Nucor Reports Results down for Q3 and 9 Months 2012

By comparison, net earnings of $112.3M, or $0.35 per diluted share,were achieved in Q2 2012 and net earnings of $181.5M, or $0.57 per diluted share, in Q3 2011. Q3 results include non-cash inventory related purchase accounting charges of approximately $28.2M associated with the acquisition of Skyline Steel LLC in Q2 2012. Q3 2012 results were also negatively impacted by a loss on the sale of the assets of Nucor Wire Products Pennsylvania, Inc. of $17.6M.

In the first nine months of 2012, consolidated net earnings of $367.7M, or $1.15 per diluted share were achieved, compared with consolidated net earnings of $641.1M, or $2.02 per diluted share, in the first nine months of 2011. The impact of the Skyline inventory related purchase accounting adjustments was $36.8M. Nucor expect such charges to be much lower in Q4 2012.

Consolidated net sales decreased 6% to $4.80bn in Q3 2012 compared with $5.10bn in Q2 2012 and dropped 9% compared with $5.25bn in Q3 2011. Average sales price per ton (US short ton = 0.9 metric tonne) decreased 3% from Q2 2012 and fell 8% compared with Q3 2011.

Total tons shipped to outside customers were 5768000 stons (519.12t)in Q3 2012, a 3% decrease from Q2 2012 and a slight decrease from Q3 2011. Total Q3 steel mill shipments were down 3% from Q2 2012 and decreased 2% from Q3 2011. Q3 downstream steel products shipments to outside customers increased 1% over Q2 2012 and 4% over Q3 2011.

In the first nine months of 2012, Nucor's consolidated net sales decreased 1% to $14.98bn compared with $15.19bn the first nine months of 2011. Total tons shipped to outside customers increased 1% over the first nine months of 2011, while average sales price per ton decreased 3%.

The average scrap and scrap substitute cost per ton used in Q3 2012 was $380, a decrease of 11% from $427 in Q2 2012 and a decrease of 15% from the $449 in Q3 2011. The average scrap and scrap substitute cost per ton used in the first nine months of 2012 was $418, a decrease of 5% from $439 in the first nine months of 2011.

Overall operating rates at Nucor’s steel mills in Q3 2012 was 71%, down from the Q2 value of 76% and also down on Q3 2011 when it was 74%. Year-to-date steel mill utilization was 75% for flat products.

Total energy costs increased by approximately $5 per ton over Q2 2012 primarily due to higher electricity and natural gas unit costs. Energy costs decreased approximately $2 per ton from Q3 2011 and decreased $3 per ton from the first nine months of 2011 primarily due to lower natural gas unit costs.

Lower steel mill margins are primarily the result of very high import levels, which began rising in 2011. According to US Census Bureau reports, 2012 steel products imports are on pace to reach 27.7M short tons in 2012. This represents an increase of 21% from 2011 imports of 22.8M tons and is 43% higher than the 2010 import levels of 19.3M tons. In addition, US sheet steel markets have been negatively impacted by new domestic supply that began ramping up production in 2011.

Nucor expects further reduction in earnings exclusive of one-time charges for Q4 2012. In addition to high import levels and excess domestic sheet supply, slowing economic growth both domestically and globally is expected to be a negative factor to the end of the year. Volatility in scrap prices, together with a combination of political and economic uncertainty in global markets, is impacting steel buyers’ confidence and therefore supply-chain stocking levels. The strongest end markets continue to be manufactured goods including automotive, energy and heavy equipment. The construction market continues to be very challenging.

Construction of the new 2.5Mst/y DRI plant in Louisiana is reported to be going well. The majority of the equipment will arrive in 2012, and construction work is schedule for completion by mid-2013.