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Schnitzer Reports Fourth Quarter and Fiscal 2021 Financial Results

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Best Fourth Quarter and Full Year Operating Performance in a Decade

Acquisition of Columbus Recycling Assets Completed

Schnitzer Board Declares Quarterly Dividend

PORTLAND, Ore., October 21, 2021--(BUSINESS WIRE)--Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) today reported results for its fourth quarter and fiscal year ended August 31, 2021.

Fourth Quarter and Fiscal 2021 Highlights

  • Diluted earnings per share from continuing operations of $1.43 in the fourth quarter of fiscal 2021, compared to $0.14 in the fourth quarter of fiscal 2020. Diluted earnings per share from continuing operations of $5.66 in fiscal 2021, compared to a loss of $(0.15) per share in fiscal 2020.

  • Adjusted diluted earnings per share from continuing operations in the fourth quarter of fiscal 2021 of $1.81, excluding, among other items, charges of $0.34 per share related to legacy environmental matters. Comparatively, adjusted diluted earnings per share were $0.23 in the fourth quarter of fiscal 2020. Adjusted diluted earnings per share from continuing operations of $6.13 in fiscal 2021, compared to $0.43 in fiscal 2020.

  • Net income of $44 million in the fourth quarter of fiscal 2021, compared to $5 million in the fourth quarter of fiscal 2020. Net income of $170 million in fiscal 2021, compared to a net loss of $(2) million in fiscal 2020.

  • Adjusted EBITDA of $80 million in the fourth quarter of fiscal 2021, compared to $28 million in the fourth quarter of fiscal 2020. Adjusted EBITDA of $289 million in fiscal 2021, compared to $85 million in fiscal 2020.

The Company’s performance during the fourth quarter of fiscal 2021 benefited from strong global market conditions for recycled metals, with average selling prices reaching multi-year highs and sales volumes for its ferrous and nonferrous products increasing year over year. Average selling prices for finished steel products also continued to increase during the quarter to their highest level in more than a decade, benefiting from the continued strength in West Coast demand. The Company began ramping up production at its steel mill ahead of schedule in mid-August following substantial completion of the replacement and repair of property and equipment lost and damaged due to a fire in May 2021. Finished steel sales volumes decreased significantly year over year as a result of the production outage.

For the full fiscal year, the Company’s improved performance was primarily driven by higher average selling prices for ferrous, nonferrous and finished steel products, benefits of operating leverage from significantly higher ferrous and nonferrous volumes year over year and execution of productivity improvements and commercial initiatives supported by the implementation of the One Schnitzer operating platform.

Tamara Lundgren, Chairman and Chief Executive Officer stated, "Our fourth quarter and fiscal 2021 results reflect our best operating performance in a decade. I am proud of what our team accomplished during a year in which we faced challenges from the COVID-19 pandemic, logistics constraints and labor shortages. We stayed focused on our sustainability framework of People, Planet and Profit, delivering strong financial performance, strengthening our core operations through productivity initiatives, progressing strategic investments in advanced metal recovery technologies and increasing our sales volumes. Our efforts led to strong operating cash flow, which enabled us to reduce our debt to the lowest level since 2005, while continuing to return capital to shareholders and invest in our strategic initiatives to deliver growth."

Ms. Lundgren continued, "We recently completed the acquisition of eight metals recycling facilities from Columbus Recycling, a leading provider of ferrous and nonferrous recycled metal products and services in the southeastern U.S. Combined with our existing facilities, this acquisition increases Schnitzer’s footprint to 22 operating facilities in the Southeast, a region that is expected to see a significant increase in electric arc furnace steelmaking capacity in the coming years. This brings our total number of operating facilities to 102 across North America. We also continued to advance the implementation of our advanced metal recovery technology, including the ramp-up of production at new systems in California and Georgia during the quarter. Extracting more nonferrous metals from our shredding activities is a significant value-added process and is directly aligned with global decarbonization and demand trends," she added.

Summary Results

($ in millions, except per share amounts)

Quarter

Year

4Q21

3Q21

4Q20

2021

2020

Revenues

$

846

$

821

$

465

$

2,759

$

1,712

Gross margin (total revenues less cost of goods sold)

$

126

$

142

$

62

$

453

$

209

Gross margin (%)

14.9

%

17.4

%

13.4

%

16.4

%

12.2

%

Selling, general and administrative expense

$

77

$

62

$

49

$

242

$

188

Net income (loss)

$

44

$

65

$

5

$

170

$

(2

)

Net income (loss) per ferrous ton

$

38

$

54

$

4

$

39

$

(1

)

Diluted earnings (loss) per share from continuing operations attributable to SSI shareholders

Reported

$

1.43

$

2.16

$

0.14

$

5.66

$

(0.15

)

Adjusted(1)

$

1.81

$

2.20

$

0.23

$

6.13

$

0.43

Adjusted EBITDA(1)

$

80

$

97

$

28

$

289

$

85

Adjusted EBITDA per ferrous ton(1)

$

69

$

80

$

27

$

66

$

22

Ferrous sales volumes (LT, in thousands)

1,163

1,215

1,063

4,408

3,954

Avg. net ferrous sales prices ($/LT)(2)

$

449

$

400

$

236

$

381

$

237

Nonferrous sales volumes (pounds, in millions)(3)

164

156

159

593

551

Avg. nonferrous sales prices ($/pound)(2)(3)

$

1.01

$

0.97

$

0.56

$

0.88

$

0.55

Finished steel average net sales price ($/ST)(2)

$

920

$

802

$

618

$

737

$

630

Finished steel sales volumes (ST, in thousands)

65

153

139

488

505

Rolling mill utilization (%)

28

%

98

%

96

%

78

%

86

%

LT = Long Ton, which is equivalent to 2,240 pounds

ST = Short Ton, which is equivalent to 2,000 pounds

(1)

See Non-GAAP Financial Measures for reconciliation to U.S. GAAP.

(2)

Price information is shown after netting the cost of freight incurred to deliver the product to the customer.

(3)

Nonferrous sales volumes and average nonferrous prices excludes platinum group metals (PGMs) in catalytic converters.

Fourth Quarter Fiscal 2021 Financial Review and Analysis

The Company delivered its best fiscal fourth quarter operating performance since fiscal 2011. Net income per ferrous ton was $38 and adjusted EBITDA per ferrous ton was $69 in the fourth quarter, a strong year over year increase from $4 and $27, respectively. The benefits from increased average selling prices for ferrous and nonferrous recycled metals, as well as higher sales volumes for ferrous and nonferrous products year over year, were the primary drivers of the expansion in operating margins. The Company’s improved performance compared to the prior year quarter also reflected benefits from the execution of commercial initiatives and productivity improvements, notwithstanding the adverse impact of the fire to the steel mill contribution. In the fourth quarter, the Company recognized initial insurance recoveries of $10 million primarily related to the repair and replacement of property and equipment lost and damaged in the fire. Selling, general and administrative (SG&A) expense increased primarily due to legacy environmental-related expenses of $13 million not associated with ongoing operations and higher employee-related expenses mainly associated with incentive compensation related to higher Company performance. Fourth quarter results also included benefits from average inventory accounting of approximately $4 per ferrous ton compared to benefits of $2 in the fourth quarter of the prior year.

Compared to the fourth quarter of the prior year, ferrous and nonferrous sales volumes were up 9% and 3%, respectively, even though ferrous sales volumes were adversely impacted by the delayed arrival of one ship and nonferrous sales volumes were constrained by tight container availability. Global demand for recycled metals remained strong with average ferrous and nonferrous net selling prices up 90% and 80% year over year, respectively. Finished steel sales volumes were down 53% and rolling mill utilization in the quarter was 28% due to the impact of the fire at the mill. Average net selling prices for finished steel products were up 49% year over year amid strong non-residential construction demand.

Operating cash flow in the fourth quarter of fiscal 2021 was $139 million, as cash flows associated with increased profitability were enhanced by strong working capital management, including benefits from selling down inventory at the mill during the temporary production outage.

Capital expenditures were $42 million in the quarter, including investments in maintaining the business, environmental projects and advanced metal recovery technologies. Total debt at the end of the quarter was $75 million and debt, net of cash, was $47 million (for a reconciliation of adjusted results and debt, net of cash, to U.S. GAAP, see the table provided in the Non-GAAP Financial Measures section). The Company has a revolving credit facility of $700 million and CAD$15 million that matures in 2023.

The Company’s effective tax rate for the fourth quarter of fiscal 2021 was an expense of 13%, lower sequentially due to certain discrete tax items recognized in the period.

During the fourth quarter, the Company returned capital to shareholders through its 110th consecutive quarterly dividend.

Completion of Acquisition of Columbus Recycling Assets

On October 1, 2021, the Company successfully closed its previously announced acquisition of eight metals recycling facilities across several states in the Southeast, including Mississippi, Tennessee and Kentucky, from Columbus Recycling, a leading provider of ferrous and nonferrous metal recycling products and services. In the twelve months through the end of August 2021, Columbus delivered annual sales volumes of approximately 300,000 ferrous tons and 40 million nonferrous pounds. Combined with Schnitzer’s existing facilities in Georgia, Alabama and Tennessee, the acquired operations offer additional recycling products, services and logistics solutions to customers and suppliers across the Southeast.

Declaration of Quarterly Dividend

The Board of Directors declared a cash dividend of $0.1875 per common share, payable November 22, 2021 to shareholders of record on November 8, 2021. Schnitzer has paid a dividend every quarter since going public in November 1993.

Analysts’ Conference Call: Fourth Quarter and Fiscal 2021 Results

A conference call and slide presentation to discuss results will be held today, October 21, 2021, at 11:30 a.m. Eastern and will be hosted by Tamara L. Lundgren, Chairman and Chief Executive Officer, and Richard Peach, Executive Vice President, Chief Financial Officer and Chief Strategy Officer. The call and the slide presentation will be webcast and accessible on the Company’s website under Company > Investors > Event Calendar at www.schnitzersteel.com/company/investors/event-calendar.

Summary financial data is provided in the following pages. The slide presentation and related materials will be available prior to the call on the above website.

About Schnitzer Steel Industries, Inc.

Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled metal products in North America with operating facilities located in 25 states, Puerto Rico and Western Canada. Schnitzer 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 50 stores which sell serviceable used auto parts from salvaged vehicles and receive approximately 5 million annual retail visits. The Company’s steel manufacturing operations produce finished steel products, including rebar, wire rod and other specialty products. The Company began operations in 1906 in Portland, Oregon.

SCHNITZER STEEL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except per share amounts)

(Unaudited)

Quarter

Year

4Q21

3Q21

4Q20

2021

2020

Revenues

$

845,615

$

820,718

$

464,594

$

2,758,551

$

1,712,343

Cost of goods sold

719,941

678,297

402,228

2,305,357

1,503,725

Selling, general and administrative expense

76,528

61,887

49,132

242,463

187,876

(Income) from joint ventures

(1,875

)

(950

)

(136

)

(4,006

)

(834

)

Asset impairment charges

1,408

5,729

Restructuring charges and other exit-related activities

26

104

1,183

1,008

8,993

Operating income (loss)

50,995

81,380

10,779

213,729

6,854

Interest expense

(898

)

(1,383

)

(3,270

)

(5,285

)

(8,669

)

Other income (loss), net

66

(114

)

(142

)

(455

)

(124

)

Income (loss) from continuing operations before income taxes

50,163

79,883

7,367

207,989

(1,939

)

Income tax expense

(6,346

)

(14,401

)

(2,734

)

(37,935

)

(166

)

Income (loss) from continuing operations

43,817

65,482

4,633

170,054

(2,105

)

Loss from discontinued operations, net of tax

(21

)

(46

)

(55

)

(79

)

(95

)

Net income (loss)

43,796

65,436

4,578

169,975

(2,200

)

Net income attributable to noncontrolling interests

(1,011

)

(1,801

)

(616

)

(4,863

)

(1,945

)

Net income (loss) attributable to SSI shareholders

$

42,785

$

63,635

$

3,962

$

165,112

$

(4,145

)

Net income (loss) per share attributable to SSI shareholders:

Basic:

Income (loss) per share from continuing operations

$

1.52

$

2.27

$

0.14

$

5.90

$

(0.15

)

Net income (loss) per share

$

1.52

$

2.27

$

0.14

$

5.90

$

(0.15

)

Diluted:

Income (loss) per share from continuing operations

$

1.43

$

2.16

$

0.14

$

5.66

$

(0.15

)

Net income (loss) per share

$

1.43

$

2.15

$

0.14

$

5.66

$

(0.15

)

Weighted average number of common shares:

Basic

28,087

28,047

27,729

27,982

27,672

Diluted

29,882

29,543

28,295

29,193

27,672

Dividends declared per common share

$

0.1875

0.1875

$

0.1875

$

0.7500

0.7500

SCHNITZER STEEL INDUSTRIES, INC.

SELECTED OPERATING STATISTICS

(Unaudited)

YTD

1Q21

2Q21

3Q21

4Q21

2021

Total ferrous volumes (LT, in thousands)(1)

1,053

977

1,215

1,163

4,408

Total nonferrous volumes (pounds, in thousands)(1)(2)

138,236

135,899

155,657

163,586

593,378

Ferrous selling prices ($/LT)(3)

Domestic

$

242

$

349

$

395

$

453

$

364

Foreign

$

276

$

399

$

401

$

446

$

385

Average

$

269

$

387

$

400

$

449

$

381

Ferrous sales volume (LT, in thousands)

Domestic

388

391

412

309

1,500

Foreign

665

586

803

854

2,908

Total

1,053

977

1,215

1,163

4,408

Nonferrous average price ($/pound)(2)(3)

$

0.64

$

0.83

$

0.97

$

1.01

$

0.88

Nonferrous sales volume (pounds, in thousands)(2)

138,236

135,899

155,657

163,586

593,378

Cars purchased (in thousands)(4)

78

80

91

89

338

Auto stores at period end

50

50

50

50

50

Finished steel average sales price ($/ST)(3)

$

621

$

690

$

802

$

920

$

737

Sales volume (ST, in thousands)

Rebar

94

103

...

106

50

353

Coiled products

39

32

47

14

...

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