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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Q & A
Operator
Operator

from KeyBanc Capital Markets. Your line is open.

Analyst
Phil Gibbs

Hey, good morning.

Executive
Tamara Lundgren

Good morning, Phil. Happy New Year.

Analyst
Phil Gibbs

Happy New Year. I was going to say the same. So, on the side of just the first quarter results here, can you describe what that environmental headwind was for AMR and was that something, just to be sure, here was in the results? Because I think you pointed that out early in the presser [Phonetic].

Executive
Richard Peach

Hi, Phil. It's Richard. Yes, that environmental headwind was in the adjusted results. It was -- impacted us by $0.05 or $2 per ton in AMR and it related to the resolution of an air emissions matter at one of our California facilities.

Analyst
Phil Gibbs

Okay. So presumably that's not going to recur in the second quarter, partly helping out the results. Are you going to have -- given the run in pricing here in the last 90 days, are you going to have inventory accounting benefits? Is that at all thought about in the numbers in the guidance you've provided?

Executive
Richard Peach

Yes. We see the adverse effect that impacted the first quarter, we see that reversing in the second quarter, and that's built into our outlook [Phonetic] guidance of $20 per ton expected operating income per ton for AMR for the second quarter.

Analyst
Phil Gibbs

Reversing -- I mean, you're not going to have it, but I mean, does it move to a positive, I guess? Are you expecting a gain?

Executive
Richard Peach

Yes, a small gain -- a small gain.

Analyst
Phil Gibbs

Okay. Okay. And then you went in pretty exhaustive detail around the non-ferrous investments which was great, and I took away from it that you're putting this in very consciously -- in stages. And then you're starting to reap some of the reward by the end of this fiscal year. Can you just give us a little bit more context, because many of us don't know what these things actually are and what they do, just to be a little bit more concrete in terms of where you're starting and how you're getting the benefit maybe this year and then what's really to come as you get to that full $8 a ton?

Executive
Richard Peach

Yes. It's a comprehensive plan that has three different aspects. The first phase is clean copper recovery, and we will be putting in systems on the East and the West Coast, and that's really about taking a lower grade copper and aluminum products and converting it into a more furnace-ready material where we can get a higher price for it. And that's how we get the value.

The second phase is the advanced metal recovery systems. Now, these are replacements and upgrades to our existing non-ferrous recovery technology in our major export facilities and we get a benefit there in three different ways. One is, we will increase our processing capacity coming out the back of the shredding process for recovery of non-ferrous metals. Then, in addition, we will increase the amount of separation of non-ferrous metals so that