Fort Wayne, Indiana-based steelmaking and recycling company Steel Dynamics, Inc. (SDI) announced Monday that it expects Q3 earnings to be in the range of $0.18 to $0.22 per diluted share, a significant drop from Q2 2011 earnings of $0.43 per diluted share, but still up compared to Q3 2010 earnings of $0.09 per diluted share. The decline in forecasted earnings is primarily due to the substantial drop in anticipated Q3 2011 earnings from the flat-rolled sector, according to a press release from the company.
SDI said that, "Despite the continuation of relatively low service-center inventory levels, flat rolled demand during July and August did not materially improve, pricing remained a challenge, and the cost of raw materials, specifically steel scrap, did not decline in step with steel prices, all of which resulted in reduced third quarter margins."
A bright spot for SDI in Q3 was the long product sector, which is expected to improve based on increased volumes and expanding margins, largely from special bar quality (SBQ) steel.
Earnings from the company's metals recycling and ferrous resources and fabrication operations are expected to be consistent with those achieved in Q2 2011. Overall, renewed uncertainty within the US and global economies continues to negatively impact corporate and consumer spending, resulting in a challenging demand environment. SDI also explained that if more economic clarity develops throughout the remainder of the year, demand could be expected to increase, along with steel pricing and margins which have already started to move, with the potential to positively impact fourth quarter results, given the low levels of existing inventories throughout the supply chain.