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Steel Dynamics, Inc. announced second quarter 2020 financial
results. The company reported second quarter 2020 net sales of $2.1
billion and net income of $75 million, or $0.36 per diluted share.
Excluding the impact from the following items, the company's second
quarter 2020 adjusted net income was $100 million, or $0.47 per diluted
share.
"Our differentiated business model, coupled
with the passion of our people drove strong steel mill production
utilization, allowing for cost compression benefits and market share
gains. Our second quarter 2020 steel shipments were only 12 percent
lower than our record high sequential first quarter volumes,"
continued Millett. "Our steel mills operated at almost 80 percent
utilization, while the rest of the domestic industry operated at an
estimated 55 percent. Our fabrication operations and steel processing
locations helped achieve this higher utilization, complementing the market
share gains. In addition, our metals recycling platform provided a
competitive advantage in sourcing ferrous scrap for our steel mills in a
challenging supply environment."
Q2 2020 Comments
Second quarter 2020
operating income for the company's steel operations was $172
million, or 41 percent lower than sequential first quarter results,
due to lower selling values and shipments related to the temporary
closures of numerous steel consuming businesses in response to the
coronavirus (COVID-19) pandemic. Domestic automotive producers and the
related supply chain idled operations beginning in March
2020 and slowly began restarting production in May and June.
Construction related steel demand was steadier than industrial
manufacturing throughout the second quarter. The second quarter 2020
average external product selling price for the company's steel operations
decreased $19 sequentially
to $755 per
ton. The average ferrous scrap cost per ton melted at the company's steel
mills decreased $1 sequentially
to $266 per
ton. The company's steel mill's operated at 79 percent of their
production capability during the second quarter 2020, with the flat roll
group achieving a rate of 89 percent. Additionally, second quarter 2020
steel shipments of 2.5 million tons were only 12 percent lower than record
high sequential first quarter shipments of 2.8 million tons, and only nine
percent lower than the second quarter of 2019.
As states issued shelter-in-place mandates and domestic
manufacturing slowed, scrap supply and collection declined. In
addition, significantly lower second quarter 2020 domestic steel
production of an estimated 55 percent, resulted in weak ferrous scrap
demand. As a result, the company's metals recycling operations
recorded an operating loss of $6
million for the second quarter 2020, compared to operating
income of $8
million in the sequential first quarter. As states have
started to reopen, scrap flows have improved, and the company expects its
metals recycling operations to return to profitability for the third
quarter 2020.
Second quarter 2020 operating income from the company's steel
fabrication operations of $27
million was strong, nearly equal to sequential first quarter
results of $29
million, based on steady shipments. The steel fabrication
platform's customer order backlog remains strong, and customers remain
constructive concerning non-residential construction projects. The team
has not seen widespread project delays or cancellations.
Outlook
"We entered 2020 in
a position of strength with ample cash and available liquidity of $2.8
billion, and we remain in a position of strength maintaining that
liquidity at the end of the second quarter 2020," stated Millett.
"Our differentiated business model and performance-driven culture
have proven our ability to generate strong cash flow during challenging
times such as these. We entered 2020 prepared for the capital investment
requirements related to the construction of our new state-of-the art,
electric-arc-furnace (EAF) flat roll steel mill. We are excited about this
strategic project, and the associated long-term value creation it will
bring through geographic and value-added product diversification. This
facility is designed to have product size and quality capabilities beyond
that of existing EAF flat roll steel producers, competing even more
effectively with the integrated steel model and foreign competition, as
well as providing a much more environmentally friendly steel production
alternative for our customers. We have targeted specific regional markets.
Our facility is located and designed to have a meaningful competitive
advantage in these regions and in the displacement of imports. We have
also now signed long-term agreements with two customers to co-locate on
our site, and they plan to represent annual steel consuming and processing
capability of over 800,000 tons. Construction is going well within our
expected capital costs of $1.9
billion, with plans on schedule to commence operations mid-year
2021.
"I also want to congratulate our Columbus Flat Roll Division
team for producing their first prime coil July
9th on their new 400,000-ton
galvanizing line. This is their fourth value-added line investment and
will allow them to sell significantly more higher margin products, while
also providing a ready hot band consumer base in the South for our
anticipated new Texas flat
roll steel mill.
"It is still not possible to determine the full scope of the
negative impact COVID-19 will cause to global economies and the related
impact to domestic steel demand," continued Millett. "As states
continue to determine their reopening guidelines and many steel consuming
businesses have resumed operations, we anticipate steel and metals
recycling demand will improve in the second half of the year compared to
second quarter 2020 trough results. The automotive sector and its related
supply chain have restarted production, and we have started to see some
resulting increase in steel demand and prime scrap production. The
construction sector has remained more resilient and related steel demand
has been steady, as evidenced by our Structural and Rail Division volume
and steel fabrication platform's customer backlog. The weaker sectors
continue to be related to energy and general industrial consumers, which
likely require a longer recovery period.
"Our commitment is to the safety of our teams, families,
communities and to meet the needs of our customers. Our culture and our
business model continue to positively differentiate our performance from
the rest of the industry, and we are in a place of strength. We are
competitively positioned and focused to deliver long-term value creation
for all of our stakeholders," concluded Millett.
SUPPLEMENTAL INFORMATION
(dollars in thousands)
|
External
Net Sales
|
Q2 2020
|
Q2 2019
|
Two quarters
in 2020
|
Two quarters
in 2019
|
Q1 2020
|
|
Steel
|
1,628,027
|
2,106,350
|
3,569,733
|
4,230,920
|
1,941,706
|
|
Fabrication
|
215,250
|
241,424
|
436,186
|
469,904
|
220,936
|
|
Metals Recycling
|
156,583
|
323,100
|
448,439
|
674,237
|
291,856
|
|
Other
|
94,445
|
99,641
|
215,047
|
212,889
|
120,602
|
|
Consolidated Net Sales
|
2,094,305
|
2,770,515
|
4,669,405
|
5,587,950
|
2,575,100
|
|
Operating
Income
|
|
|
|
|
|
|
Steel
|
172,395
|
294,769
|
465,141
|
607,206
|
292,746
|
|
Fabrication
|
27,196
|
30,706
|
56,400
|
51,369
|
29,204
|
|
Metals Recycling
|
-5,918
|
10,614
|
2,408
|
30,572
|
8,326
|
|
Operations
|
193,673
|
336,089
|
523,949
|
689,147
|
330,276
|
|
|
|
|
|
|
|
|
Non-cash amortization of intangible assets
|
-7,190
|
-7,013
|
-14,381
|
-14,026
|
-7,191
|
|
Profit sharing expense
|
-9,092
|
-22,871
|
-30,546
|
-46,548
|
-21,454
|
|
Non-segment operations
|
-18,541
|
-21,173
|
-46,486
|
-51,699
|
-27,945
|
|
Consolidated Operating Income
|
158,850
|
285,032
|
432,536
|
576,874
|
273,686
|
|
Adjusted
EBITDA
|
|
|
|
|
|
|
Net income
|
78,765
|
196,746
|
269,601
|
401,573
|
190,836
|
|
Income taxes
|
24,280
|
60,214
|
81,700
|
122,450
|
57,420
|
|
Net interest expense
|
25,849
|
25,598
|
47,639
|
49,615
|
21,790
|
|
Depreciation
|
70,116
|
72,585
|
141,849
|
144,431
|
71,733
|
|
Amortization of intangible assets
|
7,190
|
7,013
|
14,381
|
14,026
|
7,191
|
|
Noncontrolling interest
|
-3,270
|
-2,444
|
-6,766
|
-2,943
|
-3,496
|
|
EBITDA
|
202,930
|
359,712
|
548,404
|
729,152
|
345,474
|
|
Non-cash adjustments
|
|
|
|
|
|
|
Unrealized hedging gain
|
-208
|
-3,719
|
-1,470
|
-1,977
|
-1,262
|
|
Inventory valuation
|
258
|
351
|
1,117
|
592
|
859
|
|
Equity-based compensation
|
9,519
|
9,080
|
20,331
|
19,699
|
10,812
|
|
Refinancing charges
|
4,907
|
-
|
4,907
|
-
|
-
|
|
Adjusted EBITDA
|
217,406
|
365,424
|
573,289
|
747,466
|
355,883
|
|
Other
Operating Information
|
|
|
|
|
|
|
Steel
|
|
|
|
|
|
|
Average external sales price (Per ton) (a)
|
755
|
879
|
766
|
890
|
774
|
|
Average ferrous cost (Per ton melted) (b)
|
266
|
316
|
266
|
327
|
267
|
|
|
|
|
|
|
|
|
Flat Roll shipments
|
|
|
|
|
|
|
Butler and Columbus Flat Roll divisions
|
1,358,473
|
1,574,463
|
2,942,737
|
3,101,314
|
1,584,264
|
|
Steel Processing divisions (c)
|
418,837
|
422,849
|
824,818
|
753,624
|
405,981
|
|
Long Product shipments
|
|
|
|
|
|
|
Structural and Rail Division
|
400,150
|
352,013
|
835,032
|
728,276
|
434,882
|
|
Engineered Bar Products Division
|
137,386
|
195,644
|
327,187
|
402,518
|
189,801
|
|
Roanoke Bar Division
|
125,104
|
128,460
|
265,326
|
280,860
|
140,222
|
|
Steel of West Virginia
|
78,069
|
95,929
|
170,101
|
187,177
|
92,032
|
|
Total Shipments (Tons)
|
2,518,019
|
2,769,358
|
5,365,201
|
5,453,769
|
2,847,182
|
|
|
|
|
|
|
|
|
External Shipments (Tons) (a)
|
2,152,856
|
2,386,851
|
4,648,020
|
4,734,060
|
2,495,164
|
|
|
|
|
|
|
|
|
Steel Mill Production (Tons)
|
2,132,167
|
2,401,289
|
4,667,400
|
4,812,455
|
2,535,233
|
|
Metals Recycling
|
|
|
|
|
|
|
Nonferrous shipments (000's of pounds)
|
166,914
|
266,222
|
438,992
|
558,260
|
272,078
|
|
Ferrous shipments (Gross tons)
|
802,070
|
1,189,679
|
1,994,214
|
2,361,040
|
1,192,144
|
|
External ferrous shipments (Gross tons)
|
197,970
|
425,477
|
591,621
|
808,318
|
393,651
|
|
Fabrication
|
|
|
|
|
|
|
Average sales price (Per ton)
|
1,364
|
1,538
|
1,360
|
1,556
|
1,356
|
|
Shipments (Tons)
|
160,168
|
156,983
|
323,480
|
302,205
|
163,312
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Full
article
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