Nucor Reports Improvements in Steel Products and Raw Materials Segments During Second Quarter
07/18/2013 - As it reported its second quarter earnings results, Nucor Corp. said its steel mills' operating performance was down compared to the second quarter mainly due to weakness in sheet steel, but it expects to see improvements in the third quarter.
Nucor announced consolidated net earnings of US$85.1 million for the second quarter of 2013. By comparison, Nucor reported net earnings of US$84.8 million in the first quarter of 2013 and net earnings of US$112.3 million in the second quarter of 2012.
In the first half of 2013, Nucor reported consolidated net earnings of US$169.9 million compared with consolidated net earnings of US$257.4 million in the first half of last year.
Nucor's results include no charge to value inventories using the last-in, first-out (LIFO) method of accounting in the second quarter of 2013, compared with a charge of US$18.0 million recorded in the first quarter of 2013 and a credit of US$14.5 million recorded in the second quarter of 2012. As a result, the LIFO charge in the first half of 2013 was US$18.0 million, compared with no LIFO charge in the first half of 2012. Second quarter of 2012 earnings were also affected by non-cash purchase accounting adjustments related to the Skyline acquisition and the elimination of profit associated with our steel mills' sales to Skyline post-acquisition of US$8.5 million and a non-cash impairment charge related to our Duferdofin Nucor S.r.l. joint venture of US$30.0 million.
Nucor's consolidated net sales increased 3% to US$4.67 billion in the second quarter of 2013 compared with US$4.55 billion in the first quarter of 2013 and decreased 8% compared with US$5.10 billion in the second quarter of 2012. Average sales price per ton increased slightly from the first quarter of 2013 and decreased 7% from the second quarter of 2012. Total tons shipped to outside customers were 5,839,000 tons in the second quarter of 2013, a 2% increase over the first quarter of 2013 and a decrease of 1% from the second quarter of 2012. Total second quarter steel mill shipments decreased 3% from the second quarter of 2012 and were down 1% from the first quarter of 2013. Second quarter downstream steel products shipments to outside customers decreased 4% from the second quarter of 2012 and increased 19% over the first quarter of 2013.
In the first half of 2013, Nucor's consolidated net sales decreased 9% to US$9.22 billion, compared with US$10.18 billion in last year's first half. Total tons shipped to outside customers decreased 3% from the first half of 2012, while average sales price per ton decreased 7%.
The average scrap and scrap substitute cost per ton used in the second quarter of 2013 was US$377, a slight decrease from US$379in the first quarter of 2013 and a decrease of 12% from US$427 in the second quarter of 2012. The average scrap and scrap substitute cost per ton used in the first half of 2013 was US$378, a decrease of 13% from US$436 in the first half of 2012.
Overall operating rates at our steel mills in the second quarter (73%) were up slightly from the first quarter (72%) and decreased from last year's second quarter (76%). Steel mill utilization decreased from 77% in the first half of 2012 to 73% in the first half of 2013.
Construction is nearing completion on our 2,500,000-ton DRI facility in Louisiana. We are on schedule for completion of construction and beginning of start-up late in the third quarter of 2013.
Our liquidity position remains solid with US$749.2 million in cash and cash equivalents, short-term investments, and restricted cash and an untapped US$1.5 billion revolving credit facility that does not expire until December 2016. In addition, cash flow from operations continues to be strong and was US$485.0 million through the second quarter of 2013.
In June, Nucor's board of directors declared a cash dividend of US$0.3675 per share payable on August 9, 2013 to stockholders of record on June 28, 2013. This dividend is Nucor's 161st consecutive quarterly cash dividend, a record we expect to continue.
Our second quarter operating performance in the steel mills segment was down compared with first quarter performance due mainly to weakness in sheet steel. Our steel products businesses have seen improvements from last quarter across the board, including joists and deck, building systems and rebar fabrication products. The steel products segment as a whole returned to solid profitability in the second quarter after a modest loss in the first quarter of 2013. We also saw significant improvement in our raw materials segment over the first quarter of 2013, due mainly to improved performance from our Trinidad DRI facility that experienced an unplanned 18 day outage last quarter.
We currently expect to see a modest improvement in earnings for the third quarter of 2013. We expect to see improvements in sheet steel pricing, which dropped to its lowest level since November 2010 in June but has since begun to slowly rebound. Margins on sheet steel have followed a similar trend and are slowly recovering from lows in the second quarter. The automotive and energy markets remain strong, while the construction market remains challenged. We also expect to see increased earnings from our downstream businesses in the third quarter, continuing the upward trend observed in the second quarter. Our David J. Joseph operations are expected to benefit from the bottoming of scrap pricing in the second quarter.
Nucor and affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel -- in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; 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.
