Schnitzer Steel (SCHN) Sees Larger Q2 Loss

Schnitzer Steel Industries, Inc. (Nasdaq: SCHN) will report its second quarter fiscal 2016 financial results on Wednesday, April 6, 2016 and will webcast a conference call to discuss the performance at 11:00 a.m. Eastern on the same day.

During the second quarter, significantly weaker export demand in the latter half of the quarter led to ferrous and nonferrous sales prices falling to multi-year lows. The lower price environment adversely impacted scrap flows which compressed metal spreads. At the end of February, export ferrous sales prices for shipments in the third quarter began to improve and have continued to show strength.

In the second quarter, Auto and Metals Recycling Business ferrous sales volumes are estimated to be approximately 8% below first quarter levels and average ferrous selling prices are estimated to be approximately 6% lower sequentially. In the Steel Manufacturing Business, finished steel sales volumes and selling prices are estimated to be approximately 10% lower sequentially, primarily due to increased competition from imported long steel products. During the second quarter, the Company identified additional cost savings in both operating divisions and corporate which are expected to benefit the second half of fiscal 2016 by approximately $13 million.

The Company estimates an adjusted loss per share from continuing operations for the second quarter in the range of $0.25 – $0.27 per share excluding noncash goodwill and other asset impairment charges and restructuring costs (*** consensus is -$0.11) The estimated improvement in adjusted loss per share from continuing operations compared to the second quarter of fiscal 2015 is primarily due to higher AMR adjusted operating income and decreased corporate expense, partially offset by lower SMB performance. Reported GAAP loss per share from continuing operations is estimated to be in the range of $1.48 to $1.50, including noncash goodwill and other asset impairment charges estimated to be $27 million, or approximately $1.00 per share, and restructuring and other exit-related costs of $5 million, or approximately $0.23 per share.

Although markets remain volatile, for the third quarter the Company currently anticipates ferrous sales volumes to increase approximately 10% sequentially, subject to timing of shipments. As a result, AMR’s operating income for the third quarter of fiscal 2016 is expected to be approximately double the adjusted operating income in the third quarter of fiscal 2015, reflecting stronger ferrous sales prices and retail activity compared to the second quarter, benefits from higher cost savings and no material impact from average inventory accounting. SMB is expected to deliver positive operating income on higher sales volumes. The Company will discuss its third quarter outlook as part of its quarterly conference call.

The preliminary information provided above is based on the Company’s current estimate of its financial results for the second quarter ended February 29, 2016 and remains subject to change based on ongoing review of the Company’s second quarter financial results.

The webcast of the call and the accompanying slide presentation may be accessed on Schnitzer’s website under the Investor section Event Calendar at www.schnitzersteel.com/events. The call will be hosted by Tamara L. Lundgren, President and Chief Executive Officer, and Richard D. Peach, Senior Vice President and Chief Financial Officer.

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