Schnitzer Steel posts net loss in Q3 but sees improving overseas scrap demand

US ferrous scrap recycler Schnitzer Steel Industries Inc. reported a net loss in its third fiscal quarter, with revenues in the quarter amounting to less than half of their year-ago levels.

Portland, Oregon-based Schnitzer reported a net loss of $1.5 million for its third quarter, ended May 31, 2009, which compares to a net income of $61.7 million a year earlier. Total sales were down 58 percent from a year earlier, dropping from $972.1 million in Q3 '08 to $411.8 million in Q3 '09.

Schnitzer's sales fell in all three of its divisions (scrap recycling, steel manufacturing and used auto parts), with revenue at its scrap recycling division, it's largest unit, declining by 61 percent in the third quarter compared to a year ago, due to lower prices and volumes.

However, despite the drops in revenue from last year, the company also said it saw some improvements in the third quarter from the second quarter that point to a recuperation of its key markets. Tamara Lundgren, president and chief executive, stated, “During the third quarter all of our businesses showed sequential improvements in operating income, reflecting a strengthening of demand for recycled metal in the export markets and the benefit of a full quarter of previously implemented cost containment actions.”

Schnitzer also generated additional cash from its operations in the third quarter totaling $80 million, bringing its year-to-date cash from operations to $241 million.

“As we look forward, our strong balance sheet, positive cash flow and low leverage allow us to continue to undertake acquisitions and investments in technology as we have done throughout the year, enabling us to expand our access to supply and to improve our operating efficiencies,” Lundgren concluded.

Schnitzer Steel Industries Inc. is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 42 operating facilities located in 13 states and Puerto Rico, including seven export facilities. The company’s vertically integrated operating platform also includes its auto parts and steel manufacturing businesses. The company’s auto parts business sells used auto parts through its 57 facilities located in 14 states and in western Canada. With an annual production capacity of nearly 800,000 net tons, the company’s steel manufacturing business produces finished steel products, including rebar, wire rod and other specialty products.