Steel Dynamics’ net sales up 72 percent year-over-year

Tuesday, 19 October 2010 03:06:45 (GMT+3)   |  
       

Fort Wayne, Indiana-based Steel Dynamics, Inc. (SDI) announced Monday that year-to-date 2010 net sales through September 30 were $4.8 billion, up 72 percent from the same period of 2009, and greater than full-year 2009 net sales of $4.0 billion.  Year-to-date net income of $133 million compares to a loss of $35 million in the first nine months of 2009.  Operating income for the first nine months of 2010 was $318 million versus $41 million in the first nine months of 2009. 

Third quarter net sales of $1.6 billion were 35 percent higher than net sales of $1.2 billion for the third quarter of 2009 and were 3 percent lower than the second quarter of 2010.  Third quarter steel shipments of 1.3 million nt were 5 percent higher than the third quarter of 2009, and 4 percent higher than the second quarter of 2010.  In metals recycling, OmniSource's ferrous metals shipments in the third quarter were 1.4 million gross tons, nearly the same as the second quarter.

"In mid-September we noted our expectation that our third quarter's earnings could be weaker due to reduced margins in the steel segment," said Keith Busse, Chairman and CEO.  "While third quarter steel volume remained relatively flat, the decline in steel selling prices, mainly steel sheet, outpaced the decline in scrap prices.  Our third-quarter average selling price per ton for steel products was $782, down $47 from $829 in the second quarter, while our average scrap cost per ton charged decreased $23.  As a result of the reduced margins, operating income for the steel segment fell to $88 million in the third quarter, down from $134 million in the second quarter.

"In September, our metals recycling business posted a very strong financial performance, driven by higher than expected shipping volumes and expanded non-ferrous margin, which offset the down market experienced earlier in the quarter.  However, despite slightly higher quarterly shipping volumes, lower ferrous metal margins resulted in operating income of $22 million in the third quarter as compared to $25 million in the second quarter. In steel fabrication, New Millennium's operating losses narrowed in the third quarter to less than $500,000 from the prior quarter's $5 million loss, as a result of increased volume and ongoing efforts to control operating costs," Busse said.

During the third quarter, increased steel shipments of long-products combined with weaker flat-rolled volume resulted in a change in product mix, causing flat-roll shipments to decline from 64 percent of total steel shipments in the second quarter to 60 percent in the third.  The Engineered Bar Products Division achieved record production levels due to stronger OEM customer demand, and shipped 153,000 nt in the third quarter, up 19 percent from the second quarter.

Structural steel demand remains lackluster, as shipments by the structural and rail division decreased slightly, despite increasing shipments of its rail products.  With the approvals of SDI's rail products by all the nation's leading railroads, rail and welded-rail shipments are expected to continue to grow significantly.  

"In terms of steel market conditions, we have seen a slight improvement in our long product order activity; while in contrast, we have seen a significant decline in our sheet steel backlogs," Busse continued, "looking to the fourth quarter, we believe that margin improvement is possible in both our steelmaking and metals recycling operations, which could result in a slightly stronger fourth quarter.   However, given the uncertainty surrounding demand for flat-rolled steels, we will provide specific fourth-quarter guidance in December.   Additionally, we are still assessing the potential impact to near-term earnings related to our recent acquisition of certain steel fabrication assets, but currently anticipate the related costs to be minimal."

Moving on to Steel Operations, net sales for the third quarter (including intra-segment and intra-company sales) were $1.3 billion.  The segment represented 61 percent of the company's external net sales for the quarter.  This segment includes five steel mills and related steel processing facilities, including The Techs.  SDI's five steel mills produce a wide variety of flat-rolled and long steel products.  The Techs produce galvanized steel sheet using steel that is sourced primarily from third parties.
Third quarter 2010 Steel Operations shipments were 1.3 million tons (including intra-segment and intra-company shipments), of which 788,000 tons were flat-rolled steel shipments.  Based on tons shipped, including the steel shipments made by The Techs, flat-rolled products accounted for 60 percent of third quarter steel operations shipments, 12 percent were structural steel and rail shipments, 12 percent was engineered bars, 11 percent was merchant bars, and 5 percent related to Steel of West Virginia. 

Third quarter operating income for the steel segment was $88 million, or $68 per ton shipped, compared to an operating income of $108 per ton in the second quarter of 2010.  The third quarter's average external selling price per ton for Steel Operations was $782, a decrease of $47 per ton from $829 in the second quarter of 2010 and an increase of $143 per ton from the year-ago quarter.  The average cost of ferrous scrap per net ton charged decreased $23 compared to the second quarter.

During the third quarter, the company's scrap operations supplied 556,000 gross tons of ferrous scrap to SDI's Steel Operations, which was 41 percent of the total tonnage of ferrous scrap OmniSource shipped and was 50 percent of the tonnage of ferrous scrap purchased by our mills during the quarter.

Steel Fabrication Operations segment, which consists of the New Millennium Building Systems fabricating plants that produce joists, trusses, and steel decking that is used in the construction of non-residential buildings, saw third quarter net sales of $54 million (including intra-company sales).  The segment represented 3 percent of SDI's third quarter external sales.  New Millennium reported an operating loss of $494,000 for the quarter, compared to a $5 million loss in the second quarter.  Third quarter shipments totaled 47,000 tons (including intra-company shipments), 13 percent higher than the second quarter of 2010 and 37 percent higher than the year-ago quarter.


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