Nucor Posts 4th Quarter Earnings Guidance
12/10/2008 - Nucor says that it expects to be profitable in the fourth quarter ending December 31, 2008, although it will be only marginally above the breakeven level.
Nucor Corp. announced that it expects to be profitable in the fourth quarter ending December 31, 2008, although it will be only marginally above the breakeven level.
Nucor noted that the full year 2008 could still be a record year based on the results of the first nine months, despite fourth quarter results, which will reflect the impact of the unprecedented financial crisis on the economy and steel markets. Nucor said that in addition to the decline in end-use demand for steel, the economic crisis has also led many customers to reduce inventories due to liquidity concerns arising from the credit crunch.
The company expects its total steel shipments for the fourth quarter to decline by approximately 40% from the third quarter 2008 level. The company also expects its steel mill average capacity utilization rate for the current quarter to be slightly above 50%.
The dramatically lower production rates also have slowed the pace at which the company’s steel mills have consumed higher-cost scrap and pig iron inventories purchased prior to the collapse in the economy and scrap pricing. As a result, the company is now including a small LIFO inventory charge in its fourth-quarter forecast, as opposed to the previously expected large LIFO credit.
"We have never been confronted with the economic and steel market conditions that we are seeing today,” stated Dan DiMicco, Nucor's Chairman, CEO and President, commenting on the fourth quarter guidance. “However, our team is confident that Nucor's position of strength will allow us to capitalize on our company's substantial competitive advantages. These advantages include: our strong balance sheet and cash flow; our highly variable cost structure and the significant magnitude of that variability in our costs; our highly flexible production process utilizing electric arc furnaces; our product diversification; our market-leadership positions; and, most importantly, Nucor's employees and the Nucor culture. Our team is focused on continuing Nucor's long tradition of taking advantage of economic downturns to grow even stronger.
Looking into the first quarter of 2009, the company said it expects results to benefit from more recent purchases of lower cost scrap and pig iron as well as order levels aligned more closely to end-use demand. At present, actual end-user demand appears to be down between 25% and 30%, and not down the 50% to 60% that has been reflected in order entry. The company said that it expects to see an increase in order entry based on real end-user demand as inventory levels will need to more closely track to real demand.
The company said it is already seeing raw material prices increase, and that it expects to see this impact steel pricing going forward. The company noted that this expectation depends on real demand not falling further below the current, dramatically reduced levels.
"We are encouraged by growing recognition by leaders in our nation's government that U.S. infrastructure and energy needs can no longer be ignored,” continued DiMicco. “We believe that the impact of major portions of the infrastructure stimulus package will be felt on projects at the Federal, State and local levels in the second quarter of 2009."
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 Company, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and non-ferrous scrap. Nucor is North America's largest recycler.
