Global Slowdown Hurts Schnitzer Steel

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On January 8, 2009, Schnitzer Steel Industries (SCHN Quote) reported that it swung to a net loss during Q1 FY09, hurt by noncash inventory write-downs of $52.00 million, amid rapid decline in demand for recycled metals and finished steel products. Net loss stood at $34.00 million or $1.21 per share compared to a profit of $24.71 million or $0.85 per share a year ago. The latest quarterly consensus estimate was a loss of $0.75 per share.

During Q1 FY09, SCHN's revenue fell 17.4% to $498.57 million from $603.90 million in Q1 FY08, as a result of rapid and precipitous drop in both sales volumes and sales prices across businesses. In addition, Metal Recycling Business (MRB) revenue shrunk 16.7% to $401.18 million, impacted by a 31.0% drop in sales ferrous volumes and a 22.0% decline in nonferrous average net sales price, offset by a 26.0% rise in ferrous average net sales price. Within the business-line, ferrous sales plunged 19.5% to $312.76 million, while nonferrous sales inched down 3.4% to $86.52 million. Furthermore, Auto Parts Business (APB) revenue dropped 6.7% to $67.30 million, on lower parts revenue, along with 16.0% and 19.0% slump in scrap vehicle and core revenues due to reduced sales volumes and prices. Meanwhile, Steel Manufacturing Business (SMB) revenue slipped 10.1% to $98.63 million, primarily due to reduction in finished steel sales volumes.

During the latest first quarter, SCHN signed a definitive agreement to acquire Ponce Resources of Salinas, Puerto Rico.

Recently, the company's board increased the repurchase of its common stock by 3.00 million. In addition, SCHN paid a quarterly cash dividend of $0.017 per share.

Looking forward to Q2 FY09, Schnitzer expects ferrous shipment volumes to be similar to those of the same-quarter last year, while nonferrous volumes to be 10.0% to 20.0% lower than Q2 FY08 levels. Moreover, SCHN anticipates finished steel products shipments to be down by 60.0% and average net sales prices to be lower compared to the levels realized in the year-ago quarter.

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