Schnitzer Steel Industries : 2023 Q1 EarningsConference Call

NASDAQ:SCHN

Financial Results

First Quarter FiscalYear 2023

January 5, 2023

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 in this presentation 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 equipment upgrades, equipment failures, and facility damage on production, including timing of repairs and resumption of operations; the realization of insurance recoveries; the impact of pandemics, epidemics, or other public health emergencies, such as the coronavirus disease 2019 ("COVID-19") pandemic; the Company's outlook, growth initiatives, or expected results or objectives, including pricing, margins, sales volumes, and profitability; completion of acquisitions and integration of acquired businesses; the impacts of supply chain disruptions, inflation, and rising interest rates; 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 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 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; the potential impact of adopting new accounting pronouncements; 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. Examples of these risks include: potential environmental cleanup costs related to the Portland Harbor Superfund site or other locations; the impact of equipment upgrades, equipment failures, and facility damage on production; failure to realize or delays in realizing expected benefits from capital projects, including investments in processing and manufacturing technology improvements; the cyclicality and impact of general economic conditions; the impact of inflation, rising interest rates, and foreign currency fluctuations; changing conditions in global markets including the impact of sanctions and tariffs, quotas, and other trade actions and import restrictions; increases in the relative value of the U.S. dollar; economic and geopolitical instability including as a result of military conflict; volatile supply and demand conditions affecting prices and volumes in the markets for raw materials and other inputs we purchase; significant decreases in recycled metal prices; imbalances in supply and demand conditions in the global steel industry; difficulties associated with acquisitions and integration of acquired businesses; supply chain disruptions; reliance on third-party shipping companies, including with respect to freight rates and the availability of transportation; the impact of goodwill impairment charges; the impact of long-lived asset and equity investment impairment charges; the impact of pandemics, epidemics, or other public health emergencies, such as the COVID-19 pandemic; inability to achieve or sustain the benefits from productivity, cost savings and restructuring initiatives; inability to renew facility leases; customer fulfillment of their contractual obligations; 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 one or more cybersecurity incidents; translation risks associated with fluctuation in foreign exchange rates; inability to obtain or renew business licenses and permits; environmental compliance costs and potential environmental liabilities; increased environmental regulations and enforcement; 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 First Quarter Fiscal 2023

Recycling Today for a Sustainable Tomorrow	4
First Quarter Fiscal 2023 Highlights	5

Industry Trends

Recycled Metals & Finished Steel Market Price Trends	6
Strong Long-Term Drivers for Recycled Metals Demand	7

Strategic Initiatives

Strategic Actions for Continued Growth

8

Performance Trends

Recycled Metals Market Dynamics	9-10
Advanced Metal Recovery Technology Initiatives	11
Finished Steel Market Dynamics	12
Balance Sheet & Liquidity Position	13

Summary

FY23 Strategic Priorities

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Recycling Today for a Sustainable Tomorrow

FY22 ESG Highlights

• 90% of facilities free of any lost time injuries and the second- best safety performance in Company's history
• Increased employee participation in retirement benefits program by 15%
• More than 50% female directors on the Board of Directors
• Achieved 100% net carbon-free electricity use across operations for second consecutive year
• Reduced Scope 1 and 2 greenhouse gas emissions from recycling operations by 24% against the 2019 baseline
• Deployed an ISO Certified Environmental Management System
• Launched GRN SteelTM, a line of net zero carbon emissions steel products
• Achieved second-best fiscal year earnings in Company's history
• Added 10 new operating locations through acquisitions in the southeastern U.S., including first metals shredding operation in the region

Our Fiscal 2022 Sustainability Report can be found here	4

First Quarter Fiscal 2023 Highlights
	 Adjusted EBITDA of $8 million, adjusted EBITDA per ferrous ton of $10
	• Demand weakened throughout the quarter, influenced by global economic concerns and
	steel inventory destocking
Performance	• Results reflect an estimated adverse impact of $18 million or $21 per ferrous ton from
extended operational disruptions at the Everett and Oakland metals recycling facilities
that were resolved in November
	• Average net selling prices for ferrous, nonferrous, and finished steel prices decreased
	sequentially by 12%, 14% and 9%, respectively, leading to a compression in metal spreads
Operational	 Ferrous and nonferrous sales volumes decreased 33% and 12% sequentially
 Finished steel sales volumes decreased by 6% sequentially
	• Tighter supply flows in lower price environment
	• Sales volumes in Q1 impacted by operational disruptions and several ferrous shipments
	slipping into December
&	• Reflects normal seasonality and product mix
Financial	 Increased productivity improvements' annual benefit target from $40
	million to $60 million to mitigate inflationary pressure
	 Continued focus on strategic volume growth initiatives
	• Began the commissioning of two advanced nonferrous recovery technology systems in
	Massachusetts and California
	• Acquired ScrapSource, a recycling services business based in Texas
Note: For a reconciliation to U.S. GAAP of adjusted EBITDA and adjusted EBITDA per ferrous ton, see appendix.	5