Schnitzer Steel provides market outlook and predictions
Schnitzer Steel Industries, Inc. disclosed its market outlook for the second quarter of fiscal 2013 ended February 28, 2013.
Schnitzer expects to report a sequential improvement in its consolidated financial performance in the second quarter of fiscal 2013. For the second quarter, fully diluted earnings per share are expected to be in the range of $0.20 to $0.26 before restructuring charges. In the second quarter, they expect to incur a pre-tax restructuring charge in connection with their announcement in August of approximately $2 million, which equates to $0.04 earnings per share. Actual financial performance may be materially different based on, among other factors, market conditions and the timing of shipments.
In Schnitzer’s metals recycling business, ferrous export selling prices strengthened throughout the quarter, with prices for February shipments approximately $40 per ton higher than shipments at the end of the first quarter, while domestic selling prices weakened slightly toward the end of the quarter. The supply of scrap continued to be constrained by low U.S. GDP growth, resulting in high raw material costs which moderated the overall improvement to margins. During the second quarter, ferrous average net selling prices increased slightly from the first quarter of fiscal 2013 and ferrous sales volumes increased approximately 15 to 20 percent. Nonferrous average selling prices are in line with the first quarter while volumes increased approximately 10 percent. The combination of higher selling price and volumes trends are expected to generate operating income per ferrous ton of approximately $12, an increase of 100 percent from the first quarter of fiscal 2013.
In the auto parts business (APB), higher commodity prices, stronger car purchases and the incremental volume contribution of acquisitions are expected to result in an increase of approximately 10 percent in revenues from the first quarter of fiscal 2013. APB’s operating margin, excluding the impact of new locations added since the first quarter, is expected to be approximately 10 percent, a sequential increase over the prior quarter’s performance. During the second quarter, APB added 10 new locations which, as anticipated, will result in approximately $2 million of transaction, integration and startup costs which will impact APB’s reported operating margin, expected to be approximately 7 percent, in the quarter.
In their steel manufacturing business (SMB), average selling prices are expected to increase slightly from the first quarter while sales volumes are expected to be approximately 25 percent lower than the first quarter. Higher costs for raw materials, a lower utilization rate resulting from planned maintenance and a typical seasonal slowdown in demand during the quarter are expected to result in SMB operating income of approximately $1 million.