Q4 2023 Schnitzer Steel Industries Inc Earnings Call

October 25, 2023

Okay.

Good day, ladies and gentlemen, thank you for standing by welcome to the way it used to be called recycling fourth quarter 2023 earnings release call and webcast. At this time all participants are in a listen only mode.

After the Speakers' presentation, there'll be a question and answer session.

Ask a question during the session you will need to press star one one on your telephone you will dungeon automatic message advising Yohanan suite.

Please note that today's conference is being recorded.

I'll now hand, the conference I'll, let Jesse goes Michael Bennett Investor Relations. Please go ahead.

Thank you Olivia and good morning, I'm, Michael Bennett, the company's Vice President of Investor Relations.

I am happy to welcome you to radius for claims earnings presentation for the fourth quarter of fiscal 2023 and.

In addition to today's audio comments, we've issued our press release and posted a set of slides both of which you can access on our website at radius recycling dot com.

Before we start let me call your attention to the detailed safe Harbor statement on slide two which is also included in our press release and in the company's Form 10-K, which will be filed later today.

As we note on slide two we may make forward looking statements on our call today, such as our statements about our targets volume growth and margins. Our actual results may differ materially from those projected in our forward looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statement is contained in slide two as well as our press release of today and our Form 10-K.

Please note that we will be discussing some non-GAAP measures during our presentation. Today. We have included a reconciliation of those metrics to GAAP in the appendix to our slide presentation now, let me turn the call over to Tamara Lundgren, Our chairman and Chief Executive Officer, She will host the call today with Stefan in Virginia, Our Chief Financial Officer.

Thank you Michael Good morning, everyone and welcome to our fiscal 'twenty three fourth quarter earnings call.

On our call. This morning, I will discuss our recent rebranding will review, our quarterly and full year financial results the trends affecting our business and project on this strategic activities, we have underway to address industry dynamics and create long term value through the cycle.

Stefano will then provide more detail on our financial performance our capital investments at our capital structure I'll wrap up and then we'll take your questions.

Before we begin our review I would like to recognize our team for their unwavering commitment to safety.

Health and safety of our employees and all who work at and visit our sites is Paramount.

In fiscal 'twenty, three almost 90% of our facilities were free of any lost time injuries. While we still have work to do our team is dedicated to continuing their progress and identifying and addressing potential hazards before they become injuries to ensure a safe working environment for everyone.

Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Radius Recycling 4th quarter, 2023 earnings release call and webcast. At this time, all participants are in a listen only mode. After the biggest presentation, there will be a question and answer session. As a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advised in your hand. It's raised. Please know that today's conference is being recorded.

Operator: I will now hand a conference over to you.

So, let's turn now to slide four to get started.

In July we announced the launch of our new corporate name and logo radius recycling. This is an exciting new step in our company's history.

Michael Bennett: Michael Bennett, congratulations. Please go ahead. Thank you, Olivia, and good morning. I am Michael Bennett, the company's vice president of investor relations. I am happy to welcome you to Radius Recycling's earnings presentation for the 4th quarter of fiscal 2023. In addition to today's audio comments, we've issued our press release and posted a set of slides, both of which you can access on our website at RadiusRecycling.com. Before we start, let me call your attention to the detailed Safe Harbor statement on slide 2, which is also included in our press release and in the company's form 10k, which will be filed later today.

Over the last 118 years with operated under many names from our humble beginnings in 19 six through over 50 acquisitions today, we operate in more than 100 communities across North America employing over 3300 talented individuals.

The rising demand for ferrous and nonferrous metals continues to propel our company forward.

The name radius recycling reflects our company's global leadership in metals recycling.

And conveys our work our purpose and our vision for a sustainable future like the radius of the circle. Our work sits at the center of the circular economy seamlessly connecting all points towards a low carbon future.

Michael Bennett: As we note on slide 2, we may make board-looking statements on our call today, such as our statements about our targets, volume growth, and margins. Our actual results may differ materially from those projected in our forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statement is contained in slide 2, as well as our press release of today and our form 10k. Please note that we will be discussing some non-gap measures during our presentation today. We have included a reconciliation of those metrics to gap in the appendix to our slide presentation.

And while metals recycling and steel manufacturing represent the foundation of our business. We are not the company we were essentially a go.

Our reach now extends far beyond what the name ships or steel implied.

And it's important for us to clearly communicate our role in the circular economy and the value we deliver in the communities in which we operate.

And while our name is changing our commitment to our core values of safety sustainability and integrity remains steadfast and those S. S. I initials will continue to serve as a reminder of our historic legacy.

Michael Bennett: Now, let me turn the call over to Tamra Lungren, our chairman and chief executive officer. She will host the call today with Stephanie Goodjini, our chief financial officer. Thank you, Michael.

Tamara Lundgren: Good morning, everyone, and welcome to our fiscal 23-fourth quarter earnings call. On our call this morning, I'll discuss our recent rebranding, review our quarterly and full-year financial results, the trans-affecting our business, and project on the strategic activities we have underway to address industry dynamics and create long-term value through the cycle. Stephanie will then provide more detail on our financial performance, our capital investments, and our capital structure. I'll wrap up and then we'll take your questions.

So, let's turn now to slide five to review our fourth quarter highlights.

Earlier this morning, we announced our fourth quarter results, which reflected adjusted EPS of <unk> 47.

And adjusted EBITDA of $49 million, which included material insurance recoveries.

Our underlying performance reflected market conditions for recycled metals, which significantly weakened during the quarter on lower global steel demand sequentially average net selling prices for recycled metals decreased which in combination with a further tightening of supply flows over the summer.

Tamara Lundgren: Before we begin our review, I'd like to recognize our team for their unwavering commitment to safety. The health and safety of our employees and all who work at and visit our sites paramount. In fiscal 23, almost 90% of our facilities were free of any lost time injuries. While we still have work to do, our team is dedicated to continuing their progress in identifying and addressing potential hazards before they become injuries to ensure a safe working environment for everyone. So let's turn now to slide four to get started.

Led to significant metal spread compression in the quarter, lower ferrous and nonferrous sales volumes and an adverse impact from average inventory accounting. These effects were substantially offset by the recognition of insurance recoveries.

We generated strong operating cash flow and used free cash flow of over $100 million to reduce debt. We also continued our uninterrupted record of returning capital to our shareholders through the issuance of our 118th consecutive quarterly dividend.

Tamara Lundgren: In July, we announced the launch of our new corporate name and logo, Radius Recycling. This is an exciting new step in our company's history. Over the last 118 years, we've operated under many names from our humble beginnings in 1906 through over 50 acquisitions. Today, we operate in more than 100 communities across North America, employing over 3,300 talented individuals. The rising demand for ferris and non-ferris metals continues to propel our company forward.

Let's turn now to slide six to review our fiscal 'twenty three highlights.

I am proud of the performance our team achieved in fiscal 'twenty three.

During the year characterized by weaker market conditions, our focus on our strategic initiatives delivered positive benefits are.

Nonferrous sales volumes increased by seven 5% year over year, reflecting initial contributions from our investments in advanced metal recovery technologies.

Tamara Lundgren: The name, Radius Recycling, reflects our company's global leadership in metals recycling, and conveys our work, our purpose, and our vision for a sustainable future. Like the radius of a circle, our work sits at the center of the circular economy, seamlessly connecting all points towards a low carbon future. And while metals recycling and steel manufacturing represent the foundation of our business, we are not the company we were a century ago. Our reach now extends far beyond what the name Schitzer Steel implied, and it's important for us to clearly communicate our role in the circular economy, and the value we deliver in the communities in which we operate. And while our name is changing, our commitment to our core values of safety, sustainability, and integrity remains steadfast, and those SSI initials will continue to serve as a reminder of our historic legacy.

In addition, we expanded our platform and services last November we acquired scrap source and asset light business that significantly scales, our national sourcing platform and enhances our recycling services offerings, both of which are now integrated under our trademark <unk> brand.

Our three PR services help our customers to increase their recycling rates reduce material going to landfill improve their carbon footprint and enhance their sustainability reporting.

During the fiscal year, we also successfully implemented $60 million in annual productivity initiatives focused on production cost reductions operating efficiencies and SG&A savings. These initiatives helped to mitigate inflationary and other cost pressures in fiscal 'twenty three we achieved full.

So your operating cash flows of $139 million, demonstrating our consistent ability to generate cash flow through the cycle. Our free cash flow was also positive for the year.

Tamara Lundgren: So let's turn now to slide five to review our fourth quarter highlights. Earlier this morning, we announced our fourth quarter results which reflected adjusted EPS of 47 cents, and adjusted EBITDA of $49 million, which included material insurance recoveries. Our underlying performance reflected market conditions for recycled metals, which significantly weakened during the quarter on lower global steel demand.

And last I am delighted to share that our company for the third consecutive year earn a great place to work certification. This certification recognizes companies that value employee credibility Trust respect pride and camaraderie.

And as a testament to the positive experiences of our employees and our strong workplace culture, we have built together let's.

Tamara Lundgren: Sequentially, average net selling prices for recycled metals decreased, which in combination with the further tightening of supply flows over the summer led to significant metal spread compression in the quarter, lower ferrous and non-ferrous cell volumes, and an adverse impact from average inventory accounting. These effects were substantially offset by the recognition of insurance recoveries. We generated strong operating cash flow and used free cash flow of over $100 million to reduce debt.

Let's turn now to slide seven for a review of market conditions.

One of the most significant drivers of change to our operating margins during fiscal 'twenty three including the fourth quarter has been the reduced supply of recycled scrap metal as the U S. Economy flows our markets are experiencing a tightening in the availability of end of life automobiles.

Absolutely white goods as scrap from reduced manufacturing activity and construction and demolition projects. These constrained supply conditions have pressured purchase costs for raw materials, leading to margin compression.

Tamara Lundgren: We also continued our uninterrupted record of returning capital to our shareholders through the issuance of our 118th consecutive quarterly dividend. Let's turn now to slide six to review our fiscal 23 highlights. I'm proud of the performance our team achieved in fiscal 23. During a year characterized by weaker market conditions, our focus on our strategic initiatives delivered positive benefits. Our non-ferrous sales volumes increased by 7.5 percent year-over-year, reflecting initial contributions from our investments in advanced metal recovery technologies.

As the charts on this slide demonstrate.

U S. PMI has dropped below pre COVID-19 levels. The availability of end of life vehicles has also decreased as the average age of vehicles on the road has reached its highest level on record.

Lower durable goods orders along with increased scrap collection cost have also contributed to tighter scrap flows by focusing on what we can control.

Including customer service technology and platform expansion, our nonferrous volumes increased by over 7% in fiscal 'twenty, three and we were able to limit our ferrous sales volume declined to about 5% and unlike previous periods with similar market conditions, we expect the long term structural.

Tamara Lundgren: In addition, we expanded our platform and services. Last November, we acquired scrap source, an asset light business that significantly scales our national sourcing platform, and enhances our recycling services offerings, both of which are now integrated under our trademark 3PR brand. Our 3PR services help our customers to increase their recycling rates, reduce material going to landfill, improve their carbon footprint, and enhance their sustainability reporting. During the fiscal year, we also successfully implemented $60 million in annual productivity initiatives focused on production, cost production, operating efficiencies, and S3NA savings.

<unk> related to the carbonization to provide further upside when the market strengthens.

Turn now to slide eight to review market prices in more detail.

As the chart in the upper left corner of this slide indicates ferrous export prices soften during the quarter due to slowing global economy, and corresponding weaker global steel demand.

Chinese steel exports have also increased meaningfully over the last 12 months since their domestic demand, especially for construction activities has fallen Chinese exports have reached their highest levels since fiscal 2016 and are leading to slower global steel production ex China.

Tamara Lundgren: These initiatives helped to mitigate inflationary and other cost pressures. In fiscal 23, we achieved full-year operating cash flows of $139 million, demonstrating our consistent ability to generate cash flow through the cycle. Our free cash flow was also positive for the year.

In the U S ferrous market prices fell by 15% during the quarter as steel mill utilization rates fell and uncertainty regarding the UAW strike has led to some destocking.

Turning to nonferrous as the chart in the top right corner of this slide shows during Q4 base metal prices were mixed with copper improving due to low global inventories.

Tamara Lundgren: And last, I'm delighted to share that our company, for the third consecutive year, earned a great place to work certification. This certification recognizes companies that value employee credibility, trust, respect, pride, and camaraderie, and is a testament to the positive experiences of our employees and the strong workplace culture we have built together.

Aluminum falling on weaker Chinese domestic demand and lower energy prices.

Turning to finished steel while we are seeing a bit of softening due to the level of interest rates and tighter credit conditions, we expect to see increased activity in 2024 and beyond related to the U S infrastructure bills.

Tamara Lundgren: Let's turn now to slide seven for a review of market conditions. One of the most significant drivers of change to our operating margins during fiscal 23, including the fourth quarter, has been the reduced supply of recycled scrap metals. As the U.S, economy flows, our markets are experiencing a tightening in the availability of end-of-life automobiles, obsolete white goods, and scrap from reduced manufacturing activity and construction and demolition projects. These constrained supply conditions have pressured purchase costs for raw materials, leading to margin compression.

While activity supported by these bills has been very limited thus far.

Data tracking shows that the pipeline of projects in the pre design and design phases is growing.

Our Oregon steel mill with its range of low carbon long product is very well positioned to meet this expected demand for example last month, Oregon passed a bill requiring the Oregon Department of transportation and administrative services to prioritize domestically manufactured iron and steel.

Tamara Lundgren: As the charts on this slide demonstrate, U.S. PMI has dropped below pre-COVID levels. The availability of end-of-life vehicles has also decreased as the average age of vehicles on the road has reached its highest level on record. Lower durable goods orders, along with increased scrap collection costs, have also contributed to tighter scrap flows.

In public works and public improvement transportation and vertical construction projects.

The Bill complements Oregon's previously enacted by clean law aimed at procuring low carbon construction materials like art net zero carbon emission green steel products.

Let's turn now to slide nine to review the longer term outlook for recycled metals.

Tamara Lundgren: By focusing on what we can control, including customer service, technology, and platform expansion, our non-ferrous volumes increased by over 7% in fiscal 23, and we were able to limit our ferrous sales volume decline to about 5%. And unlike previous periods with similar market conditions, we expect the long-term structural benefits related to decarbonization to provide further upside when the market strengthens.

As we've emphasized during previous earnings calls de Carbonization is a powerful driver of demand for recycled metals, which required less carbon to produced in mind metals. As you can see from the chart in the top left corner of this slide many low carbon technologies are widely acknowledged to be more metal intensive than the technologies they are replacing.

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As a result, the long term demand for recycled metals remains very positive and is further supported by the anticipated structural deficits for metals, such as copper and nickel and the increased demand for manufacturers to maximize their use of recycled materials and reduce the environmental impact of their activities.

Tamara Lundgren: Let's turn now to slide 8 to review market prices in more detail. As the chart in the upper left corner of this slide indicates, Ferris' export prices is softened during the quarter due to slow and global economy and corresponding weaker global steel demand. Chinese steel exports have also increased meaningfully over the last 12 months as their domestic demand, especially for construction activities, has fallen. Chinese exports have reached their highest levels since fiscal 2016, and are leading to slower global steel production, ex-China.

And as you can see in the two charts on the bottom of this slide the use of ferrous scrap in the steelmaking.

<unk> is also expected to continue to grow in the coming years as electric arc furnace steelmaking capacity, which uses scrap ferrous scrap as its primary raw material has been expanding and is projected to increase further.

Let's turn now to slide 10 for an update on our strategic priorities.

Tamara Lundgren: In the U.S., Ferris market prices fell by 15% during the quarter as steel mill utilization rates fell, and uncertainty regarding the UAW strike has led to some destocking. Turning to non-ferrous, as the chart in the top right corner of this slide shows, during Q4, base metal prices were mixed, with copper improving due to low global inventories, and aluminum falling on weaker Chinese domestic demand and lower energy prices. Turning to finished steel, while we are seeing a bit of softening due to the level of interest rates and tighter credit conditions, we expect to see increased activity in 2024 and beyond related to the U.S, infrastructure bills.

In an economic environment characterized by market volatility and inflationary pressures, we continue to be focused on managing the things within our control our strategic priorities are directly aligned with the long term trends of de carbonization and the corresponding need for more recycled metals and can be summarized as follows first.

Technology investments in advanced metal recovery systems at our major recycling operations as Stefano will describe in more detail 11 of the 13, new systems are now operational or in commissioning.

<unk> volume growth.

Even in the current challenging market conditions, we remain highly focused on increasing our ferrous and nonferrous volumes.

Tamara Lundgren: While activity supported by these bills has been very limited thus far, data tracking shows that the pipeline of projects in the pre-design and design phases is growing. Our Oregon steel mill, with its range of low carbon-long products, is very well positioned to meet the suspected demand. For example, last month Oregon passed a bill requiring the Oregon departments of transportation and administrative services to prioritize domestically manufactured iron and steel in public orks and public improvement transportation and vertical construction projects.

Third expansion of our products and services to meet the increasing demand for recycled metals, we continue to focus on providing products and services that meet this demand such as our green steel products and our <unk> services.

And for productivity initiatives that we undertake as part of our continuous improvement culture in.

In fiscal 'twenty, three we achieved the full run rate of benefits from the productivity initiatives that we announced earlier in this fiscal year for fiscal 'twenty four we have launched a new $30 million productivity improvement program.

Tamara Lundgren: The bill compliments Oregon previously enacted by clean law aimed at procuring low carbon construction materials like art net zero carbon emission green steel products.

Before turning it over to Stefano, it's worth noting that while the weaker environment that we're in today presents challenges, we have experienced cyclical downturns and volatility before and have demonstrated our ability to navigate effectively through these periods.

Tamara Lundgren: Let's turn out to slide 9 to review the longer term outlook for recycled metals. As we have emphasized during previous earnings calls, decarbonization is a powerful driver of demand for recycled metals, which require less carbon to produce than mine metals. As you can see from the chart in the top left corner of this slide, many low carbon technologies are widely acknowledged to be more metal intensive than the technologies they are replacing.

Tamara Lundgren: As a result, the long-term demand for recycled metals remains very positive and is further supported by the anticipated structural deficits for metals such as copper and nickel and the increased demand for manufacturers to maximize their use of recycled materials and reduce the environmental impact of their activities. And as you can see in the two charts on the bottom of this slide, the use of ferrous scrap in the steel making process is also expected to continue to grow in the coming years as electric arc furnace steel making capacity, which uses scrap ferrous scrap as its primary raw material has been expanding and is projected to increase further.

We have a strong track record of delivering positive through the cycle operating cash flows and have a flexible balance sheet equally.

As important we benefit from an operating platform, where the majority of our costs are variable and we have multiple levers available to us to manage through this period of slowing economic activity and tighter supply flows.

These market conditions won't last forever, and we are well positioned to benefit from the expected increased demand for recycled metals associated with de carbonization and low carbon technologies.

So now let me turn it over to Stefano.

Sure.

Thank you Tamara and good morning.

The review of our consolidated results and provide an update on our ferrous sales and the market dynamics adjusted.

Adjusted EBITDA in the fourth quarter was $49 million.

Or $44 per ton.

Average ferrous and nonferrous net selling prices were lower sequentially by 14% and 7% respectively.

Tamara Lundgren: Let's turn now to slide 10 for an update on our strategic priorities. In an economic environment characterized by market volatility and inflationary pressures, we continue to be focused on managing the things within our control.

In addition to lower prices metal spread compression was exacerbated by the further tightening of scrap flows since June which affected our ability to adjust crop purchase prices to reflect the decline in selling prices in the quarter.

Tamara Lundgren: Our strategic priorities are directly aligned with the long-term trends of decarbonization and the corresponding need for more recycled metals and can be summarized as follows. First, technology investments in advanced metal recovery systems that are major recycling operations, as Stefano will describe in more detail, 11 of the 13 new systems are now operational or in commissioning. Second, volume growth, even in the current challenging market conditions, we remain highly focused on increasing our ferrous and non-ferrous volumes.

Lower than expected scrap generation also led to a sequential decline of ferrous sales volumes of 4% and a loss of operating leverage.

The lower price environment led to a detriment from average inventory accounting of $5 million or $5 per ton.

Finished steel sales volumes were 7% higher sequentially benefiting from seasonality, which substantially offset the impact of lower finished steel net selling prices.

Our fourth quarter results included the recognition of insurance recoveries of $41 million.

Tamara Lundgren: Third, expansion of our products and services to meet the increasing demand for recycled metals. We continue to focus on providing products and services that meet this demand, such as our green steel products and our 3PR services. And fourth, productivity initiatives that we undertake as part of our continuous improvement goals, in fiscal 23, we achieved the full run rate of benefits from the productivity initiatives that we announced earlier in this fiscal year.

Representing final settlement with our insurers during the quarter for losses, resulting from the fire at our steel mill in fiscal 'twenty, one as well as recoveries related to the shredder outage at our <unk> facility last year.

As a reminder, we experienced the financial impact from the operational disruptions associated with these events in the last couple of years, including earlier in our fiscal 'twenty. Three we did not exclude that impact from our adjusted EBITDA and consistent with that approach, we do not adjust out the insurance recoveries. When they are recognized in our income statement.

Tamara Lundgren: For fiscal 24, we have launched a new $30 million productivity improvement program. Before turning it over to Stefano, it's worth noting that while the weaker environment that we are in today presents challenges, we have experienced cyclical downturns and volatility before and have demonstrated our ability to navigate effectively through these periods. We have a strong track record of delivering positive through the cycle operating cash flows and have a flexible balance sheet. Equally as important, we benefit from an operating platform where the majority of our costs are variable, and we have multiple lovers available to us to manage through this period of slowing economic activity and tighter supply flows. These market conditions won't last forever, and we are well positioned to benefit from the expected increased demand for recycled metals associated with decarbonization and low carbon technologies.

Finding ways to mitigate increases and operating costs, resulting from inflation remains a priority.

As Tom mentioned today, we are announcing additional productivity initiatives for fiscal 'twenty, four targets and benefits of $30 million on an annual basis.

These initiatives are focused primarily on further production cost reductions operating efficiencies logistics procurement savings and yield improvements.

We have already started implementing these measures, which aim to not only mitigate inflationary pressure on operating costs, but also offset the loss of operating leverage due to the lower volumes. We are seeing in the current environment.

In the fourth quarter, we recognized noncash impairment charges of $45 million, primarily related to goodwill associated with one of the company's reporting units as part of the annual set required by the accounting standards. These noncash charges, our adjusted out of our non-GAAP financial measures.

Stefano Gaggini: So now, let me turn it over to Stefano. Thank you, Tamara, and good morning. I'll start the review of our concentrated results and provide an update on our ferrous sales and the market dynamics. Adjusted EB-9, the fourth quarter, was $49 million, or $44 per ferrous ton. Average ferrous and non-ferrous net selling prices were lower sequentially by 14% and 7% respectively. In addition to lower prices, metal spread compression was exacerbated by the further tightening of scrub flows in June, which affected our ability to adjust scrub purchase prices to reflect the decline in selling prices in the quarter.

Turning to other federal dynamics in the quarter.

Share of domestic ferrous shipments was 48% our top sales destination for ferrous exports, where Bangladesh, Turkey and India.

Now, let's move to slide 12 for an update on nonferrous sales and the market dynamics.

Average net selling prices for copper aluminum and other nonferrous products were down 7% sequentially, reflecting the decline in market prices since the spring.

Lower generation of non ferrous scrap also contributed to margin pressure.

Prices of PGM metals continued to decline significantly with average net selling prices down 19% sequentially and almost 50% from a year ago in <unk>.

Stefano Gaggini: Slower than expected scrub generation also led to a sequential decline of ferrous sales volumes of 4% and a loss of operating leverage. The lower price environment led to a detriment from average inventory accounting of $5 million, or $5 per ferrous ton. Finish steel sales volumes were 7% higher sequentially, benefiting from seasonality, which substantially offset the impact of lower finished steel net selling prices.

Factored by lower demand from the U S and global auto industry.

Nonferrous sales volumes remained at similar levels sequentially.

We sold our nonferrous products to 12 countries with a major export destinations being India, Malaysia and China.

Our product mix is highly diversified with sales of products to recover from shredding operations, reaching around half of total nonferrous volumes.

Stefano Gaggini: Our fourth quarter results included the recognition of insurance recoveries of $41 million, representing final settlement with our insurers during the quarter for losses resulting from the fire at our steel mill in fiscal 21, as well as recoveries related to the shredder outage at our Everett facility last year. As a reminder, we experienced the financial impact from the operational disruptions associated with these events in the last couple of years, including earlier in our fiscal 23.

Now, let's move to slide 13, we provide an update on our technology investments.

We continue the deployment of our technology program focused on increasing metal recovery of non ferrous materials generating more furnace ready higher value products and creating product optionality.

We expect the remaining capital expenditures to complete these investments to be less than $5 million.

Stefano Gaggini: We did not exclude that impact from our adjusted EBITDA and consistent with that approach, we do not adjust out insurance recoveries when they are recognized in our income statement. Finding ways to mitigate increases in operating costs resulting from inflation remains a priority.

Once fully operational we expect these technologies to increase non ferrous volumes to recover from shredding operations by at least 20%.

As shown in the slide our initiative comprises 13 systems in total.

Sixth our advanced separation systems, all of which are now operational.

Stefano Gaggini: As Tamara mentioned, today we are announcing additional productivity initiatives for fiscal 24 targeting benefits of $30 million on an annual basis. These initiatives are focused primarily on further production cost operating efficiencies logistics procurement savings and yield improve. We have already started implementing these measures which aim to not only mitigate inflation or the pressure on operating costs, but also offset the loss of operating leverage due to the lower volumes we are seeing in the current environment.

We're also implementing seven primary nonferrous systems for the recovery of aluminium and copper, which are the main drivers of the projected increase in recovery volumes and incremental profitability during.

During the quarter, we began commissioning on the west coast of one of his primary recovery systems, bringing to five the number of deals that are either operational or in <unk> stages of commissioning and ramp up there remains two major copper recovery systems to construct on the west coast to complete our program one of these systems continues.

Stefano Gaggini: In the fourth quarter, we recognize non-cash impairment charges of $45 million, primarily related to goodwill associated with one of the company's reporting units as part of the annual test required by the accounting standards. These non-cash charges are adjusted out of our non-gap financial measures. Turning to other ferrous dynamics in the quarter, the share of domestic ferrous shipments was 48%, our top sales destinations for ferrous exports were Bangladesh, Turkey and India.

Huawei permitting approval with construction on the order now projected to start by around the end of the calendar year.

As a result, we now target to start of commission of the two remaining systems by the spring of 2024.

The contribution to performance from these technologies in the fourth quarter was positive.

Lower in the third quarter, which had benefited from particularly supportive pricing for the nonferrous products could generate.

The current weaker market conditions, including a significant compression of the historical price premium between the higher grade twitched aluminum product in Zorba all the way on the contribution from these systems now.

Stefano Gaggini: Now, let's move to slide 12 for an update on non-ferrous sales and the market dynamics. Average net selling prices for copper, aluminum and other non-ferrous products were down 7% sequentially, reflecting the decline in market prices since the spring. Lower generation of non-ferrous crop also contributed to margin pressure.

Now, let's move to slide 14 to discuss our steel mill performance.

Demand for finished steel in the fourth quarter in our Western U S markets remained steady and reflected the lift from summer seasonality on construction activity.

Stefano Gaggini: Prices of PGM metals continued to decline significantly, with average net selling prices down 19% sequentially and almost 50% from a year ago, impacted by lower demand from the US and global auto industry. Non-ferrous sales volumes remained at similar levels sequentially. We sold our non-ferrous products to 12 countries, with the major export destinations being India, Malaysia and China. Our product mix is highly diversified, with sales of products recovered from trading operations reaching around half of total non-ferrous volumes.

<unk> steel sales volumes reached 152000 tons up 7% sequentially.

Our mill operations reached full utilization significantly higher than the U S average of 77% for the period.

Average net selling prices for finished steel decreased 7% sequentially driven by lower raw material inputs and pressure from imports.

Although down slightly sequentially metal spreads at our mill remain healthy political comparison.

As Dominic mentioned, we believe our mill stands to benefit from the expected demand created by the U S infrastructure Bill.

Stefano Gaggini: Now, let's move to slide 13 to provide an update on our technology investments. We continue the deployment of our technology program focused on increasing metal recovery of non-ferrous material, generating more furnace-ready higher-value products and creating product optionality. We expect remaining capital expenditures to complete these investments to be less than $5 million. Once fully operational, we expect these technologies to increase non-ferrous volumes recovered from shredding of operations by at least 20%. As shown in the slide, our initiative comprises 13 systems in total.

Now, let's move to slide 15, and discuss cash flow capital structure and our outlook for the first quarter.

Operating cash flow in the fourth quarter was strongly positive at $135 million, driven by EBITDA profitability and benefits to working capital, including from the lower commodity price environment and collections from several bulk shipments that had been delayed at the end of the prior quarter.

Benefiting from the strong cash flow generation, our net debt ended the quarter at $243 million.

A reduction of more than $100 million sequentially.

Stefano Gaggini: Of these, six are advanced separation systems, all of which are now operational. We are also implementing seven primary non-ferrous systems for the recovery of aluminum and copper, which are the main drivers of the projected increase in recovery volumes and incremental profitability. During the quarter, we began commissioning on the west coast of one of these primary recovery systems, bringing to five the number of those that are either operational or in value stages of commissioning and rampant.

Availability under our credit facility remains sizable with a borrowing capacity of $800 million.

And a maturity of August 2027.

Net leverage was 21% of quarter end and the ratio of net debt to adjusted EBITDA was $1 seven X.

We also returned capital to shareholders through our quarterly dividend.

During the quarter, we entered into interest rate swaps to fix the rate on a portion of our floating rate credit facility.

Swaps are a three year duration and a notional amount of $150 million.

Execution of these contracts provide us with more interest rate certainty, while also benefiting from the inverted yield curve.

Capex spend in the fourth quarter was $28 million.

Stefano Gaggini: The contribution to performance from these technologies in the fourth quarter was positive, but lower than the third quarter, which had benefited from particularly supportive pricing for the non-ferrous products to generate.

For the full fiscal 'twenty, three capex was $118 million net of insurance reimbursements, primarily associated with the repair of the shredder enclosure building at our <unk> facility.

Stefano Gaggini: The current weaker market condition, including a significant compression of the historical price premium between the higher-grade Twitch aluminum product and Zorba, all the way on the contribution from these systems. Now let's move to slide 14 to discuss our steel mill performance. Demand for finished steel in the fourth quarter in our Western US markets remains steady and reflected the lift from summer seasonality on construction activity. Finished steel sales volumes reached 152,000 tons up 7% sequentially.

Looking ahead, we currently project our fiscal 'twenty, four capex investments to be lower compared to the past year at approximately $100 million.

Approximately 25% of the anticipated spend will be for growth projects, including the completion of our nonferrous technology initiatives and investments to support recycling services expansion.

The remaining capex would be for maintaining the business and environmental related capital projects.

Our effective tax rate on fourth quarter adjusted results was 32% and 31%.

Stefano Gaggini: Our mill operations reached full utilization significantly higher than the US average of 77% for the period. Average net selling prices for finished steel decreased 7% sequentially, driven by lower raw material inputs and pressure from imports. Although down slightly sequentially, metal spreads at our mill remain healthy in historical comparison. As Tamara mentioned, we believe our mill stands to benefit from the expected demand created by the US infrastructure bills.

Fiscal 'twenty three.

For fiscal 'twenty, four we expect the tax rate to be in the range of 25%, but reflect some quarter to quarter variability, including in our first quarter of fiscal 'twenty four when the rate is projected to be lower at around 15% subject to company performance.

While we are just over halfway through the quarter I'll now turn to our outlook for the first quarter of fiscal 'twenty, four which is based on information and market conditions. We have today that may be subject to significant volatility due to geopolitical uncertainties.

Stefano Gaggini: Now let's move to slide 15 and discuss cash flow, capital structure and our outlook for the first quarter. Operating cash flow in the fourth quarter was strongly positive at 135 million dollars driven by EBDA profitability and benefits to working capital, including from the lower commodity price environment and collections from several ferrous bulk shipments that have been delayed at the end of the prior quarter. Benefitting from the strong cash flow generation, our net debt ended the quarter at $243 million.

We expect our consolidated adjusted EBITDA per ton to remain approximately flat compared to the fourth quarter when excluding the insurance recoveries.

In the lower price environment, we project, a modest detriment from average inventory accounting in the quarter.

We expect our ferrous sales volumes to be approximately flat sequentially.

Our non ferrous volumes are projected to be up 10% year over year, reflecting benefits of our strategic non ferrous recovery investments and expansion of our platform.

Stefano Gaggini: A reduction of more than $100 million sequentially. Availability under our credit facility remains sizable with a borrowing capacity of $800 million and a maturity of August 2027. Net leverage was 21% at quarter end and the ratio of net debt to adjusted EBDA was 1.7X.

We expect the contribution from our steel mill to remain healthy, but declined sequentially, reflecting a 10% to 15% decrease in sales volume due to normal seasonality along with the impact of lower average finished steel prices.

We expect the initial benefits from the implementation of our new fiscal 'twenty for productivity initiative program to more than offset the impact of inflation and loss of operating leverage due to lower volumes in the quarter.

Stefano Gaggini: We also return capital to shareholders to our quarterly dividend. During the quarter, we enter into interest rate swaps to fix the rate on a portion of floating rate credit facility. The swaps have a three-year duration and a national amount of $150 million. Execution of this contract provides us with more interest rate certainty while all the benefitting from the inverted yield curve.

We expect our operating cash flow in the first quarter to reflect the seasonal detriment from working capital.

For full fiscal year 'twenty four we aim to continue our trend of generating positive operating cash flow through the cycle.

And with that I'll turn the call back over to Tamara.

Stefano Gaggini: CapExpend in the fourth quarter was $28 million. For full fiscal 23, CapEx was $118 million. Net of insurance reimbursement primarily associated with the repair of the shredder enclosure building at our Everett facility.

Thank you Stefano as we conclude our remarks today I'd like to thank our employees once again for their resilience and dedication to working safely while continuously serving our customers and communities supporting our suppliers and demonstrating the critical and essential role of our business and industry and the economy.

Stefano Gaggini: Looking ahead, we currently project our fiscal 24 CapExpend to be lower compared to the past year at approximately $100 million. Approximately 25% of the anticipated spend will be for growth projects, including the completion of our non-ferrous technology initiatives and investments to support recycling services expansion. To remain in CapExp, we'll be for maintaining the business and environmental related capital projects.

Enemy.

You have demonstrated once again why we have continued to be a leader in the recycling industry for over a century.

And I look forward to the next steps in our company's history as radius recycling.

And now Olivia, let's open the call for questions.

Certainly ladies and gentlemen to ask a question you will need to press star one on your telephone and wait.

Stefano Gaggini: Our effective tax rate on fourth quarter adjusted results was 32% and 31% for full fiscal 2020. For fiscal 24, we expect the tax rate to be in the range of 25%, but reflect some quarter-to-corter variability, including in our first quarter of fiscal 24, when the rate is projected to be lower at around 15%, subject to company performance.

To be announced to withdraw your question you May press Star one again.

Please standby, while we compile the Q&A roster.

And we have a question coming from the line of Sam will Mckinney from Keybanc. Your line is open.

Hi, good morning, good morning.

Morning.

As you mentioned scrap supply supply flows were tight in the summer quarter now that we are headed into the winter is it safe to say that there are some more availability for both.

Stefano Gaggini: While we are just over halfway through the quarter, I'll now turn to our outlook for the first quarter of fiscal 24, which is based on information and market conditions we have today that may be subject to significant volatility due to geopolitical uncertainties. We expect our contrudited adjusted EBDA after ferris tonne to remain approximately flat compared to the fourth quarter when excluding the insurance recoveries. In the lower price environment, we project a modest settlement from average inventory accounting in the quarter.

<unk> flows and spreads to fall into what are you seeing just in general from your peddlers.

Well what.

What is really driving.

The continued tight.

Apply of scrap.

A couple of things lower.

Lower manufacturing activity lower construction and demolition activity.

And just the slowing economy generally combined are just higher collection costs for scrap as as inflation pressures have hit suppliers and interest rates are obviously higher than they've been in the past so so.

Stefano Gaggini: We expect our ferris sales volumes to be approximately flat sequentially. Our non-ferris volumes are projected to be up 10% year-over-year, reflecting benefits of our strategic non-ferris recovery investments and expansion of our platform. We expect a contribution from our steel mill to remain healthy but decline sequentially, reflecting a 10% to 15% decrease in sales volumes due to normal seasonality, along with the impact of lower average-finished steel prices. We expect the initial benefits from the implementation of our new fiscal 24 productivity initiative program to more than offset the impact of inflation and loss of operating leverage due to lower volumes in the quarter. Finally, we expect our operating cash flow in the first quarter to reflect a seasonal detriment from working capital.

So we are projecting a continuation of these tighter supply conditions until we start to see some changes in the economy and the things that we're looking for.

Is increased PMI I E increased manufacturing activity.

Resolution of the UAW strike, which will should resolve both ferrous and or should help to to improve both ferrous and nonferrous supply flows clear.

Clearly.

Stabilization and in ferrous ferrous prices and non ferrous prices for that matter.

Stefano Gaggini: For full fiscal year 24, we aim to continue our trend of generating positive operating cash flow through the cycle.

I think will help supply flows as well and obviously helped.

Tamara Lundgren: And with that, I'll turn the call back over to Tamara. Thank you, Stefano.

<unk> compression and then lastly in 'twenty four we are expecting to see a higher flow of higher pace of funds coming through from the U S infrastructure Bill.

Tamara Lundgren: As we conclude our remarks today, I'd like to thank our employees once again for their resilience and dedication to working safely while continuously serving our customers and communities, supporting our suppliers, and demonstrating the critical and essential role of our business and industry in the economy. You have demonstrated once again why we have continued to be a leader in the recycling industry for over a century.

Okay. Thank you Tamara is very helpful.

And then moving to ferrous domestic and export volumes sequentially decreased by a pretty similar percentage in the fourth quarter, given the guidance Stefano Gabe for the first quarter of 'twenty for any sort of divergence expected between domestic and export volumes in the first quarter.

Tamara Lundgren: And I look forward to the next steps in our company's history as radius recycling.

Operator: And now, Olivia, let's open the call for questions.

Operator: Stanley, ladies and gentlemen, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, you may press star 11 again.

I think that as Stefano Yes go ahead Stephanie.

Yes.

Just from an Alco perspective at this point, we don't expect that divergence to be to be a factor as we look at our Q1.

Operator: Please send by while the company can erupts there.

Ron outlook, obviously Domino mentioned via the <unk>.

Samuel Mckinney: And we have a question coming from the line of Samuel McKinney from Keybank, you let us open.

W strike that could be a factor that could that could be helpful. On the domestic side at this point there is still uncertainty regarding that.

Tamara Lundgren: Hi, good morning. Good morning. As you mentioned, you know, scrap supply flows were tight in the summer quarter. Now that we are headed into the winter, is it safe to say that there's some more availability for both scrap flows and spreads to fall? And what do you see just in general from your peddlers? Well, what is really driving the continued tight supply of scrap are a couple of things. Lower manufacturing activity, lower construction and demolition activity, and just the slowing economy generally.

Tamara Lundgren: Combined are just higher collection costs for scrap as inflation pressures have hit suppliers and interest rates are obviously higher than they've been in the past. So we are projecting a continuation of these tighter supply conditions until we start to see some changes in the economy and the things that we're looking for is increased PMI, i.e, increased manufacturing activity, resolution of the UAW strike, which should resolve both ferris and or should help to improve both ferris and non-ferris supply flows.

Understood.

Then lastly for me on the Nonferrous side Tamara touched on it during the call, but you all did a solid job during this quarter on the nonferrous volume side moving into next year can you talk through some of the various pricing headwinds that you might face in that space I know, there's a lot of moving parts, there and what can be done to perhaps mitigate some of those.

Impacts, including the cost reduction initiative, you announced today.

Sure let me let.

And then and then Stefano why don't you add some specifics.

At a high level.

It's the same it's the same dynamics that we are speaking about before which is manufacturing activity.

As well as the.

The UAW strike has really.

Impacted in nonferrous production as well so we see some we expect that that will resolve over time and so both flows and prices should stabilize and get back on that positive trend of.

Of meeting this higher demand due to.

The transition to low carbon technologies, whether it's electric vehicles or solar or.

Or when for example, all of these low carbon technologies require more metals, and particularly more nonferrous metals.

Tamara Lundgren: Clearly, stabilization in Ferris prices and non-ferris prices for that matter, I think will help supply flows as well and obviously help margin compression. And then lastly, in 24, we are expecting to see a higher flow, a higher pace of funds coming through from the U.S, infrastructure bills.

The technologies that they're replacing.

So we're really looking for those economic trends to come to come through and those funds from the U S infrastructure bills to start to flow in 'twenty four.

Stefano.

Yes, and then Sam.

From what we can control obviously, we have talked about.

Being excited about having made progress on our deployment of advanced non ferrous recovery technologies that we want to do.

Stefano Gaggini: Okay, thank you, Tamara, it's very helpful. And then moving to Ferris, domestic and export volumes sequentially decreased by a pretty similar percentage in the fourth quarter, given the guidance that Stefano gave for the first quarter of 24, any sort of divergence expected between domestic and export volumes in the first quarter? I think that is Stefano.

<unk> benefits from non ferrous recovered from trading operations.

And so we provided that and we should see.

The run rate of those increases as we go into FY 'twenty for us, but our comments and then with respect to your questions on productivity initiatives.

Today, we announce.

For mental initiative program targeting benefits of $30 million on an annual basis.

Stefano Gaggini: Go ahead, Stefano. Yeah, just from an outward perspective, at this point, we don't expect that divergence to be a factor as we look at our Q1, our Q1 outlook. Obviously, Tamara mentioned the UAW strike, there could be a factor that could be helpful under domestic side, at this point, there is still uncertainty regarding that.

We have a process to track these initiatives based on Kpis and other data points to support the achievement and two we are confident we will be able to gain benefits from that we have already started implementing these measures in our first quarter.

And we expect to realize an initial benefit from them in the quarter in the range of probably half of the of the quarterly run rate implied in that $30 million annual annual number.

Tamara Lundgren: Understood. And then lastly, for me, on the non-ferris side, Tamara touched on it during the call that you all did a solid job during this quarter on the non-ferris volumes side. Moving into next year, can you talk through some of the various pricing headwinds that you might face in that space? I know there's a lot of moving parts there and what can be done to perhaps mitigate some of those impacts, including the cost reduction initiative you announced today?

Okay. Thank you that's it for me thanks for the time.

Thank you. Thank you.

Okay.

Thank you and I see no further questions in the queue at this time I'll turn the call back over to Sam Royal London for any closing remarks.

Thank you and thank you everyone for your time today, we look forward to speaking with you again in January when we report our first quarter results and the interim stay safe and stay well.

Tamara Lundgren: So let me start at a high level, and then Stefano, why don't you add some specifics? At a high level, it's the same dynamics that we're speaking about before, which is manufacturing activity, as well as the UAW strike has really impacted non-ferris production. So we expect that that will resolve over time, and so both flows and prices should stabilize and get back on that positive trend of meeting this higher demand due to the transition to low-carbon technologies, whether it's electric vehicles or solar or wind, for example, all of these low-carbon technologies require more metals and particularly more non-ferris metals than the technologies that they're replacing. So we're really looking for these economic trends to come through and those funds from the U.S, infrastructure bills to start to flow in 24.

Ladies and gentlemen that does conclude the conference for today. Thank you for your participation you may now disconnect.

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Stefano Gaggini: Stefano? Yes, and then Sam, from what we can control, obviously we have talked about being excited about having made progress on our deployment of the advanced non-ferris recovery technologies. That's how we want to gain benefits from non-ferris rights, recover from shedding operations, and so we provided that, and we should see the run rate of those increase as we go into FY24 as per our comments.

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Stefano Gaggini: And then we respect your questions on productivity initiatives. So today we announced this incremental initiative program targeting benefits of $30 million on an annual basis. You know, we have a process to track these initiatives based on KPIs and other data points to support the achievement, and to be confident we will be able to gain benefits from that. We have already started implementing these measures in our first quarter, and we expect to realize an initial benefit from them in the quarter, in the range of probably half of the quarterly run rate, that implies in the $30 million annual number.

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Good day, ladies and gentlemen, thank you for attending by welcome to the radius.

Cycling fourth quarter 2023 earnings release call and webcast at this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone you Wilton and automatic message advising Yohan <unk> Suisse.

Please note that today's conference is being recorded.

I'll now hand, the conference over to Yossi goes.

Michael Bennett Investor Relations. Please go ahead.

Thank you Olivia and good morning, I am Michael Bennett, the company's Vice President of Investor Relations.

I am happy to welcome you to radius cleans earnings presentation for the fourth quarter of fiscal 2023.

In addition to today's audio comments, we have issued our press release and posted a set of slides both of which you can access on our website at radius recycling dot com.

Thank you Michael Good morning, everyone and welcome to our fiscal 'twenty three fourth quarter earnings call.

On our call. This morning, I will discuss our recent rebranding will review, our quarterly and full year financial results the trends affecting our business and project on the strategic activities, we have underway to address industry dynamics and create long term value through the cycle.

Stefano will then provide more detail on our financial performance our capital investments at our capital structure I'll wrap up and then we'll take your questions.

Before we begin our review I would like to recognize our team for their unwavering commitment to safety.

Health and safety of our employees and all who work at and visit our sites is Paramount.

In fiscal 'twenty, three almost 90% of our facilities were free of any lost time injuries. While we still have work to do our team is dedicated to continuing their progress in identifying and addressing potential hazards before they become injuries to ensure a safe working environment for everyone.

Stefano Gaggini: Thank you.

So, let's turn now to slide four to get started.

In July we announced the launch of our new corporate name and logo radius recycling. This is an exciting new step in our company's history.

Stefano Gaggini: That's it for me. Thanks for the time. Thank you.

Operator: And I see no further questions in the queue at this time.

The rising demand for ferrous and nonferrous metals continues to propel our company forward the name radius recycling.

Flex our company's global leadership in metals recycling.

And conveys our work our purpose and our vision for a sustainable future like the radius of a circle. Our work sits at the center of the circular economy seamlessly connecting all points towards a low carbon future.

And while metals recycling and steel manufacturing represent the foundation of our business. We are not the company we were essentially ago.

Our reach now extends far beyond what the name ships or steel implied.

And it's important for us to clearly communicate our role in the circular economy and the value we deliver in the communities in which we operate.

Tamara Lundgren: I'll turn the call back over to Tamara Lundgren for any closing remarks. Thank you. And thank you everyone for your time today. We look forward to speaking with you again in January when we report our first quarter results in the interim. Stay safe and stay well.

Operator: Martin Englert, Philip Gibbs, Stefano Gaggini Martin Englert, Martin Englert, Martin Englert, Thank you for standing by.

So, let's turn now to slide five to review our fourth quarter highlights.

Operator: Welcome to the Radius Recycling's 4th quarter 2023 earnings release call and webcast. At this time, all participants are in a listen-only mode. After this biggest presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automatic message advised in your hand at three. Please know that today's conference is being courted.

Earlier this morning, we announced our fourth quarter results, which reflected adjusted EPS of <unk> 47.

And adjusted EBITDA of $49 million, which included material insurance recoveries.

Michael Bennett: I will now hand a conference over to your speakers. Michael Bennett, open best relations. Please go ahead.

In combination with a further tightening of supply flows over the summer led to significant metal spread compression in the quarter, lower ferrous and nonferrous sales volumes and an adverse impact from average inventory accounting. These effects were substantially offset by the recognition of insurance recoveries.

Michael Bennett: Thank you, Olivia, and good morning. I am Michael Bennett, the company's vice president of investor relations.

Michael Bennett: I am happy to welcome you to Radius Recycling's earnings presentation for the 4th quarter of fiscal 2023. In addition to today's audio comments, we've issued our press release and posted a set of slides, both of which you can access on our website at radiusrecycling.com.

Let's turn now to slide six to review our fiscal 'twenty three highlights.

Michael Bennett: Before we start, let me call your attention to the detailed Safe Harbor statement on slide 2, which is also included in our press release and in the company's form 10k, which will be filed later today. As we note on slide 2, we may make board-looking statements on our call today such as our statements about our targets, volume growth, and margins. Our actual results may differ materially from those projected in our four-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the four-looking statement is contained in slide two, as well as our press release of today and our form 10K.

I am proud of the performance our team achieved in fiscal 'twenty three.

During the year characterized by weaker market conditions, our focus on our strategic initiatives delivered positive benefits.

Our nonferrous sales volumes increased by seven 5% year over year, reflecting initial contributions from our investments in advanced metal recovery technologies.

Our three PR services help our customers to increase their recycling rates reduce material going to landfill improve their carbon footprint and enhance their sustainability reporting.

So your operating cash flows of $139 million.

Demonstrating our consistent ability to generate cash flow through the cycle. Our free cash flow was also positive for the year.

And last I am delighted to share that our company for the third consecutive year earn great place towards certification. This certification recognizes companies that value employee credibility Trust respect pride and camaraderie.

Michael Bennett: Please note that we will be discussing some non-gap measures during our presentation today. We have included a reconciliation of those metrics to gap in the appendix to our slide presentation.

And as a testament to the positive experiences of our employees and our strong workplace culture, we have built together.

Tamara Lundgren: Now, let me turn the call over to Tamara Lundgren, our chairman and chief executive officer. She will host the call today with Stefano Gaggini, our chief financial officer. Thank you, Michael.

Let's turn now to slide seven for a review of market conditions.

One of the most significant drivers of change to our operating margins during fiscal 'twenty three including the fourth quarter has been the reduced supply of recycled scrap metals as the U S economy flows our markets are experiencing a tightening in the availability of end of life automobiles.

Absolutely white goods and <unk>.

Scrap from reduced manufacturing activity and construction and demolition projects. These constrained supply conditions have pressured purchase costs for raw materials, leading to margin compression.

As the charts on this slide demonstrate.

U S. PMI has dropped below pre COVID-19 levels. The availability of end of life vehicles has also decreased as the average age of vehicles on the road has reached its highest level on record.

Tamara Lundgren: Good morning, everyone, and welcome to our fiscal 23-4-quarter earnings call. On our call this morning, I'll discuss our recent rebranding, review our quarterly and full-year financial results, the trans-affecting our business and project on the strategic activities we have underway to address industry dynamics and create long-term value through the cycle. Stefano will then provide more detail on our financial performance, our capital investments, and our capital structure. I'll wrap up and then we'll take your questions.

Tamara Lundgren: Before we begin our review, I'd like to recognize our team for their unwavering commitment to safety. The health and safety of our employees and all who work at and visit our site's paramount. In fiscal 23, almost 90% of our facilities were free of any lost time injuries. While we still have work to do, our team is dedicated to continuing their progress in identifying and addressing potential hazards before they become injuries to ensure a safe working environment for everyone. So let's turn now to slide forward to get started.

Lower durable goods orders along with increased scrap collection costs have also contributed to tighter scrap flows by focusing on what we can control <unk>.

Tamara Lundgren: The name, Radius Recycling, reflects our company's global leadership in metals recycling and conveys our work, our purpose and our vision for a sustainable future. Like the radius of a circle, our work sits at the center of the circular economy, seamlessly connecting all points towards a low carbon future. And while metals recycling and steel manufacturing represent the foundation of our business, we are not the company we were a century ago. Our reach now extends far beyond what the name Schitzer Steel implied, and it's important for us to clearly communicate our role in the circular economy and the value we deliver in the communities in which we operate. And while our name is changing, our commitment to our core values of safety, sustainability, and integrity remains steadfast. And those SSI initials will continue to serve as a reminder of our historic legacy.

Tamara Lundgren: So let's turn now to slide five to review our fourth quarter highlights. Earlier this morning we announced our fourth quarter results which reflected adjusted EPS of 47 cents and adjusted EBITDA of $49 million which included material insurance recoveries. Our underlying performance reflected market conditions for recycled metals which significantly weakened during the quarter on lower global steel demand sequentially average net selling prices for recycled metals decreased which in combination with a further tightening of supply flows over the summer led to significant metal spread compression in the quarter lower ferrous and non-ferrous sales volumes and an adverse impact from average inventory accounting these effects were substantially offset by the recognition of insurance recoveries. We generated strong operating cashflow and used free cashflow of over $100 million to reduce debt.

Tamara Lundgren: We also continued our uninterrupted record of returning capital to our shareholders through the issuance of our 118 consecutive quarterly dividend. Let's turn now to slide six to review our fiscal 23 highlights. I'm proud of the performance our team achieved in fiscal 23. During a year characterized by weaker market conditions are focused on our strategic initiatives delivered positive benefits. Our non-ferrous sales volumes increased by seven and a half percent year over year reflecting initial contributions from our investments in advanced metal recovery technologies.

<unk> related to de carbonization to provide further upside when the market strengthens.

Tamara Lundgren: In addition we expanded our platform and services. Last November we acquired scrap source an asset light business that significantly scales our national sourcing platform and enhances our recycling services. Both of which are now integrated under our trademark three PR brand. Our three PR services help our customers to increase their recycling rates reduce material going to landfill improve their carbon footprint and enhance their sustainability reporting. During the fiscal year we also successfully implemented $60 million in annual productivity initiatives focused on production cost production operating efficiencies and SG&A savings.

Turn now to slide eight to review market prices in more detail.

As the chart in the upper left left corner of this slide indicates ferrous export prices soften during the quarter due to slowing global economy, and corresponding weaker global steel demand.

Chinese steel exports have also increased meaningfully over the last 12 months is there domestic demand, especially for construction activities as follows Chinese exports have reached their highest levels since fiscal 2016 and are leading to slower global steel production ex China.

Tamara Lundgren: These initiatives helped to mitigate inflationary and other cost pressures. In fiscal 23 we achieved full year operating cash flows of $139 million demonstrating our consistent ability to generate cash flow through the cycle. Our free cash flow was also positive for the year.

In the U S ferrous market prices fell by 15% during the quarter as steel mill utilization rates fell and uncertainty regarding the UAW strike has led to some destocking.

Tamara Lundgren: And last I'm delighted to share that our company for the third consecutive year earned great place to work certification. This certification recognizes companies that value employee credibility trust respect pride and camaraderie. And as a testament to the positive experiences of our employees and the strong workplace culture we have built together.

Turning to nonferrous as the chart in the top right corner of this slide shows during Q4 base metal prices were mixed with copper improving due to low global inventories and aluminum falling on weaker Chinese domestic demand and lower energy prices.

Tamara Lundgren: Let's turn now to slide seven for a review of market conditions. One of the most significant drivers of change to our operating margins during fiscal 23 including the fourth quarter has been the reduced supply of recycled scrap metals. As the US economy flows our markets are experiencing a tightening in the availability of end of life automobiles, obsolete white goods and scrap from reduced manufacturing activity and construction and demolition projects.

Tamara Lundgren: These constrained supply conditions have pressured purchase costs for raw materials, leading to margin compression. As the charts on this slide demonstrate, US PMI has dropped below pre-COVID levels. The availability of end-of-life vehicles has also decreased, as the average age of vehicles on the road has reached its highest level on record. Lower durable goods orders, along with increased scrap collection costs have also contributed to tighter scrap loads. By focusing on what we can control, including customer service, technology, and platform expansion, our non-ferrous volumes increased by over 7% in fiscal 23, and we were able to limit our ferrous cells volume decline to about 5%.

While activity supported by these bills has been very limited thus far.

Data tracking shows that the pipeline of projects in the pre design and design phases is growing.

Our Oregon steel mill with its range of low carbon long products is very well positioned to meet this expected demand for example last month, Oregon passed a bill requiring the Oregon Department of transportation and administrative services to prioritize domestically manufactured iron and steel.

Public works and public improvement transportation and vertical construction projects.

The Bill complements Oregon's previously enacted by clean law aimed at procuring low carbon construction materials like art net zero carbon emission green steel products.

Let's turn now to slide nine to review the longer term outlook for recycled metals.

Tamara Lundgren: And unlike previous periods with similar market conditions, we expect the long-term structural benefits related to decarbonization to provide further upside when the market strengthens.

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Tamara Lundgren: Let's turn now to slide 8 to review market prices in more detail. As the chart in the upper left corner of this slide indicates, ferrous export prices soften during the quarter due to slowing global economy and corresponding weaker global steel demand. Chinese steel exports have also increased meaningfully over the last 12 months if their domestic demand, especially for construction activities, has fallen. Chinese exports have reached their highest levels to fiscal 2016, and are leading to slower global steel production, ex-China.

And as you can see in the two charts on the bottom of this slide the use of ferrous scrap in the steelmaking.

Let's turn now to slide 10 for an update on our strategic priorities.

Tamara Lundgren: In the US, ferrous market prices fell by 15% during the quarter as steel mill utilization rates fell, and uncertainty regarding the UAW strike has led to some destocking. Turning to non-ferrous, as the chart in the top right corner of this slide shows, during Q4, base metal prices were mixed, with copper improving due to low global inventories, and aluminum falling on weaker Chinese domestic demand and lower energy prices. Turning to finish steel, while we are seeing a bit of softening due to the level of interest rates and tighter credit conditions, we expect to see increased activity in 2024 and beyond related to the US infrastructure bills.

In an economic environment characterized by market volatility and inflationary pressures, we continue to be focused on managing the things within our control.

Our strategic priorities are directly aligned with the long term trends of de carbonization and the corresponding need for more recycled metals and can be summarized as follows first technology investments in advanced metal recovery systems at our major recycling operations as Stefano will describe in more detail 11.

Of the 13, new systems are now operational are in commissioning.

Volume growth even in the current challenging market conditions, we remain highly focused on increasing our ferrous and nonferrous volumes.

Tamara Lundgren: While activity supported by these bills has been very limited thus far, data tracking shows that the pipeline of projects in the pre-design and design phases is growing. Our Oregon Steel Mill, with its range of low carbon-long products, is very well positioned to meet the suspected demand. For example, last month Oregon passed a bill requiring the Oregon Department of Transportation and Administrative Services to prioritize domestically manufactured iron and steel in public orks and public improvement transportation and vertical construction projects.

And for productivity initiatives that we undertake as part of our continuous improvement culture in.

Tamara Lundgren: The bill compliments Oregon's previously enacted by Clean Law aimed at procuring low carbon construction materials like art net zero carbon emission green steel products.

Tamara Lundgren: Let's turn out to slide 9 to review the longer-term outlook for recycled metals. As we have emphasized during previous earnings calls, decarbonization is a powerful driver of demand for recycled metals which require less carbon to produce than mine metals. As you can see from the chart in the top left corner of this slide, many low-carbon technologies are widely acknowledged to be more metal intensive than the technologies they are replaced. As a result, the long-term demand for recycled metals remains very positive and is further supported by the anticipated structural deficits for metals such as copper and nickel, and the increased demand for manufacturers to maximize their use of recycled materials and reduce the environmental impact of their activities. And as you can see in the two charts on the bottom of this slide, the use of ferrous scrap in the steel making process is also expected to continue to grow in the coming years.

We have a strong track record of delivering positive through the cycle operating cash flows and have a flexible balance sheet equal.

Equally as important we benefit from an operating platform, where the majority of our costs are variable and we have multiple levers available to us to manage through this period of slowing economic activity and tighter supply flows.

These market conditions won't last forever, and we are well positioned to benefit from the expected increased demand for recycled metals associated with de carbonization and low carbon technologies. So now let me turn it over to Stefano.

Yes.

Thank you Tamara and good morning.

With a review of our consolidated results and provide an update on our ferrous sales and the market dynamics <unk>.

Adjusted EBITDA in the fourth quarter was $49 million.

Tamara Lundgren: As electric arc furnace steel making capacity, which uses scrap, ferrous scrap, as its primary raw material has been expanding and is projected to increase further.

Or $44 per ferrous ton.

Average ferrous and nonferrous net selling prices were lower sequentially by 14% and 7% respectively.

Tamara Lundgren: Let's turn now to slide ten for an update on our strategic priorities. In an economic environment characterized by market volatility and inflationary pressures, we continue to be focused on managing the things within our control.

In addition to lower prices metal spread compression was exacerbated by the further tightening of scrap flows into June which affected our ability to adjust the crop purchase prices to reflect the decline in selling prices in the quarter.

Tamara Lundgren: Our strategic priorities are directly aligned with the long-term trends of decarbonization, and the corresponding needs for more recycled metals, and can be summarized as follows. First, technology investments in advanced metal recovery systems that are major recycling operations, as Stefano will describe in more detail, 11 of the 13 new systems are now operational or in commissioning. Second, volume growth, even in the current challenging market conditions, we remain highly focused on increasing our ferrous and non-ferrous volumes.

Slower than expected scrap generation also led to a sequential decline of ferrous sales volumes of 4% and a loss of operating leverage.

The lower price environment led to a detriment from average inventory accounting of $5 million or $5 per ferrous ton.

Finished steel sales volumes were 7% higher sequentially benefiting from seasonality, which substantially offset the impact of lower finished steel net selling prices.

Our fourth quarter results included the recognition of insurance recoveries of $41 million.

A reminder, when we experienced the financial impact from the operational disruptions associated with these events in the last couple of years, including earlier in our fiscal 'twenty three we did not exclude the impact from our adjusted EBITDA and consistent with that approach, we do not adjust out the insurance recoveries. When they are recognized in our income statement.

Tamara Lundgren: In fiscal 23, we achieved the full run rate of benefits from the productivity initiatives that we announced earlier in this fiscal year.

Finding ways to mitigate increases and operating costs, resulting from inflation remains a priority.

As Tom mentioned today, we are announcing additional productivity initiatives for fiscal 'twenty, four targets and benefits of $30 million on an annual basis.

These initiatives are focused primarily on further production cost reductions operating efficiencies logistics procurement savings and yield improvements.

Tamara Lundgren: These market conditions won't last forever, and we are well positioned to benefit from the expected increased demand for recycled metals associated with decarbonization and low carbon technologies.

In the fourth quarter, we recognized noncash impairment charges of $45 million.

Primarily related to goodwill associated with one of the company's reporting units as part of the annual tests required by the accounting standards. These noncash charges, our adjusted out of our non-GAAP financial measures.

Stefano Gaggini: So now, let me turn it over to Stefano. Thank you, Tamara.

Stefano Gaggini: Good morning. I'll start the review of our concentrated results and provide an update on our fair sales and the market dynamics. Average ferrets and non-ferrous net selling prices were lower sequentially by 14% and 7% respectively. In addition to lower prices, metal spread compression was exacerbated by the further tightening of scrap loads in June, which affected our ability to adjust scrap purchase prices to reflect the decline in selling prices in the quarter.

Turning to other federal dynamics in the quarter the share of domestic ferrous shipments was 48% our top sales destination for ferrous exports, where Bangladesh, Turkey and India.

Now, let's move to slide 12 for an update on nonferrous sales and the market dynamics.

Average net selling prices for copper aluminum and other nonferrous products were down 7% sequentially, reflecting the decline in market prices since the spring.

Lower generation of non ferrous scrap also contributed to margin pressure.

Prices of PGM metals continue to decline significantly with average net selling prices down 19% sequentially and almost 50% from a year ago.

Stefano Gaggini: Slower than expected scrap generation, all the less was sequential decline of ferrous sales volumes of 4% and a loss of operating leverage. The lower price environment led to a detriment from average inventory accounting of 5 million dollars or 5 dollars per ferrous ton. Finish steel sales volumes were 7% higher sequentially, benefiting from seasonality, which substantially offset the impact of lower finish steel net selling prices. Our four quarter results included the recognition of insurance recoveries of 41 million dollars, representing final settlement with our insurers during the quarter for losses resulting from the fire at our steel mill in fiscal 21, as well as recoveries related to the shredder outage at our average facility last year.

Factored by lower demand from U S and global auto industry.

Nonferrous sales volumes remained at similar levels sequentially.

We sold our nonferrous products to 12 countries with a major export destinations being India, Malaysia and China.

Our product mix is highly diversified with sales of products to recover from shredding operations, reaching around half of total nonferrous volumes.

Now, let's move to slide 13 to provide an update on our technology investments.

Stefano Gaggini: As a reminder, we experienced the financial impact from the operational disruptions associated with these events in the last couple of years, including earlier in our fiscal 23. We did not exclude that impact from our adjusted EBIDA and consistent with that approach, we do not adjust out insurance recoveries when they are recognized in our income statement. Finding ways to mitigate increases in operating costs resulting from inflation remains a priority. As Tamara mentioned, today we are announcing additional productivity initiatives for fiscal 24 targeting benefits of 30 million dollars on an annual basis.

We expect the remaining capital expenditures to complete these investments to be less than $5 million.

Once fully operational we expect these technologies to increase non ferrous volumes to recover from shredding operations by at least 20%.

As shown in the slide our initiative comprises 13 systems in total.

Six our advanced separation systems, all of which are now operational.

We're also implementing seven primary nonferrous systems for the recovery of aluminum and copper, which are the main drivers of the projected increase in recovery volumes and incremental profitability during.

Stefano Gaggini: These initiatives are focused primarily on further production cost reductions operating efficiencies logistics procurement savings and yield improvements. We have already started implementing these measures which aim to not only mitigate inflationary pressure on operating costs, but also offset the loss of operating leverage due to the lower volumes we are seeing in our current environment. In the fourth quarter, we recognize non-cash impairment charges of 45 million dollars, primarily related to good will associated with one of the company's reporting units as part of the annual test required by the accounting standards.

During the quarter, we began commissioning on the west coast of one of his primary recovery systems, bringing to five the number of deals that are either operational or in bayou stages of commissioning and ramp up the remaining two major copper recovery systems to construct on the west coast to complete our program one of these systems continues.

To await permitting approval with construction on the order now projected to start by around the end of the calendar year.

As a result, we now target to start of commission of the two remaining systems by the spring of 2024.

Stefano Gaggini: These non-cash charges are adjusted out of our non-gap financial measures. Turning to other ferrous dynamics in the quarter, the share of domestic ferrous shipments was 48%. Our top sales destination for ferrous exports were Bangladesh, Turkey and India.

The contribution to performance from these technologies in the fourth quarter was positive.

Lower than the third quarter, which had benefited from particularly supportive pricing for the non ferrous products could generate.

The current weaker market conditions, including a significant compression of the historical price premium between the higher grade Twitch aluminum product in Zorba all the way on the contribution from these systems now.

Now, let's move to slide 14 to discuss our steel mill performance.

Demand for finished steel in the fourth quarter in our Western U S markets remained steady and reflected the lift from summer seasonality on construction activity.

Stefano Gaggini: Prices of PGM metals continued to decline significantly, with average net selling prices down 19% sequentially and almost 50% from a year ago, impacted by lower demand from the US and global Industry. Non-ferrous sales volumes remain at similar levels sequentially. We sold our non-ferrous products to 12 countries with the major export destinations being India, Malaysia and China. Our product mix is highly diversified with sales of products recovered from shredding operations reaching around half of total non-ferrous volumes.

<unk> steel sales volume reached 152000 tons up 7% sequentially.

Our mill operations reached full utilization significantly higher than the U S average of 77% for the period.

Average net selling prices for finished steel decreased 7% sequentially driven by lower raw material inputs and pressure from imports.

Although down slightly sequentially metal spreads at our mill remain healthy political comparison.

As Tamara mentioned, we believe our mill stands to benefit from the expected demand created by the U S infrastructure Bill.

Stefano Gaggini: Now let's move to slide 13 to provide an update on our technology investments. We continue the deployment of our technology program focused on increasing metal recovery of non-ferrous material, generating more furnace-ready higher value products and creating product optionality. We expect remaining capital expenditures to complete these investments to be less than $5 million. Once fully operational, we expect these technologies to increase non-ferrous volumes recovered from shredding operations by at least 20%. As shown in the slide, our initiative comprises 13 systems in total.

Now, let's move to slide 15, and discuss cash flow capital structure and our outlook for the first quarter.

Operating cash flow in the fourth quarter was strongly positive at $135 million.

Driven by EBITDA profitability and benefits to working capital, including from the lower commodity price environment and collections from several ferrous bulk shipments that had been delayed at the end of the prior quarter.

Benefiting from the strong cash flow generation, our net debt ended the quarter at $243 million.

Stefano Gaggini: Of these six are advanced separation systems, all of which are now operational. We are also implementing seven primary non-ferrous systems for the recovery of aluminum and copper, which are the main drivers of the projected increase in recovery volumes and incremental profitability. During the quarter, we began commissioning on the west coast of one of these primary recovery systems, bringing to five the number of those that are either operational or in various stages of commissioning and rampant.

A reduction of more than $100 million sequentially avail.

Availability under our credit facility remains sizable with a borrowing capacity of $800 million.

And a maturity of August 2027.

Net leverage was 21% of quarter end and the ratio of net debt to adjusted EBITDA was $1 seven X.

We also returned capital to shareholders through our quarterly dividend.

During the quarter, we entered into interest rate swaps to fix the rate on a portion of our floating rate credit facility.

Stefano Gaggini: There remain two major copper recovery systems to construct on the west coast to complete our program. One of these systems continues to await permitting approval with construction on the other now projected to start by around the end of the calendar year. As a result, we now target start of commissioning of these two remaining systems by the spring of 2024. The contribution to performance from these technologies in the fourth quarter was positive, but lower than the third quarter, which had benefited from particularly supportive pricing for the non-ferrous products to generated.

The swaps have a three year duration and a notional amount of $150 million.

Execution of these contracts provide us with more interest rate certainty, while also benefiting from the inverted yield curve.

Capex spend in the fourth quarter was $28 million.

For the full fiscal 'twenty, three capex was $118 million net of insurance reimbursements, primarily associated with the repair of the shredder enclosure building at our <unk> facility.

Stefano Gaggini: The current weaker market conditions, including a significant compression of the historical price premium between the higher-grade Twitch aluminum product and Zorba, all the way on the contribution from these systems. Now, let's move to slide 14 to discuss our steel mill performance. Demand for finished steel in the fourth quarter in our western U.S, markets remains steady and reflected the lift from summer seasonality on construction activity. Finished steel sales volumes reached 152,000 tons, up 7% sequentially.

Looking ahead, we currently project our fiscal 'twenty, four capex investments to be lower compared to the past year at approximately $100 million.

Approximately 25% of the anticipated spend would be for growth projects, including the completion of our nonferrous technology initiatives and investments to support recycling services expansion.

<unk> capex will be for maintaining the business and environmental related capital projects.

Our effective tax rate on fourth quarter adjusted results was 32% and 31%.

Stefano Gaggini: Our mill operations reached full utilization significantly higher than the U.S, average of 77% for the period. Average net selling prices for finished steel decreased 7% sequentially, driven by lower raw material inputs and pressure from imports. Although down slightly sequentially, metal spreads at our mill remain healthy in historical comparison. As Tamara mentioned, we believe our mill stands to benefit from the expected demand created by the U.S, infrastructure bills.

Fiscal 'twenty three.

For fiscal 'twenty, four we expect the tax rate to be in the range of 25%.

And that reflects some quarter to quarter variability, including in our first quarter of fiscal 'twenty four when the rate is projected to be lower at around 15% subject to company performance.

While we are just over halfway through the quarter I will now turn to our outlook for the first quarter of fiscal 'twenty, four which is based on information and market conditions. We have today that may be subject to significant volatility due to geopolitical uncertainties.

Stefano Gaggini: Now, let's move to slide 15 and discuss cash flow, capital structure, and our outlook for the third quarter. Cooperating cash flow in the fourth quarter was strongly positive at $135 million, driven by EBITDA profitability and benefits to working capital, including from the lower commodity price environment and collection from several ferrous bulk shipments that have been delayed at the end of the prior quarter. Benefitting from the strong cash flow generation, our net debt ended the quarter at $243 million, a reduction of more than $100 million sequentially.

We expect our consolidated adjusted EBITDA per ferrous ton to remain approximately flat compared to the fourth quarter when excluding the insurance recoveries.

In the lower price environment, we project, a modest detriment from average inventory accounting in the quarter.

We expect our ferrous sales volumes to be approximately flat sequentially.

Our non ferrous volumes are projected to be up 10% year over year, reflecting benefits of our strategic non ferrous recovery investments and expansion of our platform.

Stefano Gaggini: Availability under our credit facility remained sizable with a borrowing capacity of $800 million and a maturity of August 2027. Net leverage was 21% at quarter end, and the ratio of net debt to adjusted EBITDA was 1.7x.

Stefano Gaggini: We also returned capital to shareholders to our quarterly dividend. During the quarter, we entered into interest rate swaps to fix the rate on a portion of our floating rate credit facility, the swaps have a three-year duration and a national amount of $150 million. Execution of this contract provides us with more interest rate certainty while also benefiting from the inverted yield curve. CapExpend in the fourth quarter was $28 million. For full fiscal 23, CapEx was $118 million, net of insurance reimbursement primarily associated with the repair of the shredder enclosure building at our Everett facility.

Finally, we expect our operating cash flow in the first quarter to reflect the seasonal detriment from working capital.

For full fiscal year 'twenty four we aim to continue our trend of generating positive operating cash flow through the cycle and.

And with that I'll turn the call back over to Tamara.

Stefano Gaggini: Looking ahead, we currently project our fiscal 24 CapEx investments to be lower compared to the past year at approximately $100 million. Approximately 25% of the anticipated spend would be for growth projects, including the completion of our non-ferrous technology initiatives and investments to support recycling services expansion. The remaining CapEx would be for maintaining the business and environmental related capital projects. Our effective tax rate on fourth quarter adjusted results was 32%, and 31% for full fiscal 23.

You have demonstrated once again, while we have continued to be a leader in the recycling industry for over a century and I look forward to the next steps in our company's history as radius recycling and.

And now Olivia, let's open the call for questions.

Certainly ladies and gentlemen to ask a question you will need to press star one on your telephone and wait.

Aimed to be announced.

A question you May press Star one again.

Please standby, while we compile the Q&A roster.

Stefano Gaggini: For fiscal 24, we expect the tax rate to be in the range of 25%, but reflect some quarter to quarter variability, including in our first quarter of fiscal 24 when the rate is projected to be lower at around 15%, subject to company performance.

And we have a question coming from the line of Sam will Mckinney from Keybanc. Your line is open.

Hi, good morning, good morning.

Good morning.

As you mentioned scrap supply supply flows were tight in the summer quarter now that we are headed into the winter is it safe to say that there is some more availability for both.

Stefano Gaggini: While we are just over halfway through the quarter, I'll now turn to our outlook for the first quarter of fiscal 24, which is based on information and market conditions we have today that may be subject to significant volatility due to geopolitical uncertainties. We expect our contributed adjusted EBDA per ferrous ton to remain approximately flat compared to the fourth quarter when excluding the insurance recoveries. In the lower price environment, we project a modest settlement from average inventory accounting in the quarter.

<unk> flows and spreads to fall in but what are you seeing just in general from your peddlers.

Well what.

What is really driving.

The continued tight.

Apply of scrap.

A couple of things lower.

Lower manufacturing activity lower construction and demolition activity.

Stefano Gaggini: We expect our ferrous sales volumes to be approximately flat sequentially. Our non-ferrous volumes are projected to be up 10% year over year, reflecting benefits of our strategic non-ferrous recovery investments and expansion of our platform. We expect the contribution from our steel mill to remain healthy but decline sequence Unfortunately, reflecting a 10% to 15% decrease in sales volumes due to normal seasonality, along with the impact of lower average-finished-till prices. We expect the initial benefits from the implementation of our new fiscal 24 productivity initiative program to more than offset the impact of inflation and loss of operating leverage due to lower volumes in the quarter. Finally, we expect our operating cash flow in the first quarter to reflect a seasonal detriment from working capital.

Ration of these tighter supply conditions until we start to see some changes in the economy and the things that we're looking for.

Is increased PMI I E increased manufacturing activity.

Resolution of the UAW strike, which will should resolve both ferrous and should help to to improve both ferrous and non ferrous supply flows.

Clearly.

Stefano Gaggini: For full fiscal year 24, we aim to continue our trend of generating positive operating cash flow through the cycle.

Stabilization and in ferrous ferrous prices and non ferrous prices for that matter.

I think will help supply flows as well and obviously helps.

Tamara Lundgren: And with that, I'll turn the call back over to Tamara. Thank you, Stefano.

Margin compression and then lastly in 'twenty four we are expecting to see a higher flow of higher pace of funds coming through from the U S infrastructure Bill.

Okay. Thank you Tamara is very helpful.

And then moving to ferrous domestic and export volumes sequentially decreased by a pretty similar percentage in the fourth quarter given the guidance Stefano gate for the first quarter of 'twenty for any sort of divergence expected between domestic and export volumes in the first quarter.

Tamara Lundgren: And I look forward to the next steps in our company's history as Radius Recycling.

Operator: And now, Olivia, let's open the call for questions. Finally, Lisa and gentlemen, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, you may press star 1-1 again. Please send by while we compile the county roster.

I think that this is Stefan yes go ahead Stephanie.

Yes.

Just from an Alco perspective at this point, we don't expect that divergence to be to be a factor as we look at our Q1, our Q1 outlook, obviously, Tom and I mentioned.

Samuel Mckinney: And we have a question coming from the line-up, Samuel McKinney from Keybank, Gila Nusopen. Hi. Good morning. As you mentioned, scraps supply flows were tight in the summer quarter. Now that we are headed into the winter, is it safe to say that there's some more availability for both scrap flows and spreads to fall, and what do you see just in general from your peddlers? Well, what is really driving the continued tight supply of scrap are a couple of things.

The UAW strike that could be a factor that could that could be helpful. On the domestic side at this point there is still uncertainty regarding that.

Understood.

And then lastly for me on the Nonferrous side Tamara touched on it during the call, but you all did a solid job during this quarter on the nonferrous volume side moving into next year can you talk through some of the various pricing headwinds that you might face in that space I know, there's a lot of moving parts, there and what can be done to perhaps mitigate.

Samuel Mckinney: Lower manufacturing activity, lower construction and demolition activity, and just the slowing economy generally. Combined are just higher collection costs for scrap as inflation pressures have hit suppliers and interest rates are obviously higher than they've been in the past. So, we are projecting a continuation of these tighter supply conditions until we start to see some changes in the economy. And the things that we're looking for is increased PMI, i.e, increased manufacturing activity, resolution of the UAW strike, which will resolve both Ferris or should help to improve both Ferris and non-Ferris supply flows.

Some of those impacts, including the cost reduction initiative, you announced today.

Sure let me.

High level, and then and then Stefano.

I don't you add some specifics.

At a high level.

It's the same it's the same dynamics that we are speaking about before which is manufacturing activity.

As well as the.

The UAW strike has really.

Impacted your nonferrous production as well so we see some.

We expect that that will resolve over time and so both.

Rose and prices should stabilize and get back on that positive trend of.

Meeting this higher demand due to the.

The transition to a low carbon technologies, whether it's electric vehicles or solar or.

Or when for example, all of these low carbon technologies require more metals, and particularly more non ferrous metals.

Then the technologies that they are replacing so so we're really looking for those economic trends to come to come through and those funds from the U S infrastructure bills to start to flow in 'twenty four.

Samuel Mckinney: Clearly stabilization in Ferris prices and non-Ferris prices for that matter, I think will help supply flows as well and obviously help margin compression. And then lastly, in 24, we are expecting to see a higher flow, a higher pace of funds coming through from the US infrastructure bill.

Stefano.

Yes, and then Sam.

From what we can control obviously, we have talked about.

Being excited about having made progress on our deployment of advanced non ferrous recovery technologies.

Tamara Lundgren: Okay, thank you, Tamara. It's very helpful. And then moving to Ferris, domestic and export volumes sequentially decreased by a pretty similar percentage in the fourth quarter, given the guidance that Stefano gave for the first quarter of 24. Any sort of divergence expected between domestic and export volumes in the first quarter? I think that... Go ahead, Stefano. Yeah, just from an outlook perspective, at this point, we don't expect that divergence to be a factor as we look at our Q1 outlook.

We want to.

Again benefit from non ferrous recovered from trading operations.

And so we provided that and we should see.

The run rate of those increases as we go into FY 'twenty for us, but our comments and then with respect to your questions on productivity initiatives.

Today, we announced an incremental initiative program targeting benefits of $30 million on an annual basis.

We have a process to track these initiatives based on Kpis and other data points to support the achievement and so we are confident we will be able to gain benefits from that we have already started implementing these measures in our first quarter and we expect to realize an initial benefit from them in the quarter.

Tamara Lundgren: Obviously, Tamara mentioned the UAW strike. There could be a factor that could be helpful on the domestic side, at this point, there's still uncertainty regarding that. Understood. And then, lastly, for me, on the non-ferrous side, Tamara touched on it during the call, but you all did a solid job during this quarter on the non-ferrous volumes side. Moving into next year, can you talk through some of the various pricing headwinds that you might face in that space?

The range of probably off of the of the quarterly run rate implied in that $30 million on your on your number.

Okay. Thank you that's it for me thanks for the time.

Thank you. Thank you.

Yes.

Thank you and I see no further questions in the queue at this time I'll turn the call back over to Sam Royal London for any closing remarks.

Tamara Lundgren: I know there's a lot of moving parts there, and what can be done to perhaps mitigate some of those impacts, including the cost reduction initiative you announced today? Sure. So, let me start at a high level, and then Stefano, why don't you add some specifics? You know, at a high level, it's the same dynamics that we're speaking about before, which is manufacturing activity as well as the UAW strike has really impacted non-ferrous production as well.

Thank you and thank you everyone for your time today, we look forward to speaking with you again in January when we report our first quarter results and the interim stay safe and stay well.

Ladies and gentlemen that does some teleconference for today. Thank you for your participation you may now disconnect.

Tamara Lundgren: So, we see some, we expect that that will resolve over time, and so both flows and prices should stabilize and, you know, get back on that positive trend of meeting this higher demand due to the transition to low carbon technologies, whether it's electric vehicles or solar or wind, for example, all of these low carbon technologies require more metals and particularly more non-ferrous metals than the technologies that they're replacing. So, we're really looking for those economic trends to come through and those funds from the US infrastructure bills to start to flow in 24.

Tamara Lundgren: Stefano? Yes, and then Sam, you know, from what we can control, obviously, we have talked about, you know, being excited about having made progress on our deployment of the advanced non-ferrous recovery technologies. That's how, you know, we want to gain benefits from non-ferrous rights, recover from shedding operations, and so we provided that, and we should see, you know, the run rate of those increases as we go into FY24 as per our comments.

Tamara Lundgren: And then we respect your questions on productivity initiatives. So today, we announced in this incremental initiative program targeting benefits of $30 million on an annual basis. You know, we have a process to track these initiatives based on KPIs and other data points to support the achievement, and to we are, you know, confident we will be able to gain benefits from that. We have already started implementing these measures in our first quarter, and we expect to realize an initial benefit from them in the quarter, in the range of probably half of the quarterly run rate, and providing that $30 million annual, annual number. Oliver. Okay, thank you. That's it for me. Thanks for the time. Thank you.

Stefano Gaggini: And I see no further questions in the queue at this time.

Tamara Lundgren: I'll turn the call back over to Tamara Lundgren for any closing remarks. Thank you. And thank you everyone for your time today.

Tamara Lundgren: We look forward to speaking with you again in January when we report our first quarter results. In the interim, stay safe and stay well.

Operator: Ladies and gentlemen, that doesn't got conference for today. Thank you for your participation.

Operator: You may now disconnect.

Q4 2023 Schnitzer Steel Industries Inc Earnings Call

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