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Radius Recycling Inc. has reported a net loss of $199 million in its 2024 fiscal year third quarter, which ran from March 1 to May 31.
The operator of a network of more than 50 scrap yards, about a half-dozen auto shredders, one electric arc furnace (EAF) steel mill and about 50 auto salvage locations, says its quarterly loss was due primarily to a noncash goodwill impairment charge reflecting the challenging market conditions for recycled metals experienced during the last year.
The $199 million net loss in its third quarter results in a loss from continuing operations of $6.97 per share. The results include a goodwill impairment charge of $216 million, or $6.21 per share.
In its previous financial quarter covering December 2023 and the first two months of this year, Radius reported a net loss of $34 million and a loss per share of $1.19.
The Portland, Oregon-based company says the $9 million adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) garnered in its most recent quarter was an improvement from $3 million in the prior quarter.
“The sequential improvement reflected higher nonferrous and ferrous sales volumes, benefits from cost reduction and productivity improvements, and higher insurance recoveries, partially offset by lower ferrous selling prices and compressed metal spreads resulting from continuing tight ferrous supply flows,” Radius says.
“Nonferrous and ferrous market conditions reflected diverging trends in the third quarter. Global demand for nonferrous recycled metals strengthened throughout the quarter, leading to a 10 percent sequential increase in average net selling prices and 4 percent higher sales volumes. However, global demand for ferrous recycled metals was softer sequentially, due in part to continued elevated levels of Chinese steel exports, which led to a 9 percent decline in average net selling prices.”
When steel made in Chinese blast furnaces and made with iron ore is exported to China’s numerous trading partners, it frequently replaces steel made in recycled-content furnaces in other nations, thus suppressing the ferrous scrap market.
“Ferrous sales volumes increased 13 percent sequentially, benefiting from seasonally higher flows and the sales of cargoes delayed at the end of the prior quarter,” Radius says, despite difficulties in the steel and recycled steel sectors.
At its EAF mill in Portland, Radius cites seasonally stronger construction activity as responsible for finished steel sales volumes that increased 11 percent sequentially, and a rolling mill utilization rate of 88 percent compared to 81 percent in the prior quarter.
“Although market conditions continued to remain challenging during the quarter, our operating performance reflected the benefits from delivering our cost reduction and productivity improvement programs and successfully increasing sales volumes for all of our products and services,” Radius CEO Tamara Lundgren says.
“In the current market environment, the constrained supply of unprocessed recycled metals is the main driver leading to compressed margins,” adds Lundgren, whose company operates metals recycling facilities located predominantly on the U.S. Pacific Coast and the Northeast, although it also has a presence in the Southeast.
“We expect that as manufacturing activity improves and construction activity picks up, supply flows should expand,” Lundgren says. “Independent of the timing of that recovery, we are continuing to see benefits from progress on our strategic initiatives which include investments in advanced nonferrous metal recovery technologies and expansion of our recycling services platform.
“With our 100-plus operating facilities producing annual recycled ferrous volumes of over 4 million tons, nonferrous volumes of over 700 million pounds (350,000 tons) [and a] service and supply chain solution that enables our customers to increase their recycling rates, we are well positioned to benefit from demand associated with decarbonization, infrastructure investment, stronger global manufacturing activity and declines in interest rates.”
Because of the decline in ferrous prices during the quarter, metal spreads compressed and contributed to an average inventory accounting detriment of approximately $3 per ferrous ton, the company says of its position in the ferrous market and its resulting goodwill charge.
