FORT WAYNE, INDIANA, April 22, 2009 — Steel Dynamics, Inc.
(NASDAQ-GS: STLD) today announced a first quarter 2009 loss of $88
million, or $0.48 per diluted share, compared to net income of $143
million in the first quarter of 2008. Net sales for the quarter were
$815 million, 57 percent lower than the first quarter of 2008. Compared
to the fourth quarter of 2008, net sales were down 33 percent from $1.2
billion.
The most significant component of our first quarter loss was a
non-cash adjustment to raw- materials inventory values due principally
to lower selling values for flat rolled steel. A charge of $83 million,
or $0.27 per diluted share, related to both flat-roll and long-products
steel operations, exceeded an earlier estimate of $70 million as a
result of the continued weakening in steel prices during March. The
company also recorded an additional amortization charge of approximately
$5 million, related to the final valuation of the Recycle South
acquisition. Excluding these adjustments, the first quarter loss would
have been approximately $0.19 per diluted share, within the range
forecast in March.
“The first quarter was obviously not a strong quarter for any of our
operating units,” said Keith Busse, Chairman and CEO, “During the first
quarter our steel mills operated at 46 percent of capacity, ferrous
metals recycling at about 42 percent of processing capacity, and
fabricating operations at about 45 percent. Unfortunately, we have still
not seen clear signs of increasing demand, as our orders remain
relatively steady month-to-month at these reduced rates.
“Our employees, who are now earning less because of shorter workweeks
and lower production bonuses, have done an excellent job of controlling
costs as we all recognize the realities of the current business
environment. We continue to focus on actions to reduce costs, including
options to delay capital spending and related expenses.
“The valuation adjustments to our scrap inventory at the end of the
first quarter, principally at the Flat Roll Division, to current market
prices positions us for improved profit margins for flat-roll steel
shipments in the second quarter. On the long products side, profit
margins remain healthy, but could contract somewhat in the second
quarter because of lower selling values. In all of our operations, the
key challenge in the coming quarters will be to increase throughput.”
The first quarter’s operating loss, inclusive of the $83-million
inventory adjustment, was predominantly in steel operations. Without the
inventory valuation adjustment, steel operations would have shown an
operating profit of approximately $17 million, or $22 per ton shipped.
The major factors impacting the quarter’s operational results were the
continued deterioration in steel shipping volumes and the consumption of
scrap valued at levels much higher than current market prices. First
quarter steel shipments of 743,000 tons were 54 percent lower than first
quarter 2008 shipments of 1.6 million tons, and were 21 percent lower
than fourth quarter 2008 shipments of 942,000 tons. In addition, our
average steel selling price declined $193 per ton, down to $720 in the
first quarter from $913 in the fourth quarter of 2008.
In metals recycling, ferrous volumes continued to decline while
nonferrous rebounded slightly. Ferrous shipments were 730,000 net tons,
down 48 percent from the first quarter of 2008, and down 19 percent from
the fourth quarter of 2008. Nonferrous shipments of 190 million pounds
were down 20 percent compared to the first quarter of 2008, but they
increased 7 percent from 177 million pounds in the fourth quarter of
2008.
During the first quarter, the company continued to increase its
available liquidity largely through reductions in working capital and by
cash generated from operations. Correspondingly, this allowed us to
reduce outstanding debt obligations by $136 million. At March 31, 2009,
the company had available funds of over $625 million. In light of the
current economic environment, the company continuously monitors its
capital investment plans, including those projects currently in process,
and if necessary, will delay these projects to retain sufficient
availability of cash resources.
“Second quarter results should improve from the first quarter,
ranging from a small profit to a small loss,” Busse said. “As clarity
for the quarter improves, we expect to provide quantitative guidance. In
the second half of 2009, we should be profitable, inclusive of and
factoring in lackluster demand throughout the year.
“As we have stated in the past, Steel Dynamics is poised to ramp up
quickly as the economy recovers to meet renewed demand for our steel
products and recycled metals, and we are poised to resume the company’s
profitable growth.”
First Quarter 2009 Operating Segment Information
The following highlights our first quarter 2009 results for each of SDI’s three primary operating segments.
Steel Operations. Steel Operations remain SDI’s
largest segment, representing 59 percent of the company’s first quarter
net sales. This segment includes five steel mills and related steel
processing facilities, such as The Techs. SDI’s five steel mills produce
a wide variety of flat- rolled and long steel products. The Techs
galvanize steel sheet that is sourced primarily from third parties.
Value-added steel finishing processes and testing are performed at our
six finishing operations.
First quarter 2009 Steel Operations shipments were 743,000 tons on
net sales of $535 million. Based on tons shipped, including steel
shipments made by The Techs, flat-rolled products accounted for 57
percent of first quarter steel segment shipments, 17 percent was
structural steel shipments, 10 percent was engineered bars, 10 percent
was merchant bars, and 6 percent was Steel of West Virginia shipments.
The first quarter operating loss for the steel segment was $66 million,
or $88 per ton shipped, compared to operating income of $3 per ton in
the fourth quarter. Without the effect of inventory adjustments, Steel
Operations would have generated an operating profit of about $17
million, or $22 per ton. These figures exclude amortization related to
the segment’s intangible assets and certain non-allocated corporate
overhead expenses, such as profit-sharing costs.
The first quarter’s average selling price per ton for Steel
Operations was $720, a decrease of $193 per ton from $913 in the fourth
quarter of 2008 and a decrease of $62 per ton from the year-ago quarter.
The average scrap cost per net ton charged decreased $78 compared to
the fourth quarter. “This data speaks volumes about the cost reductions
achieved in recent quarters,” Busse said.
Metals Recycling and Ferrous Resources. This segment
includes ferrous and non-ferrous metals recycling by OmniSource
Corporation (processing and trading) and SDI’s Iron Dynamics
scrap-substitute operation that produces pig iron for use by the Flat
Roll Division. The segment also includes expenses related to the Mesabi
Nugget project, which currently is under construction. The segment’s net
sales for first quarter 2009 were $296 million, representing 33 percent
of SDI’s first quarter net sales. The operating loss for this segment
was $12 million, excluding amortization related to the segment’s
intangible assets and certain non-allocated corporate overhead expenses,
such as profit-sharing costs.
For the first quarter, total ferrous scrap shipments, including
shipments to SDI’s Steel Operations, were 730,000 tons, 48 percent lower
than the year-ago-quarter (excluding Recycle South’s first quarter 2008
shipments prior to its acquisition by OmniSource) and 19 percent lower
than the fourth quarter of 2008. Non-ferrous scrap shipments for the
first quarter of 2009 were 190 million pounds, 20 percent lower than the
year-ago quarter and 7 percent higher than fourth quarter 2008
shipments.
During the first quarter, the company’s scrap operations supplied
247,000 tons of ferrous scrap to SDI’s Steel Operations, or
approximately 37 percent of the tonnage of ferrous scrap purchased by
our mills during the quarter.
Steel Fabrication Operations. Steel Fabrication
Operations are the New Millennium Building Systems fabricating plants
that produce joists, trusses, and steel deck used in the construction of
non-residential buildings. First quarter net sales were $61 million, or
7 percent of SDI’s first quarter net sales. Operating income for this
segment was $3 million, or $70 per ton shipped, excluding amortization
related to the segment’s intangible assets and certain non-allocated
corporate overhead expenses, such as profit-sharing costs. Operating
income in this segment has been steady despite dismal commercial
construction activity. First quarter shipments totaled 45,000 tons at an
average selling price of $1,343 per ton. First quarter shipments were
34 percent lower than the year-ago quarter, and 29 percent lower than
the fourth quarter of 2008.
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.
Forward Looking Statements
Contact:
Fred Warner, Investor Relations Manager
(260) 969-3564 or fax (260) 969-3590
f.warner@steeldynamics.com |