Steel Dynamics Provides Second Quarter Earnings Guidance
06/17/2011 - Steel Dynamics, Inc. expects second quarter earnings to be in the range of $0.35 to $0.40 per diluted share, lower than the first quarter 2011 reported results of $0.46, but higher than earnings of $0.22 per diluted share achieved in Q2 2010.
Steel Dynamics, Inc. expects second quarter earnings to be in the range of $0.35 to $0.40 per diluted share, lower than the first quarter 2011 reported results of $0.46, but higher than earnings of $0.22 per diluted share achieved in Q2 2010.
On a comparative basis, unrealized hedging gains at the company's metals recycling operations were $9.5 million in the first quarter 2011, as compared to an estimated second quarter unrealized hedging loss of approximately $3 million, resulting in a non-cash fluctuation in the company's quarter-over-quarter pretax earnings of $12.5 million, an estimated impact of approximately $0.03 per diluted share.
During the quarter, the company has been experiencing reduced metal margins in its metals recycling operations, as the cost of acquiring unprocessed scrap material more than outpaced any price increases, resulting in an estimated 15% quarterly reduction in ferrous margins and an estimated 25% reduction in nonferrous margins (excluding the impact from unrealized hedging adjustments), driven by the copper and stainless steel markets. The impact of Mesabi Nugget on the company's results is estimated to be comparable to that experienced in the first quarter 2011, due to the previously discussed planned May maintenance outage.
During the second quarter the company experienced periods of weaker-than-expected market dynamics for both its sheet and structural products. April incoming orders for flat-rolled steel were about 25% less than the monthly average achieved in the first quarter, but the company noted that since the beginning of May orders have returned to levels consistent with those achieved earlier in the year. The company expects this trend to continue.
Incoming orders for structural steel weakened in the quarter, as the residential and nonresidential construction markets remain a challenge. Despite these volume and pricing issues, the company expects its steel operations' operating results to be further improved from those experienced in the first quarter 2011.
