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On Thursday, Schnitzer Steel Industries, Inc. Class A (NASDAQ:SCHN) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Timna Tanners – Bank of America Merrill Lynch: I’ve tried to listen carefully to everything that you said, and I appreciate that market conditions are somewhat challenging. I guess, I’m just stuck and I want to look specifically on scrap EBIT per ton, so the MRB division, and we’re still talking about average first three quarters of the year being in the low teens versus average last year being more than double that, and so that’s still including the fact that you bought these (indiscernible) yards, your non-ferrous business is up and exports are strong, so I mean there were certainly uncertainty at the end of last year as well, and I’m wondering is there something more that’s going on here, how much of this is structural, how much of this is maybe greater tonnages in the North American scrap side of the equation rather than the export demand?
Tamara Lundgren – President and CEO: There are a lot of questions embedded in there. Let me see if I could recall it. So, first of all, you made the reference to structural, and we don’t see that as long term, and last year we were working in a rising price environment, and this year in our fiscal year, a lot seems to line up with global financial crisis, whether that’s the fall of ’08 or the fall of 2011. So the beginning of our fiscal year began with a significant fall in price environment, so that’s really the big difference between what was going on last year, and what was going on this year, but after structural part of your question, we are still selling into markets that continue to grow and this is a cyclical business. The current pricing weakness is due to different reasons, I think, in different markets whether you’re looking at domestic or exports, but I think the one common reason is global uncertainty.
Timna Tanners – Bank of America Merrill Lynch: But if I look at your scrap prices last year, yeah, you’re right on a calendar – on a fiscal year basis, this yeah has been particularly challenging, but there has been times in your history where prices have fallen and there haven’t been that much variation this year in the scrap price. So, you make the point that you haven’t been able to go back to your – to be able to cut your price at the Yard as quickly as you are having to cut prices, so isn’t there something going in that domestic scrap industry that hasn’t enabled you to maintain your margins as well as you have in the past?
Tamara Lundgren – President and CEO: Well, if you look back in the past sort of 6th and 7th, big difference between that environment and this environment is the lower growth U.S. GDP environment and what you see in today’s market is purchase prices are more sticky than they were in a higher GDP growth environment because the absolute scrap pool is affected by lower consumer spending. People hold on to their cars and their (finances) longer. So you don’t see the same elasticity in the scrap supply and in purchase prices, as you did in higher U.S. GDP growth environment.
Timna Tanners – Bank of America Merrill Lynch: I’ll shift gears and ask an easier question and I’ll hand the call off but if I could we are seeing a strange divergence between scrap prices in last couple of months sharply down globally, and yet iron ore price is much more stable. What are you seeing to make you believe that scrap prices will stabilize?
Tamara Lundgren – President and CEO: Well, we are seeing that in the market right now, is that we are seeing goof demand in Turkey. We are seeing China in the market, we are seeing Southeast Asia in the market and if you look at the reported prices you can see some price stabilization.
SG&A Cost Reduction
Philip Gibbs – KeyBanc Capital Markets: Good job on the SG&A cost reduction — it looked like you’d come down another $2 million sequentially or how much more momentum are we expecting here going forward.
Tamara Lundgren – President and CEO: Well, we’ve got good momentum going forward as we leverage our infrastructure across all three of our divisions and shared services. All three of our operating divisions and shared services. Where I see some benefits going forward is in the increased focus we have got on driving synergies between our MRB and APB platforms across our buying processing and selling activities. So, we still got a high focus on that.
Philip Gibbs – KeyBanc Capital Markets: Can you talk a little bit about the integration of Western Canada and any view on when you may implement another shredder up in Vancouver?
Tamara Lundgren – President and CEO: Sure. That shredder is in Canada is currently being constructed and the acquisitions that we did last year are showing benefits in terms of volumes and we are anticipating to see increased benefits from Canada once that shredder is up and running and we’re in the middle of construction on that right now.
Philip Gibbs – KeyBanc Capital Markets: Just lastly if I could hear, what is your view of the recent listing on Russia’s scrap ferrous and have any of your conversations with customers been focused on that or has that issue come up?
Tamara Lundgren – President and CEO: We haven’t seen much of an impact from the Russia scrap export listing of their bands. Our perspective is we believe in free trade and fair trade, but we haven’t seen any real impact from the Russia activity.
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