Schnitzer Steel (SCHN) Tops Q3 EPS by 28c

Schnitzer Steel (NASDAQ: SCHN) reported Q3 EPS of $0.46, $0.28 better than the analyst estimate of $0.18. Revenue for the quarter came in at $352 million versus the consensus estimate of $356.41 million.

Volumes: Ferrous sales volumes in the third quarter increased 13% from the second quarter, primarily due to stronger seasonal demand and the beneficial impact of the higher price environment on supply flows of scrap metal. Ferrous volumes declined 17% from the prior year third quarter due to weaker global demand. Nonferrous sales volumes were consistent with the second quarter but declined 15% from the prior year third quarter due to the lower price environment. Export customers accounted for 61% of total ferrous sales volumes in the third quarter. Ferrous and nonferrous products were exported to 14 countries, with Turkey, India and South Korea the top export destinations for ferrous shipments.

Pricing: The improvement in export and domestic demand led to market prices increasing significantly from February levels before selling prices decreased in the second half of May and into June. As a result, average ferrous net selling prices for shipments during the quarter increased $46 per ton, or 27% from second quarter levels. Compared to the prior year third quarter, ferrous average net selling prices declined 9%, or $20 per ton, primarily as a result of weaker export demand. Nonferrous prices stabilized in the third quarter and were consistent with the second quarter. Compared to the prior year third quarter, nonferrous prices declined 17% due to weaker global demand and a strong U.S. dollar.

Margins: Operating income of $32 per ferrous ton in the third quarter increased substantially from the second quarter due to a combination of stronger market conditions, higher volumes and the successful execution of our cost savings and productivity initiatives which drove significant improvements in operating income per ton. Compared to the prior year third quarter, significant operating leverage was generated from the successful execution of our cost savings and productivity initiatives which more than offset the adverse impact of lower volumes. Due to the rising ferrous price environment, operating results for the third quarter included an estimated $3 million, or $3 per ton, benefit from average inventory accounting. The second quarter included an estimated $1 million, or $1 per ton, adverse impact from average inventory accounting and the prior year third quarter included an estimated $15 million, or $15 per ton, adverse impact.

For earnings history and earnings-related data on Schnitzer Steel (SCHN) click here.

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