Schnitzer Steel Industries, Inc. reported $1.10 diluted earnings per share from continuing operations for its fiscal 2011 second quarter ended February 28, 2010. This compares with $0.62 diluted earnings per share for the year-ago second quarter.
Schnitzer also reported $31 million income from continuing operation for the second quarter, an increase of 73% from income of $18 million from continuing operations in the year-ago second quarter, and second-quarter revenues of $722 million, an increase of 28% from the second quarter of fiscal year 2010.
Management Comments — "Building on the momentum generated during the first quarter, we delivered our strongest second-quarter performance since fiscal 2008. Year-over-year, our revenues grew by 28%, our operating income grew by 61% and our earnings per share grew by 77%," said Tamara Lundgren, President and CEO. "Each of our segments delivered higher revenues and improved operating income margins and we continued to execute on our growth strategy through acquisitions and capital expenditures focused on improving our operating efficiencies and production yields."
"Our strong balance sheet and access to capital enabled us to complete the acquisition of six metals recycling businesses and four auto parts stores while funding continued investments in new technologies and operational efficiencies," said Lundgren.
Segment Business Drivers — The company’s Metals Recycling Business (MRB) grew operating income by 45% as compared to last year's second quarter, reflecting strong global demand and higher sales prices for both ferrous and nonferrous metals. Aggregate ferrous volumes over the last four quarters continue to approximate the record volumes achieved in fiscal 2008 and nonferrous volumes are trending at a record run rate.
The company’s Auto Parts Business (APB) achieved record second-quarter operating income, reflecting 24% growth vs. last year's record second-quarter results. During the quarter, the company actively pursued its growth strategy with the acquisition of four stores, including one in Texas and three in Washington. Car purchase volumes also increased significantly from the prior year, reflecting the benefits from both organic and acquisition growth.
The company’s Steel Manufacturing Business (SMB) delivered year-over-year financial improvement with near break-even operating income despite weak demand and highly competitive market conditions.
Steel Manufacturing Business — During the second quarter, the company’s Steel Manufacturing Business continued to be negatively impacted by weak demand for finished steel products in its West Coast markets.
"Our Steel Manufacturing Business generated improved year-over-year performance despite ongoing weak demand in the West Coast construction markets," said Lundgren. "We expect to benefit from the normal seasonal improvement in construction during the summer months and to continue to maximize value from our product diversification and operational efficiencies."
Second-quarter finished steel sales volumes of 99,000 tons improved 3% from the prior-year quarter and 1% sequentially. Average net sales prices for finished steel products increased by 24%, as compared to the prior year quarter, and 8%, as compared to the first quarter of fiscal 2011. Higher sales prices resulted in improved operating margins on both a year-over-year and sequential basis.
Subject to uncertainty, the company said it expects sales volumes to be slightly higher than the second quarter of fiscal 2011 due to normal seasonal increases in construction activity, while average net sales prices are expected to increase as domestic demand continues to improve. The company also expects margins to improve slightly due to higher throughput and higher average pricing as compared to the second quarter.
Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 57 operating facilities located in 14 states, Puerto Rico and Western Canada. The business has seven deep-water export facilities located on both the East and West Coasts and in Hawaii and Puerto Rico. The company's integrated operating platform also includes its auto parts and steel manufacturing businesses. With an effective annual production capacity of approximately 800,000 tons, the company's steel manufacturing business — Cascade Steel — produces finished steel products, including rebar, wire rod and other specialty products. The company commenced its 105th year of operations in fiscal 2011.