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Nucor Reports 2nd Quarter, Six-Month Results
07/23/2010 - Nucor reported consolidated net earnings of $91.0 million on consolidated net sales of $4.20 billion for the second quarter, and consolidated net earnings of $122.0 million on consolidated net sales of $7.85 billion for the first half of 2010.
Nucor Corp. reported consolidated net earnings of $91.0 million on consolidated net sales of $4.20 billion for the second quarter, and consolidated net earnings of $122.0 million on consolidated net sales of $7.85 billion for the first half of 2010.
Second Quarter Results — The $91.0 million consolidated net earnings ($0.29 per diluted share) compares to net earnings of $31.0 million ($0.10 per diluted share) in the previous quarter (Q1-2010) and a net loss of $133.3 million ($0.43 per diluted share) in the year-ago second quarter (Q2-2009).
Consolidated net sales of $4.20 billion a 15% increase compared with net sales of $3.65 billion in the previous quarter (Q1-2010) and a 69% increase compared with $2.48 billion in the year-ago second quarter (Q2-2009). Average sales price per ton increased 14% from the previous quarter and increased 25% from the year-ago second quarter.
Total tons shipped to outside customers were 5,555,000 tons, an increase of 1% over the previous quarter (Q1-2010) and an increase of 35% over the year-ago second quarter (Q2-2009). Total steel mill shipments were down 2% from the previous quarter but increased 53% over the year-ago second quarter. Downstream steel products shipments to outside customers increased 25% over the previous quarter (Q1-2010) and 19% over the year-ago second quarter (Q2-2009).
The average scrap and scrap substitute cost per ton was $373, an increase of 17% compared with $318 in the previous quarter and a 20% increase over $312 in the year-ago second quarter.
Nucor recorded a $67.0 million charge to value inventories using the last-in, first-out (LIFO) method of accounting, compared with a charge of $24.0 million in the previous quarter and a credit of $125.0 million in the year-ago second quarter. Increasing scrap prices caused the LIFO charge to be higher than the company anticipated.
Overall operating rates at the company’s steel mills were 71%, down slightly from 73% in the first quarter but a significant from 46% in last year's second quarter. The rate reflects some improvements at the beam and plate mills offset by declines at the sheet mills.
Total energy costs decreased approximately $2 per ton from the previous quarter primarily due to decreased energy costs driven by lower natural gas prices. Total energy costs decreased approximately $8 per ton from the year-ago second quarter, mainly as a result of increased production.
Second-quarter pre-operating and start-up costs of new facilities were $43.4 million, compared to $50.5 million in the previous quarter (Q1-2010) and $31.6 million in the year-ago second quarter (Q2-2009). Costs in the current quarter primarily related to the SBQ mill in Memphis, Tenn., and the galvanizing line in Decatur, Ala.
Six Month Results — Consolidated net earnings of $122.0 million ($0.38 per diluted share) compare with a net loss of $323.0 million ($1.03 per diluted share) in the first half of last year.
Consolidated net sales of $7.85 billion reflect a 53% increase compared with net sales of $5.13 billion in last year's first half. Average sales price per ton increased 8% while total tons shipped to outside customers increased 41% over the first half of 2009.
The average scrap and scrap substitute cost per ton used in the first half of 2010 was $345, an increase of 7% over $322 in the first half of 2009.
Nucor recorded a $91.0 million charge to value inventories using the last-in, first-out (LIFO) method of accounting in the first half of 2010, which compares to a credit of $230.0 million in the first half of 2009.
Steel mill utilization reached 72% in the first half of 2010, a significant increase from 46% in the first half of 2009.
Total energy costs decreased $9 per ton from the first half of 2009 to the first half of 2010, mainly as a result of increased production.
First-half pre-operating and start-up costs of new facilities were $93.9 million, compared to $64.8 million in the first half of 2009. In 2010, these costs primarily related to the SBQ mill in Memphis and the galvanizing line in Decatur, Ala.
The company said its liquidity position remains strong with $1.14 billion in cash and cash equivalents and short-term investments and an untapped $1.3 billion revolving credit facility that matures in November 2012.
Second-Quarter Highlights — In April, Nucor acquired a 50% interest in NuMit LLC, which invests in various steel and steel related activities, both in North America and globally. As part of the agreement, Mitsui and Co. (U.S.A.), Inc., a wholly owned subsidiary of Mitsui and Co., Ltd., contributed 100% of Steel Technologies Inc., which operates 23 sheet steel processing facilities throughout the U.S., Canada and Mexico. The purchase price of Nucor's 50% interest was approximately $221.3 million and did not result in a significant amount of goodwill. At closing, Nucor extended a $40.0 million loan and a $60.0 million line of credit (of which $54.0 million was drawn down immediately) to Steel Technologies.
Outlook — Although operating results excluding LIFO improved significantly over the first quarter (primarily due to increased margins), the company said there was no clear indication that the upward trend would continue. The company noted there is a general slowdown taking place across all product lines as the overall economy has entered into a new period of uncertainty, both in the U.S. and globally.
The company said the most challenging markets for its products continue to be those associated with residential and non-residential construction, which continue to show little, if any, strength — particularly true for the company’s downstream businesses.
Nucor and affiliates manufacture steel products, with operating facilities primarily in the U.S. and Canada. Products 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.
