FT. WAYNE, INDIANA — October 12, 1999 — Steel Dynamics, Inc.
(NASDAQ: STLD) today announced consolidated earnings for the third
quarter of 1999 of $10.5 million or $.22 per diluted share, compared to
$8.5 million, or $.18 per diluted share, for the third quarter of 1998.
Operating profit (operating income before start-up costs) was $28.3
million, or $58 per ton on sales of $158.7 million, compared to an
operating profit of $57 per ton for the third quarter of 1998 on sales
of $141.0 million. SDI’s third quarter 1999 shipments of 484,700 tons
were 28% more than in the third quarter of 1998. Start-up costs
associated with Iron Dynamics, Inc. (IDI) and the Structural Mill were
$5.1 million in the quarter. Hot band production was 502,900 tons
compared to 426,600 tons in the year-earlier quarter.
Keith Busse, SDI’s CEO, stated that “Our results were slightly better
than management anticipated in light of the cold mill motor failures on
August 4th. As a result of this event, our operating profit per ton was
slightly lower than that reported in the second quarter of 1999 largely
due to lost tonnage and a lower-margin product mix. We believe that the
cold mill motor failures, combined with numerous July energy outages
and a prolonged IDI restart, dampened the quarter’s earnings by at least
$.08 per share.
Our employees did an extraordinary job of refocusing their efforts on
other market opportunities during the cold mill outage. We are grateful
to General Electric and Koontz Wagner for working together to return
our rebuilt motors within weeks rather than the three to six months
normally required in similar situations. Their performance enabled our
employees to fully restart the cold mill by September 24th.”
The PSD air permit for the Structural Mill issued by the Indiana
Department of Environmental Management and reviewed by the EPA has been
appealed at both the state and federal levels by the Plumbers and
Steamfitters Local Union No. 166. We believe this callous action is
without merit and is linked to SDI’s unwillingness to sign a building
trades project agreement. We are confident that the government will
successfully defend the permit. The parties have filed their briefs and a
hearing is expected soon. Construction will begin immediately following
a successful defense and is expected to be completed within 13-14
months thereafter.
The restart of Iron Dynamics has progressed slowly. Although IDI has
finally begun to achieve stable operating results, such results are
currently at significantly lower than expected volumes due to what we
believe to be design problems at the submerged arc furnace. Refractory
life has again become impaired at higher energy levels due to inadequate
side wall cooling. We are confident that design modifications to the
furnace along with improved shell cooling will eliminate this problem. A
redesign and retrofit of the furnace is likely, but will not be
completed until June of next year due to equipment lead times. We
anticipate, however, that IDI will be able to operate in a curtailed
mode until that time. We also believe that our equipment suppliers will
absorb most of the cost of equipment redesign and replacement. Other
significant problems at the mixer, balling operations, and rotary hearth
furnace have been stabilized, with good metallurgical results to date.
When the side wall cooling issues are resolved, we are extremely
confident that the process will yield excellent production results with
good economics.
The markets for SDI’s products have been steadily improving, but we
are not yet, from a pricing perspective, back to pre-import crisis
levels. However, assuming continued trade case success, we would expect
to be there by the first or second quarter of next year. Demand is
healthy and prices are rising. Resource costs, although having risen
recently, are now fairly stable and are not expected to dramatically
increase in the near future.
SDI continues to be focused on providing a variety of high quality
value-added flat rolled products for demanding applications with
excellent results achieved to date in a variety of OEM markets. |