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Nucor Reports Record 3rd Quarter Results
10/17/2008 - Nucor reports record consolidated net earnings of $734.6 million on record consolidated net sales of $7.45 billion for the third quarter, and record consolidated net earnings of $1.73 billion on record consolidated net sales of $19.51 billion for the first nine months of 2008.
Nucor Corp. announced record consolidated net earnings of $734.6 million on record consolidated net sales of $7.45 billion for the third quarter, and record consolidated net earnings of $1.73 billion on record consolidated net sales of $19.51 billion for the first nine months of 2008.
Third Quarter Results—The record $734.6 million ($2.31 per diluted share) consolidated net earnings represents a 93% increase from consolidated net earnings of $381.2 million ($1.29 per diluted share) in the third quarter of 2007, and an increase of 26% compared with consolidated net earnings of $580.8 million ($1.94 per diluted share) in the second quarter of 2008.
The record $7.45 billion consolidated net sales represent a 75% increase compared with consolidated net sales of $4.26 billion in the third quarter of 2007, and a 5% increase compared with consolidated net sales of $7.09 billion in the second quarter of 2008. Average sales price per ton increased 51% from the third quarter of 2007 and increased 21% from the second quarter of 2008. Total tons shipped to outside customers were 6,701,000 tons, an increase of 16% over the third quarter of 2007 and a 13%decrease compared to the second quarter of 2008.
The average scrap and scrap substitute cost per ton used increased 92% from $277 in the third quarter of 2007 to $533 in the third quarter of 2008, and increased 17% from $456 in the second quarter of 2008. Total energy costs increased $7 per ton from the third quarter of 2007 and increased $3 per ton from the second quarter of 2008.
Nucor incurred a charge to value inventories using the last-in, first-out (LIFO) method of accounting of $140.0 million ($0.25 per diluted share, after tax) in the third quarter of 2008, compared with a charge of $11.0 million ($0.02 per diluted share, after tax) in the third quarter of 2007 and a charge of $214.0 million ($0.42 per diluted share, after tax) in the second quarter of 2008.
Nine Month Results—The record $1.73 billion ($5.70 per diluted share) consolidated net earnings represent a 56% increase from net earnings of $1.11 billion ($3.68 per diluted share) in last year's first nine months.
Record consolidated net sales of $19.51 billion represent a 60% increase compared with consolidated net sales of $12.20 billion in last year's first nine months. Average sales price per ton increased 30% while total tons shipped to outside customers increased 23% compared to the first nine months of 2007.
The average scrap and scrap substitute cost per ton used in the first nine months of 2008 increased 60% to $439 compared to $275 in the first nine months of 2007. Total energy costs increased $5 per ton compared with the first nine months of 2007.
Nucor incurred a record charge to value inventories using the last-in, first-out (LIFO) method of accounting of $423.0 million ($0.82 per diluted share, after tax), compared with a charge of $102.0 million ($0.20 per diluted share, after tax) in the first nine months of 2007.
Effect of Recent Acquisitions—Nucor attributes the increased sales and net earnings in part to the significant acquisitions the company made over the last 21 months, including Harris Steel Group, Inc. in March 2007 and The David J. Joseph Co. (DJJ) in February 2008. Nucor has also used these two companies as platforms for additional acquisitions to grow the rebar fabrication and scrap businesses.
Nucor’s product line diversity also means that its performance is not tied to any one steel market. With the acquisition of Harris and other downstream products companies, the company's annual steel products capacity has more than doubled since the beginning of 2007 to more than 4.5 million tons. The new companies also provide Nucor’s steel mills with a profitable base load of volume.
YTD Segment Results—In the steel mills segment, steel production increased 5% to 17,384,000 tons in the first nine months of 2008, compared with 16,503,000 tons produced in the first nine months of 2007.
Total steel shipments increased 5% to 17,506,000 tons in the first nine months of 2008, compared with 16,663,000 tons in last year's first nine months. Steel shipments to outside customers increased 1% to 15,285,000 tons in the first nine months of 2008, compared with 15,157,000 tons in last year's first nine months.
In the steel products segment, steel joist production during the first nine months of 2008 decreased to 391,000 tons, compared with 409,000 tons in the first nine months of 2007. Steel deck sales increased to 388,000 tons in the first nine months of 2008, compared with 355,000 tons in last year's first nine months. Cold finished steel sales increased to 394,000 tons compared to 322,000 tons in the first nine months of 2007. Sales of fabricated concrete reinforcing steel were 669,000 tons compared to 385,000 in the first nine months of 2007.
Corporate Developments—In August, Nucor's wholly owned subsidiary, Harris Steel, Inc., acquired all of the issued and outstanding common shares of Ambassador Steel Corp. for a cash purchase price of approximately $185 million. At closing, Harris Steel also repaid Ambassador's bank debt of approximately $136 million. Based in Auburn, Ind., Ambassador is a fabricator and distributor of concrete reinforcing steel and related products.
Also in August, Nucor's wholly owned subsidiary, The David J. Joseph Co., completed the acquisition of substantially all the assets of the American Compressed Steel operations of Secondary Resources, Inc. American Compressed Steel has facilities in Kansas City, St. Joseph and Sedalia, Missouri, and processes nearly 180,000 tons annually. DJJ is now operating these facilities under the Advantage Metals Recycling, LLC name.
In July, Nucor completed the acquisition of 50% of the stock of Duferdofin—Nucor Srl, for the purchase price of approximately $667.0 million. Duferdofin—Nucor Srl operates a steel melting and bloom/billet caster in San Zeno as well as rolling mills in Pallanzeno and Giammoro. Total production in 2007 was approximately one million tons. A new 450,000 tons/year merchant bar mill currently under construction at the Giammoro plant is expected to be fully operational in late 2008.
In July, Nucor announced its plans to install a plate heat treating facility at its plate mill in Hertford County, N.C. The heat treat line will have an estimated annual capacity of 120,000 tons and will have the ability to produce heat treated plate in thicknesses from 3/16 through 2 inches. Total cost of the project is expected to be approximately $110 million.
Discussions between Sidenor SA of Greece and Nucor concerning the possible formation of a joint venture between the companies continue in a cooperative and friendly nature. However, the current turmoil in the world financial markets has delayed completion of this effort. Both Sidenor and Nucor expect to conclude their discussions when the future outlook becomes clearer.
Outlook—Looking ahead to the fourth quarter, Nucor noted the negative impact the crisis in the financial markets has had on the global economy. What started out as a seasonal slowdown—due to temporary global market disruptions such as the six-month China Olympics effect and the Middle Eastern religious holidays—has now been overwhelmed by a worldwide financial crisis that is unique in both size and scope in our lifetime. The company noted that the business environment has become significantly more challenging for everyone, and that there is “little forward visibility on either the economy or our industry”, even for the fourth quarter. These conditions are such that financial projections are not practical. Therefore, the company said it would not be providing numerical or qualitative guidance at this time, but will give an update at the normal time midway between its quarterly earnings releases.
The company did say that 2008 will be another record year for Nucor, and that its competitive position is stronger than ever, both here and globally. The company believes that if recent initiatives by the world's governments to stabilize financial markets are successful, then businesses should see significantly improved access to credit and resulting improved business conditions beginning early in 2009.
“We are still strong believers in the long-term strength of the global infrastructure build and the associated bull market for steel,” said the company. “It is this global growth in steel demand that will help drive Nucor's growth and profitability.”
“We are still strong believers in the long-term strength of the global infrastructure build and the associated bull market for steel,” said the company. “It is this global growth in steel demand that will help drive Nucor's growth and profitability.”
Headquartered in Charlotte, N.C., Nucor and its 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 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.
