Schnitzer Steel to Cut Costs, Capacity
8 April 2015
Schnitzer Steel Industries Inc. unveiled plans Tuesday to cut costs and capacity after posting a sharply steeper-than-expected loss in its February quarter.
Schnitzer has struggled in recent quarters with sharp declines in ferrous prices. In its fiscal second quarter, Schnitzer said selling prices for recycled metals posted their sharpest drops since 2008.
The company said ferrous sales prices fell as much as 30% from their first-quarter levels amid soft global steel markets, the strong dollar and weaker demand.
Schnitzer said its business was also hit by harsh winter weather in the Northeast and Midwest, which dented sales in its auto-parts business and supply in its metals recycling business. The company booked about $52 million in restructuring and impairment charges to idle or close some parts of the two businesses at the end of the latest quarter.
Schnitzer also unveiled plans to cut costs, reduce its capacity and improve productivity—moves the company said could improve its financial performance by $60 million annually by the end of 2016. Schnitzer said the savings will come from idling equipment in the metals recycling business and by closing stores in its auto-parts business, among other actions.
“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 Chief Executive Tamara Lundgren in a news release.
Schnitzer joins a host of steelmakers, such as AK Steel and Nucor Corp., that have warned in recent months that their results are being hurt by unexpectedly high levels of steel imports that are driving down selling prices.
Overall, for the period ended Feb. 28, the company posted a loss of $195.6 million, or $7.24 a share, compared to a profit of $1.79 million, or seven cents a share, a year earlier.
Results included a $141 million write-down on its metals recycling business.
Excluding write-downs and restructuring charges, per-share loss was 33 cents.
Revenue dropped 30% to $439.2 million.
Analysts polled by Thomson Reuters had forecast a loss of six cents a share on $564.1 million in revenue.
Revenue in its metals recycling business—Schnitzer’s largest top-line contributor—fell 36.4%, while its auto-parts business revenue fell 9.5%. Schnitzer is the in the process of integrating the two businesses in a move to drive synergies.