Nucor Reports 46% Increase in Earnings in 2014
01/27/2015 - Nucor Corporation announced consolidated net earnings of US$713.9 million, or US$2.22 per diluted share, for the full year 2014, an improvement of 46% compared with consolidated net earnings of US$488.0 million, or US$1.52 per diluted share, for the full year 2013.
Nucor reported consolidated net earnings of US$210.4 million, or US$0.65 per diluted share, for the fourth quarter of 2014. By comparison, Nucor reported net earnings of US$245.4 million, or US$0.76 per diluted share, in the third quarter of 2014 and net earnings of US$170.5 million, or US$0.53 per diluted share, in the fourth quarter of 2013.
Nucor's results include a credit of US$57.3 million for the fourth quarter and full year 2014 (US$0.11 per diluted share) to value inventories using the last-in, first-out (LIFO) method of accounting. These credits are compared with a charge of US$17.4 million (US$0.04 per diluted share) for the fourth quarter and full year 2013, and a credit of US$14.5 million (US$0.03 per diluted share) in the third quarter of 2014.
Third quarter of 2014 results included a US$12.5 million charge (US$0.03 per diluted share) related to the partial write down of assets within the steel mills segment. The fourth quarter of 2013 results were impacted by an out-of-period non-cash gain of US$21.3 million (US$0.07 per diluted share) related to a correction of deferred tax balances.
For the full year 2014, Nucor's consolidated net sales increased 11% to US$21.11 billion, compared with US$19.05 billion for 2013. Average sales price per ton increased 3%. Total tons shipped to outside customers in 2014 were 25,413,000, an increase of 7% from the full year 2013.
Nucor's consolidated net sales decreased 12% to US$5.00 billion in the fourth quarter of 2014 compared with US$5.70 billion in the third quarter of 2014 and increased 2% compared withUS$4.89 billion in the fourth quarter of 2013. Average sales price per ton decreased 2% from the third quarter of 2014 and increased 1% from the fourth quarter of 2013. Total tons shipped to outside customers were 6,070,000 tons in the fourth quarter of 2014, an 11% decrease from the third quarter of 2014 and a 1% increase over the fourth quarter of 2013. Total fourth quarter steel mill shipments decreased 7% from the third quarter of 2014 and increased 2% over the fourth quarter of 2013. Fourth quarter downstream steel products shipments to outside customers decreased 17% from the third quarter of 2014 and increased 3% over the fourth quarter of 2013.
The average scrap and scrap substitute cost per ton used for the full year 2014 was US$381, an increase of 1% from US$376 in 2013. The average scrap and scrap substitute cost per ton used in the fourth quarter of 2014 was US$363, a decrease of 4% from US$379 in the third quarter of 2014 and US$377 in the fourth quarter of 2013.
Overall operating rates at our steel mills increased to 78% for the full year 2014 from 74% for the full year 2013. Steel mill utilization rates in the fourth quarter (76%) decreased compared to the third quarter of 2014 (81%) and increased compared to the fourth quarter of 2013 (75%).
For the full year 2014, total steel mill energy costs increased approximately US$2 per ton from the prior year primarily due to higher unit costs for natural gas and electricity. In the fourth quarter of 2014, total steel mill energy costs decreased approximately US$3 per ton from the third quarter of 2014 due primarily to lower electricity unit costs, and increased approximately US$1 per ton from the fourth quarter of 2013.
Cash and cash equivalents and short-term investments totaled US$1.12 billion as of the end of the fourth quarter of 2014. During the fourth quarter of 2014, Nucor closed on its purchase of all the equity of Gallatin Steel Company for approximately US$779 million, which was paid for in cash. Nucor issued approximately US$300 million of commercial paper in the fourth quarter of 2014 to partially fund the Gallatin transaction. At 31 December 2014, Nucor had approximately US$151 million of commercial paper outstanding. Nucor's liquidity position remains strong after the Gallatin acquisition, and our undrawn US$1.5 billion revolving credit facility does not expire until August 2018.
In December, Nucor's board of directors declared a cash dividend of US$0.3725 per share payable on 11 February 2015 to stockholders of record on 31 December 2014. This dividend is Nucor's 167th consecutive quarterly cash dividend, and it marks 42 consecutive years of an increased base dividend.
As expected, overall operating performance at our steel mills segment and downstream products segment for the fourth quarter of 2014 decreased compared to the third quarter of 2014 due to seasonality that is typical in the fourth quarter. Imports remain at exceptionally high levels, which contributed to the downward pressure on the performance of the steel mills segment. The steel mills segment experienced some margin compression from the third quarter of 2014, as well as a decrease in volume. Newly acquired Nucor Steel Gallatin contributed profitable performance in the fourth quarter of 2014, as profits more than offset the US$8.9 million (US$0.02 per diluted share) of non-cash inventory related purchase accounting charges incurred during the quarter. The operating performance of the raw materials segment was negatively impacted by an operating loss of approximately US$35 million (US$0.07 per diluted share) at Nucor Steel Louisiana and the decreased performance of our scrap processing business. For the full year 2014, Nucor Steel Louisiana had an operating loss of approximately US$135 million (US$0.28 per diluted share).
The production operations of Nucor Steel Louisiana have remained suspended since the equipment failure related to the process gas heater occurred on 2 November 2014. We are continuing to make the necessary repairs to the process gas heater. We estimate that Nucor Steel Louisiana will not be operational until late in the first quarter of 2015. We expect a small reduction in the operating loss of Nucor Steel Louisiana in the first quarter of 2015.
We currently expect that first quarter of 2015 earnings will decrease from the fourth quarter of 2014 to a level slightly exceeding the first quarter of 2014. Market conditions in the steel mills segment in the first quarter of 2015 will be impacted by challenges in energy markets due to customer inventory reductions caused by the recent collapse in oil prices. We do expect improvement in energy demand once inventory destocking is complete. Additionally, from a long-term macroeconomic perspective, we believe lower energy prices are good for the domestic economy and therefore good for Nucor. Import levels have continued to increase in 2015, and we expect imports to remain at high levels throughout the first quarter. The performance of our downstream products businesses is expected to decrease from the fourth quarter of 2014 due to typical seasonality experienced in the first quarter, and then to improve as we enter the construction season in the second quarter. We continue to see positive trends in nonresidential construction markets which should benefit our steel mills and fabricated construction products businesses as the year progresses.
Nucor's results include a credit of US$57.3 million for the fourth quarter and full year 2014 (US$0.11 per diluted share) to value inventories using the last-in, first-out (LIFO) method of accounting. These credits are compared with a charge of US$17.4 million (US$0.04 per diluted share) for the fourth quarter and full year 2013, and a credit of US$14.5 million (US$0.03 per diluted share) in the third quarter of 2014.
Third quarter of 2014 results included a US$12.5 million charge (US$0.03 per diluted share) related to the partial write down of assets within the steel mills segment. The fourth quarter of 2013 results were impacted by an out-of-period non-cash gain of US$21.3 million (US$0.07 per diluted share) related to a correction of deferred tax balances.
For the full year 2014, Nucor's consolidated net sales increased 11% to US$21.11 billion, compared with US$19.05 billion for 2013. Average sales price per ton increased 3%. Total tons shipped to outside customers in 2014 were 25,413,000, an increase of 7% from the full year 2013.
Nucor's consolidated net sales decreased 12% to US$5.00 billion in the fourth quarter of 2014 compared with US$5.70 billion in the third quarter of 2014 and increased 2% compared withUS$4.89 billion in the fourth quarter of 2013. Average sales price per ton decreased 2% from the third quarter of 2014 and increased 1% from the fourth quarter of 2013. Total tons shipped to outside customers were 6,070,000 tons in the fourth quarter of 2014, an 11% decrease from the third quarter of 2014 and a 1% increase over the fourth quarter of 2013. Total fourth quarter steel mill shipments decreased 7% from the third quarter of 2014 and increased 2% over the fourth quarter of 2013. Fourth quarter downstream steel products shipments to outside customers decreased 17% from the third quarter of 2014 and increased 3% over the fourth quarter of 2013.
The average scrap and scrap substitute cost per ton used for the full year 2014 was US$381, an increase of 1% from US$376 in 2013. The average scrap and scrap substitute cost per ton used in the fourth quarter of 2014 was US$363, a decrease of 4% from US$379 in the third quarter of 2014 and US$377 in the fourth quarter of 2013.
Overall operating rates at our steel mills increased to 78% for the full year 2014 from 74% for the full year 2013. Steel mill utilization rates in the fourth quarter (76%) decreased compared to the third quarter of 2014 (81%) and increased compared to the fourth quarter of 2013 (75%).
For the full year 2014, total steel mill energy costs increased approximately US$2 per ton from the prior year primarily due to higher unit costs for natural gas and electricity. In the fourth quarter of 2014, total steel mill energy costs decreased approximately US$3 per ton from the third quarter of 2014 due primarily to lower electricity unit costs, and increased approximately US$1 per ton from the fourth quarter of 2013.
Cash and cash equivalents and short-term investments totaled US$1.12 billion as of the end of the fourth quarter of 2014. During the fourth quarter of 2014, Nucor closed on its purchase of all the equity of Gallatin Steel Company for approximately US$779 million, which was paid for in cash. Nucor issued approximately US$300 million of commercial paper in the fourth quarter of 2014 to partially fund the Gallatin transaction. At 31 December 2014, Nucor had approximately US$151 million of commercial paper outstanding. Nucor's liquidity position remains strong after the Gallatin acquisition, and our undrawn US$1.5 billion revolving credit facility does not expire until August 2018.
In December, Nucor's board of directors declared a cash dividend of US$0.3725 per share payable on 11 February 2015 to stockholders of record on 31 December 2014. This dividend is Nucor's 167th consecutive quarterly cash dividend, and it marks 42 consecutive years of an increased base dividend.
As expected, overall operating performance at our steel mills segment and downstream products segment for the fourth quarter of 2014 decreased compared to the third quarter of 2014 due to seasonality that is typical in the fourth quarter. Imports remain at exceptionally high levels, which contributed to the downward pressure on the performance of the steel mills segment. The steel mills segment experienced some margin compression from the third quarter of 2014, as well as a decrease in volume. Newly acquired Nucor Steel Gallatin contributed profitable performance in the fourth quarter of 2014, as profits more than offset the US$8.9 million (US$0.02 per diluted share) of non-cash inventory related purchase accounting charges incurred during the quarter. The operating performance of the raw materials segment was negatively impacted by an operating loss of approximately US$35 million (US$0.07 per diluted share) at Nucor Steel Louisiana and the decreased performance of our scrap processing business. For the full year 2014, Nucor Steel Louisiana had an operating loss of approximately US$135 million (US$0.28 per diluted share).
The production operations of Nucor Steel Louisiana have remained suspended since the equipment failure related to the process gas heater occurred on 2 November 2014. We are continuing to make the necessary repairs to the process gas heater. We estimate that Nucor Steel Louisiana will not be operational until late in the first quarter of 2015. We expect a small reduction in the operating loss of Nucor Steel Louisiana in the first quarter of 2015.
We currently expect that first quarter of 2015 earnings will decrease from the fourth quarter of 2014 to a level slightly exceeding the first quarter of 2014. Market conditions in the steel mills segment in the first quarter of 2015 will be impacted by challenges in energy markets due to customer inventory reductions caused by the recent collapse in oil prices. We do expect improvement in energy demand once inventory destocking is complete. Additionally, from a long-term macroeconomic perspective, we believe lower energy prices are good for the domestic economy and therefore good for Nucor. Import levels have continued to increase in 2015, and we expect imports to remain at high levels throughout the first quarter. The performance of our downstream products businesses is expected to decrease from the fourth quarter of 2014 due to typical seasonality experienced in the first quarter, and then to improve as we enter the construction season in the second quarter. We continue to see positive trends in nonresidential construction markets which should benefit our steel mills and fabricated construction products businesses as the year progresses.
