Schnitzer Steel Industries, Inc.

Thank you for standing by and welcome to this Mr. Steele second quarter 2022 earnings release call and webcast. At this time, all participants are in listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question at that time, please press star then one on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key. And now I'd like to introduce your host for today's program, Michael Bennett of Bresta Relations. Please go ahead, sir.

Thank you and good morning. I'm Michael Bennett, the company's Vice President of Investor Relations. I am happy to welcome you to Schnitzer Steel's earnings presentation for the second quarter of fiscal year 2022. 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 schnitzersteel.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 future margin expansion. 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 contained in slide two, 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've 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 Richard Peach, our Chief Financial Officer and Chief Strategy Officer.

Thank you, Michael. Good morning, everyone, and welcome to our fiscal 22 second quarter earnings call. Before we begin with our formal presentation, I'd like to congratulate our employees on achieving another record. This quarter's adjusted EBITDA represents the best second quarter in our company's history. To all our employees, thank you. You have continued to exhibit the resilience, creativity, and commitment to excellence that have been hallmarks of our company for over a century. You've also shown your generosity and humanitarian spirit. As Russia's invasion of Ukraine enters its second month, our company and our employees have stepped up to offer many forms of aid and support, both to those forced to flee and to those who remain. Thank you. On our call today, I'll review our quarterly financial results and the trends affecting our business. I'll also provide an update on the strategic initiatives we have underway, both to meet the increasing demand for our products and services, and to create long-term value. Richard will then provide more detail on our financial performance, CapEx investments, and capital structure. I'll wrap up, and then we'll take your questions. So let's turn now to slide four to get started. As I often say, sustainability is at the core of what we do and how we operate and has been since our founding in 1906. Since our last earnings call, we've been recognized by several well-respected organizations for various aspects of our sustainability program. Ethisphere named us one of the world's most ethical companies for the eighth consecutive year. Corporate Knights ranked us number 15 on their Global 100 list of the world's most sustainable companies, highlighting the increasingly critical role of our work in the global transition to a low carbon future. In March, I was also pleased to announce the launch of Green Steel, a line of net zero carbon emissions products from our Cascade steel mill located in Oregon. Cascade has created some of the lowest carbon emission steel products in the world through EAF technology powered primarily by carbon-free hydroelectricity. The introduction of this new product line exemplifies Cascade's long-standing reputation for delivering innovative products that meet the ever-evolving needs of our customers. Now, you can see on this slide our multi-year people, planet, and profit goals that underpin our sustainability framework. I encourage you to visit our website to view our latest sustainability report, which describes our goals in more detail. So now, let's turn to slide six. After delivering record first quarter earnings, earlier this morning we announced our fiscal 22 second quarter adjusted earnings per share of $1.38. Together, these results reflect the highest first half performance in our company's history. Our second quarter results benefited from strong global demand for recycled metals, with average selling prices for ferrous, non-ferrous, and finished steel products at or near all-time highs. Similar to the first quarter, our year-over-year ferrous and non-ferrous sales volumes grew, increasing by 10 percent and 8 percent, respectively. Our results included a full quarter contribution from our acquisition of the Columbus recycling assets which we completed in October. Finished steel sales volumes increased sequentially as we completed the ramp-up of steel mill operations after their outage. We generated positive free cash flow, and our balance sheet remained strong. We repurchased 200,000 shares of our stock during the quarter, and we continued our uninterrupted record of returning capital to shareholders through the issuance of our 112th consecutive quarterly dividend. While we continue to be impacted by supply chain disruptions, global demand for our products and services remains very high. Our outlook is strong, and we expect our third quarter results to benefit from both higher sales volumes in all our product lines and the strong current price environment. Let's turn now to slide seven for a review of pricing trends for recycled metals and finished steel products. As you can see on this slide, during Q2, market prices for recycled ferrous metals remained at historically high levels, with a dip in the beginning of the quarter followed by a strong reversal towards the end. Copper and aluminum scrap prices also traded at or near multi-year highs, benefiting from tight supplies, shipping constraints, and deployment of low-carbon technologies. Demand for long products continue to rise during the quarter, with prices reaching their highest levels on record, primarily driven by increases in construction spending. Since the end of the second quarter, we've seen a sharp increase in ferrous pricing, driven by the lack of semi-finished and pig iron exports from Ukraine and Russia. Supply flows are strong, supported by higher prices, spring weather, increased industrial activity, and slightly better trucking availability. Let's turn now to slide eight to discuss some of the longer-term demand trends for recycled products and services. Demand for recycled metals is underpinned by both short-term and long-term drivers. In the current environment, there are several. First, the Russian invasion of Ukraine, which has led to the subsequent shortage of semi-finished and alternative metal units from the Black Sea region. Second, the continued pent-up demand for autos, appliances, and other products without a corresponding recovery in supply. Third, the effects of years of underinvestment in industrial metals and mining, which has created a structural shortage. And lastly, the recent COVID lockdown in China, which covers a material portion of their metal production capacity. In the longer term, The shift to low carbon technologies is widely acknowledged to be more metal intensive. Decarbonization is a powerful structural driver of demand for recycled metals, which require less carbon to produce than mine metals. The use of recycled metals is recognized as an important strategic solution for companies, industries, and governments that are focused on carbon reduction and are committed to reducing material directed to landfill. We can see how these trends have translated into higher ferrous scrap metal demand in the U.S., Europe, and China by looking at the charts on this slide. EAF steelmaking capacity, which uses scrap as its primary raw material, is projected to increase significantly over just the next few years in all three regions. In addition, there is increasing demand by steelmakers using BOFs who are maximizing the use of scrap to reduce the higher carbon footprint associated with their steelmaking process. In summary, both near-term and longer-term trends are supporting higher demand for recycled metal products, and pricing peaks and troughs continue to reflect higher levels than we have seen in the past decade. Let's turn now to slide nine to review the strategic actions we have underway which are aligned with these long cycle trends. Our strategic priorities can be summarized in four buckets. Technology investments in advanced metal recovery systems at our major recycling operations to enable us to extract more non-ferrous metals, including copper and aluminum, from our shredding activities. Ferrous volume growth with a fiscal 23 target of 5.3 million tons representing an average annual 4% increase from our fiscal 19 baseline. Expansion of our products and services to meet the evolving demand for recycled metals, such as our green steel launch and the reverse logistics services we provide to manufacturers and retailers. And lastly, productivity initiatives that we undertake as part of our continuous improvement culture, where our focus is on efficiencies in processing, procurement, and pricing. to offset the inflationary environment that we are all experiencing. As you can see on this slide, we have been making significant progress in all four areas. We are on track to reach our goals, which, in aggregate, once completed, are expected to expand our EBITDA per fairest ton margins by approximately $17 per ton. So, now, let me turn it over to Richard for a more detailed review of our financial and operating performance.