On Tuesday, Schnitzer Steel Industries, Inc. provided its outlook for its Q4 of fiscal 2013 ending August 31, 2013. During the quarter, export demand for recycled metals weakened versus Q3, as reflected by lower shipped volumes and lower average sales prices. Average purchase prices for material shipped during the quarter declined more slowly than sales prices, resulting in lower margins compared to Q3.
In the Steel Manufacturing Business, sales volumes are expected to increase sequentially by approximately 10 percent, driven by improvements in demand for finished steel in the Western US. These volume benefits are expected to offset a slight decline in average selling prices compared to Q3, resulting from lower scrap costs. The improvement in demand and additional cost efficiencies from increased productivity are expected to generate positive operating income and to result in the best full-year performance for the Steel Manufacturing Business since fiscal 2008.
In the Metals Recycling Business, ferrous sales volumes are anticipated to be 5-10 percent lower than in Q3 and average ferrous selling prices are expected to decline 8-10 percent sequentially. Schnitzer anticipates that the Metals Recycling Business will incur an operating loss in Q4 due to weaker market conditions and other factors.
In the Auto Parts Business, car purchase volumes are expected to approximate Q3 levels. Despite challenging market conditions, car purchase volumes for the full year are anticipated to increase 5 percent compared to the prior fiscal year, including the impact of new stores acquired in fiscal 2013. Operating margins are expected to be positive but lower sequentially mainly due to the adverse impact of average inventory accounting.
