Steel Dynamics Updates Earnings Guidance
12/20/2007 - Excluding the effect of its late-October acquisition of OmniSource, Steel Dynamics expects fourth quarter earnings to be in line with the guidance that was issued in October.
Based on current information regarding the financial impact of its purchase of OmniSource, as well as the company’s operating performance to date, Steel Dynamics, Inc. is keeping its fourth-quarter 2007 earnings expectations in line with the guidance provided in October. This guidance excludes, however, the company’s October 26, 2007 acquisition of OmniSource Corp.
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NASDAQ announced on December 14 that Steel Dynamics would be added to the NASDAQ-100 Index, effective Monday, December 17, 2007.
Based on market capitalization, the NASDAQ-100 Index includes 100 of the largest non-financial domestic and international securities listed on the NASDAQ stock market.
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"At the time of our October guidance, we promised a December update of our fourth-quarter earnings estimates to reflect the anticipated financial impact of the OmniSource acquisition," said Keith Busse, Chairman and CEO.
"Outside of the adjustments we are making today to reflect the OmniSource acquisition, our previous estimates of earnings per diluted share would be unchanged, with our current expectation being at the middle- to low-end of guidance.
“We are still in the process of determining final purchase price allocations for the OmniSource acquisition and the resulting impact on our fourth-quarter earnings,” continued Busse. Based on current estimates, Busse said that “we believe the acquisition to be dilutive to earnings by approximately $0.07 per diluted share, resulting in an updated fourth-quarter earnings range of $0.95 to $1.00 per diluted share as compared to the $1.02 to $1.07 range that we provided in October.” The October guidance did not include an estimate of OmniSource operations or purchase accounting adjustments.
Dilution in fourth quarter earnings is the result of the 9.7 million shares issued as a part of the consideration paid for the acquisition of OmniSource, in addition to related additional interest expense and purchase accounting adjustments. The estimated purchase accounting adjustments for the fourth quarter are approximately $0.03 per diluted share.
Since the acquisition, Busse said that OmniSource's performance has been consistent with the dynamics of the scrap industry, with seasonally weaker fourth quarter shipments typically followed by increased shipments and stronger financial results in the first quarter.
"Because of our two major acquisitions in 2007, as well as our capacity expansions and product diversification at existing operations, we also want to share our early views of 2008 to provide investors a better idea of the company's expected growth potential for the new year,” said Busse. “Our current view is that SDI's earnings per diluted share could be in the range of $5.00 to $5.50 for 2008. This is based on our outlook for steel markets next year, as well as company-specific growth from acquisitions and internal expansion.
"We are very positive about the prospects for stronger U.S. steel markets in 2008, particularly for flat-rolled steels," continued Busse. "Various positive factors exist to suggest a stronger year for flat rolled steels, including low inventories, limited imports, high steel prices abroad, and high ocean freight costs. We expect that by the beginning of the second quarter, shipping volumes and prices will have improved markedly. We also expect continued strength in structural and bar steels, which should benefit from continued North American investment in infrastructure, in institutional, industrial and distribution buildings, and energy projects. Of course, there are risks related to possible further deterioration in the U.S. economy and to specific steel-consuming sectors, but we believe the steel markets should strengthen in 2008 even without significant improvement in the U.S. economy.
"In addition,” said Busse, “Steel Dynamics expects to benefit in 2008 from full-year contributions from the acquisitions of The Techs and OmniSource Corp., as well as from volume growth and margin improvements due to recent capital investments. In particular, the start-up in the first quarter of our second coil-coating line at Jeffersonville, Ind., and the start-up in the second quarter of a second rolling mill at Columbia City, Ind., will provide increased volumes of steel shipments and potentially higher profit margins. In addition,” concluded Busse, “our investments in revamping three New Millennium Building Systems fabricating plants should begin to pay off in 2008."
