Nucor Reports Q3, Nine Months Results
10/21/2011 - Nucor reported consolidated net earnings of $181.5 million on consolidated net sales of $5.25 billion for the third quarter, and consolidated net earnings of $641.1 million on consolidated net sales of $15.194 billion for the first nine months of 2011.
Nucor Corp. reported consolidated net earnings of $181.5 million on consolidated net sales of $5.25 billion for the third quarter, and consolidated net earnings of $641.1 million on consolidated net sales of $15.194 billion for the first nine months of 2011.
Third Quarter Results — The $181.5 million consolidated net earnings ($0.57 per diluted share compares to net earnings of $23.5 million ($0.07 per diluted share) in the year-ago third quarter and net earnings of $299.8 million ($0.94 per diluted share) in the previous quarter (2Q-2011).
Consolidated net sales of $5.25 billion reflect a 3% increase compared to net sales of $5.11 billion in the previous quarter (2Q-2011) and a 27% increase compared with $4.14 billion in the year-ago third quarter. Average sales price per ton decreased less than 1% from the previous quarter and increased 24% over the year-ago third quarter.
Nucor incurred a $28.0-million ($0.05 per diluted share) charge to value inventories using the last-in, first-out (LIFO) method of accounting in the third quarter, which compares with a charge of $32.0 million ($0.06 per diluted share) in the previous quarter (2Q- 2011) and a charge of $50.0 million ($0.10 per diluted share) in the year-ago third quarter. The LIFO charge in the first nine months of 2011 was $91.0 million ($0.17 per diluted share) compared to a charge of $141.0 million ($0.28 per diluted share) in the first nine months of 2010.
The average scrap and scrap substitute cost per ton used in the third quarter was $449, an increase of 1% over $444 in the previous quarter (2Q-2011) and an increase of 27% over $354 in the year-ago third quarter. Total energy costs increased approximately $3 per ton over both the second quarter of 2011 and the third quarter of 2010 primarily due to higher electricity unit costs.
Pre-operating and start-up costs of new facilities were $17.0 million for the third quarter, which compares to $31.4 million in the previous quarter (2Q-2011) and $41.9 million in the year-ago third quarter. The decrease in pre-operating and start-up costs was due to several projects coming out of start-up, including the special bar quality ("SBQ") mill in Memphis, Tennessee, the wire rod products mill in Kingman, Arizona, and the galvanizing line in Decatur, Alabama.
Nucor shipped 5,785,000 total tons to outside customers in the third quarter, an increase of 3% over both the previous quarter and the year-ago third quarter. Total third quarter steel mill shipments increased 9% over the year-ago third quarter and increased 5% over the previous quarter (2Q-2011). Third quarter downstream steel products shipments to outside customers increased 5% over the year-ago third quarter and 7% over the previous quarter (2Q-2011).
Overall operating rates at the company’s steel mills were 74%, up from 71% in the previous quarter (2Q-2011 and 68% in the year-ago third quarter.
Nine-Month Results — Consolidated net earnings of $641.1 million ($2.02 per diluted share) compare with net earnings of $145.5 million ($0.46 per diluted share) in the first nine months of 2010, an increase of 340%.
Consolidated net sales of $15.19 billion reflect a 27% increase compared with net sales of $11.99 billion in last year's first nine months. Average sales price per ton increased 22% while total tons shipped to outside customers increased 4% over the first nine months of 2010.
Nucor incurred a $91.0-million ($0.17 per diluted share) charge in the first nine months to value inventories using the LIFO method of accounting, which compares to a charge of $141.0 million ($0.28 per diluted share) in the first nine months of 2010.
In the first nine months, the average scrap and scrap substitute cost per ton used was to $439, a 26% increase from $348 in the first nine months of 2010. Pre-operating and start-up costs decreased from $135.8 million in 2010 to $76.3 million in the first nine months of 2011. Total energy costs increased $1 per ton in the first nine months compared with the comparable year-ago period due to higher electricity unit costs.
Steel mill utilization in the first nine months was 75%, up from 71% in the first nine months of 2010.
Third-Quarter Update — The company said that construction – primarily infrastructure – continues on the planned 2,500,000-ton direct reduced iron (DRI) facility in Louisiana. The majority of the equipment is to begin arriving in 2012, and the project is on schedule for completion of construction and beginning of start-up in mid-2013.
The company also noted that its liquidity position remains strong with $3.02 billion in cash and cash equivalents, short-term investments, and restricted cash and investments, and an untapped $1.3 billion revolving credit facility that matures in November 2012.
Outlook — The company commented that while third-quarter earnings were below earnings achieved in the previous quarter, they remain well ahead of 2010 levels of $0.07 per share. The company said the decrease reflects lower steel prices and significantly lower metal margins for sheet mill products due to increases in the supply/demand imbalances from both new domestic supply and increased imports.
The company also noted that price stability and generally low service center inventories have helped to minimize volatility in order rates and pricing in its long product business. While end markets such as automotive, heavy equipment, energy and general manufacturing have continued to show the most strength compared to 2010, they have shown very little improvement compared to the first half of 2011.
The company said that despite only minimal improvement in non-residential construction markets and the expectation for only slight improvement in demand through the end of 2011, it anticipates that its combined construction businesses (steel mills and downstream facilities) will continue to operate profitably.
The company said it expects further margin compression in the sheet market in the fourth quarter, and a smaller compression in plate margins due to imports, most likely resulting in lower overall earnings for the third quarter. The company said the magnitude of margin compression would be favorably impacted by expected lower scrap costs through the quarter.
The company plans to provide quantitative earnings guidance later in the quarter.
Nucor and affiliates are manufacturers of 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.
