SCHN - Earnings call transcript Q1 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the Schnitzer Steel's First Quarter 2018 Earnings Release Call. [Operator Instructions]. And as a reminder, this conference is being recorded. I would now like to introduce your host for today's call, Mr. Stefano Gaggini, Vice President, Corporate Controller and Principal Accounting Officer. begin. may you Sir,

Stefano Gaggini

Good Controller Stefano Welcome and Quarter Presentation. Steel's Amanda. Vice to the President, First Earnings XXXX Corporate Principal Fiscal morning. you, Gaggini, I'm company's Schnitzer Thank Accounting Officer.

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

our harbor call press statements company's which started, get to attention we also the your included and let are release me in Slide in Form on would detailed later Before X, be which safe today. the XX-Q, filed

As we and note our statements we for in such about call statements may targets make on as Slide today, forward-looking growth. X, outlook our our

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

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

have those GAAP to the appendix metrics slide of included presentation. a in our to We reconciliation

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

Tamara Lundgren

initiatives. with with our everyone review and and progress joining results our up sharing segment questions. you're conference in our macroeconomic closing for safely market of all interest managing through Good forward our underlying season, take this we on our and then our structure. then and businesses details winter great I growth hope some morning. more Thank trends We the I'll against our look to on performance, capital hope quarterly a the you we'll call. morning. On for Richard I your provide on first and your you call performance holiday wrap our the each had Coast, company those of our appreciate East you us I'll and storm. quarter early strategic will today, remarks

Slide begin since So impact share accounting quarter let's this liability. 'XX. X. our performance $X.XX for QX Even adjusted environmental announced our Earlier 'XX a by after from a turning morning, first earnings best per fiscal to of fiscal $X.XX, we legacy negative

nonferrous our and results reflect Our by volumes operating driven performance supporting improvements, demand. the higher our our benefits X%, and to On divisions environment market on commercial financial Pick-n-Pull success and initiatives continued from volumes. efforts XX% our supply sustained broadening productivity strong reflecting channels and growth sales a were ferrous volume and up each year-over-year in increase higher and our margin respectively, prices operating expansion a purchase AMR's of basis, ongoing and car focus of our

recycling These adjusted initiatives. created cost leverage delivered multiyear operating and in contributions imports, with quarter platform including volumes, CSS with levels prices were per higher significantly productivity positively grew we through margins. but later, steel is this of during testament operating integration double reached year's first we While and income We'll from productivity Oregon from our adjusted it's synergies operations. prices performance operating and worth detail $XX and of our by impacted results we when more first ton per AMR's our fiscal strong our also both our income ton more of of income was volumes speak than higher. of last rebar expanded the operating our were this to lower here highlighting volumes, level that 'XX, in scrap our last mill reduction improvements, the a million. to quarter. This improved further also was $X

quarter. year-over-year review and the quarter basis, first turn significantly. Beginning followed Slide you nonferrous to trajectory. per strengthen latter prices In U-shaped the December On prices the at slightly market market ton, the we the can prices market, $XXX continued of export a range per a October both softening ferrous above reported a The through to now in recovery metal export and and recently then to ferrous trends. levels X, $XXX ton. are of part If beginning in quarter rose $XXX market towards

to internal U.S. pace been yet have exports and to ferrous has on While exceed not production ferrous calendar October year, XXXX's up were demand. Turkey's U.S. steel XX% were export increased through to year-over-year meet scrap exports October, both levels Turkey reported through level. as export significantly

period, driven The Vietnam. lower same a U.S. demand year-over-year Scrap approximately both from still significantly below at billets. by the U.S. although Chinese and well expanding similar driven price levels the average. long-term increased semifinished utilization such quarter, followed XX%, lower U.S. China, and For finished goods and U.S. utilization. export. GDP In Asia exports as throughout competitively by up priced has domestic was X% market and increased capacity than increased global as of has is but against to been higher the Bangladesh as markets, pricing products steel exports remained semifinished trajectory

scrap. an China's for steel enforcement being decrease in from from is exports These at to during and see the of have right-hand China higher scrap in chart year iron levels This which also with ore, calendar widening combined price graph by steel iron As manufacturing. the tighter high-grade on high-grade driven for the continued corner market ore environmental and low-grade coal upper and between prices met global regulations slide, are to prices. almost emissions are support XX% improved differential 'XX, demand can of you this illustrates trends, trading which supporting ferrous lower pricing

aluminum Sword anticipated and and ferrous higher regulations, metals. supporting and in National pricing to driven more We recycled conditions. these including and of basis, If creating as are continued These BOFs. the rest in product nonferrous are for the The cleaner long-term product in could continue to higher copper on sequentially effect to pending positive both value community to look of anticipate go scrap pricing like a March, capabilities use trends meet sector into which sustainable continue and nonferrous expected demand at require greater by metals. migrate we across who and strengthen of market year-over-year looking Now the levels proposition from long recycled for stronger the are a demand the steel invested a invest recyclers more China metals environmentally of processing of and trends, to developments ourselves, practices, have quality, specifications higher-yielding global production to term. improved stringent sensitive EAFs prevalence to

long-term trends with company All of and market continued for these growth. opportunities our support an for stronger improved

turn review market to let's X Slide trends. now So to steel

raw approximately a should reduction year-over-year. level combined in the result positive, rebar for imports. the During remain utilization in costs XX% resulting of the Rebar with prospects by and in and activity. production up about than significant pricing seasonal healthier construction believe a a rebar and trends, with discipline, long These improving reduced long and spending very at XX% of steady markets contributing sequentially the the and global and quarter, first domestic, in underpinned products products We reduction anticipated driven domestic steel current imports, increased a rate prices the industry. improved rebar higher year-over-year, imports domestic spread higher lower import markets higher to material construction pricing to by

year-over-year more in impacting U.S. industrial industry. November, the the an to dollar, growth. strong last strong confidence on and display on this Consumer orders can we flows, rise end-of-life trends, leading used pricing road vehicles factors, goods, automotive are a stems improved the steel hitting turn stronger level which update Now XX-year white global leading our confidence and its has energy, also the personal an aggressive of labor This the the age stronger production goods supply continued confidence including demand contributing consumption year-over-year Through sales its is economic and light reflected both X on scrap fundamentals. in vehicles. industries, markets Slide durable year, continued U.S. remains for On several to continue indicators and optimistic which average highlighting positive slide, softer of higher generation which trajectory. new key shipment of that stronger outlook appliance on This the and vehicle improved the in including The higher includes growth. XXXX, a high we've expenditures, let's of for index, supply November. been GDP construction and to indicators the see the also over from

domestic metals We federal to that infrastructure believe support and and steel program, markets with should individual spending. beneficial reform recent prospects for to higher demand investment corporate and rate lower for steel are greater these recycled potential trends, economic expected global the a capital products. to along the environment as considerable and lend U.S. spur domestic tax legislation also finished GDP growth both Collectively, incentives prove tax the

on initiatives. strategic Let's turn now to Slide X an update our for

increase by we leveraging viewed macroeconomic productivity strategic announced continuation you'll cost-savings plan through environment industry initiatives. grow our expanding recall, Our elements, execution the efficiencies to supported we our three-year excellence, operational a be and our capital initiatives initiatives and as further our margins businesses. to the three have successful been balance of of three deploying strong we the year. our and our margins, These by increasing trends can foundational developed our last experiencing over Last as pillars, are sheet a the volumes the volumes had year, expand and operating and positive

at the the expanding sales base least supply also to we tons plan these of and our tons per effectiveness. channels to 'XX initiatives using quarter fiscal founded ferrous The base AMR's million was analytics fiscal a a a in and volumes $XX trends. from seen a We 'XX, X.X end on our can per of results clearly approximately operating increasing from ton commercial to income as $XX set of flexibility of our increase our through to X.X of on fiscal ton operating 'XX at company-wide target be million XX% resegmented operating our Our grow per ton of by processing the platform, basis. first by increase

on income over have averaging stronger four quarters reach our last anticipated in and Market ton per 'XX is volumes we fiscal several Our target are targets. up when been of conditions AMR's company-wide the these than ferrous $XX operating pace, quarters. tracking XX%, set sales last to ahead track the

of to 'XX. of trajectory 'XX company-wide annual and $XX our 'XX the leverage expand per fiscal condition to least XX% believe our fiscal million by to While AMR's the tons us capacity our should from such AMR's fiscal ferrous enable impact continue, X and that targets, political margins will timing circumstances, and uncertainties target another trends enable In we sales embedded at market current platform in ton. if by volumes our operating the economic grow retained could us

a for and of Richard So to structure. our segment capital review performance now turn let me it over our

Richard Peach

more you, of Adjusted strong Metals Tamara. income performance start for results and increased price than These XX%. I'll by a year's quarter double Auto review was spreads, positive for the higher the last first $XX operating metal volumes, continued the per with our benefits ton and higher improvements trend. expanded Thank productivity driven were sequentially initiatives. and AMR's first business. by significant Recycling was a quarter environment from sustained

was middle commercial softened. major Our shipments market of ahead margin expansion, the had to the export the process in domestic to when a at integrated quarter led our selling a as time higher sales priced contributor and

basis, on slightly and diversify up of these grow. metal ton year-over-year expected trends by year-over-year normal four X.X our process. conditions fiscal volumes continue XX%. goals AMR's selling flows, sequential to last strategies, were stage volume per our a of and higher the April benefits reflects year-over-year lower Average line side trends due based market from and of of Selling were we first volume by ferrous This trends, lower economic on compared XX%. and a logistics prices ferrous ferrous volumes, performance to tracking ahead sales. we actions of Nonferrous and volumes and supplier announced Consequently, operating integrated income expect rates transportation channel the XX% our for growth car volumes in AMR's to an and volumes followed supported ferrous basis. generated XXX,XXX target up to current are Over would by from sequentially. improved were tons, quarter, China. has per ton. ferrous global an about tons, timing XX% million This prices representing were to sales by On be XX% supply were sales of by seasonality our multiyear growth. substantially by similar at higher U.S. the sequential to volumes this when sales in of which also publicly The In tracking up supply our where purchase year-over-year, margin our be by $XX reform to back is nonferrous average supported in quarters, performance $X trends, from XX% XXXX. growth were upper are continuing 'XX our and sales to end with stronger also we sequentially year-over-year by continue and positive AMR

'XX, capacity be range X ton existing by volumes XX%. tons approximately to by than plenty of In last second modest term, of AMR's million sales inventory which per Our Nonferrous was AMR's driven average creates demand. expect year-over-year by increase per sequentially, benefit runway additional XX% quarter, ton as to $XX an we increase year's our to expected ferrous include quarter of we flows a second to higher shorter approximately are to would supply also XX%. growth. improved ahead overseas expected accounting. income yard higher the a of fiscal increase look to capture is operating also be and volumes This the from XX% year-over-year to from and sales

old steel while by cycle. at This was X%, U.S. the and the patterns higher Finished of decommissioning driven increased the on were XX% rebar was and operations. for compared Slide trends sales by XX% steel $X see finished this lower operating sequentially, Adjusted mill. to Coast. up reflected million cost year-over-year, quarter. Scrap. Demand now million Cascade by previous income for and volumes and increased improvement million, year-over-year the Steel the sales XX. recent cover steel was to I synergies The Moving $XX year-over-year $X finished the to from we input imports products reduced of expanded significant operating that for I'll steel integration CSS equipment year-over-year both mainly rolling which our and also costs margins were reflecting seasonality first prices, for quarter and approximately and should substantially time an due of prior recycling the finished resulted from annual of steel imports metal scrap. which selling year's West major manufacturing normal note lower selling Oregon and and included $X.X onetime by volumes primarily the our million, of pricing steel prices also higher, Average in in higher sequentially, the by further respectively. year-over-year, strength upgrades from

finished Looking the be finished to period, expect volumes and will lower holiday second $X to approximately higher we year-over-year sequentially seasonally with utilization to quarter, which, to Compared operating steel income by sales planned the ahead be first impact the we seasonally volumes XX%, sales by to expect by due approximately expected maintenance together lower million. approximately is XX%. steel quarter,

in in higher the healthy recent performance CSS continuing year-over-year margins our to volumes years. expect We quarter second steel and result metal best

Moving Slide on, our capital to let's structure. proceed review to XX

and by debt first to in of ratio to leverage very flow a was remains a capital the increased anticipate with of sheet we of flow but X.Xx. quarter Operating EBITDA cash return only second operating XX% the in positive cash quarter. impacted low balance Our working healthy net

Our of capital $XX $XX the replacement increased and mobile for to whole, business. further the technologies the $XX were CapEx investments upgrades on fiscal We million. in expenditures spend range in volumes, quarter million nonferrous in processing as investment year to the of equipment, projects, anticipate we capital first and include will maintaining environmental this in supporting expect and million invest capital a

costs. corporate to Turning

quarter second item. lower included legacy as the the sequentially be $X quarter million environmental expect to first We the

during approximately first rate the XX%. quarter effective Our was tax

our the recently result fiscal rate effective of lower a be the to federal 'XX, of as we tax expect ahead enacted reform. Looking tax remainder to

the impact We are still yet the new assessing are and in of not quantify a the tax law to position effects.

managing returning growing shareholders. in to our paid we our consecutive our the quarter, priorities and capital investing capital business, balanced our dividend and for our remain in Finally, among and allocation debt first quarterly XXth

of over presentation turn the remainder her Tamara I'll for back Now summary to remarks. our

Tamara Lundgren

Richard. you, Thank

that the conditions leading improving steel highlighted we've creating industry markets. last favorable scrap indicators Over for several economic are and trends quarters, and

these a this are We quarter performance executing been we on our positive financial and volume to on of goals. initiatives and markets, continuation strong 'XX margin and on is capitalize improved performance towards our a of delivering. steadily the trajectory have strategic our We successfully trend operational meeting exceeding or remain fiscal

our We service offerings will company continue operate our to systems and invest efficiently. customers in our more even to and our products, enhance increase technologies to

consistently investment to maintained have strong our growth the foundation capital transactional We while organic to continued a and which the ability shareholders. return structure, capital provides for retaining in

achieving We call in beyond. are shareholder our fiscal closing, I'd 'XX our further our know listening of on employees, are many focused whom into thank value goals morning. to In this to increase I firmly and like

and be excellence our each drive result environmental continues is cornerstones best as challenges with century. recycling a well since quarter wavering of we you company of opportunities thanks to your the Thanks quality this our one this commitment a quarter service. and our go our have industry communities and were of at you demonstrated integrity, the values resolve, as Your you've safety, of why every over fiscal achievements from turn. direct operational ability best-in-class our stewardship, without 'XX. of delivered our contributions, we performance leader the foundation, meet truly our for My results company's first to continued in core many to customer dedication, and of is strengthening your to to Each performance and

call open questions. Now let's the up operator, for

Operator

[Operator Stanley. first of comes Sood Piyush the our question line from Instructions]. And Morgan of

Piyush Sood

of So questions. a couple

second, take your but AMR comment to Maybe to you're that sense in of on it's how XXXX? a now. targets a performance just you see this more expected? outlook strong a from hurricane-related did has affect from that's -- how come and and The And early there's for it quarter, through first if your one, little wanted benefit a have you the or scrap something already seen about thinking does benefit it

Richard Peach

going higher be 'XX. in We're to

Tamara Lundgren

in basis quarter targets, We're as first the up start the in on and first one, we remarks, 'XX, the XX% in I mentioned 'XX 'XX of on slightly me And from But And each broke against what with been 'XX. a years ahead would on our an you have have in second CSS. announced annual margins, four tracking of we not is average our first recall, our terms when resegmented are may margin. volume the fiscal let you increase what prepared ton because at XX% one, a targets, through up are last you the that. So basis of repeat on so integrated was $XX Piyush. on which have Oregon a quarter fiscal as ahead of $XX a and basis we 'XX, to and yet the tracking we one,

second XX%. volume X and that from target, this tons reached may recall 'XX. the what? at of ahead that are continues And targets we anticipate 'XX and of a our assuming this reasons looked being -- recently least at And another we million at question trajectory, 'XX why that margin capacity X further And remains ton So rate, the million capacity. year was the of positive similar your growth retained hit or fiscal continually on we retained we stable expand is have market the one you to to able, on

Piyush Sood

quarters? to the hurricane-related areas it's of the still through hurricane About your in scrap from impact. do Has you think it coming the all or in come flown some

Tamara Lundgren

relatively localized generation be tends scrap very the to of from Well, hurricanes and short-lived.

-- concluded. where quickly are fairly and are generation up seeing got and we we after So we are seeing back storm we scrap the Puerto operating Rico, in

see see slight exporting global we're not a So scrap from increase volumes. But we we there it being I material. are or do -- don't and shredding in facilities. national the on Else a operating basis Texas, in again,

Piyush Sood

because so last Steel. us give being break a maybe out if you or out I margin integration? quarter I rebar much benefit was primarily -- what's and margins of, figure could gains the were on up really want follow had derived that Can if Cascade scrap the some to And from you rebar sense

Richard Peach

Yes. quarter operating CSS in Hi, Piyush, from the first business. mainly steel it's was Richard in the income here. The

margins manufacturing. the So primarily from in delivers. we that scrap that from to mill mill, The the are it was the that coming mainly supply steel profits seen the

mainly our terms mill, in where the mix of products is profit provide we from. is the product, of mix primary at but our our that's rebar do a press In coming release our and

Piyush Sood

to higher. last -- realized it the it least for last below quarter I compare higher So much in quarter, seems benchmark typically, versus was, realized, when rebar we some benchmark. was relatively there's at -- would it historical price say, But like, comes

out? So can formula you kind of or the lag of changed, or the anything kind point

Richard Peach

prices other terms than the of is in of cost you're into feed rebar What particular themselves. higher through scrap the the input themselves. Nothing in seeing selling prices

Operator

And [Operator next Phil question our Instructions]. KeyBanc. comes line from Gibbs of the of

Philip Gibbs

bit. and the on know a well up, that a basis bit outlook think, sequential little on prices I a nonferrous on the did moving I first in still the Question they're a little lag. extraordinary quarter

anticipating market? will second appreciation quarter, more are have the So that gains from you the potential nonferrous pricing in Richard,

Richard Peach

not anything We're dynamics. the market current that seeing changes

strong So another we're expecting quarter.

Philip Gibbs

second the Okay. outlook quarter. on for And then the

be inventory them the... did some I'm there could but mention you sorry, gain, -- you inventory on not think that call I what

Richard Peach

inventory... Average

Philip Gibbs

The inventory yes. accounting,

Richard Peach

Yes.

Philip Gibbs

curious going -- to curious I was what modest So meant. what modest say

Richard Peach

mind. is ton That our type of somewhere a dollars modest couple that of range is in small, in dollars, the per of couple

Philip Gibbs

to question you forward? perhaps you just are Are levels that? how and met you moving side thinking on of And Or internal a procure wanting be the Tamara, then terms China in to do consumption about their of is think of scrap right more now. going by seeing their in some interest growth you EAF terms from

Tamara Lundgren

internally of import, been flows is EAFs. Phil. there's increasing that being seeing think met Part China. years. through the I in has is charge are increasing of being and scrap both, which we that Well, are clearly, many, and Clearly, BOFs is the part for utilization usage trend increased of many met their a answer for

they desire seen has we for to as so As increasing, foreseeable more becoming I that, that's for demand scrap their and going in and for continue environmentally more China. utilization's the sensitive, would And uptick future. imports for increased an are their scrap have imagine recently

Philip Gibbs

year? Are selling to right Chinese, you the calendar them past now, this

Tamara Lundgren

Yes.

Philip Gibbs

last mention Tamara, just right Okay. scrap I in up? did for then wanted making Did I that you now was that a clarification. or question, And ton? pricing you Turkey $XXX hear I that say is

Tamara Lundgren

was said have I cetera. ranged $XXX from et to coast varies reported prices -- the that is per range $XXX size of What is recently depending shipment ton. coast But And range globally. and that the upon that demand,

Operator

Gaggini And the at back turn showing I'd this I'm time, the to to Stefano further questions. remarks. conference over Mr. closing no like for

Tamara Lundgren

you, results. report for in second We a and we and Thank with for in our when today you and interest Operator. you, speaking healthy your us quarter you all prosperous joining Thank our our again on look company. XXXX, you, Thank safe, April forward everyone, call wish to operator. we

Operator

in your conference. for This and does you Ladies gentlemen, thank program. participation today's the conclude

disconnect. now great have may You day. a Everyone,

Radius Recycling (RDUS) 9 Jan 182018 Q1 Earnings call transcript