Hugo Neu/Schnitzer
Joint Ventures Separation
June 9, 2005
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Forward Looking Statements
This Presentation contains forward-looking statements, within the meaning of U.S. securities laws.
These forward-looking statements include statements concerning the anticipated financial and
operational benefits expected to arise from the transactions referred to herein, the pro forma financial
and operating data and the anticipated uses of the Company’s available cash, and can be identified
generally either because they contain the words “expect”, “anticipate”, “believe” or “estimate” or similar
terms or because they do not relate strictly to historical or current facts. These forward looking
statements are not guarantees of future performance. Examples of factors affecting both Schnitzer
Steel Industries, Inc.'s consolidated operations and its joint ventures (the Company) that could cause
actual results to differ materially from current expectations are the following: inability of the parties to
complete the proposed joint venture separation due to inability to obtain required financing or
consents, or otherwise satisfy closing conditions; volatile supply and demand conditions affecting
prices and volumes in the markets for both the Company's products and raw materials it purchases;
world economic conditions; world political conditions; changes in federal and state income tax laws;
impact of pending or new law and regulations regarding imports and exports into the United States
and other foreign countries; foreign currency fluctuations; competition; seasonality, including weather;
energy supplies; freight rates; loss of key personnel; the inability to complete expected large scrap
export shipments in the current quarter; consequences of the pending investigation by the Company's
audit committee into Far East payment practices; business integration issues relating to acquisitions of
businesses; and business disruptions resulting from installation or replacement of major capital assets,
as discussed in more detail under the heading "Factors That Could Affect Future Results" in the
Company's most recent annual report on Form 10-K or quarterly report on Form 10-Q. One should
understand that it is not possible to predict or identify all factors that could cause actual results to differ
from the Company's forward-looking statements. Consequently, the reader should not consider any
such list to be a complete statement of all potential risks or uncertainties. The Company does not
assume any obligation to update any forward-looking statement.
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Negotiated Asset Separation
Schnitzer receives:
Hugo Neu receives:
Metals Processing Operations:
Massachusetts/Maine/New
Hampshire
Rhode Island (60% interest)
Metals Trading: Russian / Eastern
European / Baltic Sources
Hawaii Metals Recycling
(Previously 100% owned by HNC)
Cash of $52 million
Metals Processing Operations:
Los Angeles
New York / New Jersey
Interim New York City Recycling
Metals Trading: Mexico
Transaction Expected to Close Around the End of Schnitzer’s
Fiscal Year (August 2005), Subject to Closing Conditions
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Best Option to Separate Assets
Asset values have grown significantly since
SCHN acquired Proler’s JV stake in 1996
Partnership issues divert significant management time
Separation gives SCHN control of key assets and
unlocks growth opportunities
Separating assets was most practical solution
To provide equitable allocation between partners,
negotiations focused on EBIT-neutral terms as of
December 2004
4
A Top U.S. Supplier of Scrap to World Markets
Controlling ~4.4 million tons of ferrous scrap
Increased Direct Marketing / Operational Leverage
Diversified export and domestic markets
More sources of scrap … greater shredder capacity
More strong regional market positions
More sales flexibility
More Transparency, More Protections From Risk
Complete control over operations, assets and cash flow
Enhanced credit profile
Improved Upside, Less Risk
5
Post-Separation: Schnitzer Steel
= Major Processing Facilities
Schnitzer positioned for expanded benefits from excellent long-term industry fundamentals
Wash.
Oregon
Calif.
Mass. / N.H.
/ Rhode Is.
Russian /
East European /
Baltic Trading
Korea
China
Mexico
Latin
America
Europe
Hawaii
Southeast
Asia
= Pre-Separation Product Flow
= Added Direct Product Flow
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Selected Pro Forma
Financial Data (unaudited, $ in millions)
$ 112.3
$ 167.8
$ 68.2
Operating Income
Upon termination of JVs, Schnitzer will have both control over operating
cash flows and reinvestment opportunities for after-tax proceeds
$ 781.7
$1,316.3
$ 802.1
Revenues
Pro forma (as if separated)
$ 38.5
$ 0.0
$ 0.0
Cash Received from
HNSJVs
$ 123.9
$ 166.9
$ 68.8
Operating Income
$ 414.7
$ 688.2
$ 496.9
Revenues
FY 2005 6mos
FY 2004
FY 2003
As reported (pre-separation)
Pro forma operating income includes 100% of income attributable to MRL, of which $1.7 million, $7.6 million and $3.8
million in fiscal 2003, 2004 and 6 months of 2005, respectively, is attributable to the 40% owned by a minority
partner. Pro forma information not necessarily indicative of future performance.
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Selected Pro Forma
Volume Controlled by Schnitzer
(in millions)
98.1
195.2
188.2
Non Fe Sales Volumes (lbs)
1.5
3.1
2.9
-Processing (tons)
0.6
1.3
0.8
-Trading (tons)
2.2
4.4
3.7
Fe Sales Volumes
Pro Forma (Post Separation)
60.3
118.0
113.3
Non Fe Sales Volumes (lbs)
0.9
1.8
1.8
Fe Sales Volumes (tons)
FY 2005
6 mo
FY 2004
FY 2003
As Reported (Pre-separation)
Note: pro forma information not necessarily
indicative of future performance
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Financial Implications of Separation
Improved financial reporting transparency
Greater visibility of size of operation
Increase in realized cash flows
Modest near term dilution until cash proceeds are re-
invested and synergies realized
Anticipate ~$3 million net non-recurring expenses in FY’06
associated with transition and building infrastructure
Anticipate ~$3 million net pre-tax annual benefit beginning in FY
‘07
Does not include potential benefits from reinvestment of net
proceeds
9
Schnitzer Steel Growth Strategy
Transaction advances growth strategies:
Removes perceived barriers to expand scrap
business through acquisitions
Frees cash to deploy in independent growth
Eliminates potential conflict associated with
expanding Auto Parts Business into JV markets
Plans for cash
Acquire value-creating scrap franchises
Continue aggressive growth in Auto Parts Business
Technology and facility modernization to improve
productivity in all business segments
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New England Franchise
Desirable East Coast presence, opportunity to broaden
footprint
Selling primarily to Asian, Latin American & European markets
Potential synergies with growing Auto Parts Business
Strong franchise
Market leading processor in New England: 3 large automobile
shredders
Processing/export facilities in Everett, MA (Boston harbor) and
Providence, RI and processing facility in Madbury, NH
Capital improvement projects underway
Major re-construction increases capacity, promises improved
operating efficiencies and opportunities for growth
Post-Separation Operations
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Post-Separation Operations
Global Trade Russia
Trading business taps huge Russian scrap reservoir
Also sources scrap in Baltic and Eastern European countries
Exports primarily to Europe, Middle East and Southeast Asia
Expands SCHN’s global supply footprint
Adds flexibility to fulfill customer demand
Five-year non-compete agreement from Hugo Neu in
Baltic and Russian regions
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Post-Separation Operations
Hawaii Metals Recycling
Entity not previously part of HNS joint ventures
Included in transaction to “balance” the asset allocation
Largest scrap processor in Hawaii
Only Hawaiian operator with shredder capability
Along with New England operation, increases wholly-owned
shredders from three to seven
Access to deep draft export terminal
Exports into key Asian markets
Additional source of supply enhances marketing leverage
13
Interim Operations
‘Business as usual’ until closing
100% of JV pre-tax income distributed equally
from September 1, 2004 through closing
Borrowings, net of cash balances, attributable to
respective businesses under JV credit facility, if
any, to be repaid by Schnitzer and Hugo Neu at
closing
14
Current Performance of Operations
Businesses experiencing short-term divergence
in results
New England scrap supply flows adversely impacted
by harsh winter weather and sales allocation
Los Angeles franchise experiencing stronger relative
business conditions
Trading business impacted by recent volatility in
export markets
Relative profitability has historically been
consistent with valuation assumptions over time
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Integration Considerations
Good on-site operational teams in place
Building regional management
infrastructure to oversee operations and
allow for continued expansion
Transitional services agreement in place
for temporary administrative support
required post-closing
Expedite completion of previously planned
major yard renovations in New England
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Integration Risks
Attracting and retaining key management
Completing facility upgrades
Maintaining supplier relationships in
brokerage business
Integrating new systems, processes and
cultures
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In Summary: Financial Advantages
Complete control over all financial decisions
Increase in realized cash flow
Wholly-owned operations and cash flows
In contrast, as an equity investment, the JV produced pre-
tax earnings but limited cash distributions in recent years
Improved financial transparency
Enhanced credit profile
EBIT enhancements after reinvestment of proceeds
and incurrence of non-recurring infrastructure costs
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In Summary: Operational Advantages
Operational control of key strategic assets
Better structure to pursue strategic initiatives
East Coast platform to grow metals recycling business
Improved access to worldwide markets / sales flexibility
provides opportunity for improved export margins
Diversified, expanded production base provides greater
flexibility to supply customers and cost efficiencies
Schnitzer can grow and compete in any market without
restriction
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Export Marketing Reach
East Coast export facilities and access to
supply in Russia, the Baltics and Eastern
Europe provide direct access to Latin America,
European and Middle Eastern markets
Termination of Joint Venture relationship
eliminates potential conflicts in pursuing world-
wide markets
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Summary of Benefits
Complete operational and financial control of
strategic franchises
Stronger platform for future growth
Improved direct access to scrap supply
Expanded access to worldwide markets
Opportunities to re-invest cash in value
creating investments
Separating JV Provides Schnitzer with
Improved Upside and Less Risk
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