Steel Dynamics warns of lower profitability in Q4

Minimill steel producer Steel Dynamics Inc. has provided fourth quarter earnings guidance in the range of 49-to-53 cents per diluted share. The company’s fourth quarter will conclude Dec. 31.

Excluding the impact from the following items, the company says it expects fourth-quarter adjusted earnings to be in the range of 55-to-59 cents per diluted share:

• additional financing costs related to its December refinancing activities of approximately $4 million, or 1 cent per diluted share, and
• lower earnings from two planned annual maintenance outages at SDI’s Butler, Indiana, and Columbus, Mississippi, flat-roll divisions, resulting in higher than normal maintenance and associated costs of approximately $15 million, or 5 cents per diluted share. The outages also reduced flat-roll steel shipments by an estimated 70,000-to-80,000 tons, further reducing fourth-quarter earnings.

Comparatively, the company's sequential third quarter 2019 earnings were 69 cents per diluted share and prior-year fourth-quarter earnings were $1.17 per diluted share.

SDI says it expects its fourth-quarter 2019 profitability from its steel operations to be lower in comparison with sequential third-quarter results based on the two planned outages, seasonally lower shipments and margin compression as average steel pricing declined more than scrap costs during the quarter. Underlying domestic steel demand remains principally intact for the primary steel-consuming sectors, and customers have been positive concerning the business outlook for 2020, the company adds.   

Fourth-quarter results for SDI’s metals recycling platform are expected to decrease when compared to sequential third-quarter results, the company says, as a result of lower ferrous shipments and average selling values.     

SDI says its fourth-quarter earnings from its steel fabrication business are expected to modestly decline from near-record-high third-quarter results based on margin compression as average product pricing declined more than steel input costs. The company adds that demand remains strong with the possibility of record shipments in the fourth quarter, saying it continues to experience strong steel fabrication order backlogs and customers remain optimistic concerning nonresidential construction projects in 2020.

SDI produces steel products, including hot roll, cold roll and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant bar products, specialty steel sections and steel joists and deck. In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap.