FORT WAYNE, INDIANA, January 26, 2009 — Steel Dynamics, Inc.
(NASDAQ-GS: STLD) today announced another strong year of growth,
achieving record full-year 2008 results despite weak fourth-quarter
sales and shipments and fourth-quarter losses from unrealized hedging
losses and inventory write-downs. Net sales for the year grew to a
record $8.1 billion, an increase of 84 percent compared to net sales of
$4.4 billion in 2007. The increase in sales for 2008 resulted primarily
from the acquisition of OmniSource Corporation in October 2007 and from
additional metals recycling operations in mid-2008, plus significantly
higher average selling prices for steel and recycled metals during 2008.
Net Income for 2008 was a record $463 million, a 17 percent increase
from $395 million in 2007. Diluted earnings per share in 2008 were
$2.38, up 18 percent compared to $2.01 in 2007. Net cash flow from
operating activities for 2008 was $775 million, compared to $428 million
in 2007.
Following a very strong performance in both the steel and metals
recycling segments for the first three quarters of 2008, the significant
weakening in order activity first seen by our Flat Roll Division and in
metals recycling in late September broadened to other steel operations
as the fourth quarter progressed. Compared to the third quarter,
fourth-quarter 2008 steel shipments of 942,000 were down 34 percent,
ferrous metals shipments of 898,000 net tons were down 49 percent, and
non- ferrous metals shipments of 177 million pounds were down 27
percent. Lower volumes combined with declining prices for all business
segments resulted in fourth-quarter sales of $1.2 billion, down 53
percent from $2.6 billion in the third quarter, and down 17 percent from
$1.5 billion in the year-ago quarter.
For the fourth quarter, the company incurred a net loss of $83
million, or $0.45 per diluted share. This compares to net income of $193
million in the third quarter of 2008, or $0.98 per diluted share, and
to net income of $98 million in the fourth quarter of 2007, or $0.50 per
diluted share. Steel operations achieved operating income in the fourth
quarter, but this income declined significantly from recent quarters
due to slower operating rates and shipping volumes, declining steel
selling prices, and higher input costs as lower production volumes led
to a slower than anticipated depletion of ferrous raw materials that had
been purchased at higher prices. Steel fabrication operations also
generated an operating profit for the quarter on lower volume.
A significant portion of the fourth-quarter loss was due to a
non-cash, unrealized hedging loss of $35 million related to valuing
certain non-ferrous financial contracts at fair market value.
Additionally, our steel and metals recycling operations recorded losses
of approximately $26 million and $10 million, respectively, due to
necessary reductions in ending inventory values for lower of cost or
market requirements. After making these adjustments and having consumed
much of the older, higher-cost raw materials, our steel and metals
recycling operations begin 2009 with lower scrap costs reflecting more
recent market values.
“It is strange to be reporting the best year in the company’s history
and at the same time the company’s worst quarter,” said Keith Busse,
Chairman and CEO. “The steel industry took it on the chin in the fourth
quarter as orders dried up, and Steel Dynamics was not exempted. The
combination of weaker demand, inventory reductions in both distribution
and at the OEM level, and the commercial paralysis brought about by
tight credit markets led to very slow order activity. This resulted in
fourth-quarter production curtailments at our mills and metals-recycling
facilities. We have started the new year with somewhat better activity,
but we cannot be certain how long it will take the steel and scrap
markets to return to more normal demand patterns. All of our SDI
facilities are currently operating well below capacity. However, the
company is prepared to ramp up very quickly with any pick-up in business
activity.
“We believe that SDI is well positioned with our low, variable cost
structure and state-of-the-art facilities that are capable of
cost-effectively producing excellent, high-quality products. We are
optimistic that, even if we continue to encounter lackluster demand for
steel and scrap for several quarters, we will return to profitability in
the first quarter and remain profitable in 2009, assuming no recurrence
of dramatic price swings such as those experienced in the second half
of 2008. Our very preliminary estimate is that we could achieve earnings
of $0.05 to $0.15 per diluted share in the first quarter. If needed,
further guidance will follow later in the quarter as visibility
improves. We continue to believe that earnings for the full year 2009
could, under somewhat improved circumstances, be comparable to those
achieved in 2008. We are focusing on cash management and controlling
costs tightly, utilizing free cash flow to continue to pay down debt on
our revolving line of credit and continue funding capital expenditures
for critical projects that are underway,” Busse said.
The company reduced total debt by $226 million during the fourth
quarter of 2008 and continues to focus on further reductions in
leverage, while maintaining and closely monitoring appropriate capital
investment plans for future long-term growth. We significantly increased
our liquidity position during the quarter, resulting in availability of
funds of over $500 million at the end of the year. The company’s first
meaningful debt amortization does not occur until 2012. The company has
prioritized its use of available cash during 2009 as follows: first, to
reduce leverage; second, to provide for critical capital investments and
any modest strategic initiatives; and third, to provide for continued
cash dividends to shareholders.
Operating Segment Information
The following highlights our fourth quarter and full-year 2008 results for each of SDI’s three primary operating segments.
Steel Operations. Steel operations represented 63
percent of the company’s fourth quarter net sales and 57 percent of
company sales for the full year 2008. This segment includes five
electric-arc-furnace (EAF) steel mills and related steel finishing and
processing facilities. In addition to flat-rolled steel, the company’s
steel operations produce structural steel, merchant bars,
special-bar-quality steel, and other specialty shapes.
Fourth quarter 2008 steel operations net sales were $860 million on
shipments of 942,000 tons (including intra-company shipments). Steel
operations net sales for the year 2008 were $5.5 billion on shipments of
5.6 million tons (including intra- company shipments). Based on tons
shipped for the full year 2008, including steel shipments made by The
Techs, flat-rolled products accounted for 56 percent of 2008 steel
segment shipments. Structural steel shipments were 20 percent,
engineered bars were 10 percent, merchant bars were 9 percent, and the
remaining 5 percent were shipments by our Steel of West Virginia
subsidiary. Operating income for the steel segment in the fourth quarter
was $2 million, or $2 per ton shipped, compared to $200 per ton in the
third quarter. Operating income for the year was $861 million, or $153
per ton shipped. These figures exclude profit-sharing costs and
amortization related to the segment’s intangible assets.
The fourth quarter’s average selling price per ton for steel
operations was $913, a decrease of $273 per ton from $1,186 in the third
quarter of 2008, but an increase of $203 per ton from the year-ago
quarter. The average ferrous scrap cost per net ton charged decreased by
$209 compared to the third quarter and was $72 higher than the fourth
quarter of 2007. For the year 2008, the average selling price per ton
was $973, an increase of $284 from 2007. The average scrap cost per ton
in 2008 increased $164 from 2007.
Metals Recycling and Ferrous Resources. This segment
includes ferrous and non-ferrous metals processing and trading by
OmniSource Corporation and SDI’s Iron Dynamics scrap-substitute
operation, which produces pig iron for use by the Flat Roll Division.
The segment also includes expenses related to the Mesabi Nugget project,
which is currently under construction. The segment’s net sales for the
quarter were $389 million (including intra-company sales), representing
28 percent of SDI’s fourth quarter net sales. For the year, this
segment’s net sales were $3.7 billion, representing 38 percent of
company sales. The operating loss in the fourth quarter for this segment
was $118 million and operating income for the year 2008 was $123
million, excluding profit-sharing costs and amortization related to the
segment’s intangible assets.
Total ferrous shipments in the fourth quarter, including shipments to
SDI’s steel operations, were 898,000 tons and non- ferrous metals
shipments were 177 million pounds. During the fourth quarter, the
company’s metals recycling operations supplied 439,000 tons of ferrous
scrap to SDI’s steel operations, or approximately 42 percent of the
tonnage of ferrous scrap purchased by our mills during the quarter. For
the year 2008, metals recycling operations supplied 2.3 million tons of
ferrous scrap to SDI’s steel operations, or approximately 41 percent of
the tonnage of ferrous scrap purchased by our mills.
Steel Fabrication Operations. Steel fabrication
operations includes New Millennium Building Systems, which fabricates
steel joists, trusses, and decking used in the construction of
non-residential buildings. Fourth quarter net sales were $93 million, or
7 percent of SDI’s fourth quarter net sales. Net sales for the year
were $376 million, or 4 percent of company sales for 2008. Operating
income in the fourth quarter for this segment was $5 million, or $84 per
ton shipped. For the year, operating income was $18 million, or $63 per
ton shipped, excluding profit-sharing costs. Fourth quarter shipments
totaled 64,000 tons at an average selling price of $1,461 per ton.
Download Unaudited Financial Statements (PDF File)
Conference Call and Webcast
On Tuesday, January 27, 2009, at 10:00 a.m. Eastern time,
Steel Dynamics will host a conference call in which management will
discuss fourth quarter and full year 2008 results. You are invited to
listen to the live audio broadcast of the conference call over the
Internet, accessible from the Steel Dynamics Web site: www.steeldynamics.com.
Dial-in information is available on our Web site. An audio replay of
the Webcast and a downloadable podcast will be available from the SDI
Web site. No telephone replay will be available.
Contact:
Fred Warner, Investor Relations Manager
(260) 969-3564
(260) 969-3590 fax
f.warner@steeldynamics.com
Forward Looking Statements
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