Steel Dynamics, Inc. provided first quarter 2015 earnings guidance Tuesday, expecting first quarter 2015 adjusted earnings guidance in the range of $0.12 to $0.16 per diluted share, excluding approximately $17 million, or $0.04 per diluted share, of estimated premium and related expenses associated with the company's repayment of $350 million in senior notes in March 2015. Including these charges, earnings guidance for the first quarter 2015 would have been in the range of $0.08 to $0.12 per diluted share.
Estimated first quarter earnings are lower than the company's sequential fourth quarter 2014 adjusted earnings of $0.40 per diluted share and similar to prior-year first quarter earnings of $0.17 per diluted share.
The company’s statement included two developments that had a significant impact in the first quarter:
“Domestic steel product pricing declined to levels that are now globally competitive, which the company believes will result in reduced steel import levels beginning in the second quarter 2015. Despite continued solid domestic steel consumption, product pricing decreased meaningfully due to delayed customer orders caused by the volatility in scrap prices and inventory buildup related to excessive fourth quarter 2014 steel imports. The company believes the surplus inventory can be right-sized in the April and May 2015 timeframe, which coupled with continued demand, should result in increased domestic steel mill utilization.”
“Ferrous scrap pricing declined between 25 percent and 30 percent during February, which the company believes will benefit metal margin. Ferrous scrap pricing disconnected from iron ore pricing during 2014, as iron ore prices declined dramatically, while scrap prices remained relatively unchanged. Historically these commodities are highly correlated; therefore, a sharp decline in scrap prices was not unexpected.”
“The company believes these events, coupled with continued strength in domestic steel consumption from the automotive, manufacturing and construction sectors, should support a stronger second quarter, and second half 2015, based on the expectation of reduced domestic steel import levels, reduced raw material costs, and increased orders as customer inventory levels decline. Historically, the construction industry has been the largest single domestic steel consuming sector. The construction market grew during 2014, improving meaningfully from the lows experienced in 2009 and 2010. Despite the first quarter of each year being historically weaker for the construction industry due to seasonality, the company's fabrication operations are expected to achieve solid first quarter 2015 financial results. These results could approach those achieved in the third quarter 2014, which is traditionally the strongest construction quarter of a calendar year. The company believes this is evidence of the continued growth in non-residential construction.”