Portland, Oregon-based Schnitzer Steel Industries reported Tuesday adjusted operating income of $3 million and a loss per share of $0.02 for its fiscal 2013 Q1 ended November 30, 2012.
During Q1, export and domestic sales prices for recycled ferrous metals dropped approximately $50 per ton from August levels driven by significantly lower domestic utilization rates and weak global economic conditions which continued to adversely impact overall steel demand. In addition, the supply of scrap continued to be constrained by low US GDP growth, and supply volumes were negatively impacted by the lower price environment. The combination of declining trend in selling prices, the impact of constrained supply volumes on production costs and the timing of shipments resulted in lower sales volumes and compressed margins during the quarter, according to a press release from the company.
Ferrous sales volumes of 955,000 tons in Q1 decreased 19 percent from Q4 2012 levels, primarily due to reduced flows of raw materials resulting from the lower price environment as well as the timing of shipments. Export customers accounted for 71 percent of total ferrous sales volumes in Q1. Schnitzer said that demand softened in the export markets in September and October, driving average net ferrous selling prices down 5 percent from fourth quarter levels. Operating income per ferrous ton was $6, a decline of 46 percent sequentially. Overall, the first quarter was significantly impacted by a sharp decline in selling prices and lower volumes.
In Schnitzer's Auto Parts Business, revenues in Q1 decreased 3 percent sequentially due to lower shipped volumes and lower commodity prices. Operating margins during Q1 increased sequentially to 9 percent, primarily due to lower average inventory costs which more than offset the negative impact of lower commodity prices on sales.
Sales volumes in the company's Steel Manufacturing Business were 130,000 tons, up 3 percent from Q4 2012. Average net sales prices for finished steel products of $680/nt approximated Q4. Steady market conditions, combined with improved utilization of 70 percent and reduced costs of raw materials, resulted in operating income of $3 million during Q1.