FORT WAYNE, INDIANA, October 16, 2007— Steel Dynamics, Inc.
(NASDAQ-GS: STLD) today announced third quarter earnings of $101
million, or $1.06 per diluted share, after purchase accounting
adjustments related to the company’s recent acquisition of The Techs in
July of approximately $0.01 per diluted share. Diluted earnings per
share increased 12 percent sequentially from $0.95 in the second quarter
of 2007, but were 2 percent lower than $1.09 in the third quarter of
2006. SDI’s third quarter diluted earnings per share of $1.06 are within
the company’s range of $1.02 to $1.07 per diluted share updated on
August 30, 2007.
Third quarter revenues increased to $1.2 billion, 27 percent higher
than both the year-ago quarter and the second quarter of 2007. Third
quarter consolidated shipments of 1.6 million tons increased 26 percent
as compared to the year-ago quarter. The sequential volume increase from
the second quarter of approximately 336,000 tons, or 27%, was due
primarily to increased shipments of 335,000 tons from the company’s
steel operations, of which 231,000 tons were from The Techs and 110,000
tons were from increased shipments by the Flat Roll Division. During the
first nine months of 2007, net income grew to $297 million on revenues
of $2.9 billion. Year-to-date diluted earnings per share were $3.02, 11
percent ahead of last year. Consolidated shipments for the first nine
months grew 15 percent to 4.1 million tons, compared to 3.5 million tons
in the first nine months of 2006. The company’s steel operations showed
increased year-over-year nine-month shipments of nearly 513,000 tons,
or 14 percent.
“Overall, Steel Dynamics is experiencing another strong year,” said
Keith Busse, Chairman and CEO. “From an operating standpoint, we saw
sequential improvement from the second quarter, in spite of continued
softness in flat-rolled steels and some spotty slowness in merchant and
specialty bar steels. “The integration of The Techs is proceeding well.
The Techs represents an increase in steel operating revenues and
volumes. The product mix sold by The Techs generally elicits higher
average selling values, but the resulting operating margins are somewhat
lower than traditionally experienced at SDI as The Techs do not
currently produce their own substrate as does our Flat Roll Division.
Consequently, as the operations exist, consolidating The Techs operating
results will generally increase cost of goods sold as a percentage of
net sales; however, we hope to internally provide The Techs with more
substrate at some point. At this time we expect The Techs acquisition to
be accretive for the fourth quarter of 2007.”
In the third quarter, the company’s operating income was $111 per ton
shipped with an operating margin of 15 percent, compared with second
quarter operating income of $136 per ton shipped and an operating margin
of 18 percent. The third quarter’s average consolidated selling price
per ton decreased to $737 from $739 in the second quarter of 2007 but
increased $4 from the year-ago quarter. The average scrap cost per net
ton charged decreased $21 compared to the second quarter, which had seen
an increase of $44 from the first quarter.
“The outlook for the fourth quarter is positive,” Busse said. “The
costs of ferrous resources have trended down and we expect them to
remain relatively stable going into winter. We expect selling prices to
remain steady or increase slightly. Market demand for flat-rolled steel
should improve in the fourth quarter due to inventory de-stocking and
limited imports. We expect continued strength in our long products
mills, particularly structural steel that is used in the non-residential
construction markets. We currently expect fourth quarter earnings will
be in a range of $1.02 to $1.07 per diluted share, excluding any impact
from the planned acquisition of OmniSource Corporation. This early
guidance closely parallels our third quarter, as improved market
conditions will be offset by scheduled outages for upgrades at three of
our five mills. We will provide updated guidance to reflect the effect
of the acquisition of OmniSource, which we believe could be accretive,
after the transaction closes in early November.
“During the third quarter, we made two important announcements that
have strong implications for our future,” Busse continued. “The
acquisition of OmniSource helps anchor our supply of domestic ferrous
scrap resources and the commencement of the Mesabi Nugget project
develops future self-sufficiency in pig-iron supply, both of which are
critical steps in providing a strong platform for future growth
initiatives. “The acquisition of OmniSource creates an environment that
allows us to capture margins at every step of the value chain. We
believe that scrap resources in the future could become scarce at times
due to increasing global demand and a softer U.S. dollar. Given these
assumptions, we anticipate scrap margins could increase in the future
and we hope to continue to grow this arm of our business. OmniSource
can, at times, provide SDI with a more dependable, nearby supply of
high-quality steel scrap and affords SDI a measure of protection from
supply chain shortages under certain market conditions.
“Our plan to develop iron resources on the Mesabi Range in Minnesota
promises to provide a consistent future supply of high-quality,
lower-cost iron nuggets (i.e., pig iron) for use in our mini mills. We
expect ultimately to control the entire process from mining,
concentrating, and then direct reduction of the concentrate into pig
iron. We believe that the economics of production will make these
resources attractive compared to imported pig iron today and even more
attractive as global demand grows and the cost of iron units continues
to increase. We have demonstrated that the use of these resources in our
electric-arc furnaces result in numerous operating advantages,
including better management of residuals, lower electrode utilization,
improved yields, and increased output by reducing tap-to-tap times.”
During the third quarter, the company continued its share repurchase
program. A total of 4.9 million shares were repurchased during the
quarter for approximately $198 million. At the end of the quarter, the
company had 5.0 million shares authorized for repurchase. At September
30, 2007, the company had approximately 87.2 million shares of common
stock outstanding.
Conference Call and Webcast
On Wednesday, October 17, 2007 at 11:00 am EDT, Steel Dynamics will
host a conference call in which Steel Dynamics’ management will discuss
third quarter 2007 results. You are invited to listen to the live audio
broadcast of the conference call over the Internet, accessible from
Steel Dynamics’ Web site: www.steeldynamics.com .
Dial-in information is available on our Web site. No telephone replay
will be available. An audio replay of the Webcast will be available
from the SDI Web site.
Forward Looking Statements
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