Financial Data and Key Metrics Changes - The company reported an adjusted EBITDA of $1 million and an adjusted EPS loss of $0.64 for Q1 2024, reflecting challenging market conditions for recycled metals due to lower manufacturing activity and scrap generation in the U.S. [1][17] - Realized prices for recycled metals declined, with average ferrous and non-ferrous net selling prices down sequentially by 1% and 3%, respectively, while PGM prices decreased by 11%, reaching their lowest level in five years [17][18]. - The contribution from the steel mill remained significant but was down sequentially due to seasonally lower finished steel sales volumes, although year-over-year sales volumes were up 10% [19][42]. Business Line Data and Key Metrics Changes - Ferrous sales volumes increased by 10% year-over-year, driven by healthy demand from non-residential construction in the West Coast markets, despite a sequential decline due to normal seasonality [8][42]. - Non-ferrous sales volumes were up 12% year-over-year, attributed to new metal recovery technology investments and a fiscal '23 acquisition [14][33]. - The share of domestic ferrous shipments was 46%, with top export destinations for ferrous being Turkey, Bangladesh, and India [13]. Market Data and Key Metrics Changes - U.S. domestic ferrous prices were somewhat flat during the first two months of the quarter, impacted by the resolved UAW strike and overall low utilization rates [9]. - Finished steel market prices were down slightly due to normal seasonality, but an increase in activity is expected in 2024 related to U.S. infrastructure bills [10]. - The average age of vehicles on the road has reached record levels, leading to lower scrappage rates and constrained scrap generation [11]. Company Strategy and Development Direction - The company is investing in advanced technologies to increase recovery of non-ferrous metals and generate higher-value products [2]. - The focus remains on increasing ferrous and non-ferrous volumes in light of long-term demand drivers [2]. - The company is committed to ongoing productivity initiatives targeting annual benefits of $30 million, focusing on production cost reductions and operating efficiencies [20]. Management's Comments on Operating Environment and Future Outlook - Management noted that current market conditions are challenging but expressed confidence in navigating through volatility and tight scrap availability [28]. - There is an expectation of improved financial performance in Q2 due to rising ferrous and non-ferrous prices since mid-November [46][65]. - Long-term demand for recycled metals is driven by decarbonization and structural deficits for metals like copper and nickel [36]. Other Important Information - The company recognized $4 million in insurance recoveries related to a prior event at the Everett facility, down from $41 million in the previous quarter [12][72]. - Capital expenditures for Q1 were $25 million, with a projected total of $100 million for fiscal '24, focusing on growth projects and maintaining business operations [44]. Q&A Session Summary Question: What contributed to the sequential decline in EBITDA per ferrous ton? - Management indicated that the decline was primarily due to seasonally lower mill contributions and further compression of recycling metal spreads, with lower prices impacting both ferrous and non-ferrous metals [57]. Question: Will the improvement in flows and metal spreads contribute to better results? - Management confirmed that the expected improvement in results for Q2 is primarily driven by spread expansion due to rising prices, rather than improved flows, which are typically constrained in winter [66][70]. Question: What is the status of the insurance recovery related to the Everett facility? - The recovery recognized in the current quarter was associated with a fire at the Everett facility in December 2021, and management does not expect future recoveries to be as significant as previously recognized [76][78]. Question: How are freight dynamics impacting guidance? - Management noted that while there are challenges in the global seaborne freight market, the impact on Q1 results was not significant, and freight costs are generally passed through [86]. Question: Are there any planned outages in shredding facilities? - Management confirmed that there are no unplanned outages in shredding facilities, including the Everett facility [93].
Radius Recycling(RDUS) - 2024 Q1 - Earnings Call Transcript