Scnhitzer Provides 3Q Guidance

Zacks

Schnitzer Steel Industries, Inc. (SCHN) has announced its guidance for the third quarter of fiscal 2013 (ending May 31, 2013). For the quarter, the company expects to incur a pre-tax restructuring charge of roughly $1 million in connection with its restructuring program announced last year.

Schnitzer expects its full-year tax rate to be around 33%. The company stated that it expects its third quarter effective tax rate to be significantly higher than the estimated full year rate.

Further, Schnitzer announced that in the first three quarters of fiscal 2013, consolidated selling, general and administrative expenses excluding the impact of the recent acquisitions, are expected to be roughly 9% lower year over year.

As per Schnitzer, selling prices of ferrous export decreased steadily throughout the third quarter with market prices at the end of May decreasing about $50 per ton compared with the previous quarter. The lower prices were the results of weaker export demand. Declining selling prices, restricted supply trends, and lower tax benefits are expected to sequentially lower consolidated net income.

In the Metals Recycling Business, average net ferrous sales prices for shipments during the third quarter are expected to decline sequentially by about $5 per ton. Ferrous sales volumes are forecast to increase 5% to 10%. Nonferrous average sales prices are expected to be flat versus the second quarter of fiscal 2013 while sales volumes are expected to increase roughly 10% due to higher production. Operating income per ferrous ton is expected to be in the range of $6 to $8.

In Schnitzer’s Auto Parts Business (APB), seasonally stronger car purchases, admissions and part sales along with strong volumes from acquisitions are expected to result in a sequential revenue increase of roughly 10%. APB’s reported operating margin is expected to be around 9% for the third quarter which includes a 3% impact of start up costs of the ten new locations that were added during the second quarter.

Average selling prices for Schnitzer’s Steel Manufacturing Business, are expected to decrease modestly from the second quarter while sales volumes are likely to jump 30% due to gradually improving end markets in the third quarter.

Schnitzer currently holds a Zacks Rank #3 (Hold).

Other companies in the steel industry having favorable Zacks Ranks are Angang Steel Company Limited (ANGGY), LB Foster Co. (FSTR) and ArcelorMittal South Africa Limited (AMSIY). All of them retain a Zacks Rank #2 (Buy).
 

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