Nucor Reports Stronger Results for First Quarter of 2011
04/22/2011 - Nucor reports consolidated net earnings of $159.8 million on consolidated net sales of $4.83 billion for the first quarter of 2011.
Nucor Corp. announced consolidated net earnings of $159.8 million on consolidated net sales of $4.83 billion for the first quarter of 2011.
The consolidated net earnings of $159.8 million ($0.50 per diluted share) compares to a net loss of $11.4 million (-$0.04 per diluted share) in the previous quarter (4Q2010), and represents an increase of 416% over earnings of $31.0 million ($0.10 per diluted share) in the first quarter of 2010. The company said diluted earnings per share are greater than guidance due to March earnings in the steel mills segment exceeding expectations.
In the first quarter, Nucor incurred a $31.0 million ($0.06 per diluted share) charge to value inventories using the last-in, first-out (LIFO) method of accounting, which compares with a charge of $23.0 million ($0.04 per diluted share) in the previous quarter and a charge of $24.0 million ($0.05 per diluted share) in the year-ago first quarter.
Pre-operating and start-up costs of new facilities were $27.9 million in the first quarter, compared with $39.0 million in the previous quarter and $50.5 million in the year-ago first quarter. In 2011, these costs related to several projects, the largest of which was the galvanizing line in Decatur, Ala. The decrease in pre-operating and start-up costs was due to the improved performance at the special bar quality mill in Memphis, Tenn., and the wire rod products mill in Kingman, Ariz.
Consolidated net sales of $4.83 billion reflect a 32% increase compared with $3.65 billion in the first quarter of 2010; the company attributes the gain to a 22% increase in average sales price per ton and a 9% increase in total tons shipped to outside customers. Consolidated net sales increased 25% compared with $3.85 billion in the previous quarter due to a 12% increase in both total tons shipped to outside customers and in average sales price per ton.
The average scrap and scrap substitute cost per ton used during the first quarter of 2011 was $424, an increase of 18% over $359 in the previous quarter and an increase of 33% compared to $318 in the year-ago first quarter.
Overall operating rates at the company’s steel mills increased to approximately 80% in the first quarter of 2011, compared to 68% in the previous quarter and 73% in the year-ago first quarter. As a result of this increased utilization, total energy costs were unchanged from the previous quarter but decreased approximately $1 per ton from the first quarter of 2010.
In January, Nucor received an air quality permit from the Louisiana Department of Environmental Quality for the direct reduced iron (DRI) making facility that will be located in St. James Parish, La. The permit allows for the construction and operation of two plants with a combined annual DRI production of 5,500,000 tons. Nucor broke ground on a 2,500,000-ton DRI facility in March. In addition to a second DRI facility, future plans for the Louisiana site may include a coke plant, blast furnace, pellet plant and steel mill.
The company’s liquidity position remains strong with $2.3 billion in cash and cash equivalents and short-term investments and an untapped $1.3-billion revolving credit facility that matures in November 2012. The company also has $576.5 million in restricted cash related to proceeds received from the November 2010 issuance of Gulf Opportunity Zone Bonds that will be used to partially fund the capital costs associated with the DRI facility in Louisiana.
The company noted that its profitability improved significantly through the quarter, as utilization rates increased and as price increases for steel mill products caught up with higher raw material costs. The company noted that although there are some signs of market weakness that could impact results near the end of the second quarter, second quarter results are expected to show improvement over the first quarter.
The company said that it continues to see slow, steady improvement in real demand in certain end markets. This is most evident in products sold to the manufacturing/industrial sector, including special bar quality products, sheet and plate. The company continues to keep a watchful eye on imports as any measurable increase in import levels will be a threat to current market stability, particularly in the sheet markets. The most challenging markets for the company’s products continue to be those associated with residential and non-residential construction.
The company plans to provide quantitative earnings guidance later in the quarter.
Nucor and affiliates are manufacturers of 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 The David J. Joseph Company, 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.
