Mr. Dienst said, "The performance of our European business in the first half of Fiscal 2013 was an obvious disappointment. Our traditional UK Metals operations in particular continue to struggle with weak scrap generation and tight margins masking a reduction in underlying controllable costs of $0.8 million per month in the UK Metals business and solid earnings contribution from SRS in Continental Europe. As we move through the second half of Fiscal 2013 our efforts to reduce costs and tighten controls will intensify. We anticipate reaching a controllable cost savings run rate of $1.5 million per month during the second half of Fiscal 2013, while rigorously examining further cost savings opportunities in both the metals and SRS businesses there."
Mr. Dienst stated, "While an investigation into the UK inventory matter has revealed that the conditions which allowed this activity to occur were unique to the two facilities in the UK, and principally a function of our SRS business outgrowing its control environment, the Board and management continue to view the full resolution of the matter as its highest priority. We are working diligently to ensure this issue will never be replicated."
Markets & Outlook
Mr. Dienst continued, "The majority of the first half period endured very challenging conditions in which ferrous prices declined by circa $50 per tonne sequentially versus the prior corresponding period. Intake also slowed precipitously, particularly heading from October into November as we aggressively lowered our buy prices to reflect the realities of global trading conditions as ferrous prices declined from circa $415 per tonne to $365 per tonne intra period. We maintained a steady position with sales against inventories, but profits were squeezed as ferrous selling prices fell abruptly versus average inventory costs. In mid to late November, ferrous markets seemed to find a floor, firmed somewhat through the end of the calendar year and have recently increased significantly from the second fiscal quarter bottom. There is currently adequate trading liquidity in the deep sea ferrous markets and we expect the same in the coming weeks. Intake currently remains challenged versus normally functioning historical economic activity, although January and February, traditionally quiet months, have shown some resiliency on volumes and some margin improvement is noted as the market has held its recently found discipline. Non-ferrous markets, while trading at lower levels at period end, have been and remain liquid, and we expect a potential acceleration of activity, particularly as Lunar New Year festivities in the PRC draw to a close."