Schnitzer Steel (SCHN) Prelim. Q2 EPS Misses Consensus

Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today announced preliminary results for its fiscal 2022 second quarter ended February 28, 2022.

Second Quarter Fiscal 2022 Expected Highlights

The Company anticipates:

• Second quarter diluted earnings per share from continuing operations to be in the range of $1.22 - $1.27. Net income to be in the range of $36 million - $38 million.
• Adjusted earnings per share from continuing operations to be in the range of $1.33 - $1.38, which excludes expected charges of $5 million or $0.11 per share related primarily to legacy environmental matters.
• Adjusted EBITDA to be in the range of $73 million - $75 million.
• Higher year-over-year average net selling prices at or near multi-year highs for ferrous and nonferrous metals and finished steel products.
• Higher year-over-year sales volumes for ferrous and nonferrous metals despite significant impact from a nearly two-month pause in shredding operations at our Everett, MA facility and supply chain disruptions. Finished steel sales volumes were lower year-over-year also due to supply chain disruptions, including delays to construction projects related to the concrete industry strike in the Pacific Northwest.
• Positive operating cash flow in the range of $45 million.

(Consensus sees Q2 EPS of $1.47)

Tamara Lundgren, Chairman and Chief Executive Officer stated, “After delivering record first quarter earnings, we expect to deliver another strong quarterly performance notwithstanding continued supply chain disruptions. Demand for our products and services continues to be strong, with market prices for ferrous, nonferrous and finished steel products at or near multi-year highs.” She continued, “We expect our operating performance to continue to benefit from both strong current demand and long-term structural trends, including the focus on decarbonization and the increased use of recycled ferrous metals in steelmaking. Earlier this month we were pleased to announce the launch of GRN Steel™, our new line of net-zero carbon emission products manufactured in Oregon at our Cascade Steel mill.”

Average net ferrous and nonferrous selling prices in the second quarter are expected to increase year-over-year by 15% and 33%, respectively. Ferrous and nonferrous sales volumes are expected to increase year-over-year by 10% and 8%, respectively. Average net finished steel selling prices are expected to increase year-over-year by 51% reaching all-time highs, and finished steel sales volumes for the quarter are expected to be up sequentially by 7%, following the completion of the ramp-up of our steel mill operations in the quarter.

This strong performance reflects benefits from higher year-over-year sales volumes for recycled metals, increased average net selling prices and recognition of insurance recoveries. These benefits are expected to be offset by compressed metal spreads on contracted ferrous sales for February shipments due to the surge in market prices in the second half of the quarter as well as from the effect of the supply chain disruptions, lower PGM prices, inflationary pressure on operating costs, and the detriment associated with the Everett, MA shredder downtime. As previously announced, shredding operations at the facility restarted in late January 2022.

The Company expects to generate operating cash flow of approximately $45 million for the second quarter. Total debt is expected to be $262 million at the end of the second quarter, and debt, net of cash, is expected to be $244 million. During the quarter, the Company returned capital to shareholders through its 112th consecutive quarterly dividend and the repurchase of approximately 200,000 shares, or 0.7%, of its Class A common stock in open market transactions pursuant to its ongoing authorized share repurchase program. The effective tax rate for the second quarter is expected to be an expense of approximately 24%.

The preliminary information provided above is based on the Company’s current estimates of its financial results for the quarter ended February 28, 2022 and remains subject to change based on final review of the Company’s second quarter financial results.

Earnings Call Date

The Company will report financial results for its second quarter of fiscal year 2022 ended February 28, 2022 on Wednesday, April 6, 2022. The Company will host a webcast conference call to discuss the results at 11:30 a.m. Eastern Time on the same day. The webcast of the call and the accompanying slide presentation may be accessed at www.schnitzersteel.com/company/investors/event-calendar on Schnitzer’s website under Company > Investors > Event Calendar. The call will be hosted by Tamara Lundgren, Chairman and Chief Executive Officer, and Richard Peach, Executive Vice President, Chief Financial Officer and Chief Strategy Officer.

Replay Information

Toll Free Dial: (855) 859-2056
Toll Free International Dial: (404) 537-3406
Conference ID: 5691134
Replay Available: 4/6/2022 to 4/13/2022

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