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Steel Dynamics Reports 4th Quarter, 2009 Results

02/04/2010 - Steel Dynamics reported net income of $26.7 million on net sales of $1.2 billion for the fourth quarter and a net loss of $8.2 million on net sales of $4.0 billion for the fiscal year ended December 31, 2009.

Steel Dynamics, Inc. reported net income of $26.7 million on net sales of $1.2 billion for the fourth quarter and a net loss of $8.2 million on net sales of $4.0 billion for the fiscal year ended December 31, 2009.
 
Fourth Quarter Results — The $26.7 million ($0.12 per diluted share) net income compares to a loss of $82.7 million in the year-ago fourth quarter. Net sales of $1.2 billion are 3% lower than sales for the year-ago fourth quarter.
 
"Our fourth quarter results were within the range we bracketed in December," said Keith Busse, Chairman and CEO. "Our steel operations met our expectations in the fourth quarter, achieving an operating profit of $108.3 million. This was the result of the continued outstanding operating performance at our mills, benefiting in particular from continued strong sales of flat-rolled and engineered-bar steels. OmniSource generated an operating profit of $4.6 million in the quarter, with weaker results due to lower margins and reduced volumes. Continued losses in the steel fabrication segment and costs related to the start-up of Mesabi Nugget also detracted from fourth quarter's results."
 
Steel shipments were 1.2 million tons, 6% lower than the previous quarter (3Q09), but 24% higher than the year-ago fourth quarter. The average steel selling price reached $675 per ton, a $48 per ton increase from $627 in the previous quarter, which compares to $913 per ton in the year-ago fourth quarter. The average ferrous scrap cost per ton charged in the fourth quarter increased $29 compared to the previous quarter.
 
In metals recycling, OmniSource's ferrous shipments for the quarter were 1.2 million tons, 7% lower than the previous quarter (3Q09) but 34% higher than the year-ago fourth quarter. OmniSource provided 49% of the ferrous scrap purchased by SDI's steel mills in the fourth quarter. Non-ferrous shipments were 202.8 million pounds, 7% lower than the previous quarter, but 14% higher than the year-ago fourth quarter.
 
Full Year Results — The $8.2 million ($0.04 per diluted share) net loss compares to net income of $463.4 million in 2008. Net sales of $4.0 billion were 51% lower than net sales of $8.1 billion in 2008.
 
Steel shipments for the year were 4.0 million tons, 28% lower than the 5.6 million tons shipped in 2008. Year-to-year average selling price per ton decreased $322, from $973 in 2008 to $651 in 2009. SDI's average ferrous scrap cost per ton charged in 2009 was $232, which compares to $421 in 2008.
 
Total ferrous scrap shipments for 2009 were 4.1 million tons, reflecting a 27% decrease from shipments of 5.6 million tons in 2008. In 2009, 47% of SDI's ferrous scrap requirements were supplied by OmniSource. Non-ferrous shipments were 780.1 million pounds, a 14% decrease compared to 911.8 million pounds in 2008. (Ferrous and non-ferrous figures for 2008 exclude shipments by Recycle South prior to the June 2008 acquisition.)
 
Management Comments — "Looking back at 2009, and in light of the extraordinary steel-market and economic conditions the country faced throughout the year, the company's performance was reasonably good," Busse stated. "With the exception of operations depending on non-residential construction, our business improved as the year progressed. We ended the year on a sound footing, and I am very proud of our employees throughout the company. All have focused on efficient operations and cost control, as well as attention to product quality and customer service. 2009 was a tough year, but we came through this extraordinary period much better prepared.
 
"As we enter the new year, we have seen a slight improvement in business conditions,” continued Busse. “Demand for our flat-rolled, engineered bar, and merchant bar steel products, as well as recycled metals, remains robust; but demand for structural steel and building components is still very weak. Our flat-roll steel business, inclusive of The Techs, continues to run at a high rate of capacity utilization. OmniSource continues to operate at about 75% of capacity. Our first-quarter outlook is for stronger profitability in both our steel operations and in metals recycling. We expect to provide quantitative guidance later in the quarter.
 
"There are numerous signs of recovery in the U.S. economy. Service center and OEM steel inventories are at historically low levels. These are conditions when rapid changes traditionally occur in the steel marketplace,” noted Busse. “As always, with our flexible operating culture and top-notch production facilities, Steel Dynamics is in a very good position to take advantage of these market opportunities as they develop".  
 
Operating Segment Results — Operating results for each of SDI's three primary operating segments exclude profit-sharing costs and amortization related to each of the respective segment's intangible assets.
 
The company’s Steel Operations segment includes five electric-arc-furnace (EAF) steel mills and related steel finishing and processing facilities, including The Techs. In addition to flat-rolled steel, the company's steel operations produce structural steel, merchant bars, special-bar-quality steel, rail, and other specialty shapes. This segment represented 64% of the company's fourth quarter external net sales and 63% of the company's external net sales for the full year 2009.
 
Fourth quarter steel operations net sales were $790.0 million on shipments of 1.2 million tons (including intra-company shipments).  Net sales for the year 2009 were $2.6 billion on shipments of 4.0 million tons (including intra-company shipments). Based on tons shipped (including steel shipments made by The Techs), flat-rolled products accounted for 67% of the steel segment’s 2009 shipments. Structural steel and rail shipments were 12%, merchant bars were 9%, engineered bars were 7% and the remaining 5% were shipments by the company’s Steel of West Virginia subsidiary. The segment’s fourth quarter operating income was $108.3 million ($93 per ton shipped), which compares to $106 per ton in the third quarter. Operating income for the year was $209.2 million ($52 per ton shipped).
 
The steel operations segment’s average selling price per ton for was $675 for the fourth quarter, a $48-per-ton increase from $627 in the previous quarter, but a decrease of $238 per ton from the year-ago quarter. The average ferrous scrap cost per net ton charged increased by $29 compared to the previous quarter and was $78 lower than the year-ago fourth quarter. For the year 2009, the average selling price per ton was $651, a decrease of $322 from 2008. The average scrap cost per ton in 2009 decreased $189 from 2008.
 
Steel Dynamics’ Metals Recycling and Ferrous Resources segment includes ferrous and non-ferrous metals processing and trading by OmniSource Corp. and SDI's Iron Dynamics scrap-substitute operation, which produces pig iron for use by the Flat Roll Division. The segment also includes expenses related to the Mesabi Nugget project, which is currently in a start-up mode. The segment reported net sales of $521.6 million for the fourth quarter (including intra-company sales to the company's steel operations), which represents 32% of SDI's fourth quarter external net sales.  For the full year 2009, the segment's net sales were $1.7 billion (including intra-company sales to the company's steel operations), which represents 31% of the company's external net sales. The segment’s operating loss in the fourth quarter was $2.5 million and operating income for the year 2009 was $35.2 million.  
 
OmniSource's operating income was $4.6 million for the fourth quarter and $57.5 million for the year 2009. Total ferrous shipments, including shipments to SDI's steel operations, were 1.2 million tons in the fourth quarter, and non-ferrous metals shipments were 202.8 million pounds. During the fourth quarter, the company's metals recycling operations supplied 502,000 tons of ferrous scrap to SDI's steel operations, representing approximately 49% of the tonnage of ferrous scrap purchased by the company’s mills during the quarter. For the year 2009, metals recycling operations supplied 1.6 million tons of ferrous scrap to SDI's steel operations, or approximately 47% of the tonnage of ferrous scrap purchased by the company’s mills.
 
The company’s Steel Fabrication Operations segment includes New Millennium Building Systems, which fabricates steel joists, trusses, and decking used in the construction of non-residential buildings. Fourth quarter net sales were $27.2 million, representing 2% of SDI's fourth quarter external net sales. Net sales for the year were $158.0 million, or 4% of the company's external net sales for 2009. The segment reported an operating loss of $6.2 million for the fourth quarter and an operating loss of $6.1 million ($42 per ton shipped) for the year. Fourth quarter shipments totaled 30,000 tons at an average selling price of $906 per ton. For the year 2009, shipments totaled 145,000 tons at an average selling price of $1,088.