Schnitzer Steel Industries : 2022 Q1 EarningsConference Call

NASDAQ:SCHN

Financial Results

First Quarter Fiscal 2022

January 6, 2022

Recycling Today for a Sustainable Tomorrow

Safe Harbor

Statements and information included in this presentation by Schnitzer Steel Industries, Inc. that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Except as noted herein or as the context may otherwise require, all references to "we," "our," "us," "the Company," and "SSI" refer to Schnitzer Steel Industries, Inc. and its consolidated subsidiaries. Forward-looking statements in this presentation include statements regarding future events or our expectations, intentions, beliefs, and strategies regarding the future, which may include statements regarding the impact of pandemics, epidemics, or other public health emergencies, such as the coronavirus disease 2019 ("COVID-19") pandemic; the impact of equipment upgrades, equipment failures, and facility damage on production, including timing of repairs and resumption of operations; the realization of insurance recoveries; the Company's outlook, growth initiatives, or expected results or objectives, including pricing, margins, sales volumes, and profitability; completion of acquisitions and integration of acquired businesses; the impacts of supply chain disruptions and inflation; liquidity positions; our ability to generate cash from continuing operations; trends, cyclicality, and changes in the markets we sell into; strategic direction or goals; targets; changes to manufacturing and production processes; the realization of deferred tax assets; planned capital expenditures; the cost of and the status of any agreements or actions related to our compliance with environmental and other laws; expected tax rates, deductions, and credits; the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; the potential impact of adopting new accounting pronouncements; the impact of labor shortages or increased labor costs; obligations under our retirement plans; benefits, savings, or additional costs from business realignment, cost containment, and productivity improvement programs; and the adequacy of accruals. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as "outlook," "target," "aim," "believes," "expects," "anticipates," "intends," "assumes," "estimates," "evaluates," "may," "will," "should," "could," "opinions," "forecasts," "projects," "plans," "future," "forward," "potential," "probable," and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking.

We may make other forward-looking statements from time to time, including in reports filed with the Securities and Exchange Commission, press releases, presentations, and on public conference calls. All forward-looking statements we make are based on information available to us at the time the statements are made, and we assume no obligation to update any forward-looking statements, except as may be required by law. Our business is subject to the effects of changes in domestic and global economic conditions and a number of other risks and uncertainties that could cause actual results to differ materially from those included in, or implied by, such forward-looking statements. Some of these risks and uncertainties are discussed in "Item 1A. Risk Factors" of Part I of our most recent Annual Report on Form 10-K, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. Examples of these risks include: the impact of pandemics, epidemics, or other public health emergencies, such as the COVID-19 pandemic; the impact of equipment upgrades, equipment failures, and facility damage on production; potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; volatile supply and demand conditions affecting prices and volumes in the markets for raw materials and other inputs we purchase; significant decreases in recycled metal prices; imbalances in supply and demand conditions in the global steel industry; difficulties associated with acquisitions and integration of acquired businesses; supply chain disruptions; reliance on third-party shipping companies, including with respect to freight rates and the availability of transportation; inability to obtain or renew business licenses and permits; the impact of goodwill impairment charges; the impact of long-lived asset and equity investment impairment charges; failure to realize or delays in realizing expected benefits from investments in processing and manufacturing technology improvements; inability to achieve or sustain the benefits from productivity, cost savings, and restructuring initiatives; inability to renew facility leases; customer fulfillment of their contractual obligations; increases in the relative value of the U.S. dollar; the impact of inflation and foreign currency fluctuations; potential limitations on our ability to access capital resources and existing credit facilities; restrictions on our business and financial covenants under the agreement governing our bank credit facilities; the impact of consolidation in the steel industry; product liability claims; the impact of legal proceedings and legal compliance; the adverse impact of climate change; the impact of not realizing deferred tax assets; the impact of tax increases and changes in tax rules; the impact of one or more cybersecurity incidents; environmental compliance costs and potential environmental liabilities; compliance with climate change and greenhouse gas emission laws and regulations; the impact of labor shortages or increased labor costs; reliance on employees subject to collective bargaining agreements; and the impact of the underfunded status of multiemployer plans in which we participate.

NON-GAAP FINANCIAL MEASURES

This presentation contains certain non-GAAP financial measures as defined under SEC rules. Reconciliations of the non-GAAP financial measures contained in this presentation to the most directly comparable U.S. GAAP measure are provided in the Appendix. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable U.S. GAAP measures.

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Agenda

Review of First Quarter Fiscal 2022

Recycling Today for a Sustainable Tomorrow	4
First Quarter Fiscal 2022 Highlights	5

Industry Trends

Metals & Finished Steel Market Price Trends	6
Drivers for Recycled Metals Demand	7

Strategic Initiatives

Strategic Actions for Continued Growth	8
Advanced Metal Recovery Technology Initiatives	9

Performance Trends

Market Dynamics	10-12
Strong Balance Sheet & Liquidity Position	13

Summary

Delivering Value Through the Cycle

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Recycling Today for a Sustainable Tomorrow

Recent ESG Achievements

• Achieved safest year on record in FY21
• Certified as a Great Place to Work®
• Achieved 100% net carbon-free electricity use in FY21
• 19% reduction in Scope 1 and 2 emissions in FY21 over FY19 base year
• Implemented net zero GHG emissions goal for all operations by 2050
• Named a 2021 CDP "A" List for Water Security
• Delivered best financial performance in a decade in FY21

Our Fiscal 2021 Sustainability Report can be found here

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First Quarter Fiscal 2022 Highlights

Strong

Quarterly

Results

Delivered

Robust

Operating

Performance

Progress on

Strategic

Initiatives

• Adjusted EBITDA of $78 million, best Q1 performance on record, and adjusted EBITDA per ferrous ton of $68
• Adjusted EPS of $1.58, almost triple YoY
• Ferrous and nonferrous sales volumes increased 9% and 11% YoY, respectively
• • Supply chain disruptions delayed several November contracted shipments
• Significant progress on ramp-up of steel mill operations following May 2021 fire
• • Achieved 91% utilization in November, average utilization for the quarter of 78%
• Completed acquisition of 8 Columbus Recycling facilities in October 2021
• Continued progress on the implementation of advanced metal recovery technologies, targeting completion by the end of FY22
• Productivity initiatives on track

	1Q22	1Q21
Adjusted EPS from Cont. Operations	$1.58	$0.57
Adjusted EBITDA ($ millions)	$78	$40
Adjusted EBITDA per Ferrous Ton	$68	$38

	1Q22	1Q21
Ferrous Sales Volumes (000s LT)	1,148	1,053
Nonferrous Sales Volumes (M Lbs)	153	138
Finished Steel Sales Volumes (000s ST)	99	134

Note: For a reconciliation to U.S. GAAP of adjusted EBITDA, adjusted EBITDA per ferrous ton and adjusted earnings per share from continuing operations, see appendix.	5