Nucor Reports Record Results for 2008
01/28/2009 - Nucor reports consolidated net earnings of $105.9 million on consolidated net sales of $4.15 billion for the fourth quarter, and record consolidated net earnings of $1.83 billion on record consolidated net sales of $23.66 billion for the full year 2008.
Nucor Corp. reported consolidated net earnings of $105.9 million on consolidated net sales of $4.15 billion for the fourth quarter, and record consolidated net earnings of $1.83 billion on record consolidated net sales of $23.66 billion for the full year 2008.
Fourth Quarter Results—The $105.9 million ($0.34 per diluted share) consolidated net earnings reflect a 71% decrease compared with consolidated net earnings of $364.8 million ($1.26 per diluted share) earned in the fourth quarter of 2007, and an 86% decrease from consolidated net earnings of $734.6 million ($2.31 per diluted share) earned in the third quarter of 2008.
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Approximately $85 million of Nucor’s fourth-quarter impairment charge is for the impairment of its investment in the HIsmelt joint venture in Australia. Production at this facility was suspended in December 2008 due to market conditions.
Management decided it was appropriate to recognize an impairment of this investment due to the uncertain outlook for the pig iron market and the fact that this technology is not yet fully commercialized.
The HIsmelt process has been under ongoing development as a blast furnace replacement technology that has the potential to be a hot metal source for electric arc furnaces.
The team at the HIsmelt facility has made considerable progress since they began their work in 2005. Nucor said that it remains optimistic about the long-term potential for commercializing the HIsmelt technology.
The HIsmelt joint venture expects to resume operations when pig iron market conditions improve.
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Results were unfavorably impacted by the decrease in end-use demand for steel and the consumption of higher-cost raw materials purchased earlier in the year. Earnings were also decreased by $105.2 million in charges for impairment of non-current assets and a $42.4-million expense for writing down inventory to the lower of cost or market.
The $4.15 billion consolidated net sales reflect a 6% decrease compared with consolidated net sales of $4.40 billion in the fourth quarter of 2007, and a 44% decrease compared with consolidated net sales of $7.45 billion in the third quarter of 2008. Average sales price per ton increased 30% from the fourth quarter of 2007 and decreased 13% from the third quarter of 2008. Total tons shipped to outside customers were 4,294,000 tons, a decrease of 27% from the fourth quarter of 2007 and a decrease of 36% from the third quarter of 2008.
The average scrap and scrap substitute cost per ton used reflects a 53% increase from $285 in the fourth quarter of 2007 to $435 in the fourth quarter of 2008, and decreased 18% from $533 in the third quarter of 2008.
Nucor incurred an $81.2 million credit to value inventories using the last-in, first-out (LIFO) method of accounting, compared with a charge of $92.3 million in the fourth quarter of 2007, and a charge of $140.0 million in the third quarter of 2008. Total energy costs increased $10 per ton from the fourth quarter of 2007 and increased $1 per ton from the third quarter of 2008.
Full Year Results—The $1.83 billion record consolidated net earnings ($5.98 per diluted share) compare with net earnings of $1.47 billion ($4.94 per diluted share) in 2007. The $23.66 billion record consolidated net sales reflect a 43% increase compares with $16.59 billion in 2007. Average sales price per ton increased 30% while total tons shipped to outside customers increased 10% from 2007.
The company said the increases in sales and net earnings are attributable in part to significant acquisitions in the last two years, including Harris Steel Group, Inc. in March 2007 and The David J. Joseph Company (DJJ) in February 2008. Nucor has also used these two companies as platforms for additional acquisitions to grow its steel rebar fabrication and scrap businesses.
The average scrap and scrap substitute cost per ton used was $438, an increase of 58% over $278 in 2007. Nucor also incurred a LIFO charge of $341.8 million, compared with a charge of $194.3 million in 2007, and total energy costs increased $6 per ton from 2007.
In December, Nucor's board of directors declared a cash dividend of $0.35 per share payable on February 11, 2009 to stockholders of record on December 31, 2008.
Management Comments—"The record sales and earnings achieved by Nucor in 2008 were accomplished in spite of the unprecedented economic and steel market conditions that we experienced in the fourth quarter," said Dan DiMicco, Nucor's Chairman, President and CEO. "Our strong balance sheet and cash flow, our highly variable cost structure, our product diversification and, most importantly, our employees and the Nucor culture are all factors that make Nucor well positioned to survive this crisis. Our team is focused on continuing Nucor's long tradition of taking advantage of economic downturns to grow even stronger."
Outlook—Entering the first quarter of 2009, the company said that conditions remain as challenging as they were in the fourth quarter, with the global economy still paralyzed by the ongoing credit crunch. In addition to weakened end-use demand, the company said that many customers also continue to reduce their inventories due to liquidity concerns.
With dramatically lower production rates for the fourth quarter continuing into the first quarter of 2009, Nucor said its larger mills have higher-cost scrap and scrap substitute inventories still to be consumed. These iron units — predominantly pig iron at the company’s sheet mills — were purchased prior to last fall's collapse in the economy and scrap pricing.
As in the prior quarter, the company is not providing first quarter numerical guidance due to limited forward visibility on the economy and the steel industry. The company said that it sees the first quarter being very challenging, with only marginally better earnings than in the fourth quarter of 2008. The company said that it would give a business update during March.
Headquartered in Charlotte, N.C., 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 DJJ, 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.
