Metals

Steel Dynamics to acquire CSN Heartland flat-rolled operations

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Steel Dynamics Inc., headquartered in Fort Wayne, Indiana, has announced that it has entered into a definitive agreement to acquire Companhia Siderurgica Nacional LLC (Heartland) from CSN Steel S.L.U., a wholly owned subsidiary of Companhia Siderurgica Nacional and a steelmaking company headquartered in Brazil.

Heartland, Terre Haute, Indiana, produces various types of higher-margin, flat-rolled steel by further processing hot-roll coils into pickle and oil, cold-roll and galvanized products. The company’s 220 employees will remain with the acquired business.

Steel Dynamics has agreed to purchase Heartland for $400 million in cash inclusive of $60 million of normalized working capital, subject to customary transaction purchase price adjustments. The company says the purchase price approximates current replacement value.

The transaction is expected to be accretive to near-term earnings and cash flow per share, Steel Dynamics says.

The acquisition will expand the company’s annual flat-roll steel shipping capacity to 8.4 million tons and total shipping capability to 12.4 million tons. The additional exposure to lighter-gauge and wider flat-roll steel offerings will broaden its value-added product portfolio, enhancing Steel Dynamics’ position as a leading North American steel producer, according to the company.

“The acquisition of Heartland represents a step in the continuation of our growth strategy,” says Mark D. Millett, CEO of Steel Dynamics. “It levers our core strengths and, at the same time, fulfills our initiatives to further increase value-added product and market diversification. We look forward to welcoming the Heartland employees and customers into the Steel Dynamics family and working with them to drive future growth and success.

“We have positioned our capital structure and organizational framework for growth,” Millett continues, “and we believe this acquisition will result in numerous future earnings benefits both to Heartland’s current operations and to our Midwest flat-roll operations. In combination with our current operations, Heartland brings a tremendous amount of operating flexibility and optionality. As a part of our broader business platform, Heartland is expected to provide numerous synergies with our existing operations, and we look forward to levering these opportunities in the future.”

Heartland has the annual capability to produce 1 million tons of cold-rolled steel, with galvanizing capacity of 360,000 tons. The facility includes a continuous pickle line, a cold mill and a galvanizing line. The equipment has been upgraded, well-maintained and is in excellent operating condition, Steel Dynamics says.

Historically, Heartland has operated at low utilization, primarily focusing on galvanized products. Steel Dynamics says it plans to use the full capacity of the facility, providing high-quality cold-roll, pickle and oil and galvanized products. The geographic proximity to its other flat-rolled operations and certain fabrication locations provides opportunities related to logistics and production efficiencies throughout the supply chain and customer network.

The transaction has received all required corporate approvals from the respective parties. The transaction is only subject to customary conditions and receipt of regulatory approvals. Steel Dynamics says it expects to obtain all necessary regulatory approvals and complete the transaction before the end of the third quarter. The purchase price will be paid in cash from available reserves and is subject to customary working capital adjustments dependent upon the exact date of closing, the company adds.

ISA restarts shredder, reports improved financial results

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Industrial Services of America Inc. (ISA), Louisville, Kentucky, has reported a 13 percent revenue increase and a $300,000 improvement in net income for the quarter ending March 31, 2018, compared with the same period in 2017.

ISA’s filing with the U.S. Securities and Exchange Commission of its Form 10-Q for the first quarter of 2018 indicates net income of $36,000 compared with a net loss of about $300,000 in the first quarter of 2017.

The company also reports what it calls positive adjusted EBITDA (earnings before interest, tax, depreciation and amortization) of $800,000 during the quarter, which it says is “a substantial improvement” compared with the positive adjusted EBITDA of $500,000 during the first quarter of 2017.

ISA says the improvement in operating performance “was due in part to the successful restart of the company’s shredder, as well as improvements in the company’s ferrous operations margins from 2017 to 2018.” The company says the restart of its shredder in Louisville “led to [a] favorable sales mix and improved margins.”

“We are excited to report the company generated positive net income this quarter,” says Todd L. Phillips, CEO, president and chief financial officer of ISA. “Our turnaround and growth strategy has continued to show great progress.”

ISA describes itself as a company that buys, processes and markets ferrous and nonferrous metals and other recyclables and buys used autos to sell used auto parts. According to its website, ISA operates its main facility (a shredder yard), one smaller scrap facility and its auto parts business in Louisville, along with two small scrap facilities in southern Indiana.