Nucor Reports Record 1st Quarter Results
04/20/2007 - Nucor announced record consolidated net earnings of $381.0 million on net sales of $3.77 billion for the first quarter of 2007, marking the company’s fourth consecutive year of record first quarter earnings.
Nucor Corp. announced record consolidated net earnings of $381.0 million on net sales of $3.77 billion for the first quarter of 2007, marking the company’s fourth consecutive year of record first quarter earnings.
First Quarter Results—Although the $381.0 million consolidated net earnings were similar to the first quarter of 2006's net earnings of $380.0 million, they reflect a 6% decrease from fourth quarter 2006 net earnings of $405.1 million. Diluted earnings per share of $1.26 reflect a 4% increase from $1.21 in the first quarter of 2006, and a 6% decrease from $1.34 in the fourth quarter of 2006.
Consolidated net sales of $3.77 billion reflect a 6% increase compared with $3.55 billion in the first quarter of 2006, and a 9% increase compared with $3.47 billion in the fourth quarter of 2006. The average sales price per ton reflects a 6% increase from the first quarter of 2006, and a 2% decrease compared to the fourth quarter of 2006. Total tons shipped to outside customers reflect a 1% increase from the first quarter of 2006 and an 11% increase from the fourth quarter of 2006.
The average scrap and scrap substitute cost per ton used, $259, reflects a 9% increase from $237 in the first quarter of 2006, and a 7% increase from $243 in the fourth quarter of 2006. Total energy costs were approximately $3 per ton lower compared to the first quarter of 2006, approximately $1 per ton lower compared to the fourth quarter of 2006. Nucor incurred a charge to value inventories using the last-in, first-out (LIFO) method of accounting of $24.5 million, which compares with a charge of $9.0 million in the first quarter of 2006 and a credit of $39.6 million in the fourth quarter of 2006.
Steel production was 5,585,000 tons, a 4% decrease compared with 5,791,000 tons produced in the first quarter of 2006, and a 10% increase over the 5,064,000 tons produced in the fourth quarter of 2006. Total steel shipments were 5,660,000 tons, a 1% decrease compared to 5,721,000 tons in last year's first quarter, and a 12% increase over the 5,060,000 total tons shipped in the fourth quarter. Steel shipments to outside customers, 5,229,000 tons, reflect a 1% decrease compared with 5,263,000 tons in the first quarter of 2006, and an 11% increase over the 4,713,000 tons shipped in the fourth quarter.
In the steel products segment, steel joist production was 121,000 tons, a 13% decrease compared with 139,000 tons in the first quarter of 2006. Steel deck sales, 106,000 tons, reflect a 25% increase from 85,000 tons in the first quarter of 2006. Cold finished steel sales of 90,000 tons reflect a 6% decrease compared with 96,000 tons in the first quarter of 2006.
First Quarter Business Announcements—In March 2007, a wholly owned subsidiary of Nucor acquired all the issued and outstanding shares of Harris Steel Group Inc. for a cash purchase price of Cdn$46.25 per Harris Steel share. The total purchase price of approximately $1.45 billion includes $1.06 billion paid in cash and the assumption of $393.6 million in liabilities. Harris Steel, which now operates as a subsidiary of Nucor, manufactures industrial products principally in the U.S. and Canada. Harris Steel also participates in steel trading on a worldwide basis, and in the distribution of reinforcing steel and related products to U.S. customers. The transaction has been immediately accretive to Nucor.
Also in the first quarter, Nucor sold its interest in the Ferro Gusa Carajas SA joint venture to its partner, Companhia Vale do Rio Doce (CVRD), and has entered into an off-take agreement with CVRD for the production of this facility.
Outlook—Nucor says its outlook for the second quarter remains positive, based on the favorable impact of rising prices for most of the company’s products as the company works through its higher-cost scrap inventories. Overall, says Nucor, end-use demand remains very healthy for long products and plate. Conditions appear to be improving in the company’s flat- rolled business, which is attributed to the soft market conditions of the fourth quarter of 2006 and the first quarter of 2007. Nucor says it expects this improvement to continue through the second and third quarters.
The cost of ferrous scrap is down sharply for the company’s April buys, and the company anticipates it should be down again in May. This would have a positive impact on margins by mid-May through the end of the quarter. Nucor expects to see some margin compression in some products in the early part of the second quarter, as the first quarter scrap run-up works its way through our inventories.
Nucor says that risks to its second-quarter outlook include scrap volatility, potential surges in imports, and a slowing down of inventory reductions by its customers.
Starting with the May 11, 2007 dividend payment, Nucor is increasing the regular quarterly cash dividend rate from $0.10 to $0.11 per share. In addition to the $0.11 per share base dividend amount, the board of directors also approved the payment of a supplemental dividend of $0.50 per share, for a total dividend of $0.61 per share. Nucor has increased its dividend every year since Nucor began paying dividends 34 years ago.
