Steel Dynamics Reports Significantly Stronger First Quarter 2011 Results
04/19/2011 - Steel Dynamics reported first quarter net income of $106 million on net sales of $2.0 billion.
Steel Dynamics, Inc. announced first quarter net income of $106 million ($0.46 per diluted share) on net sales of $2.0 billion. The first quarter income compares to net income of $8 million ($0.04 per diluted share) on net sales of $1.5 billion in the previous quarter (4Q10) and net income of $65 million ($0.29 per diluted share) on net sales of $1.6 billion for the year-ago first quarter.
First Quarter Results — Steel shipments were 1.5 million tons, 10% higher than the previous quarter and 4% higher than the year=ago first quarter. The average external steel selling price was $890 per ton, an increase of $137 per ton from the previous quarter’s average of $753 and an increase of $154 per ton from the first quarter 2010 average of $736. The average ferrous scrap cost per ton charged increased $60 vs. the previous quarter average and $86 compared to the year-ago first quarter.
OmniSource ferrous shipments were 1.5 million gross tons, 23% higher than the previous quarter and 24% higher than the year-ago first quarter. OmniSource provided 54% of the ferrous scrap purchased by SDI's steel mills during the first quarter. First quarter non-ferrous shipments were 287 million pounds, 25% higher than the previous quarter and 20% higher than the year-ago first quarter.
"Our first quarter earnings were significantly higher than our fourth quarter results based on both volumes and margins at our steel and metals recycling operations," said Keith Busse, Chairman and CEO. "Our steel operations achieved operating income of $196 million, or $138 per ton shipped, a 114% increase in operating income over fourth quarter results. These results were led by our sheet steel and SBQ bar operations. In addition, OmniSource recorded operating income of $49 million, one of our strongest quarters since the economic collapse in the fall of 2008. The higher steel industry utilization rate continues to strengthen demand for recycled ferrous materials.
"Our Engineered Bar Products and Flat Roll divisions continue to operate at essentially full capacity. Engineered Bar has maintained its extended order backlog for special-bar-quality steel as demand remains strong. We are currently planning a 10-day outage at Engineered Bar in April for scheduled maintenance; however, we do not believe this will meaningfully impact second-quarter shipments. Sheet steel demand also continues to be strong as we enter the second quarter.
"Unfortunately, the sustained weakness in the non-residential construction market remains a challenge for our structural and fabrication operations. Our commitment to rail as a complement to our structural operations remains strong, as first-quarter rail shipments were 31,000 tons, our highest quarterly volume so far. We are encouraged by our progress entering this market, and plan to increase our participation throughout 2011," Busse said.
Mesabi Nugget — The company's Mesabi Nugget start-up facility resumed operations in January after taking an outage for equipment modifications. Since the restart, Mesabi has achieved higher facility utilization and improved production volumes, up to a monthly operating rate of 20,000 tonnes since the beginning of April. Nugget shipments increased to 36,000 tonnes in the first quarter from 18,000 tonnes in the previous quarter (4Q10). Mesabi Nugget start-up losses negatively impacted the company's pre-tax first quarter earnings by $11 million (approximately $.03 per diluted share) after taxes.
“We are pleased with the continued production improvements at Mesabi,” said Busse. “With the additional supply of liquid pig iron from Iron Dynamics to our flat roll mill, we have nearly achieved our goal of self-sufficiency of iron for our steel operations.”
Steel Operation Segment — SDI’s Steel Operations Segment reported net sales of $1.3 billion on shipments of 1.5 million tons for the first quarter, which compares to net sales of $979 million on shipments of 1.3 million tons in the previous quarter (4Q10) and net sales of $1.0 billion on shipments of 1.4 million tons during year-ago first quarter (including intra-segment and intra-company sales).
The average external steel selling price for the first quarter increased $137 per ton to $890 from the fourth quarter 2010 average of $753. The first quarter's average ferrous scrap cost per ton charged was $60 higher than the fourth quarter of 2010.
First quarter operating income for the steel segment was $196 million ($138 per ton shipped) compared to operating income of $91 million ($70 per ton) in the previous quarter operating income of $138 million ($99 per ton) in the year-ago first quarter.
SDI’s Steel Operations segment includes five EAF-based steel mills and related steel finishing and processing facilities, including The Techs. The company's steel operations produce flat-rolled steel, structural steel, merchant bars, special-bar-quality steel, rail, and specialty shapes. Steel operations represented 59% of the company's first quarter 2011 external net sales and 60% of fourth quarter 2010 external net sales.
Metals Recycling and Ferrous Resources segment — SDI’s Metals Recycling and Ferrous Resources segment reported net sales of $1.1 billion and operating income of $47 million for the first quarter, which compares to net sales of $770 million and an operating loss of $4 million during the previous quarter and net sales of $756 million and operating income of $32 million during the year-ago first quarter (including intra-company sales). The segment represented 37% of the company's first quarter 2011 external net sales and 35% of fourth quarter 2010 external net sales.
OmniSource first quarter 2011 ferrous shipments were 1.5 million gross tons and non-ferrous shipments were 287 million pounds, which compares to shipments of 1.2 million gross tons and non-ferrous shipments of 230 million pounds for the previous quarter and shipments of 1.2 million gross tons and non-ferrous shipments of 238 million pounds for the year-ago first quarter.
During the first quarter, OmniSource supplied 670,000 gross tons of ferrous scrap to SDI's steel operations, or approximately 54% of the tonnage of ferrous scrap purchased by the mills. Operating income for OmniSource was $49 million, which compares to operating income of $9 million in the previous quarter and $43 million in the year-ago first quarter.
SDI’s Metals Recycling and Ferrous Resources segment includes the company's metals recycling operations (OmniSource Corp.), liquid pig iron manufacturing facility (Iron Dynamics), and iron nugget manufacturing start-up facility (Mesabi Nugget, which is 81% company owned).
Outlook — "Looking ahead for 2011, our view remains optimistic,” said Busse. “We are seeing the continuation of improvements in the U.S. economy and still anticipate increased steel consumption throughout the year as sectors, such as automotive, transportation, energy, industrial, agricultural, and construction equipment, maintain momentum.
“We also expect the second quarter to be solid and will provide quantitative guidance in June," Busse concluded.
