FORT WAYNE, INDIANA, July 23, 2012 / PRNewswire / Steel Dynamics,
Inc. (NASDAQ/GS: STLD) today announced second quarter net income of $44
million, or $0.20 per diluted share, on net sales of $1.9 billion. By
comparison, prior year second quarter net income was $99 million, or
$0.43 per diluted share, on net sales of $2.1 billion and sequential
first quarter 2012 net income was $46 million, or $0.20 per diluted
share, on net sales of $2.0 billion. In the first half of 2012 net
income was $90 million, or $0.40 per diluted share, on net sales of $3.9
billion. By comparison, in the first half of 2011 net income was $205
million, or $0.89 per diluted share, on net sales of $4.1 billion.
“Overall steel demand remained steady in the second quarter with
volumes increasing about 5 percent,” said Chief Executive Officer Mark
Millett. “Stability in demand from the automotive, energy, construction
equipment and agricultural sectors supported volumes. However, decreases
in flat roll pricing related to both supply-side pressure caused by
increased imports and increased domestic capacity, resulted in somewhat
decreased margins as compared to both the first quarter of 2012 and
certainly the second quarter of 2011—a timeframe when historically high
margins were achieved.
“Our overall financial performance was commendable in this
environment which continues to be a challenge, “stated Millett. “During
the second quarter, we achieved stable sequential financial results in
our steel and fabrication operations. However, earnings from our metals
recycling operations were severely impacted as margins and volume fell.
The ferrous scrap market was oversupplied as the export market weakened
and demand decreased as U.S. steel mill utilization declined.”
Second Quarter Review
Aside from metals recycling and ferrous resources, second quarter
volumes in each of the company’s operating platforms increased when
compared to the sequential first quarter of 2012, while consolidated
operating income decreased $16 million, or 13 percent. The decrease in
sequential quarterly operating income was the result of weakness in both
ferrous and nonferrous recycled metal margins. Ferrous metals spreads
declined by approximately 10 percent in the second quarter 2012 compared
to the first quarter of the year. Copper volumes declined and margins
compressed as indexed copper prices decreased $0.33 per pound during the
second quarter. Operating income for OmniSource was $5 million in the
second quarter of 2012, a decrease of $20 million compared to the first
quarter of 2012.
The company’s steel operations overall second quarter margins and
operating income remained relatively consistent in comparison to first
quarter 2012 quarterly results. The average selling price per ton
shipped decreased $21 per ton to $854, and the average ferrous scrap
cost per ton melted decreased $22. There was a change in sequential
quarterly earnings mix as operating income attributable to sheet
operations increased 12 percent based mostly on volume increases and
long product operations decreased 10 percent based mostly on pricing
declines. However, in spite of continued non-residential construction
market weakness, the company’s fabrication operations reported positive
quarterly operating income for the first time since the first half of
2009, based on increased volumes and better utilization of manpower
brought on to support expanding backlogs.
The impact of losses from the company’s Minnesota operations on
second quarter 2012 consolidated net income was $11 million (net of
tax), or approximately $0.05 per diluted share, as compared to $8
million for the second quarter of 2011 and $10 million for the first
quarter of 2012. Additional maintenance expenses were incurred during a
planned five week outage in April and May 2012. The company made
numerous equipment modifications to improve the percentage of time the
plant is available to operate each month. After restarting, availability
for the month of June increased to just over 80 percent—a significant
improvement. This improvement supports the attainability of the target
rate for plant availability of over 90 percent. Operating rates, or
productivity, also showed improvement post outage. Operating at higher
rates for longer periods of time has allowed for the identification of a
number of key process optimization opportunities that are necessary for
further improvement in both productivity and product quality. The
company has identified several possible solutions which it is currently
evaluating and intends to implement within the next twelve months, based
on equipment delivery lead times and subsequent installation and
startup.
The company’s iron concentrate facility in Minnesota is on schedule
to begin supplying the nugget facility with lower-cost iron concentrate
later in the third quarter of 2012, although higher priced third-party
material remains in inventory for use through the remainder of the year.
If commercial pig iron prices (the index used to determine the nugget
sales price) do not decrease from current levels, second half 2012
losses associated with the company’s Minnesota operations could be
similar to those recorded in the first half of the year.
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 June 30, 2012.
2011 Comparison
Despite increased volume, first half 2012 net sales of $3.9 billion
were 5 percent less than those achieved in the first half of 2011 and
operating income decreased 43 percent, as margins decreased within the
company’s flat roll steel and metals recycling operations. During the
first half of 2011 the industry recorded historically high flat roll and
metals recycling margins which were not repeated during the first half
of this year. The average selling price per ton shipped for the
company’s steel operations in the first half of 2012 was $864, a
decrease of $54 per ton compared to the same period last year. The
average ferrous scrap cost per ton melted remained unchanged for the
same comparative period.
Outlook
“Looking ahead,” Millett said, “we anticipate continued demand in
such sectors as automotive, manufacturing, energy and construction
equipment, while transportation and agriculture appears to be tempering.
We believe order rates could be somewhat uneven throughout the third
quarter, as fluctuations in immediate product needs and hesitancy for
customers to carry inventory persists. Ferrous scrap pricing fell
further in July, which could further challenge our metals recycling
operations. We should see the benefit from these lower raw material
costs for our steel operations early in the third quarter, but if the
scrap market firms due to potential resumption in exports and mill
buying, margins could moderate over the quarter. The U.S. and world
economies remain challenging; although, we believe we are uniquely
equipped to capitalize on the opportunities ahead, supported by our
superior, low-cost, highly-variable cost structure, our diversified,
value-added product mix, our vertical integration and our exceptional
team of employees.”
Summary Operating Information
The following tables highlight operating results for each of the
company’s primary operating platforms. References to operating income in
the following paragraphs exclude profit-sharing expenses 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 Tuesday, July 24, 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 |