FORT WAYNE, INDIANA, October 19, 2009— Steel Dynamics, Inc.
(NASDAQ/GS: STLD) today announced net income of $69 million for the
third quarter of 2009, or $0.30 per diluted share. The quarter’s
earnings compared to a net loss of $16 million, or $0.08 per diluted
share, in the second quarter of 2009 and net income of $193 million, or
$0.98 per diluted share, in the third quarter of 2008. The principal
drivers as to why third quarter earnings exceeded our September guidance
were stronger-than-anticipated cost compression, resulting from higher
production and shipping volumes at the Flat Roll Division, and better
than expected performance in metals recycling.
Third quarter net sales of $1.2 billion increased significantly from
$792 million in the second quarter of 2009, up 48 percent, but were down
54 percent from $2.6 billion when compared to the third quarter of
2008, a period when pricing reached historical peaks. Sequentially,
shipping volumes in all segments except fabrication were up in the third
quarter, as were selling prices. Steel shipments for the third quarter
were 1.2 million tons, 41 percent higher than the second quarter. SDI’s
average steel selling price for the third quarter increased $33 per ton,
to $627 from $594 per ton in the second quarter. Average scrap cost per
net ton charged increased $49 compared to the second quarter. This
further demonstrates the excellent cost compression achieved by both
increased volume and team effort. In metals recycling, OmniSource’s
ferrous metals shipments were 1.3 million tons, up 54 percent from the
second quarter, and nonferrous shipments were 217 million pounds, up 28
percent from the second quarter.
“In the third quarter, the company’s steel operations produced
operating income of $128 million, or $105 per ton, while OmniSource made
significant strides in earnings growth, resulting in operating income
of $50 million during the quarter,” said Keith Busse, Chairman and CEO.
“I salute SDI’s employees as these results are testament to our focus on
efficient operations and cost control throughout the company. Our
steelmaking divisions all produced pre-tax profits in the quarter,
including the Structural and Rail Division which continues to face very
challenging conditions in the construction marketplace. Our steel
fabricating operations showed an operating loss of $3 million on
continued weakness in non-residential construction.
“Current business conditions remain relatively steady. Orders for
flat-rolled steel products continue to be strong; merchant, specialty
and engineered bars are reasonably good; but structural steel backlogs
remain weak. Our flat- roll steel business, inclusive of The Techs,
continues to run at near full capacity utilization rates, while the bar
divisions are running at 60 to 70 percent of capacity. The Structural
and Rail Division has seen modest improvement, with utilization now in
the low thirty-percent range, which is now being calculated on the basis
of its expanded annual production capacity of 1.8 million tons.
OmniSource has experienced improved metals flows and is now processing
at about 75 to 80 percent of capacity.
“Our outlook for the fourth quarter anticipates a slight easing in
current operating rates, which could result in somewhat lower earnings
than the third quarter. We expect to provide quantitative guidance later
in the quarter. Factors that could affect fourth quarter results
include lower flat-roll steel shipments, due to seasonality coupled with
a slight slowing in market momentum, and margin compression in metals
recycling due to lower scrap prices. We also expect to incur increased
expenses related to the anticipated start-up of the Mesabi Nugget plant.
Overall, though, we expect the combined metals recycling and ferrous
resources segment to remain profitable in the fourth quarter on the
strength of OmniSource. We currently believe that SDI’s second-half
earnings will offset first-half losses and foresee the company
generating a small profit for the year 2009, a feat few, if any, other
steelmakers will accomplish in this very challenging and difficult
environment.
“As the Flat Roll Division, The Techs, and OmniSource demonstrated in
the third quarter, our Steel Dynamics operations are capable of ramping
up quickly to meet renewed demand for our products. Business conditions
remain somewhat uncertain for the foreseeable future, but we remain
optimistic the recovery will continue to gain a head of steam, and we
will continue to be in excellent position to take advantage of it,”
Busse said.
Third Quarter 2009 Operating Segment Information
The following highlights third quarter 2009 results for each of SDI’s three primary operating segments.
Steel Operations. Steel Operations achieved net
sales of $782 million for the third quarter and represented 63 percent
of the company’s external sales. This segment includes five steel mills
and related steel processing facilities, including 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.
Third quarter 2009 Steel Operations shipments were 1.2 million tons,
of which 877,000 tons were flat-rolled steel shipments. Based on tons
shipped, including steel shipments made by The Techs, flat-rolled
products accounted for 70 percent of third quarter steel segment
shipments, 11 percent was structural steel shipments, 8 percent was
merchant bars, 6 percent was engineered bars, and 5 percent was Steel of
West Virginia shipments. The third quarter operating profit for the
steel segment was $128 million, or $105 per ton shipped, compared to an
operating profit of $41 per ton in the second quarter. These figures
exclude amortization related to the segment’s intangible assets and
certain non- allocated corporate overhead expenses, such as
profit-sharing costs.
The third quarter’s average selling price per ton for Steel
Operations was $627, an increase of $33 per ton from $594 in the second
quarter of 2009 and a decrease of $559 per ton from the year-ago
quarter. The average scrap cost per net ton charged increased $49
compared to the second quarter.
Most notable for the quarter was the performance of the Butler,
Indiana, Flat Roll Division. After completion of an electric-furnace
upgrade early in July, the mill in August achieved a new monthly
production record, operating at an annualized rate slightly exceeding 3
million tons per year.
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 third quarter 2009 were $555 million, and
represented 33 percent of SDI’s third quarter external sales. The
operating income for this segment was $45 million, excluding
amortization related to the segment’s intangible assets and certain
non-allocated corporate overhead expenses, such as profit-sharing costs.
OmniSource’s $50 million in operating profit was partially offset by
losses at Iron Dynamics (related to lower market-based pig-iron prices)
and to expenses related to the Mesabi Nugget project as it nears the
expected start-up in November.
For the third quarter, total ferrous scrap shipments, including
shipments to SDI’s Steel Operations, were 1.3 million tons, 26 percent
lower than the year-ago-quarter and 54 percent higher than the second
quarter of 2009. Non-ferrous scrap shipments for the third quarter of
2009 were 217 million pounds, 11 percent lower than the year-ago quarter
and 28 percent higher than second quarter 2009 shipments.
During the third quarter, the company’s scrap operations supplied
576,000 tons of ferrous scrap to SDI’s Steel Operations, which was 45
percent of the total tonnage of ferrous scrap OmniSource shipped and was
50 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. Third quarter net sales were $33 million, or
3 percent of SDI’s third quarter external sales. New Millennium
reported an operating loss of $3 million for the quarter. Third quarter
shipments totaled 35,000 tons at an average selling price of $953 per
ton. Third quarter shipments were 56 percent lower than the year-ago
quarter, and 2 percent lower than the second quarter of 2009.
This
press release contains some predictive statements about future events,
including statements related to conditions in the steel and metallic
scrap markets, Steel Dynamics’ revenue, costs of purchased materials,
future profitability and earnings, and the operation of new or existing
facilities. These statements are intended to be made as
“forward-looking,” subject to many risks and uncertainties, within the
safe harbor protections of the Private Securities Litigation Reform Act
of 1995. Such predictive statements are not guarantees of future
performance, and actual results could differ materially from our current
expectations.
Contact:
Fred Warner, Investor Relations Manager
(260) 969-3564 or fax (260) 969-3590
f.warner@steeldynamics.com |