Steel Dynamics, Inc. announced Wednesday first quarter net income of $39 million, or $0.17 per diluted share, on net sales of $1.8 billion. By comparison, prior year first quarter net income was $48 million, or $0.21 per diluted share, on net sales of $1.8 billion, and sequential fourth quarter 2013 net income was $55 million, or $0.24 per diluted share, on net sales of $1.9 billion.
"The first quarter 2014 was one of the most severe winter periods in recent history across much of the United States, especially in the Midwest where a majority of our operations are located," said Chief Executive Officer, Mark Millett. "The uncharacteristically severe and prolonged winter weather conditions resulted in increased energy costs, reduced production, diminished availability of transportation and lower shipments. This environment was a major driver of the 25 percent decline in our consolidated operating income for the first quarter 2014, as compared to the sequential fourth quarter of 2013.
"Essentially all of our businesses were negatively impacted in some way; however, our Midwest steel operations were especially impacted. Operating income for our steel operations declined $47 million for the first quarter 2014, as compared to the sequential quarter. Most impactful, sheet steel volumes decreased 12 percent and metal spread also declined, as transportation issues delayed shipments; meaningfully higher energy costs were incurred; and the average quarterly product price improvement did not outpace the higher cost of scrap that was consumed earlier in the quarter. As weather conditions improved, demand also strengthened with increased order activity throughout our steel operations.
"We are optimistic," said Millett. "Rather than a structural change in growth during the first quarter, we believe weather conditions impacted the economy. We have confidence that the broader US economy will continue to improve and that the non-service sector portion of domestic GDP has the ability to grow at a higher rate than overall GDP, driven by strengthened asset values, domestic energy investment and increased infrastructure spending. Steel consuming industries, such as manufacturing, automotive, heavy machinery and the construction market continue to grow, indicative of underlying strength in steel demand."
