Nucor Downgrades First Quarter Earnings Guidance
03/18/2009 - Nucor revises its first quarter guidance to an expected loss of $0.55 to $0.65 per diluted share based on continued weakening in customer demand.
Nucor Corp. revised its first quarter guidance downward to an expected loss of $0.55 to $0.65 per diluted share based on continued weakening in customer demand and deepening downward pressure on orders, production rates and steel pricing.
"The unprecedented speed and magnitude of the global economy's decline to depressed levels not seen in our lifetime have presented severe challenges in 2009,” said Dan DiMicco, Nucor's Chairman, CEO and President, commenting on the first quarter guidance. The economy has fallen off a cliff -- and there is no visibility as to the timing of the recovery.”
Although the company had not previously issued numerical guidance for the first quarter, it had projected qualitative guidance for marginally better first quarter earnings vs. the fourth quarter of 2008, when it earned $0.34 per share. The company said its previous expectation for marginally better earnings assumed improvement in first quarter order entry over that of November and December, based on the end of customer inventory destocking such that orders would move closer to real demand. The company also said it had not forecast further erosion in pricing.
Now, however, as the economy and market conditions continue to deteriorate, the company expects its overall steel mill utilization rate to further decline to approximately 43% in the first quarter from the fourth quarter of 2008 level of 48%.
DiMicco noted that the dramatically lower production is further slowing the rate at which the company’s sheet mills are consuming higher-cost iron units, particularly pig iron inventories, which had been purchased in last year's fourth quarter, prior to the collapse in both the economy and scrap/pig iron pricing. He said that if the current production rates continue, the overhang from the high-cost pig iron will impact Nucor’s results through the second and third quarters of this year, but that the impact from higher-cost scrap should disappear during the second quarter. Raw material destocking process would be accelerated by any improvement in order entry and operating rates, which would in turn help to boost earnings.
“While the projected results for the first quarter are very disappointing, our team is responding to these challenges with the 'can do' attitude and determination of the Nucor culture,” continued DiMicco. “As always, we are focused on continual improvement in safety, quality, costs and taking care of our customers.
“With Nucor's unrivaled position of strength in the steel industry, our team is working to continue Nucor's long tradition of taking advantage of economic downturns to grow even stronger and reward our shareholders with attractive long-term returns.”
Nucor and affiliates manufacture steel products, with operating facilities primarily in the U.S. and Canada. Products produced include carbon and alloy steel bars, beams, sheet and plate; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; light gauge steel framing; steel grating and expanded metal; and wire and wire mesh. Nucor, through The David J. Joseph Co., also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.
