Schnitzer Steel Industries : 2021 Q3 EarningsConference Call

NASDAQ:SCHN

Financial Results

Third Quarter Fiscal 2021

June 30, 2021

Recycling Today for a Sustainable Tomorrow

Safe Harbor

Statements and information included in this presentation by Schnitzer Steel Industries, Inc. that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Except as noted herein or as the context may otherwise require, all references to "we," "our," "us," "the Company," and "SSI" refer to Schnitzer Steel Industries, Inc. and its consolidated subsidiaries. Forward-looking statements in this presentation include statements regarding future events or our expectations, intentions, beliefs and strategies regarding the future, which may include statements regarding the impact of pandemics, epidemics or other public health emergencies, such as the coronavirus disease 2019 ("COVID-19") pandemic; the impact of equipment upgrades, equipment failures and facility damage on production, including timing of repairs and resumption of operations; the Company's outlook, growth initiatives or expected results or objectives, including pricing, margins, sales volumes and profitability; liquidity positions; our ability to generate cash from continuing operations; trends, cyclicality and changes in the markets we sell into; strategic direction or goals; targets; changes to manufacturing and production processes; the realization of insurance recoveries; the realization of deferred tax assets; planned capital expenditures; the cost of and the status of any agreements or actions related to our compliance with environmental and other laws; expected tax rates, deductions and credits; the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; the potential impact of adopting new accounting pronouncements; the impact of labor shortages or increased labor costs; obligations under our retirement plans; benefits, savings or additional costs from business realignment, cost containment and productivity improvement programs; and the adequacy of accruals. Forward-looking statements by their nature address matters that are, to different degrees, uncertain, and often contain words such as "outlook," "target," "aim," "believes," "expects," "anticipates," "intends," "assumes," "estimates," "evaluates," "may," "will," "should," "could," "opinions," "forecasts," "projects," "plans," "future," "forward," "potential," "probable," and similar expressions. However, the absence of these words or similar expressions does not mean that a statement is not forward-looking.

We may make other forward-looking statements from time to time, including in reports filed with the Securities and Exchange Commission, press releases, presentations and on public conference calls. All forward-looking statements we make are based on information available to us at the time the statements are made, and we assume no obligation to update any forward-looking statements, except as may be required by law. Our business is subject to the effects of changes in domestic and global economic conditions and a number of other risks and uncertainties that could cause actual results to differ materially from those included in, or implied by, such forward-looking statements. Some of these risks and uncertainties are discussed in "Item 1A. Risk Factors" of Part I of our most recent Annual Report on Form 10-K, as supplemented by our subsequently filed Quarterly Reports on Form 10-Q. Examples of these risks include: the impact of pandemics, epidemics or other public health emergencies, such as the COVID-19 pandemic; the impact of equipment upgrades, equipment failures and facility damage on production; potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the cyclicality and impact of general economic conditions; changing conditions in global markets including the impact of sanctions and tariffs, quotas and other trade actions and import restrictions; volatile supply and demand conditions affecting prices and volumes in the markets for raw materials and other inputs we purchase; significant decreases in scrap metal prices; imbalances in supply and demand conditions in the global steel industry; reliance on third party shipping companies, including with respect to freight rates and the availability of transportation; inability to obtain or renew business licenses and permits; the impact of goodwill impairment charges; the impact of long- lived asset and equity investment impairment charges; failure to realize or delays in realizing expected benefits from investments in processing and manufacturing technology improvements; inability to achieve or sustain the benefits from productivity, cost savings and restructuring initiatives; inability to renew facility leases; difficulties associated with acquisitions and integration of acquired businesses; customer fulfillment of their contractual obligations; increases in the relative value of the U.S. dollar; the impact of foreign currency fluctuations; potential limitations on our ability to access capital resources and existing credit facilities; restrictions on our business and financial covenants under the agreement governing our bank credit facilities; the impact of consolidation in the steel industry; product liability claims; the impact of legal proceedings and legal compliance; the adverse impact of climate change; the impact of not realizing deferred tax assets; the impact of tax increases and changes in tax rules; the impact of property tax increases or property tax rate changes; the impact of one or more cybersecurity incidents; environmental compliance costs and potential environmental liabilities; compliance with climate change and greenhouse gas emission laws and regulations; the impact of labor shortages or increased labor costs; reliance on employees subject to collective bargaining agreements; and the impact of the underfunded status of multiemployer plans in which we participate.

NON-GAAP FINANCIAL MEASURES

This presentation contains certain non-GAAP financial measures as defined under SEC rules. Reconciliations of the non-GAAP financial measures contained in this presentation to the most directly comparable U.S. GAAP measure are provided in the Appendix. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the most directly comparable U.S. GAAP measures.

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Agenda

Review of 3Q21	Slide
Recycling Today for a Sustainable Tomorrow	4
Third Quarter Fiscal 2021 Highlights	5
Industry Trends
Metals & Finished Steel Market Price Trends	6
Drivers for Recycled Metals Demand	7
Strategic Initiatives
Strategic Actions for Continued Growth	8
Advanced Metal Recovery Technology Initiatives	9
Performance Trends
Market Dynamics	10-12
Strong Balance Sheet & Liquidity Position	13

Conclusion

Delivering Value Through the Cycle	14

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Recycling Today for a Sustainable Tomorrow

Environmental Benefits of Our Business Model(1)

4.3 million tons of	589 million pounds
ferrous scrap	of nonferrous scrap
metal recycled	metal recycled

	561 thousand tons of
	finished steel produced
	from recycled scrap
323 thousand	4.4 million recycled auto
end-of-life vehicles	parts sold retail from
purchased and recycled	end-of-life vehicles

(1) Last four quarters ended May 31, 2021

Our Multi-Year Sustainability Goals

People

Achieve a 1.00 total case incident

rate by end of FY25

Donate at least 10,000 hours

of paid volunteer time off for employees by end of FY25

Planet

Reduce absolute GHG emissions from recycling operations 25% by end of FY25

Enhanced Goal: Achieve 100% net carbon-free electricity use by FY22

Profit

Targeting operating income benefits of

$15 per ferrous ton using sustainability-basedinitiatives

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Third Quarter Fiscal 2021 Highlights

Best Financial Results

in Over a Decade

Delivered Outstanding Operating Performance

Progress on Strategic

Initiatives

• Adjusted EBITDA of $97 million, representing best quarterly performance since 4Q08
• Adjusted EPS of $2.20, an increase of 46% compared to 2Q21
• Adjusted EBITDA per ferrous ton of $80, up 10% sequentially
• Strong sequential improvement in sales volumes, with ferrous up 24%, nonferrous up 15% and finished steel up 12%
• One Schnitzer operating platform has solidified productivity improvements
• Production ramp-up well underway on two major advanced metal recovery systems commissioned in the third quarter
• Construction well progressed on two additional systems and five others in engineering or permitting; targeting completion by end of CY21

	3Q21	2Q21	3Q20
Adjusted EPS from Cont. Operations	$2.20	$1.51	$0.05
Adjusted EBITDA ($ millions)	$97	$71	$19
Adjusted EBITDA per Ferrous Ton	$80	$73	$20

	3Q21	2Q21	3Q20
Ferrous Sales Volumes (000s LT)	1,215	977	927
Nonferrous Sales Volumes (M Lbs)	156	136	123
Finished Steel Sales Volumes (000s ST)	153	136	124

Note: For a reconciliation to U.S. GAAP of adjusted earnings per share from continuing operations, adjusted EBITDA and adjusted EBITDA per ferrous ton, see appendix.	5