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Nucor Reports 2nd Quarter Results
07/22/2011 - Nucor announced consolidated net earnings of $299.8 million on consolidated net sales of $5.11 billion for the second quarter, and consolidated net earnings of $459.6 million on consolidated net sales of $9.94 billion for the first six months of 2011.
Nucor Corp. announced consolidated net earnings of $299.8 million on consolidated net sales of $5.11 billion for the second quarter, and consolidated net earnings of $459.6 million on consolidated net sales of $9.94 billion for the first six months of 2011.
Second Quarter Results — Consolidated net earnings of $299.8 million ($0.94 per diluted share) reflect an 88% increase compared to net earnings of $159.8 million ($0.50 per diluted share) in the previous quarter and a 229% increase compared to net earnings of $91.0 million ($0.29 per diluted share) in the year-ago second quarter. The company noted the profit increases were achieved despite customer rebalancing of supply chain inventories, the impact of the devastating Japanese earthquake / tsunami and the lost sales, production and shipments from the weather-related power outages and historic river flooding in North America.
Nucor incurred a charge to value inventories using the last-in, first-out (LIFO) method of accounting of $32.0 million ($0.06 per diluted share), compared with a charge of $31.0 million ($0.06 per diluted share) in the first quarter of 2011 and a charge of $67.0 million ($0.13 per diluted share) in the second quarter of 2010.
Pre-operating and start-up costs of new facilities were $31.4 million, which compares to $27.9 million in the first quarter of 2011 and $43.4 million in the second quarter of 2010.
Consolidated net sales of $5.11 billion reflect a 6% increase compared with $4.83 billion in the previous quarter and a 22% increase compared with $4.20 billion in the year-ago second quarter. Average sales price per ton increased 13% from the previous quarter and increased 21% from the year-ago second quarter.
Total tons shipped to outside customers were 5,598,000 tons, a decrease of 6% from the previous quarter and an increase of 1% over the year-ago second quarter. Total steel mill shipments increased 6% over the year-ago second quarter and were down 6% from the previous quarter. Downstream steel products shipments to outside customers increased 3% over the year-ago second quarter and 12% over the previous quarter.
The average scrap and scrap substitute cost per ton used in the second quarter of 2011 was $444, an increase of 5% over $424 in the previous quarter and an increase of 19% over $373 in the year-ago second quarter.
Overall operating rates at the company’s steel mills (71%) were down from the previous quarter (80%) and were unchanged from last year's second quarter. Utilization rates were negatively impacted by downtime caused by weather-related events and resulting power outages.
Total energy costs increased approximately $3 per ton from the previous quarter primarily due to inefficiencies caused by lower operating rates. Total energy costs increased approximately $3 per ton from the second quarter of 2010 to the second quarter of 2011 mainly as a result of higher energy unit costs.
Six Month Results — Consolidated net earnings of $459.6 million ($1.44 per diluted share) compare with consolidated net earnings of $122.0 million ($0.38 per diluted share) in the first half of last year.
The LIFO charge in the first half of 2011 was $63.0 million ($0.12 per diluted share), which compares with a charge of $91.0 million ($0.18 per diluted share) in the first half of 2010.
Six-month pre-operating and start-up costs decreased from $93.9 million in 2010 to $59.3 million in 2011. Costs related to several projects, primarily the galvanizing line in Decatur, Ala., and the Castrip facility in Blytheville, Ark. The decrease in pre-operating and start-up costs was due to the improved performance at the SBQ mill in Memphis, Tenn., and the wire rod products mill in Kingman, Ariz.
Consolidated net sales of $9.94 billion reflect a 27% increase compared with $7.85 billion in last year's first half. Average sales price per ton increased 21% while total tons shipped to outside customers increased 5% over the first half of 2010.
The average scrap and scrap substitute cost per ton used in the first half of 2011 was $433, an increase of 26% over $345 in the first half of 2010.
Steel mill utilization increased from 72% in the first half of 2010 to 75% in the first half of 2011. Total energy costs increased approximately $1 per ton from the first half of 2010 to the first half of 2011 mainly as a result of higher energy unit costs.
Corporate Update — Construction, primarily infrastructure, has begun on our 2,500,000-ton direct reduced iron (DRI) facility in Louisiana. The management team is largely in place, and purchase contracts for most of the major equipment have been issued. The majority of the equipment will begin arriving in 2012, and the facility is on schedule for completion of construction and beginning of start-up in mid-2013.
The company’s liquidity position remains strong with $2.28 billion in cash and cash equivalents and short-term investments and an untapped $1.3 billion revolving credit facility that matures in November 2012.
Outlook — As the company had expected, profitability significantly improved from the first quarter to the second quarter, as price increases for steel mill products caught up with higher raw material costs. Demand in end markets such as automotive, heavy equipment, energy and general manufacturing continues to incrementally improve, benefiting special bar quality, sheet and plate products. The company noted, however, that new domestic supply in the sheet market and increases in imports of sheet steel have begun to put significant pressure on prices and margins. The company said that unless supply, demand, and pricing dynamics reverse themselves, the sheet market will be the most challenging for the industry in the third quarter. Accordingly, the company said it expects third quarter results to be lower than second quarter.
The company noted that while markets associated with residential and non-residential construction are not robust, they are stable and slowly improving. The company’s combined construction-related businesses (steel mills and downstream facilities) have remained strong profit contributors despite the challenges throughout the downturn.
The company plans to provide quantitative earnings guidance later in the quarter.
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 Company, 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.
