Nucor posts Q2 profit, retains “position of strength”

Friday, 23 July 2010 02:08:12 (GMT+2)

Charlotte, North Carolina-based Nucor Corporation Thursday announced net earnings of $91.0 million for the second quarter of 2010, compared to net earnings of $31.0 million for the previous quarter and a net loss of $133.3 million in Q2 2009.

Nucor's net sales increased 15 percent in Q2 2010 to $4.20 billion, compared with $3.65 billion in Q1.  In comparison to the same quarter last year, when sales totaled $2.48 billion, 2010's second-quarter sales increased 69 percent.  Average sales price per ton increased 14 percent from the first quarter of 2010 and increased 25 percent from the second quarter of 2009.

Total steel mill shipments in Q2 increased 53 percent over the same quarter last year, but were down 2 percent from Q1 2010.  Overall operating rates at Nucor's mills in the second quarter, at 71 percent, were down slightly from the first quarter's 73 percent, with some improvements at the beam and plate mills offset by declines at the sheet mills. Steel mill utilization significantly increased from 46 percent in last year's second quarter.

During the quarterly company conference call, Nucor CEO and President Dan DiMicco pointed out the significance of reporting net income during a prolonged economic recovery.  CFO Jim Frias echoed his sentiments, partially attributing Nucor's "position of strength" on managing business with long-term focus.

According to COO John Ferriola, the improvements at the plate and beam mills were due to product diversification.  For example, Nucor produces the HP16 piling beam, which is the largest available in North America and is currently used extensively in New Orleans to reinforce the Mississippi River levy system.  Growing demand for plate, particularly in the energy sector (wind farms) and heavy machinery (agricultural and construction), helped boost shipments in the second quarter.

Other observations made during the call included hope for the long product market; demand for longs has hit bottom, but Nucor is looking toward increased opportunities from expected stimulus funds in the second half of 2010.  Nucor's executives also discussed a potential blast furnace project in Louisiana-specific plans have not been nailed down because the project is dependent on the outcome of "cap and trade" legislation currently under debate in Washington.  On the subject of exports, Nucor's top brass emphasized that the company will not make export commitments that negatively affect domestic customers.  That said, the company is exporting about 10-11 percent of their product, mostly to Latin American markets and NAFTA partners.  They have been doing especially well in South America lately, but unfortunately export opportunities are decreasing as the US dollar strengthens.

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