Steelmaker Schnitzer Steel Industries Inc. (NASDAQ: SCHN) announced this morning that it would fire 300 workers in a restructuring the company said will save $25 million annually. The restructuring is expected to be completed by the end of the first quarter of 2013.
The company also lowered its EPS forecast for the third quarter to approximately breakeven on an adjusted basis and a net loss of $0.12 per share on a GAAP basis. The consensus estimate for third quarter EPS had been $0.24.
Schnitzer blamed low prices, slowing global growth, uncertainty about the global economy and the stronger U.S. dollar for the change in its forecast. The impact on the company’s inventory caused the problems:
As a result of these conditions, average inventory costs were not able to decline as quickly as cash purchase costs for raw materials. Average inventory costs are expected to adversely impact consolidated operating income by approximately $25 million compared to the third quarter, with approximately two-thirds of this impact affecting our Metals Recycling Business.
Steelmaking has been hard hit by the slowdown in the global economy. AK Steel Holding Corp. (NYSE: AKS) has seen its share price plummet by 34% in the past 12 months. ArcelorMittal (NYSE: MT) and United States Steel Corp. (NYSE: X) both are off by about 25%. Only Nucor Corp. (NYSE: NUE) and Steel Dynamics Inc. (NASDAQ: STLD) have managed a share price hike over the past 12 months.
Global steel prices remain at or near annual lows, and until prices rise — especially in China — domestic steel prices will continue to be flat at best, with price declines the more likely outcome.
Schnitzer’s share price is down 0.14% in the first few minutes of trading this morning, at $29.11 in a 52-week range of $22.78 to $51.98.