Nucor Reports Results for 2007
01/25/2008 - Nucor Corp. announced consolidated net earnings of $364.8 million on record consolidated net sales of $4.40 billion for the fourth quarter, and consolidated net earnings of $1.47 billion on record consolidated net sales of $16.59 billion for the full year of 2007.
Nucor Corp. announced consolidated net earnings of $364.8 million on record consolidated net sales of $4.40 billion for the fourth quarter, and consolidated net earnings of $1.47 billion on record consolidated net sales of $16.59 billion for the full year of 2007.
Fourth Quarter Results—Consolidated net earnings of $364.8 million ($1.26 per diluted share) reflect a 10% decrease compared with net earnings of $405.1 million ($1.34 per diluted share) earned in the fourth quarter of 2006, and a 4% decrease from the $381.2 million ($1.29 per diluted share) earned in the third quarter of 2007.
Consolidated net sales of $4.40 billion—a quarterly record—reflect a 27% increase compared with net sales of $3.47 billion in the fourth quarter of 2006, and a 3% increase compared with net sales of $4.26 billion in the third quarter of 2007. Average sales price per ton increased 9% from the fourth quarter of 2006 and increased 1% from the third quarter of 2007. Total tons shipped to outside customers were 5,895,000 tons, a 16% increase over the fourth quarter of 2006 and a 2% increase over the third quarter of 2007.
The average scrap and scrap substitute cost per ton used increased 17% from $243 in the fourth quarter of 2006 to $285 in the fourth quarter of 2007, and increased 3% from $277 in the third quarter of 2007. Nucor incurred a charge to value inventories using the last-in, first-out (LIFO) method of accounting of $92.3 million, compared with a credit of $39.6 million in the fourth quarter of 2006, and a charge of $11.0 million in the third quarter of 2007.
Full Year Results—Consolidated net earnings of $1.47 billion ($4.94 per diluted share) compared with record net earnings of $1.76 billion ($5.68 per diluted share) in 2006. Although net earnings decreased 16% from 2006 levels, the company said that 2007 was the second-best earnings year in its history.
Record consolidated net sales of $16.59 billion reflect a 12% increase compared with net sales of $14.75 billion in 2006. Average sales price per ton increased 8% while total tons shipped to outside customers increased 4% from 2006.
The average scrap and scrap substitute cost per ton used increased 13% from $246 in 2006 to $278 in 2007. Nucor incurred a charge to value inventories using the last-in, first-out (LIFO) method of accounting of $194.3 million, compared with a charge of $5.4 million in 2006.
Segment Results—In the steel mill segment, steel production decreased 1% to 22,089,000 tons in 2007, compared with 22,382,000 tons produced in 2006. Total steel shipments remained flat at 22,347,000 tons in 2007, compared with 22,346,000 tons in 2006. Steel shipments to outside customers decreased 2% to 20,235,000 tons in 2007, compared with 20,649,000 tons in 2006.
In the steel products segment, steel joist production during 2007 decreased to 542,000 tons, compared with 570,000 tons in 2006. Steel deck sales increased to 478,000 tons in 2007, compared with 398,000 tons in 2006. Cold finished steel sales increased to 449,000 tons, compared with 327,000 tons in 2006. Sales of fabricated concrete reinforcing steel were 583,000 tons from the acquisition date of Harris Steel Group Inc. near the end of the first quarter of 2007 through the end of the year (approximately 9 months).
Company News—Nucor repurchased approximately 14.1 million shares of its common stock during 2007 at a cost of approximately $754.0 million under a publicly announced stock repurchase program (none in the fourth quarter of 2007). Approximately 30.0 million shares remain authorized for repurchase under the current program.
In the fourth quarter, Nucor completed the acquisition of Nelson Steel, Inc., a producer of wire mesh and related products. Nucor's wholly owned subsidiary, Harris Steel Inc., also completed three acquisitions in the fourth quarter, forming a new entity with Barker Steel Co. that combines the two companies' rebar fabrication operations in the northeastern U.S. market. Harris Steel has a 90% interest in the joint venture. During the quarter, Harris Steel also acquired Rockford Fabricators, a rebar fabricator, and U.S. Drafting and Detailing, a provider of rebar detailing and project management services. With these acquisitions, Harris Steel's annual rebar fabrication capacity exceeds 1 million tons.
Nucor signed a Memorandum of Understanding with the Duferco Group (Lugano, Switzerland) in January 2008 to establish a 50/50 joint venture for the production of beams in Italy and the distribution of beams in Europe and North Africa. The joint venture will encompass the Duferco Group's wholly owned subsidiary, Duferdofin, and associated distribution companies. Duferdofin leads beam production in Italy and Southern Europe. Final agreement to establish the joint venture company will be dependent on completion of due diligence, approval of regulatory bodies, and approval of the boards of directors of both companies.
Outlook—The company expects the first quarter of 2008 to be “another good quarter with earnings in the range of $1.20 to $1.30 per diluted share.” Bar, beam and plate businesses are expected to show continued strength, and the company believes that its downstream businesses, particularly rebar fabrication, should remain good. The company said that market conditions for sheet have improved, in spite of reduced demand, because of “a much better balance between customer inventories and demand.”
The company believes that market conditions for the first six months of 2008 are likely to be the opposite of what took place in the late 1990's, when demand for the company’s products was very strong but huge imports of finished steel caused a glut of supply. This severe imbalance made it very difficult for the domestic steel producers to achieve the profitability that would be expected for such a cyclical peak in demand.
The company expects first quarter shipments to be strong in spite of normal weather-related issues. The risk of scrap price volatility and variance in actual scrap usage costs could impact first quarter profitability. Other risks include any increased weakening in the economy and any significant reversal of the lower import levels that have prevailed for several months now.
Nucor and affiliates manufacture 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 is the nation's largest recycler.
