Schnitzer Steel Industries (SCHN)

Michael Bennett IR
Tamara Lundgren Chairman and CEO
Richard Peach CFO and Chief Strategy Officer
Emily Chang Goldman Sachs
Phil Gibbs KeyBanc Capital Markets
Call transcript
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Ladies and gentlemen, thank you for standing by, and welcome to the Schnitzer Steel's Third Quarter 2021 Earnings Release Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Bennett, Investor Relations. Please go ahead.

Michael Bennett

Thank you, Josh, and good morning. Company's of the Relations. Bennett, Michael Vice Investor President I'm Schnitzer welcome presentation fiscal I to to year Steel's of am happy quarter you earnings third for XXXX. the

release we addition of both schn.com. can website issued In audio our you a comments, on schnitzersteel.com today's our of to which press at and access slides, posted set have or

the is the company's release statement on Harbor we let start, Safe press will which me Before XX-Q, our X, Form call also which be detailed and today. in your in attention to later included Slide filed

on forward-looking volume expansion. note as growth call we our Slide on such margin future As X, we make today targets, and statements may statements our about our

materially those forward-looking may in results differ actual Our from projected our statements.

will actual in X from Additional to our metrics included results some note press Please information discussing non-GAAP as concerning be XX-Q. in the GAAP our to statement Slide reconciliation during measures our in a appendix materially the that slide of those factors as Form contained well release to is presentation. our cause We've today. could and of forward-looking we differ presentation today those that

the Peach, Chief Chief turn Now our today and to will call Executive Officer. Strategy our Richard call host Officer. Tamara the Chairman with Chief Financial She and Lundgren, over let me Officer

Tamara Lundgren

will integrity. the XX remotely, of efforts workers quarter been employees Good decade. for thank are you, all today those without a frontline third living operational not safety, I'd to call. have who earnings you past core in that discuss 'XX Michael. results morning, over fiscal The our we to Thank working financial our extraordinary everyone. would employees possible I'm our welcome been pleased like Schnitzer's their our values months. to to sustainability and They our over and best results have from

and our that embraced you culture company. and the reflects the and Our innovation resilience how success of result define these collaboration, is have values direct our performance your

So let's review. to X more turn detailed begin now a to Slide quarterly

our through One-Schnitzer the this our the Our to performance achieved this that at continued fiscal quarter model of from organization efficiencies gained year growth and execution of we from plan. strategic implemented benefit from beginning

Our framework some upon these the progress of achieved we've the and which to were results profit and like foundation planet is I'd of examples area. each made sustainability people, highlight significant in

On the people front, our performance. continued improve safety we to

do, our this margins. you of in least two electricity results have know, goals by technologies of this that from our quarter fiscal us expanding the injuries that earlier our of of that we workplace We're extend XX% recycling team's recyclables at emissions and to and financial reflects announced of our landfill trend. achieve greenhouse to through the safety third clearly the diversion delivering operations absolute this are many use morning is last profit enable XXX% year, reduced fiscal reducing process. growing volumes goals on to more As for years, commitment still on on the company. each We to but work record also we've Through planet lows to track our through. to well track that showing our carbon-free operating we material we net gas are increasing And from and achieving investments in we extract

third last adjusted $X.XX, up million XX% of times than EBITDA announced third third X was results. year. quarter quarter earnings So our higher share per which our now represents highest our than $XX performance quarter since a of 'XX Slide this and of let's is more almost turn sequentially fiscal to of review XXXX. X the we Earlier quarterly for Adjusted morning,

operating to at and which high significantly demand and able as XXXX, initiatives benefits model. in our productivity well from adjusted the time was quarter. to improvements Notably, and global reflect for that were related initiatives. One-Schnitzer our results per recycled and prices ton our non-ferrous steel of was commercial than ferrous $XX we've transition as the strong finished metals productivity commercial Our fiscal products achieve EBITDA as last to as from This we been illustrates levels the benefits better saw this the

to up strong Our our the finished non-ferrous constraints in results pace of XX% markets. solidly sequential ferrous also up reflect in sales sales is a volumes, now and freight with lift up The XX%, pre-pandemic despite back levels. steel volumes XX%

also consecutive dividend. to capital our we our through returned quarterly shareholders quarter, the XXXth During

for turn products. So Slide and steel recycled X let's now finished to review trends metals pricing of a for

trends, As to slide, export imports sales record a peaks trend the in in East April. crude Turkey and has steel QX the increase and multiyear demand, ferrous reached Chinese Turkey. also following remain pricing strong, the QX. both their and at to cyclical removal off quarter, and higher to Asia. levels XX% in production steel troughs Chinese that meet saw in the These expected off paired on the dipped high demand we continuing into tax including expected respectively overall prices continue the steel annual increased economic exports the Export ferrous decade, export at post-pandemic Coast scrap West seen have through May prices you'll of domestic were though during they sales is Turkey's demand with past Export decarbonization. by highs. a the be total pricing rebate for and to on steel scrap since of driven rose scrap end during Coast decrease higher global structural the higher even were we've slightly levels recovery see are the in by than quarter, supported focus this and multiyear highs, Notably stronger

quarter capacity scrap front, domestic ferrous the XX%. On levels and pre-pandemic of approached prices through the high demand utilization remained as steel

doubled reached we expect as multiyear year trading Zorba and quarter, steel prices broad-based to highs no August highs of market decarbonization strengthen the There melt In there was at prices shop. significant to was supplies, the non-ferrous to with and reached to was as multiyear to no limited and our September. production per which to During tight structural material and Finished mill accelerates. demand the pound it trends, from low May, in resume a than results and scrap the third constraints early the personnel. continues mills fire damage late shop cyclical quarter. combination $X.XX impact Demand auto benefiting expect as be late melt was third has for injuries also Property our more including shipping we during operations last steel programs. quarter in price. and also or loss

more fire. that also net repair our will a recoveries anticipate cover explain income will of most of in detail, amount insurance resulting Richard the the significant we lost from As costs and

mill material, compared in its one metal arc primary has to the few, Our from made primary is who's Oregon furnace the source of very exceptionally the steel comes as energy hydroelectricity. raw impact Combined the our Steel of industry recycled use average. an with electric as carbon low

full to our products to for at expect operations return steel demand we mill, remain our we As strong. finished steel

supporting of usage uses at scrap It it electric in charts a capacity more commitment metals, capacity by slide; decarbonization and in making scrap going carbon scrap now A example than metals carbon required path ferrous tools industries differentiator have to globally a many lead will higher and widely material is a community's and the recycled driven powerful for of manufactured economy the of and looking of some translated BOFs. low their levels, non-ferrous the how variety for and economy companies, the by a been And year's see in of is recycled metal acknowledged Slide increasing economy. material less this well these production reducing is in intensive. fabricators producers its one on metal to driver way making demand Let's require Decarbonization low by industrial U.S. from further. will of carbon how metals XX% is metal landfills. are circular X. can increase to steel old an increased primary focused ferrous economy a part as strategic Recycled carbon by is into trends to use the to while value solutions scrap great Increasingly use for every expected critical that as We produce reduction. of and a metals, furnace decarbonize to and as of to expanding is scrap new to be usage EAF additional arc achievable increase last technologies in the turn chain, mined steel now which be XXXX, structural by and use is on projected important immediately. to has solution are of metal's governments is that is raw China, scrap the and

which review trends. Let's underpin way, turn initiatives. have these aligned are our strategic growth Innovation, long-cycle volume with Slide actions we to now the efficiency strategic to X and under

innovative advanced Our technologies are and metal our critical efficiency strategic non-ferrous to our investments volumes. plan increase our of in grow components recovery

process commissioning new this During the shredding our year. our end additional quarter, track of calendar up systems production electrification systems demand benefit will low value-added carbon from with and activities and materially through growth trends. is aluminum is renewables. global metals on the with non-ferrous ramping two directly from aligned by in on we Extracting example a demand transition and for began for of more significant the Copper

lower be substantial operating recycling waste. and these and increase from our and our margins, volumes and our reducing improve benefits the revenues, costs support expand and of expect product to to We objectives our and sustainability projects base customer offerings increasing our

for it to our now performance. projects So turn Richard let and detailed of me over review more financial these

Richard Peach

been then Tamara, early and and on Recovery commissioned and Advanced Initiative. you, production. good an our have begin since with major In up we performance plants two we new Metal Technology Thank morning. ramping I'll April, testing update

the recovery copper all produces insulated recovered a and process. One the on our wire, primary systems new is Zorba, non-ferrous West system shredding Coast, Zurik from of that

the also zinc. aluminum new system is variety and of the second which that system convert into Twitch, Zorba U.S. advanced an is stainless, a brass higher to Southeastern in going us now situated separation value copper, ramp through gives up including and capability products, The

During these to systems we expect production the reach capability. new full two fourth quarter,

We on implemented. on will And well quarter, that advanced systems these ton copper recovery two we copper copper. $X non-ferrous EBITDA Coast, separation three will previously and for another East the systems advanced Coast, of to separation in also save construction which is system expect major to additional progressed on on ferrous use grade from the new the had fourth incremental contributions system, is Construction we including recover region. which achieve an refinery the primary that West progressing from

in first the quarter the of We of of expect 'XX fiscal will middle 'XX, additional systems by fourth the quarter completed fiscal of two these be construction respectively. and

remaining no installations fully following further calendar of to systems such the targeting We our of five plant of of we by systems and rollout are ramp-up, completion progressing and as around the fiscal the impairments, new engineering XXXX have operational timing permitting delays, by the Subject production be other year end end the XXXX. quarter of our also second of our through should phases. of all remaining

new million We by and optionality after provide rollout, by pounds technologies metal XX% complete we expect products. the recovery expect to higher to of create our range value and us the to non-ferrous to shredding annum. increase we volumes will Based produced increased per from on XX a approximately our or enable increase current

in year-to-date. first and remaining 'XX. we the spent then million investment for approximately have additional the approximately of spend range including spend of million technologies be $XXX balance metal million total advanced million. in the new an to capital of $XX fiscal $XX $XX to the the recovery 'XX, half million fiscal expect $XX Of amount, in fiscal expect 'XX this We we our In

XXXX. let's ferrous our Slide to per performance our Now Adjusted sequential and turn quarterly to consolidated a This higher was dynamics. a ton discuss basis. by of ferrous highest reached $X increase $XX on since the represented results, year-over-year and market XX EBITDA sales $XX,

structural continues XX% of rising to compared compared seasonally $X and of quarter. both including up benefits from markets sequentially ferrous Vietnam up by third for making. per ton Our factors, for cyclical from to up non-ferrous to X% platinum ferrous retail net rose by products. of supply, finished and prices increases sequentially the selling volumes XX%. Strong the to sold of use a and largest XX%. year's We inventory scrap and Sequentially, quarter. both benefit down quarter, Revenues growth by sales sales recycled destinations and for Bangladesh by were by EAFs stimulus, countries ferrous Ferrous the be ferrous last prices second strong volumes steel parts $X results in in average accounting and up our metals increased nine selling million average the recycled prices for sales to ferrous, were volumes led $X group scrap Turkey, benefited in were volumes driven demand from and and government ferrous with by and continuing global in being steel economic year-over-year recovery, tight by were

Now to volumes in year's third the quarter. XX over were prices reached dynamics. by Slide highs. on increased and aluminum for prices Zorba the let's update and market sequentially copper multiyear turn by XX% non-ferrous an non-ferrous levels up quarter, record sales Non-ferrous for last and third both sales for for Demand market reached and XX%

up year-over-year. by India, Korea. China were sequentially Our and net South prices by were for selling and non-ferrous products sold including XX% non-ferrous XX% Average countries XX to Malaysia,

discuss higher markets. year-over-year mill volumes to since up volumes by both cost prices increases mill was up XX% Coast West sales quarter XX%. represented by steel strong flow-through XX and steel our and reflected steel were sales and highest year-over-year. Slide our robust third the XX%. our significantly West of of the to input demand by turn were Finished and let's Rolling demand sequentially remains and by Finished Coast scrap. and XX% quarter XX% performance sequentially These year-over-year utilization XXXX. sequentially up Now

was loss a at and with mill mill's shop. there earlier, in the melt limited property to mentioned late Tamara our damage As steel fire May

the financial of timing quarter. impact incident, our for the performance there significant operational Given third was the no on and

produced for mill the currently fourth short resume shop our of assessing end the and by to fourth expect time the early finished we with by steel products fire quarter required repairs billets the been be or will before mill customers of in have our We Inventory operations quarter. the sold September. meet to

interruption cover is with believe insurers of lost of insured We may and replace is and several limits claims and that various The applicable on deductibles of expected policy We our asset property and damage of accounting and business have losses. repair the the we working loss anticipate to and that are lost for of significant a losses insurance fully currently as such most income to over a and to exclusions result quarters. conditions also the recoveries recognition damaged will amount fire. cost and recoveries occur

ratio decreased $XX net EBITDA adjusted was and debt expenditures our are third totaled debt and third flow Operating $XXX end $XX and capital profitability and flow, was increased flow was discuss million, volume our to offset cash capital benefits and in let's $XX $XX third by the environment. to move XX the million Now net sequentially Slide net more cash million. than leverage from year-to-date X.Xx. quarter, structure the of the from price of to our was XX% million, quarter impacts Capital debt for and Free outlook. the in net was million. quarter $XX cash working the At higher million

we For half this million, and for capital environmental will to of projects be of projects. expenditures $XXX expect including just remainder fiscal related for the business, for XXXX make growth under as up a to capital maintaining amount the whole,

at as our we this the lost in As equipment steel and connection still property assessing excludes we are fire result and projection expenditures fourth quarter of the short with total of and capital incurred mill repair a replacement costs, damaged mill. in

adjusted quarter increased tax an rate effective fourth on performance was and certain included expense items. benefits tax XX% of our and financial from discrete Our results

XX%. rate performance ahead, our our balance to in our rate fourth subject is This expect year. of be we quarter tax the trends the projected fiscal tax approximately Looking in to

now several ferrous to quarter, expect previous go, as In which I'll fourth fourth While the from it's we to outlook. which approximate quarter early to third had volumes recall, you our in might the the our with sales two still turn quarter. months delayed been in the shipments quarter, benefited

containers volumes tons, using from representing range our Our fourth in benefits production annual to XX%, to X.X of sequentially and since the the technologies. million from including quarter sales timing outlook increase availability Non-ferrous of sales, would new volumes volumes XXXX. our increased are over of highest of lead expected ferrous

sales expect the of the steel our from before finished from one-third to selling of approximately arise the and billets products made fire. of to We be steel volumes quarter down of level third created inventory

the shop quarter, While undertaken repairs to other the the fixed in mill reduced fourth are margin mill will and have expenses. steel will and and lost incur revenues costs

lost insurance timing recoveries fire, to around there quarter. of including provide repair most the a on to and our replace assets Although, a of end such the the September. recoveries accounting we of of the as in cover mill and recognition result a insurance damaged and and to intend income fourth further in for is up of will anticipate significant cost lost uncertainty amount August early as We of amount the or purposes, the steel

fire expect by quarter potential sequentially. in of insurance impact strongly fourth ferrous in drop fourth levels inventory contribute benefits the aggregate I'll outstanding mill at consolidated now average our we finally, recoveries of is that mill, accounting per of turn fire. even to operating Tamara. flow the excluding that to quarter business to to approximate ton related reduced the half cash And over the the EBITDA any steel the Excluding presentation the expect remainder expected to back be notwithstanding positive, on steel consideration from we performance, to our

Tamara Lundgren

Richard. you, Thank

increased and Our conditions. operational volumes, excellent positive efficiencies results by this quarter were market driven

our are material expected increase and our additional and volumes further to expand technology on further in track are to benefits. deliver investments initiatives to strategic Our margins through

ability delivering of of our positive an growth returning a a through have invest to operating with our shareholders and sheet cash low record our of balance record company interest dividend. capital strong We productivity the uninterrupted and flows in and to leverage expense, and track

employees recycling open have industry With a steel-making for of global once our industry we bright. global thank their for the be over questions. metal the century. demonstrated increased continued is continued They've In focus performance in for the to for Operator, again and business future our on why the low outstanding like quarter. growth carbon capacity, up decarbonization and call leader EAF the to in I'd now intensity technologies, a this let's the closing,


Our first comes Goldman Emily [Operator Chang with Sachs. Instructions] question from

your with proceed may You question.

Emily Chang

your outlook, quarters, markets categorize you're around just export is a bit to there charts it question exported Good I than narrowing today. morning, market, domestic for the taking of been scrap saw you seeing either one in we past ferrous stronger for prices pricing get destinations My this or Thanks of over Tamara, domestic had perhaps market typically that time export driven words, the premium you what has couple other premium, the market Richard. outlined I or is would that quarter-over-quarter? there of shift that ferrous the think anything export think first a quarter. of the Is what in sort more and we of there your domestic in a as ferrous

Tamara Lundgren

premium And ago, we're to right you of is years trades domestic. those What longer see markets. in in saw the typically we prices markets basis. of or fundamentally look and it market beginning globe, a domestic high But the is export market utilization strong What on the prices know, domestic And markets every both Emily, I domestic are month, is converging. price the we're as strong and or weekly globe export with really around and the now daily back seeing being as export what the you both as at demand the would - if seeing typically that you demand. with across strong wider demand a

Emily Chang

consumption this sort of you're follow-up my sort the around then being following scrap China year? is what earlier seeing the And of so around sorry, import ban export, far, just lifted

Tamara Lundgren

early scrap Chinese in changes import by policy think days. continues the in still the the China I be So are And the to modified government.

increasing. fact they they most where relevant they are and - I than for goals demand that articulated their scrap is demand the the less takeaway think is is And the scrap, for important think scrap. get probably I whether

they higher their recycled seen in into from imports the pull Asia, and utilizing the articulation scrap amount location goal haven't that ferrous. to America of steel - level lot their Chinese We from of strong to on the imports North transition BOFs They've gotten a increase produce a is to of date for another their the but long-term market. just of their demand


Our Instructions] Phil question [Operator next Gibbs with Capital KeyBanc Markets. comes from

may proceed You with your question.

Phil Gibbs

the capital are on what in think the are spending, that $XX of the where just gave about of Question benefit, investments are but EBITDA process. you where color that where are terms right terms I it in at was know in the you rollout where now? how you relative non-ferrous I of was in I and and had separation a ton much - you to you

Tamara Lundgren

Richard, that? don't you why take Sure.

Richard Peach

Good morning.

So commissioned and in system West The the the a yes, just shredding two systems, major use and process can Zurik that one into on - from is a products the U.S. such the non-ferrous and Southeastern U.S. the on West other one is Coast convey major that Coast another Twitch. to recovery we've in one extracts we one Zorba as in and the one plant Zorba Southeastern

more true capability XX% fourth of in the a production of be them, they of process we Zorba up combination then systems. to So in position are quarter, expect through the to which when between two those a our two by than will

production capability in the fourth I So looking we've to been said, up, through get quarter. ramping as and

products from previously shredding terms a produce number other we these from of products of converting per increasing the to and the we implemented the In $X achieve systems two ton and into coming process, EBITDA from expect benefits such Twitch. per fourth benefits, new from as more recovering the of of and in incremental we Zorba combination non-ferrous quarter that's ton ones

completed also plant, that these plant Coast first and additional of copper non-ferrous end quarter five by on permitting. construction, in and the on we and primary East - Coast the of separation and have that be two another have other we middle and we and quarter respectively, fiscal the 'XX, fourth in the Beyond recovery systems West which are is to expect systems engineering the on of construction

So and systems to come. more to some strong lane the we're making on get of progress beginning major with

Phil Gibbs


like would right around least what or halfway at sounds initially it you the this quarter, target by including So about about of be through? you'll half benefits

Richard Peach

before dollars, Yes, yes.

So that's, just the yes, targeted. half short of had of $XX we

Phil Gibbs

I the haven't of this had quarter? mean, you benefits any coming before

Richard Peach

in Not the and in significant two quarter. because enough that call of are process to fourth quarter systems the results out major we our are the these during of ramping third up the

Phil Gibbs

on guidance commentary, I Okay. you And in of just clear be what wanted then said. terms the to

this So shipped. $XX about quarter ton you did a ferrous per EBITDA in tons

said ferrous will same think steel a scrap volumes lower but quarter in communicated? that this you you the and you're that you'd impact out and around benefit, have you that. then level, tease from to you're even be I with separate about what Is accounting as saying inventory be basically the

Richard Peach

costs business expect core average and has the only recycling lost half well underway, good the of Even benefit and in very is insurance it's the the in of in do The repairing of that, as as the income. that, QX will progress be only from of fire, in is that we repairs said, be - the we and damage core QX addition impact business performance QX. correct. doing we was that's expect The and are of QX. in believe most been made there half temporary going we to business cover and the $X a as nature benefit most notwithstanding accounting to inventory Yes, good obviously

when are So issue strong we've timing insurance in got of settlements insurance it's coverage reached. terms but these a

to recoveries why moment, September. upbeat the in the is early and quarter, by there purposes progress accounting to could a August end extent which the for be uncertainty or further the which insurance of at recognizable we on intend there provide around any So fourth or is

Phil Gibbs

the benefits, very And take helpful. your some that into sharing early benefit commentary non-ferrous the That's does account - you'd your fourth be investments? then of from seeing volumes more on quarter, for non-ferrous Okay. lastly, your from

Richard Peach

increased sales using volume benefits Yes, sequentially production technologies. of includes absolutely. XX% non-ferrous That our new and the increased outlook


like any further not turn this I'm Lundgren now over to Tamara the And further would remarks. any showing I to questions call for time. back at

Tamara Lundgren

safe everyone, Thank again stay look fourth Thank quarter for report and stay We in In October, when you. we forward the today. And you. to time thank results. you, with your well. speaking you our interim,


and Thank this gentlemen, call. participating. conference Thank concludes for today's you. Ladies you

disconnect. now may You