SDI returns to profit in Q3; CEO Busse optimistic on recovery

Tuesday, 20 October 2009 23:13:21 (GMT+3)   |  
       

US minimill steelmaker Steel Dynamics Inc. (SDI) has reported a sharp improvement in its profitability in the third quarter compared to the previous quarter, citing effective cost-cutting measures and improved activity in its flat rolled and scrap segments during the same time period.

SDI announced late Monday a net income of $69 million for the third quarter of 2009, which compares to a net loss of $16 million in the second quarter of 2009 and net income of $193 million in the third quarter of 2008. The firm reported that the principal drivers as to why third quarter earnings registered improvement were: "stronger-than-anticipated cost compression, resulting from higher production and shipping volumes at the Flat Roll Division, and better than expected performance in metals recycling."

SDI said third quarter net sales of $1.2 billion increased significantly from $792 million in the second quarter of 2009, up 48 percent, but were down 54 percent from $2.6 billion when compared to the third quarter of 2008, a period when pricing reached historical peaks. Sequentially, shipping volumes in all segments except fabrication were up in the third quarter, as were selling prices. Steel shipments for the third quarter were 1.2 million net tons, 41 percent higher than the second quarter.

SDI's average steel selling price for the third quarter increased $33 per nt, to $627 from $594 per nt in the second quarter. Average scrap cost charged increased $49/nt compared to the second quarter. In metals recycling, SDI's OmniSource segment's ferrous metals shipments totaled 1.3 million nt, up 54 percent from the second quarter (nonferrous shipments were 217 million pounds, up 28 percent from the second quarter).

"In the third quarter, the company's steel operations produced operating income of $128 million, or $105 per ton, while OmniSource made significant strides in earnings growth, resulting in operating income of $50 million during the quarter," said Keith Busse, Chairman and CEO. "I salute SDI's employees as these results are testament to our focus on efficient operations and cost control throughout the company. Our steelmaking divisions all produced pre-tax profits in the quarter, including the Structural and Rail Division which continues to face very challenging conditions in the construction marketplace. Our steel fabricating operations showed an operating loss of $3 million on continued weakness in non-residential construction.

"Current business conditions remain relatively steady. Orders for flat-rolled steel products continue to be strong; merchant, specialty and engineered bars are reasonably good; but structural steel backlogs remain weak. Our flat-roll steel business, inclusive of The Techs, continues to run at near full capacity utilization rates, while the bar divisions are running at 60 to 70 percent of capacity. The Structural and Rail Division has seen modest improvement, with utilization now in the low thirty-percent range, which is now being calculated on the basis of its expanded annual production capacity of 1.8 million tons. OmniSource has experienced improved metals flows and is now processing at about 75 to 80 percent of capacity.

"Our outlook for the fourth quarter anticipates a slight easing in current operating rates, which could result in somewhat lower earnings than the third quarter. We expect to provide quantitative guidance later in the quarter. Factors that could affect fourth quarter results include lower flat-roll steel shipments, due to seasonality coupled with a slight slowing in market momentum, and margin compression in metals recycling due to lower scrap prices. We also expect to incur increased expenses related to the anticipated start-up of the Mesabi Nugget plant. Overall, though, we expect the combined metals recycling and ferrous resources segment to remain profitable in the fourth quarter on the strength of OmniSource. We currently believe that SDI's second-half earnings will offset first-half losses and foresee the company generating a small profit for the year 2009, a feat few, if any, other steelmakers will accomplish in this very challenging and difficult environment.

"As the Flat Roll Division, The Techs, and OmniSource demonstrated in the third quarter, our Steel Dynamics operations are capable of ramping up quickly to meet renewed demand for our products. Business conditions remain somewhat uncertain for the foreseeable future, but we remain optimistic the recovery will continue to gain a head of steam, and we will continue to be in excellent position to take advantage of it," Busse said.


Similar articles

Slowdown in Turkey’s steel exports continues in September

17 Sep | Steel News

Nucor nearly doubles earnings in Q2

22 Jul | Steel News

Steel Dynamics sees lower earnings despite higher sales in Q2

20 Jul | Steel News

Weekly US roundup: To stock or not to stock—that is the question

30 Aug | Steel Matters

Attendees of the SteelOrbis Steel Trade conference "look for the light"

13 Jul | Steel Matters

US merchant bar mills likely to try for another price increase

28 Aug | Longs and Billet

US merchant bar mills expected to increase prices ... if scrap allows

08 Jul | Longs and Billet

Light Gauge steel news from the Americas – February 27, 2009

27 Feb | Steel Matters

Despite slow rise of US scrap prices, exports strengthen

19 Jan | Scrap & Raw Materials

US domestic plate market strong as ever; few import offers emerge

02 Jun | Flats and Slab