Schnitzer Steel (SCHN) Posts Q2 Loss of 33c/Share; Plans Cost Cuts

Schnitzer Steel (NASDAQ: SCHN) reported Q2 EPS of ($0.33), $0.27 worse than the analyst estimate of ($0.06). Revenue for the quarter came in at $439 million versus the consensus estimate of $568.5 million.

Strategic Actions

The Company has commenced two strategic initiatives:

(i) A cost reduction, capacity reduction and productivity improvement initiative which, in the aggregate, is intended to improve financial performance by $60 million annually by the end of 2016; and

(ii) The integration of the Auto Parts and Metals Recycling Businesses into a single division by the end of fiscal 2015 which is intended to further optimize the efficiencies in our operating platform, enable additional synergies to be captured throughout our supply chain and global sales channel, and more effectively leverage our shared services platform.

"In the face of steep declines in commodity prices, we are taking deliberate and substantial steps to continue to lower our operating costs and generate positive cash flow,” said Tamara Lundgren, President and Chief Executive Officer. “The strategic cost reduction actions currently underway are expected to deliver additional annual benefits of approximately $60 million. This comes in addition to approximately $65 million in cost savings and productivity benefits we have delivered since fiscal 2013. The new strategic actions form part of a longer term plan which we expect will lead to improved financial performance and will position us to emerge from this trough in the cycle with greater operating leverage,” added Lundgren.

About half of the approximately $60 million in targeted savings is expected to come from our Metals Recycling Business, through a combination of equipment idling, including reduced depreciation, and SG&A reductions. Another approximately 40% is expected to come from our Auto Parts Business through the closing of stores, SG&A reductions and productivity improvement initiatives, including $14 million announced earlier this fiscal year. The balance is expected to come from our Corporate Shared Services Division through the reduction of organizational layers and leveraging support functions across the Company’s operating platform. The Company expects approximately a quarter of the savings to be achieved in the fourth quarter of fiscal 2015, with the remainder to be delivered by the end of fiscal 2016.

In connection with our strategic cost reduction initiatives, we expect to incur restructuring charges of approximately $10 million.

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

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