Steel Dynamics, Inc. today announced third quarter 2016 financial results, with adjusted net income at $160 million on net sales of $2.1 billion. Comparatively, prior year third quarter net income was $61 million on net sales of $2.0 billion, and sequential second quarter 2016 net income was $142 million on net sales of $2.0 billion.
"Our metals recycling platform earnings decreased in third quarter 2016, as scrap prices declined in both August and September," said Mark D. Millett, President and Chief Executive Officer. "Ferrous scrap demand declined based on lower domestic steel mill utilization, resulting in lower ferrous shipments, while ferrous metal margin remained steady. Earnings from our fabrication operations also declined in the quarter, due to increased steel input costs more than offsetting higher selling values. However, our fabrication platform continues to experience steady demand from the non-residential construction sector. Based on continued strong generation of cash flow from operations of $196 million in the third quarter 2016, we maintained record liquidity of over $2.2 billion at the end of September 2016, providing a firm foundation for growth."
"Steel customer inventory levels remain lower than historical levels and year-over-year steel imports have declined approximately 20 percent," continued Millett. "However, there has been buyer hesitancy in anticipation of possible declines in scrap pricing, with an expectation that this might further pressure steel prices. Additionally, we are heading into a seasonally lower demand environment and customers are hesitant to significantly increase inventories before the end of the year. Due to these factors, we anticipate lower sequential volumes in our operating platforms, which is seasonally typical for the calendar fourth quarter and sequentially weaker realized steel pricing. Although domestic automotive production may be coming off record levels, we believe 2017 automotive steel consumption will be steady with Mexico growing production, and that there will be additional growth in the construction sector, especially for larger, public sector infrastructure projects. We could also see some improved activity within the energy sector next year.”