Radius Recycling earnings take hit as metals face headwinds

Radius Recycling posted a net loss of $199 million in the third quarter, citing costs related to “challenging market conditions for recycled metals” during the past year.

“Market conditions over the past year have been the toughest we’ve experienced since 2015,” Tamara Lundgren, chairman and CEO, told analysts Tuesday. “While our reported third quarter loss was $6.97 per share, $6.21 of this was related to a non-cash goodwill impairment charge and a related deferred tax valuation allowance.”

The Oregon-based manufacturer and exporter reported a net loss of $199 million, or $6.97 per share, during the quarter ended May 31, down from a loss of $34 million in Q2. In the same period last year, the company saw a profit of $14 million.

Meanwhile, adjusted EBITDA in the third quarter was $9 million, an improvement from $3 million in Q2. The increase reflects higher non-ferrous and ferrous sales volumes, benefits from cost reduction plans, and higher insurance recoveries, partially offset by lower ferrous selling prices and compressed metal spreads resulting from tight ferrous supply flows.

Overall, Radius noted that global demand for nonferrous recycled metals strengthened throughout the quarter, resulting in a 10% sequential increase in average sales prices and 4% higher sales volumes.

However, global demand for ferrous scrap was softer sequentially. Radius attributed the weakening partly to continued elevated levels of Chinese steel exports, which led to a 9% decline in average net selling prices.

Ferrous sales volumes gained 13% quarter-over-quarter, benefiting from seasonally higher flows and the sales of cargoes delayed previously. Stronger construction activity drove up finished steel sales volumes by 11%. Rolling mill utilization was 88%, up from 81% in Q2. The U.S. average utilization rate was 77%.

Moving forward, Radius outlined four initiatives to improve performance. This year, the recycler launched a program to deliver $70 million in cost reductions and productivity initiatives. The company also pointed to its investments in technology to boost the recovery of non-ferrous metals from its shredding process. At full deployment, Radius expects to see over $40 million in annual EBITDA from that investment. In addition, its 3PR service aims to help customers increase recycling rates, cut materials going to landfills and aid other decarbonization steps. The 3PR business line is contributing about 10% to Radius’ recycled metals volumes. Finally, Radius is increasing its volumes, noting that it has retained capacity of over 1 million ferrous tons.

Radius has more than 100 operating facilities producing annual fares volumes of over 4 million tons, non-ferrous volumes of over 700 million pounds, and more than 500,000 tons of low-carbon and net-zero carbon emission green finished steel products.