Nucor Reports Results for First Half of 2007
07/20/2007 - Nucor announces consolidated net earnings of $344.9 million on consolidated net sales of $4.17 billion for the second quarter, and consolidated net earnings of $725.9 million on consolidated net sales of $7.94 billion for the first half of 2007.
Nucor Corp. announced consolidated net earnings of $344.9 million on consolidated net sales of $4.17 billion for the second quarter, and consolidated net earnings of $725.9 million on consolidated net sales of $7.94 billion for the first half of 2007.
Second Quarter Results—The $344.9 million consolidated net earnings ($1.14 per diluted share) reflect a 23% decrease from $450.0 million ($1.44 per diluted share) earned in the second quarter of 2006, and a 9% decrease from the $381.0 million ($1.26 per diluted share) earned in the first quarter of 2007.
While the $1.14 earnings per share represent historically strong results, these earnings have been adversely impacted by several factors, including continued softness in the sheet market (due to persistently high imports of steel and steel bearing manufactured products, particularly from China). Reduced demand resulting from the slowdown in the automotive, appliance and housing sectors, have contributed to a decrease in the rate of inventory reductions by sheet customers, and increased scrap and energy costs (and the resulting increase in LIFO charge) reduced the company’s margins in the second quarter.
Consolidated net sales of $4.17 billion reflect a 10% increase compared with $3.81 billion in the second quarter of 2006, and an 11% increase compared with $3.77 billion in the first quarter of 2007. Average sales price per ton increased 13% from the second quarter of 2006 and increased 11% from the first quarter of 2007. Total tons shipped to outside customers were 5,621,000 tons, a decrease of 3% from the record shipments in the second quarter of 2006 and a decrease of 1% from the first quarter of 2007.
The average scrap and scrap-substitute cost per ton used was $291, an increase of 18% compared with $247 in the second quarter of 2006 and an increase of 12% compared with $259 in the first quarter of 2007. Total energy costs increased $3 per ton from the second quarter of 2006, and increased $2 per ton from the first quarter of 2007.
Nucor incurred a $66.5 million charge to value inventories using the last-in, first-out (LIFO) method of accounting, which compares to a charge of $15.5 million in the second quarter of 2006 and a charge of $24.5 million in the first quarter of 2007.
Six-Month Results—The $725.9 million consolidated net earnings ($2.39 per diluted share) reflect a 13% decrease from net earnings of $830.0 million ($2.65 per diluted share) in last year's first half.
Consolidated net sales, $7.94 billion, reflect an 8% increase compared with $7.35 billion in last year's first half.
Average sales price per ton increased 9% while total tons shipped to outside customers decreased 1% from the first half of 2006.
The average scrap and scrap-substitute cost per ton used in the first half was $275, an increase of 14% compared with $242 in the first half of 2006. Total energy costs remained flat compared with the first half of 2006, increased $3 per ton from the second quarter of 2006 to the second quarter of 2007, and increased $2 per ton from the first quarter of 2007 to the second quarter of 2007.
Nucor incurred a charge to value inventories using the last-in, first-out (LIFO) method of accounting of $91.0 million in the first half of 2007, compared with a charge of $24.5 million in the first half of 2006.
Steel production decreased 4% to 11,103,000 tons, compared with 11,519,000 tons produced in the first half of 2006. Total steel shipments decreased 5% to 11,067,000 tons, compared with 11,616,000 tons in last year's first half. Steel shipments to outside customers decreased 6% to 10,119,000 tons, compared with 10,713,000 tons in last year's first half.
Operating Results—In the steel products segment, steel joist production decreased to 265,000 tons in the first half, which compares with 281,000 tons in the first half of 2006. Steel deck sales increased to 232,000 tons, compared with 179,000 tons in last year's first half. Cold-finished steel sales increased to 206,000 tons, compared with 187,000 tons in the first half of 2006. With the acquisition of Harris Steel Group Inc. at the end of the first quarter, sales of fabricated concrete reinforcing steel were 204,000 tons in the first half of 2007.
During the second quarter, Nucor repurchased approximately 2.5 million shares of Nucor's common stock at a cost of approximately $154.2 million under a publicly announced stock repurchase program. Approximately 11.6 million shares remain authorized for repurchase.
In June, Nucor announced that it entered into a Merger Agreement for the acquisition of Magnatrax Corp. for a
cash purchase price of approximately $280 million. Expected to close during the third quarter of 2007 after satisfactory resolution of closing conditions, the transaction is expected to be immediately accretive to Nucor’s earnings.
Outlook—The company said its outlook for the third quarter is in line with the results of the first six months of 2007. In the second half of 2007, Nucor expects bar shipments to improve over the second quarter pace. The sheet market, however, is expected to continue to be challenging due to imports from China as well as the ongoing difficult conditions in the automotive and housing sectors. The company projects that its beam mills and plate mills will continue to experience strong demand. The company also said its outlook is positive for its downstream, value-added businesses.
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 North America's largest recycler.
Magnatrax is a leading provider of custom-engineered metal building systems for the growing North American non-residential construction market. Magnatrax also offers architectural metal roofing systems for new and retrofit construction, and provides related transportation services.
