Trade Resources Industry Trends Steel Dynamics Announced Third Quarter Net Income of $57 Million

Steel Dynamics Announced Third Quarter Net Income of $57 Million

Steel Dynamics, Inc. announced Wednesday third quarter net income of $57 million, or $0.25 per diluted share, on net sales of $1.9 billion, compared to Q3 2012 net income of$13 million, or $0.06 per diluted share, on net sales of $1.7 billion.? Sequential second quarter 2013 net income was $29 million, or $0.13 per diluted share, on net sales of $1.8 billion.

"Our consolidated operating income increased 64 percent to $113 million for the third quarter 2013, as compared to the second quarter of this year," said Chief Executive Officer, Mark Millett.? "Stronger steel sheet pricing combined with increased overall steel shipments, provided significant improvement to our third quarter financial results, as operating income from our steel operations sequentially increased $61 million.? We continued to see meaningful improvement in galvanized and painted sheet product demand.? The automotive market remained strong and the steel consuming manufacturing market, such as HVAC and appliance, rose in concert with the improved residential construction market.? Although volumes have increased, customer buying patterns continue to reflect a preference to manage relatively low inventory levels.? Additionally, the continued modest growth in the overall construction market benefited our structural steel and fabrication businesses, as evidenced by sequentially higher shipments and profitability.

"Operating income for our metals recycling operations decreased 29 percent to $11 million in the third quarter 2013, as compared to the second quarter of this year, which was the result of decreased ferrous metal spread, as increased ferrous volume did not offset the decline in market prices.? Profitability from our Midwest operations was actually slightly improved; however the continued industry overcapacity of shredding locations in the Southeast resulted in deterioration in earnings for those locations."?

Third quarter 2013 shipments across the company's operating platforms increased as compared to the sequential quarter. Operating income for the company's steel operations increased to $149 million, or 69 percent as compared to the second quarter 2013, primarily due to an increase in metal spread as a result of both higher average steel selling prices and a nominal decrease in the average scrap cost per ton melted.

The company's steel mill production utilization rate was 89 percent in the third quarter 2013, compared to 83 percent in the second quarter of 2013.? The Structural and Rail Division continued to improve production utilization as structural steel shipments increased 17 percent over the sequential quarter.

The impact of losses from the company's Minnesota operations for third quarter 2013 consolidated net income was $10.6 million, or $0.04 per diluted share, as compared to a loss of $9.3 million, or $0.04 per diluted share in the second quarter 2013.? The iron concentrate plant continues to operate as designed, providing raw material to the iron nugget plant at a cash cost below $50 per metric ton.? As noted in the company's recent earnings guidance, production rates and plant availability at the iron nugget plant improved during the quarter, meeting current expectations.? However, at higher production rates, product yield has unexpectedly deteriorated.? Given the increase in costs related to the unforeseen yield impact and current pig iron prices, profitability related to the Minnesota operations is expected to approach a monthly cash? breakeven before the end of 2013, but not to achieve pre-tax breakeven in that same timeframe.? Having achieved near-term production targets, the focus is now to reduce the overall cost of production.

"We are optimistic, as the demand for high-quality steel products continues to improve", Millett said.? "The automotive market remains strong, and manufactured goods continue to strengthen.? We remain cautiously optimistic about the nonresidential construction market, as evidence of increased demand is shown by improved shipments of our structural and fabricated steel products.? However, we recognize the political environment within the U.S. concerning fiscal issues could have a limiting or negative impact on any continued improvement if not resolved in a timely manner.? In addition to improved market momentum, we are on schedule to complete two more sizable organic growth projects before the end of 2013:? a 325,000 ton capacity expansion at our Engineered Bar Products Division and a product capability expansion into premium rail at our Structural and Rail Division.? We are confident that with our exceptional team, and our superior, low-cost operating culture, we are uniquely prepared to capitalize on the opportunities ahead."

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Topics: Metallurgy