• Adjusted EPS Loss: $1.33, primarily due to an income tax detriment associated with deferred tax assets.
• Steel Mill Utilization: 81%, higher than the US average of 75%.
• Operating Cash Flow: Nearly break-even for the quarter.
• Dividend: 123rd consecutive quarterly dividend paid.
• SG&A Expense Reduction: 6% reduction in adjusted SG&A costs year over year.
• Net Debt: $430 million at the end of the first quarter.
• CapEx Investment: $12 million in the first quarter; projected fiscal '25 CapEx around $60 million.
• Finished Steel Sales Volumes: 125,000 tons, down 11% sequentially.
• Non-Ferrous Sales Volumes: Down 14% sequentially; major export destinations include Malaysia, Thailand, and India.
• Ferrous Shipments: 43% domestic; top export destinations include Bangladesh, Turkey, and India.
• Legal Costs: Elevated costs expected to recede in the second half of fiscal '25.
• Asset Monetization: Expected net proceeds of $35 million from transactions in the second half of fiscal '25.

• Warning! GuruFocus has detected 7 Warning Signs with RDUS.

Release Date: January 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Radius Recycling Inc (NASDAQ:RDUS) achieved a nearly 50% reduction in total case incident rate, with 97% of sites experiencing zero lost time injuries.
• The recycled metals business saw improved contributions due to cost reduction measures and stronger non-ferrous demand.
• The company maintained stable operating results year over year despite challenging market conditions.
• Investments in advanced metal recovery technologies are expected to yield over $40 million in annual EBITDA after full deployment.
• The 3PR services business line contributed over 10% to recycled metal volumes in fiscal '24, providing a counterbalance to cyclical core operations.

Negative Points

• Adjusted EPS showed a loss of $1.33, primarily due to an income tax detriment associated with deferred tax assets.
• Finished steel contribution declined year over year due to weaker domestic steel conditions and a scheduled maintenance outage.
• The US manufacturing sector has been in recessionary territory for two years, impacting the availability of recycled scrap metal.
• Export prices for recycled ferrous metals decreased due to softer global steel demand and elevated Chinese steel exports.
• Interest expense rose by $4 million year over year, partly due to a recent amendment to the credit facility.

Q & A Highlights

Q: Can you discuss the impact of Chinese steel overproduction on the export market and any potential relief? A: Tamara Lundgren, CEO, explained that Chinese steel overproduction has dampened markets globally. However, they expect a pullback in excess production and exports from China as other countries push back against these cheap exports. While the timing is uncertain, a correction is anticipated.

Q: How do you plan to manage rising interest expenses and debt? A: Stefano Gaggini, CFO, noted that the impact of the credit facility amendment is now fully reflected in interest costs. The decline in interest rates since September will benefit their costs, with full effects seen in Q2. They have a credit line of $800 million, with $430 million outstanding, and expect returns from investments to improve liquidity. They plan to align CapEx with cash flow and have asset monetization opportunities to support free cash flow.

Q: What are the expectations for the non-ferrous recovery systems and their impact on performance? A: Stefano Gaggini stated that they have completed construction and started commissioning the last of the permitted primary systems. They expect increasing returns from these investments in the coming quarters, targeting substantial ramp-up by Q3 of fiscal '25, with anticipated returns of approximately $10 EBITDA per ferrous ton in normal market conditions.

Q: Can you provide insights into the steel mill performance and future expectations? A: Stefano Gaggini reported that finished steel sales volumes were down due to seasonality and a scheduled maintenance outage. They expect the mill to benefit from anticipated demand from the US infrastructure bill, although this demand has not yet significantly impacted the construction market.

Q: What are the strategic priorities and expected benefits from current initiatives? A: Tamara Lundgren highlighted investments in advanced metal recovery technologies, expansion of 3PR services, and cost reduction programs. They expect these initiatives to align with secular growth trends and contribute significantly to financial performance as market conditions recover.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.