Radius Recycling, Inc.

Good day and thank you for standing by. Welcome to the Radius Recycling's first quarter 2024 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, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Michael Bennett, Investor Relations.

Thank you, Josh, and good morning. I'm Michael Bennett, the company's Vice President of Investor Relations. I am happy to welcome you to Radius Recycling's earnings presentation for the first quarter of fiscal 2024. 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 two, which is also included in our press release and in the company's form 10Q, 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 2, as well as our press release of today and our Form 10-Q. 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 Stefano Guggini, our Chief Financial Officer.

Thank you, Michael. Good morning, everyone, and welcome to our fiscal 24 first quarter earnings call. On our call this morning, I'll review our quarterly results, the trends affecting our business, and progress 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 with some takeaways from our 10th sustainability report that we issued in mid-December, and then we'll take your questions. So, let's turn now to slide four. Earlier this morning, we announced results for our fiscal 24 first quarter, which reflected adjusted EBITDA of $1 million and an adjusted EPS loss of 64 cents. Market conditions for recycled metals in Q1 were challenging. primarily due to lower manufacturing activity and scrap generation in the U.S., and muted global steel production. Our first quarter results reflected higher ferrous sales volumes, but tight scrap supply flows continued to compress metal spreads. Although the steel mill experienced a decline in prices during the quarter, we continued to benefit from healthy West Coast construction demand. The mill's quarterly utilization rate of 95 percent was significantly higher than the national average, and we achieved a 10 percent increase in sales volumes year over year. Our results reflected positive impacts from our strategic initiatives. Non-ferrous production from both our new metal recovery technology investments and a fiscal 23 acquisition contributed to a 12 percent increase in non-ferrous sales volumes versus a year ago. In addition, during the quarter, we recognized initial benefits from our $30 million productivity improvement program that we announced in October. And lastly, we continued our uninterrupted record of returning capital to our shareholders through the issuance of our 119th consecutive quarterly dividend. Let's turn now to slide five. Ferrous export prices reflected soft demand during most of the quarter. One of the continuing headwinds was China's finished steel exports, which reached their highest levels in almost seven years. This elevated level of exports impacted both steel production and ferrous scrap demand in Asia, the Middle East, and Turkey. Beginning in mid-November and continuing into December, however, export prices strengthened. This demand was primarily driven by restocking and concerns over tight scrap availability. Turning to the U.S. domestic market, similar to the export market, ferrous prices were somewhat flat during the first two months of the quarter. Domestic demand was impacted by the now resolved UAW strike, related destocking, and overall low utilization rates. Beginning in November and continuing into December, domestic ferrous prices increased across all grades on similar factors as the export market. Now let's review non-ferrous. Base metal index prices for aluminum and copper traded at strong levels during the quarter, supported by low warehouse inventories and forecasted supply disruptions from mines. Tight non-ferrous scrap supplies and the increased use of recycled non-ferrous metals in support of decarbonization efforts have resulted in higher prices and a reduced discount to LME-based metal prices. Turning to finished steel, market prices in the quarter were down slightly on normal seasonality. We expect to see increased activity in 2024 and beyond related to the U.S. infrastructure bills. Our Oregon steel mill, with its range of low-carbon products, including our line of net zero carbon emissions steel products, is very well positioned to meet this expected demand. Let's turn now to slide six. On this slide, you can see some of the economic factors that underlie the constrained scrap generation that we are experiencing. First, US PMI has dropped below pre-COVID levels. And second, the average age of vehicles on the road has reached the highest level on record, leading to materially lower scrappage rates. In addition, a decline in durable goods orders along with increased scrap collection costs and higher interest rates, have contributed to tighter scrap supply flows. We expect scrap generation to expand as manufacturing and construction activity improves and inflation and interest rates decline from their current levels. Let's turn now to slide seven. Long-term demand for recycled metals remains very positive for several reasons. First, decarbonization is driving increased demand for recycled metals. Many low-carbon technologies are more metal-intensive than the technologies that they're replacing, and recycled metals require less carbon to produce than mined metals. Second, the anticipated structural deficits for metals such as copper and nickel and the increased use of recycled metals by manufacturers seeking to reduce their environmental impact are also driving demand. Lastly, as you can see in the two charts on the bottom of this slide, the use of ferrous scrap in the steelmaking process is also expected to continue to grow significantly in the coming years. In addition, EAF steelmaking capacity, which uses ferrous scrap as its primary raw material, has been expanding and is projected to increase further. So, let's turn now to slide eight for an update on our strategic priorities. In an economic environment characterized by weak scrap generation and inflationary pressures, we continue to focus on managing the things within our control. Our strategic priorities are directly aligned with the long-term trends we just reviewed and can be summarized as follows. First, we are investing in advanced technologies to increase recovery of non-ferrous metals, generate more furnace-ready, higher-value products, and create product optionality. Second, we remain highly focused on increasing our ferrous and non-ferrous volumes in light of the positive long-term drivers of increased demand. Third, we are continuing to grow our trademark 3PR business line that supports a rapidly growing service and supply chain solution that enables our customers to increase their recycling rates, reduce material going to landfills, lower their carbon footprint, and provide enhanced sustainability reporting. And fourth, we are committed to ongoing productivity initiatives as part of our continuous improvement culture. While the current market environment is challenging, we have demonstrated our ability to navigate effectively through these periods of volatility and tight scrap availability. We have a strong track record of delivering positive through the cycle operating cash flows, and equally as important, Our operating costs are largely variable, which provide more flexibility 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. So now, let me turn it over to Stefano.