiscal fourth quarter ending Aug. 31.

Sales prices during the quarter fell faster than average purchase prices for material shipped, resulting in lower margins vs. its already weak fiscal third-quarter performance, when export volumes dropped 19 percent from the year-ago period, the Portland, Ore.-based company said in an outlook released Aug. 27.

For the fiscal fourth quarter, Schnitzer expects ferrous scrap sales volumes to drop 5 to 10 percent sequentially, with average ferrous scrap selling prices falling 8 to 10 percent.

The company expects nonferrous scrap sales volumes to trend at levels similar to those recorded in its fiscal third quarter, although average nonferrous selling prices are expected to decrease about 5 percent.

Operating results will likely to be adversely impacted by average inventory costs, impairment charges and higher unit costs resulting from lower anticipated volumes and a material increase in bad debt expense.

"These factors are expected to contribute to the metals recycling business incurring an operating loss in the (fiscal) fourth quarter," Schnitzer said.

Car purchase volumes under the company’s auto parts business are likely to hover around levels seen the previous quarter, although they should be up 5 percent from a year earlier. Operating margins should remain positive but will fall sequentially due to the adverse impact of average inventory accounting.

Schnitzer’s fiscal fourth-quarter results will also include about $2 million in start-up costs related to 11 new stores added to its auto parts business this year.

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