Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

A softening market for plate and sheet steel products and excess inventory affected Q3 bottom line of Nucor Corporation. The company announced net earnings of $275mn, or $.90 per share in Q3, down from $676.7mn or $2.13 per share during the same period last year. Its net sales declined to $5.46bn, down 19pc from $6.74bn last year. 


The destocking of excess inventory by customers meant that the electric arc furnace steelmaker shipped a total of approximately 5.94mn mt, a decrease of 7pc from a year ago and 3pc compared to the previous quarter. Of the total steel mill shipments made by Nucor, 21pc were made to internal customers, slightly up from 20pc last year. 


Nucor’s steel mill operating rates were also down from 92pc to 83pc compared to Q32018. 


The average scrap and scrap substitute cost per ton used in Q32019 stood at $299st ($330mt), a 20pc decrease compared to $374st ($412mt) during the same period last year. However, the company announced that the profitability of its steel products segment had improved over Q22019 due to strong market conditions for nonresidential construction.


Nucor’s cash and cash equivalents in Q3 were approximately $1.69bn, down 12.7pc from the same period last year. Long-term debt for this period was $4.29bn, up 1.3pc. The company produced $2.12bn cash from operating activities through Q3, up 11.5pc year over year.


The Outlook for Q4
The steelmaker’s raw materials segment was impacted during the third quarter due to margin compressions on the company’s direct reduced iron (DRI) business. Its DRI facility in Louisiana began a planned outage in September that is likely to last through mid-November, which is likely to impact its Q4 earnings too. 


While Nucor shares have not declined as much,11.6pc compared to the industry average of 29.2pc, the past year, the company’s outlook for Q4 reflects a slight drop in its earnings, due to domestic steel prices bottoming out in Q3. The earnings for Nucor’s steel products unit is also expected to decline in Q4 considering typical year-end seasonality.

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