First Quarter 2012 Net Income Increased 51% to $46 Million, Compared to Fourth Quarter 2011
FORT WAYNE, INDIANA, April 18, 2012 / PRNewswire / Steel
Dynamics, Inc. (NASDAQ/GS: STLD) today announced first quarter net
income of $46 million, or $0.20 per diluted share, on net sales of $2.0
billion. First quarter 2012 earnings were reduced by approximately $0.03
per diluted share, representing financing costs of $14 million
associated with the company’s January refinancing activities, offset by
associated interest cost savings of $3 million. By comparison, prior
year first quarter net income was $106 million, or $0.46 per diluted
share and sequential fourth quarter 2011 net income was $30 million, or
$0.14 per diluted share.
“We were able to achieve sequential quarterly financial improvement
in all of our major operating platforms during the first quarter,” said
President and Chief Executive Officer Mark Millett. “If you add back the
net expense related to our January financing activities, earnings would
have been $0.23 per diluted share. Given the mid-quarter disruption in
the flat roll markets, we believe this was a solid performance achieved
by all of our employees. The good news remains that demand in certain
market sectors continues to be steady and flat roll order entry has
regained momentum from mid-quarter levels.
“Additionally, operations at our Engineered Bar Products Division
were interrupted during the first quarter due to the unexpected duration
of a maintenance outage, which reduced first quarter volume by about
16,000 tons, “ stated Millett. “However, operations are back online and
demand remains steady with strong order backlogs for special bar quality
(SBQ) products. The announced SBQ capacity expansion is proceeding as
planned and expectations of a second-half 2013 start date remain.”
First Quarter Review
Aside from metals recycling, first quarter volumes in each of the
company’s operating segments decreased when compared to the fourth
quarter of 2011, while consolidated operating income increased 45
percent. The increase in sequential quarterly operating income was
primarily the result of improvements in steel and metals recycling
margins. Despite decreased volumes, earnings from flat roll operations
increased 22 percent, as increases in selling prices in the beginning of
the quarter were greater than corresponding increases in the cost of
raw materials, resulting in margin expansion. Flat roll earnings were
nonetheless tempered by mid-quarter price reductions resulting from
increased supply brought about by additional domestic flat roll
production capacity and increased import activity.
Likewise, operating income from long product operations increased 17
percent, with the company’s Structural and Rail Division achieving the
largest increase. Rail shipments increased from 8 percent of the mill’s
product mix in the fourth quarter of 2011 to 13 percent in the first
quarter of 2012.
First quarter margins for the combined steel operations expanded in
comparison to prior year fourth quarter results. The average selling
price per ton shipped increased $22 per ton to $875, and the average
ferrous scrap cost per ton melted increased $10.
As is typical in the first quarter of the year, metals recycling
volumes increased meaningfully when compared to the fourth quarter of
2011. Operating income for OmniSource was $25 million in the first
quarter of 2012, an increase of $9 million compared to the fourth
quarter of 2011. Non-cash unrealized hedging gains were $2 million in
the first quarter of 2012, as compared to losses of $3 million in the
fourth quarter of 2011.
The impact of losses from the company’s Minnesota operations on first
quarter 2012 consolidated net income was $10 million (net of tax), or
approximately $0.04 per diluted share, as compared to $7 million for the
first quarter of 2011 and $10 million for the fourth quarter of 2011.
First quarter 2012 financial results were consistent with those recorded
for the fourth quarter; however, shipments decreased 6,700 metric tons
to 46,200 metric tons. Decreased off-gas capacity led to the reduced
volume in the first quarter. The company plans to address this and
certain other mechanical issues during a four week outage, which began
April 13, 2012. The focus of the outage is to improve both product
quality and production levels. The impact to second quarter earnings
from Minnesota operations is currently expected to be similar to those
recorded in the first quarter of 2012. Construction of the company’s
iron concentrate joint venture in Minnesota is proceeding as planned
with continued expectations of a third quarter start date.
The company’s liquidity position remains strong with $1.5 billion in
unrestricted cash, short-term commercial paper and available funding
under the revolving credit facility at March 31, 2012. In January, the
company refinanced $280 million of the $700 million in senior notes due
November 2012, extending the maturity for a substantial portion of the
refinanced amount to September 2016.
First Quarter 2011 Comparison
In comparison to prior year, first quarter 2012 steel shipping
volumes were generally flat; although the product mix differed
significantly as flat roll shipments decreased 107,200 tons compared to
the prior year first quarter and long products shipments, most notably
for our Structural and Rail Division, increased 104,000 tons. In
addition, metals recycling and fabrication volumes improved.
Although 2012 first quarter net sales of $2.0 billion were consistent
with those achieved in the prior year first quarter, operating income
decreased 42 percent, as margins decreased within the company’s flat
roll steel and metals recycling operations. The average selling price
per ton shipped for the company’s steel operations in the first quarter
of 2012 was $875, a decrease of $15 per ton compared to the prior year
quarter. The average quarterly ferrous scrap cost per ton melted
increased $18 for the same comparative period.
Outlook
“Looking forward,” Millett said, “as we have stated previously,
despite continued uncertainty within the U.S. and global economies, we
believe there is the possibility for more stability to develop in 2012
as improvements continue in certain market sectors, such as energy,
agriculture, automotive, transportation and construction equipment. If
the U.S. economy continues a pattern of slow and steady growth during
the year, steel demand should logically follow. We remain confident that
with our exceptional team, coupled with our superior, low-cost
operating culture, we are uniquely prepared to capitalize on the
opportunities ahead.
Additionally, we are excited at the longer-term prospects offered by
our future expansion in SBQ product diversification and capacity. We
also continue to move forward in our mission to provide our own iron
concentrate to our Mesabi Nugget ironmaking plant, which should
eliminate the need for third party purchases and reduce our overall
costs significantly.”
Summary First Quarter Operating Information
The following tables highlight operating results for each of the
company’s three primary operating platforms. References to segment
operating income in the following paragraphs exclude profit-sharing
costs and amortization pertaining to intangible assets. Dollar amounts
are in thousands, excluding per ton data.
Steel Operations
This segment includes five electric-arc-furnace steel mills and
related steel finishing and processing facilities, including The Techs.
The company’s steel operations produce flat-rolled steel, structural
steel, merchant bars, special-bar-quality steel, rebar, rail, and
specialty shapes.
Metals Recycling and Ferrous Resources
This segment principally includes the company’s metals recycling
operations (OmniSource Corporation), a liquid pig iron production
facility (Iron Dynamics), and the company’s Minnesota operations, which
currently primarily includes an iron nugget manufacturing facility
(Mesabi Nugget, which is 81 percent company-owned).
Steel Fabrication Operations
Steel fabrication operations include New Millennium Building Systems,
which fabricates steel joists, trusses, and decking used in the
construction of non-residential buildings.
About Steel Dynamics, Inc.
Steel Dynamics, Inc. is one of the largest domestic steel producers
and metals recyclers in the United States based on estimated annual
steelmaking and metals recycling capability, with annual sales of $8.0
billion in 2011, over 6,500 employees, and manufacturing facilities
primarily located throughout the United States (including five steel
mills, six steel processing facilities, two iron production facilities,
over 70 metals recycling locations and six steel fabrication plants).
Forward Looking Statements
More specifically, we refer you to SDI’s more detailed explanation of
these and other factors and risks that may cause such predictive
statements to turn out differently, as set forth in our most recent
Annual Report on Form 10-K, in our quarterly reports on Form 10-Q or in
other reports which we from time to time file with the Securities and
Exchange Commission. These are available publicly on the SEC Web site, www.sec.gov, and on the Steel Dynamics Web site, www.steeldynamics.com.
Conference Call and Webcast
On Thursday, April 19, 2012, at 10:00 a.m. Eastern time, Steel Dynamics
will host a conference call with investors and analysts to discuss the
company’s first quarter operating and financial results. We invite you
to listen to the live audiocast of the conference call accessible from
our website (http://steeldynamics.com)
, or via telephone (the conference call number may also be obtained on
our website). A replay of the discussion will be available on our
website following the conclusion of the conference call.
Contact: Theresa E. Wagler, Executive Vice President and Chief Financial Officer— +1.260.969.3500 |