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An In-Depth Look at Icahn Enterprises' Segments and Strategies

PART:
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Part 13
An In-Depth Look at Icahn Enterprises' Segments and Strategies PART 13 OF 15

What’s Icahn’s Metals Segment’s Strategy to Combat Losses?

About Icahn’s metals segment

In 2015, Icahn Enterprises’ (IEP) metals segment contributed approximately 2.4% to its total revenue, with an operating loss of 8%.

What&#8217;s Icahn&#8217;s Metals Segment&#8217;s Strategy to Combat Losses?

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IEP’s metals segment’s sales have fallen at a CAGR (compound annual growth rate) of 38% since 2012. The main reasons for the sales fall were lower shipment volumes and selling prices in both the ferrous and nonferrous scrap businesses.

Volumes in the ferrous scrap business have fallen at a CAGR of 23% since 2013. Volumes in the nonferrous scrap business have fallen at a CAGR of 28% since 2013. The metals segment’s revenue fell primarily on account of low iron ore prices, the strong US dollar, and increased steel imports.

The metals segment’s strategy

PSC Metals’ strategy to increase its competitive position in existing markets is as follows:

  • lower cost structure
  • focus on widening materials margin by improving buying practices
  • invest in shredders and downstream equipment
  • expand nonferrous business through both organic growth and acquisitions

In 2015, revenues of major metal recycling players across the globe were affected by weak commodity prices and competitive markets. Commercial Metals Company’s (CMC), Schnitzer Steel Industries’ (SCHN), Steel Dynamics’ (STLD), and Nucor’s (NUE) revenues fell 12%, 24%, 13%, and 22%, respectively, compared to 2014.

IEP’s stock fell 33% year-to-date compared to the 1% fall in the SPDR S&P 500 ETF (SPY).

Now let’s analyze Icahn’s real estate segment along with the US real estate market.

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