Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) Q1 2020 Earnings Conference Call - Final Transcript

Jan 08, 2020 • 11:30 am ET

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Schnitzer Steel Industries, Inc. (NASDAQ:SCHN) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Tamara Lundgren

I'm pleased to report that this trend has continued. Our total recordable injury rate in Q1 was over 30% better than last year's first quarter. Much of this success can be attributed to our significant progress in better anticipating and preventing potential hazards. I'm very proud of our teammates throughout the Company. You are delivering on our commitment to create a safe work environment and a sustainable safety culture.

Let's turn now to slide 4 to discuss a related report that we released just a few weeks ago.

In mid-December we issued our sixth sustainability report entitled Recycling Today for a Sustainable Tomorrow. Sustainability has been at the core of what we do and how we operate since our founding in 1906 and our sustainable business model has never been more important and more relevant than it is today. Our fiscal 2019 Sustainability Report contains our first set of multi-year sustainability goals and it highlights how we help conserve resources, how we innovate to use less water and energy and to generate less waste, how we create a safe, ethical, engaging and inclusive workplace and how we give back to the communities where we operate. We believe that our goals will continue to place us at the forefront of positive change in our industry, and I encourage you to visit our website to view our latest Sustainability Report.

Now let's turn to slide 5.

Earlier this morning, we announced our fiscal '20 first quarter financial results. We reported an adjusted loss per share of $0.17, which included an adverse impact from average inventory accounting of approximately $0.11 and a charge of $0.05 related to resolution of an environmental matter. Our Q1 results were impacted by a very challenging market environment for both AMR and CSS that was partially offset by benefits from our productivity improvement initiatives which we implemented last year.

In AMR, volumes and margins were impacted by the sharp decline in selling prices during most of the quarter. Both ferrous and certain non-ferrous prices dropped to multi-year lows. Not surprisingly, supply flows tightened as a result, leading to reduced volumes for both ferrous and non-ferrous sales. The rise in ferrous prices in November led to an easing in supply flows but contributed to margin compression for sales contracted earlier in the quarter.

CSS' first quarter results were also impacted by declining prices for finished steel products driven by lower sales volumes due to customer destocking and a reduced contribution from recycling operations.

And from a consolidated perspective, we delivered $11 million of positive operating cash flow this quarter compared to negative operating cash flow of $12 million in Q1 of last year. We also returned capital to our shareholders through our 103rd consecutive quarterly dividend.

For most of calendar year 2019, the weakness in global manufacturing was exacerbated by the inevitable inventory destocking that companies undertook in response to the weak demand conditions. This lower demand and slower growth were reflected in the scrap and steel manufacturing sectors.