Nucor Reports 4th Quarter, Full Year 2010 Results
01/28/2011 - Nucor Corp. reported a consolidated net loss of $11.4 million on consolidated net sales of $3.85 billion for the fourth quarter and consolidated net earnings of $134.1 million on consolidated net sales of $15.84 billion for the full year 2010.
Nucor Corp. reported a consolidated net loss of $11.4 million on consolidated net sales of $3.85 billion for the fourth quarter and consolidated net earnings of $134.1 million on consolidated net sales of $15.84 billion for the full year 2010.
Fourth Quarter Results — The $11.4 million consolidated net loss (-$0.04 per diluted share) compares to net earnings of $23.5 million ($0.07 per diluted share) in the previous quarter (3Q 2010) and net earnings of $58.9 million ($0.18 per diluted share) in the year-ago fourth quarter.
Results were reduced by a $10.0 million charge ($0.02 per diluted share) for closure costs associated with the decision made in December by the HIsmelt(R) joint venture partners to permanently close the site in Kwinana, Western Australia, and terminate the joint venture. In addition to closure costs, Nucor incurred approximately $9.1 million of expense for the HIsmelt facility during 2010.
Results were also reduced by $39.0 million in pre-operating and start-up costs for new facilities, which compares to $48.1 million in charges for the year-ago fourth quarter. Current costs primarily related to the special bar quality (SBQ) mill in Memphis, and the galvanizing line in Decatur, Ala.
Nucor recorded a $23.0 million charge ($0.04 per diluted share) to value inventories using the LIFO method of accounting, compared with a charge of $50.0 million ($0.10 per diluted share) in the previous quarter (3Q 2010) and a credit of $116.9 million ($0.21 per diluted share) in the year-ago fourth quarter.
Consolidated net sales of $3.85 billion reflect a 7% decrease compared with net sales of $4.14 billion in the previous quarter (3Q 2010) and a 31% increase compared with $2.94 billion in the year-ago fourth quarter. Average sales price per ton decreased 2% from the previous quarter and increased 14% from the year-ago fourth quarter. The average scrap and scrap substitute cost per ton used in the fourth quarter was $359, an increase of 1% over $354 in the previous quarter and an increase of 30% over $276 in the year-ago fourth quarter.
Overall operating rates at the company’s steel mills were 68% in the fourth quarter of 2010, which remained unchanged from the third quarter of 2010 and increased from 58% in last year's fourth quarter. Total energy costs decreased approximately $2 per ton from the previous quarter (3Q 2010) and $1 per ton from the fourth quarter of 2009 primarily due to lower natural gas unit costs.
Total tons shipped to outside customers were 5,334,000 tons in the fourth quarter of 2010, a decrease of 5% from the previous quarter and an increase of 15% over last year's fourth quarter. Downstream steel products shipments to outside customers increased 12% over the fourth quarter of 2009 and decreased 12% from the third quarter of 2010. The decrease in shipments from the third quarter of 2010 was due to seasonal issues experienced during the fourth quarter.
Full-Year Results — The $134.1 million full-year consolidated net earnings ($0.42 per diluted share) compare with a net loss of $293.6 million ($0.94 per diluted share) for 2009.
Full-year pre-operating and start-up costs increased from $160.0 million in 2009 to $174.8 million in 2010. In 2010, these costs primarily related to the Memphis SBQ Mill and the galvanizing line in Decatur. Nucor also recorded a $164.0 million ($0.32 per diluted share) charge to value inventories using the LIFO method for the full year 2010, compared with a credit of $466.9 million in 2009 ($0.88 per diluted share).
The $15.84 billion full-year consolidated net sales reflect a 42% increase compared with $11.19 billion for 2009. Average sales price per ton increased 13% while total tons shipped to outside customers increased 25% from 2009 levels. For the full year 2010, the average scrap and scrap substitute cost per ton used was $351, an increase of 16% over $303 in 2009.
Steel mill utilization rates increased from 54% for the full year 2009 to 70% for the full year 2010. Total energy costs decreased approximately $3 per ton from the prior year.
In November, Nucor issued $600 million in Gulf Zone Opportunity Bonds that will partially fund the capital costs associated with the company’s direct reduced iron making facility in St. James Parish, La. Net proceeds received from the issuance of these bonds are included in restricted cash. In addition to restricted cash, the company’s liquidity position remains strong with $2.48 billion in cash and cash equivalents and short-term investments and an untapped $1.3 billion revolving credit facility.
In December, Nucor's board of directors increased the cash dividend to $0.3625 per share. The dividend is payable on February 11, 2011 to stockholders of record on December 31, 2010 and is Nucor's 151st consecutive quarterly cash dividend. Nucor continues a record of 38 consecutive years of increases to its regular dividend.
Outlook — Utilization rates, which improved throughout the fourth quarter, have continued to improve in January and the company expect that trend to continue through the first quarter. In addition, recent price increases for all steel mill products are expected to have a positive impact on earnings with a return to profitability in the first quarter. This positive trend in earnings is expected to continue into the second quarter. The company is thus cautiously optimistic regarding first half volume, pricing and profitability.
On the negative side, it appears that volatile raw material costs will continue during the first quarter. While the company believes end markets are experiencing some real demand improvement that will continue throughout 2011, the expected improvement in first quarter operating rates will be the result of a combination of both improving demand and steel buyers reacting to increasing raw material and steel prices. It remains to be seen how much of this improvement will be due to real demand. The most challenging markets for the company’s products continue to be those associated with residential and non-residential construction.
The company said it would provide additional and more quantitative earnings guidance after the midpoint between its quarterly earnings releases.
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.
