SDI Shares Q4 Guidance, Sees Steel Demand Trend Remaining Favorable
12/18/2014 - Steel Dynamics Inc. provided fourth quarter 2014 earnings guidance, noting that it expects both metal spread and shipments to contract due to seasonality and the continuation of elevated import levels.
Steel Dynamics, Inc. provided fourth quarter 2014 earnings guidance in the range of US$0.33 to US$0.37 per diluted share, which includes estimated charges of US$12 million (before taxes) related to post-acquisition purchase accounting adjustments and US$6 million (before taxes) related to estimated lower-of-cost or market adjustments caused by ferrous raw material pricing declines in the company's metals recycling and ferrous resources segment. Excluding these charges, the company's estimated fourth quarter 2014 earnings guidance would have been in the range of US$0.38 to US$0.42 per diluted share. Unadjusted estimated earnings are anticipated to be somewhat lower than the company's sequential third quarter 2014 results of US$0.38 per diluted share and higher than prior year fourth quarter results of US$0.24 per diluted share.
The company is currently in the process of assessing the asset carrying values associated with its Minnesota operations. As the analysis is still underway, no potential impairment impact has been included in the provided fourth quarter 2014 guidance range.
Profitability from the company's steel operations for the fourth quarter 2014 is expected to be similar to the sequential third quarter results. Excluding the impact of the company's recently acquired Columbus flat roll steel mill (completed 16 September 2014), both metal spread and shipments are expected to contract in the fourth quarter 2014. An expected decrease in average quarterly product pricing is anticipated to outpace lower scrap costs in the quarter, compressing profit margins. Volume decline is generally related to typical fourth quarter seasonality and the continuation of elevated import levels. End market demand dynamics remain intact heading into 2015. The demand trend for key steel-consuming end markets is expected to remain favorable, as strength in automotive and manufacturing persists, and the construction market continues to improve. Despite the recent volatility in the energy markets, the company believes that associated steel consumption in 2015 will remain strong and that the opportunity to displace related imports still exists.
Fourth quarter 2014 profitability from the company's fabrication operations is expected to continue to be strong based on higher product pricing, despite expected lower shipments related to typical construction-market seasonality. The company continues to see evidence supporting the recovery in the residential and nonresidential construction sectors.
Based on rapidly decreasing ferrous and nonferrous metal product pricing during the quarter, the company's metals recycling operations are expected to record a minimal loss for the fourth quarter 2014, compared to operating income of US$13 million in the sequential third quarter. Both shipments and ferrous metal margin are anticipated to decrease by close to ten percent in comparison to the third quarter 2014 results.
The company is currently in the process of assessing the asset carrying values associated with its Minnesota operations. As the analysis is still underway, no potential impairment impact has been included in the provided fourth quarter 2014 guidance range.
Profitability from the company's steel operations for the fourth quarter 2014 is expected to be similar to the sequential third quarter results. Excluding the impact of the company's recently acquired Columbus flat roll steel mill (completed 16 September 2014), both metal spread and shipments are expected to contract in the fourth quarter 2014. An expected decrease in average quarterly product pricing is anticipated to outpace lower scrap costs in the quarter, compressing profit margins. Volume decline is generally related to typical fourth quarter seasonality and the continuation of elevated import levels. End market demand dynamics remain intact heading into 2015. The demand trend for key steel-consuming end markets is expected to remain favorable, as strength in automotive and manufacturing persists, and the construction market continues to improve. Despite the recent volatility in the energy markets, the company believes that associated steel consumption in 2015 will remain strong and that the opportunity to displace related imports still exists.
Fourth quarter 2014 profitability from the company's fabrication operations is expected to continue to be strong based on higher product pricing, despite expected lower shipments related to typical construction-market seasonality. The company continues to see evidence supporting the recovery in the residential and nonresidential construction sectors.
Based on rapidly decreasing ferrous and nonferrous metal product pricing during the quarter, the company's metals recycling operations are expected to record a minimal loss for the fourth quarter 2014, compared to operating income of US$13 million in the sequential third quarter. Both shipments and ferrous metal margin are anticipated to decrease by close to ten percent in comparison to the third quarter 2014 results.
