Nucor’s Q2 steel shipments decline 27 percent from Q1

Nucor Corp., the electric arc furnace steelmaker based in Charlotte, North Carolina, has announced consolidated net earnings of $108.9 million, or 36 cents per diluted share, for the second quarter of 2020. The company reported consolidated net earnings of $20.3 million, or 7 cents per diluted share, for the first quarter of 2020 and $386.5 million, or $1.26 per diluted share, for the second quarter of 2019.

Included in the 2020 first-quarter results were losses on assets of $287.8 million, or 92 cents per diluted share, related to the company’s equity method investment in Italy, Duferdofin Nucor S.r.l.

 

In the first half of 2020, Nucor reported consolidated net earnings of $129.2 million, or 42 cents per diluted share compared with consolidated net earnings of $888.3 million, or $2.88 per diluted share, in the first half of 2019.

"I want to thank my teammates for their dedication and commitment to living our culture in the uncertain environment created by the COVID-19 pandemic during the last few months,” Leon Topalian, Nucor president and chief executive officer, says in a news release the company issued about quarterly earnings. “Our team's reliability and resilience are being recognized and appreciated by our customers.”

The company mentions the “considerable economic uncertainty” created by the COVID-19 pandemic, adding, “We believe Nucor is well-positioned to navigate this environment given our diverse product mix, advantaged cost position, flexible production capability and financial strength.”

Nucor says its enterprisewide efforts to conserve cash and support its teammates during the pandemic, as described in its first-quarter earnings release, have been effective. “We have continued to generate very robust operating cash flow in challenging steel market conditions.”

The company recently issued $500 million of 2 percent notes due 2025 and $500 million of 2.7 percent notes due 2030, which it says have increased its financial flexibility.

At the end of the second quarter, Nucor reports $3.04 billion in cash and cash equivalents and short-term investments on hand. Its $1.50 billion revolving credit facility remains undrawn and does not expire until April 2023. “We continue to have the strongest credit rating in the North American steel sector (Baa1/A-) with stable outlooks at both Moody's and Standard & Poor's,” the company adds.

Nucor says its consolidated net sales decreased 23 percent to $4.33 billion in the second quarter of 2020 compared with $5.62 billion in the first quarter of 2020 and decreased 27 percent compared with $5.90 billion in the second quarter of 2019. The average sales price per ton in the second quarter of 2020 increased 1 percent compared with the first quarter of 2020 and decreased 10 percent compared with the second quarter of 2019.

A total of 5.48 million tons were shipped to outside customers in the second quarter of 2020, a 24 percent decrease from the first quarter of 2020 and a 19 percent decrease from the second quarter of 2019. Total steel mill shipments in the second quarter of 2020 decreased 27 percent as compared with the first quarter of 2020 and decreased 18 percent as compared with the second quarter of 2019. Steel mill shipments to internal customers represented 21 percent of total steel mill shipments in the second quarter of 2020 compared with 20 percent in the first quarter of 2020 and 19 percent in the second quarter of 2019, the company says. Downstream steel product shipments to outside customers in the second quarter of 2020 decreased 12 percent from the first quarter of 2020 and decreased 7 percent from the second quarter of 2019.

In the first half of 2020, Nucor's consolidated net sales of $9.95 billion decreased 17 percent compared with consolidated net sales of $11.99 billion reported in the first half of 2019. Total tons shipped to outside customers in the first half of 2020 were 12.67 million, a decrease of 6 percent from the first half of 2019, while the average sales price per ton in the first half of 2020 decreased 12 percent from the first half of 2019.

The average scrap and scrap substitute cost per gross ton used in the second quarter of 2020 was $284, a 3 percent decrease compared with $293 in the first quarter of 2020 and a 14 percent decrease compared with $330 in the second quarter of 2019. The average scrap and scrap substitute cost per gross ton used in the first half of 2020 was $289, a 15 percent decrease compared with $341 in the first half of 2019.

Preoperating and startup costs related to its growth projects were approximately $22 million, or 6 cents per diluted share, in the second quarter of 2020 compared with approximately $29 million, or 7 cents per diluted share, in the first quarter of 2020 and approximately $20.5 million, or 5 cents per diluted share, in the second quarter of 2019.

In the first half of 2020, these costs were approximately $51 million, or 13 cents per diluted share, compared with approximately $40.1 million, or 10 cents per diluted share, in the first half of 2019.

Nucor says overall operating rates at its steel mills decreased to 68 percent in the second quarter of 2020 from 89 percent in the first quarter of 2020 and 84 percent in the second quarter of 2019. Operating rates in the first half of 2020 decreased to 79 percent from 85 percent in the first half of 2019.

The company describes demand in the nonresidential construction markets as “resilient” in the second quarter of this year; however, Nucor adds, “The profitability of the steel products segment in the second quarter of 2020 decreased as compared to the first quarter of 2020, but we consider the second quarter of 2020 to be another strong quarter for this segment.”

In its steel mills segment, Nucor says its sheet and plate mills were the most negatively affected of its facilities in light of weak oil and gas market activity and customer production disruptions.

The company says the quarterly performance of its raw materials segment in the second quarter “marginally improved” relative to the first quarter of the year because of better-than-forecasted June performance.

Q3 outlook

Nucor says the ongoing COVID-19 pandemic continues to cause uncertainty in overall market conditions as the third quarter of 2020 begins. At this point, the company is forecasting earnings for Q3 that will be similar to those of Q2.

“We expect another strong quarter for our downstream products segment due to the continued resiliency of nonresidential construction markets,” the company says. “The steel mills segment's performance in the third quarter of 2020 is expected to be similar to the second quarter of 2020. Nonresidential construction market conditions continue to benefit our bar and structural mills, but market conditions for our sheet and plate mills remain challenged, and average selling prices remain depressed. The performance of our raw materials segment in the third quarter of 2020 is expected to decrease compared to the second quarter of 2020 due to depressed pricing for raw materials.”