Schnitzer Steel Industries, Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Smith & Steele's third quarter 2023 earnings release conference call and webcast. At this time, all participants are on a listen-only mode. After this week's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automatic message advising your hand is raised. Please note that today's conference may be recorded. I will now hand the conference over to your speaker host. Michael Bennett of Investor Relations. Please go ahead.

Thank you, Livia, and good morning. I am Michael Bennett, the company's Vice President of Investor Relations. I am happy to welcome you to Schnitzer Steel's earnings presentation for the third 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 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 10-Q, 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'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 Stefano Guggini, our Chief Financial Officer.

Thank you, Michael. Good morning, everyone, and welcome to our fiscal 23 third quarter earnings call. Before we begin, I'd like to take a moment to thank our team for the progress they've made in deploying our advanced metal recovery technology systems. This quarter, our results include a significant contribution from the systems commission to date, both in terms of the increase in non-ferrous volumes as well as in the production of higher value recycled metals. Today on our call, I'll review our quarterly financial results, the trends affecting our business, and progress on the strategic activities we have underway to address evolving 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. So let's turn now to slide four to get started. Earlier this morning, we announced our results for our fiscal 23 third quarter, which reflected adjusted EPS of 67 cents and adjusted EBITDA of $56 million. Our adjusted EBITDA per fares ton almost doubled versus the second quarter. We also continued our uninterrupted record of returning capital to our shareholders through the issuance of our 117th consecutive quarterly dividends. Sales volumes in the quarter benefited from seasonality, customer inventory restocking, and higher production in both recycling and steel manufacturing. Our sequential non-ferrous and finished steel sales volume dropped 26% and 30% respectively. Our ferrous sales volumes were down 8% sequentially, primarily due to the timing of shipments that benefited the second quarter. Supply flows improved seasonally but remained tighter than a year ago. So let's turn now to slide five for a review of market conditions. Coming into the third quarter, demand for recycled metals was strong, driven by improved global steel demand and inventory restocking. As the chart in the upper left corner of this slide indicates, however, ferrous export prices softened during the quarter as global steel demand weakened. By the end of the quarter, fares prices had decreased about 16% from their March highs. U.S. domestic prices lagged the fall in export prices, but have converged since the end of the quarter. Turkey's lower demand during the quarter was driven by lower steel production, elevated input costs, and economic uncertainty leading up to their presidential election in May. An increase in Chinese steel export volumes also impacted Turkey's steel demand. Asia's weaker demand during the quarter was similarly impacted by higher Chinese steel exports and a slower than expected economic recovery in China, which dampened market activity. Since the end of the quarter, ferrous export demand off the East Coast has shown a slight upward bias. Ferrous export prices to Turkey reflect continued tight supply in the global deep sea market, an increase in demand for July shipments against lower than normal June scrap import volumes, and less political uncertainty. Turkey's need for 5 million tons of steel to support rebuilding efforts in the Iskandarian region implies a need for around 6 million tons of ferrous scrap. We expect that even accounting for Turkish domestic scrap generated by earthquake cleanup activities, Turkey's scrap imports should rise materially to meet this need. In the Asian markets, ferrous prices since the end of Q3 have also stabilized, driven by expectations of Chinese increased fiscal stimulus and reduced steel exports, stronger demand in South Asia, and slower seasonal scrap generation in the region. Turning to non-ferrous, coming into the third quarter, we saw stronger demand for non-ferrous products globally, including from restocking and the lifting of China's COVID lockdowns. And similar to the ferrous market, prices for non-ferrous weakened during the quarter as the slower economic activity in China impacted non-ferrous metal consumers in Southeast Asia and India. Since the end of the quarter, prices have continued to soften a bit due to seasonally slower industrial activity. Turning to finished steel. While demand and prices came off their near record highs, metal spreads remained robust during Q3. Although higher interest rates and tighter credit conditions could lead to softer demand, there are several offsetting trends, including demand supported by the US infrastructure bill and the Buy America and Buy Clean directives. Our Oregon steel mill, with its range of low carbon long products, including our net zero carbon emission green steel product line, is well positioned to meet this rising demand. Let's turn now to slide six to review the longer term outlook for recycled metals. Decarbonization is a powerful structural driver of demand for recycled metals, which require less carbon to produce than mine metals. Many low carbon technologies are widely acknowledged to be more metal intensive. As a result, the structural demand for recycled metals remains very positive, supported by the increased focus on decarbonization and the transition to low carbon technologies, the anticipated structural deficits for copper and nickel, and the increased demand from manufacturers and retailers to maximize their use of recycled materials and reduce the environmental impact of their activities. We can see how some of these trends have already been translated into higher ferrous scrap metal usage by looking at the chart on this slide. Electric arc furnace steelmaking capacity, which uses ferrous scrap as its primary raw material, has been expanding and is projected to increase further. Aligned with these structural trends, we continue to focus on providing products and services that meet this demand, such as our green steel products and our 3PR services. Our 3PR brand reflects a rapidly growing service and supply chain solution for our customers, enabling greater recycling rates, reductions in material going to landfill, an improved carbon footprint, and enhanced sustainability reporting. Turning now to slide seven. As we often say, sustainability is at the core of what we do and how we operate and has been since our founding in 1906. This quarter, we were honored to be named as one of Time 100's most influential companies. Our inclusion on this list reflects the contribution of all of our employees who are leading the way in providing solutions to companies, governments, and communities focused on carbon reduction and committed to supporting a circular economy. As a 117-year-old company with roots in the old economy, this recognition is a great example of how sustainability principles can be successfully and profitably applied to industrial companies. I encourage you to visit our website to view our latest sustainability report, which describes in more detail our multi-year people, planet, and profit goals that underpin our sustainability framework. So let's turn now to slide eight 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. Our third quarter results reflect meaningful progress and benefits from our strategic priorities. These 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. These systems enable us to extract more non-ferrous metals from our shredding activities, increase throughput and improve our margins, expand our product offerings and customer base, and reduce materials going to landfills. As Stefano will describe in more detail, this quarter's results reflect a significant contribution from the systems commission to date. Second, volume growth. We are highly focused on increasing our Ferris and non-Ferris volumes through a combination of organic growth and recent acquisitions. Our multi-year focus on this strategic priority has led to an annual 6% volume growth rate between fiscal 16 and fiscal 22. On a year-over-year basis, our non-Ferris sales volumes are up over 8% driven by higher purchase non-ferrous materials and the ramp up of advanced recovery technologies. While our year-over-year ferrous growth rate in fiscal 23 is relatively flat, we expect the customer and product initiatives we have underway to drive future volume growth. Third, expansion of our products and services to meet the increasing demand for recycled metals. Examples include our green steel products and the 3PR services we provide to manufacturers and retailers. And fourth, productivity initiatives that we undertake as part of our continuous improvement culture. These initiatives are particularly important in the face of inflationary pressures. In Q3, we achieved the full run rate of benefits from the productivity initiatives that we announced earlier in this fiscal year. So now, let me turn it over to Stefano for a more detailed review of our financial and operating performance. Stefano?