FORT WAYNE, Ind., March 17, 2015 /PRNewswire/ -- Steel Dynamics,
Inc. (NASDAQ/GS: STLD) today provided first quarter 2015 earnings
guidance. Excluding approximately $17
million, or $0.04 per diluted
share, of estimated premium and related expenses associated with
the company's repayment of $350
million in senior notes in March
2015, the company provided first quarter 2015 adjusted
earnings guidance in the range of $0.12 to
$0.16 per diluted share. Including these charges, earnings
guidance for the first quarter 2015 would have been in the range of
$0.08 to $0.12 per diluted
share.
During the first quarter of 2015, two important industry
developments occurred:
− Domestic steel product pricing declined to
levels that are now globally competitive, which the company
believes will result in reduced steel import levels beginning in
the second quarter 2015. Despite continued solid domestic
steel consumption, product pricing decreased meaningfully due to
delayed customer orders caused by the volatility in scrap prices
and inventory buildup related to excessive fourth quarter 2014
steel imports. The company believes the surplus inventory can
be right-sized in the April and May
2015 timeframe, which coupled with continued demand, should
result in increased domestic steel mill
utilization.
− Ferrous scrap pricing declined between 25%
and 30% during February, which the company believes will benefit
metal margin. Ferrous scrap pricing disconnected from iron
ore pricing during 2014, as iron ore prices declined dramatically,
while scrap prices remained relatively unchanged.
Historically these commodities are highly correlated; therefore, a
sharp decline in scrap prices was not unexpected.
The company believes these events, coupled with continued
strength in domestic steel consumption from the automotive,
manufacturing and construction sectors, should support a stronger
second quarter, and second half 2015, based on the expectation of
reduced domestic steel import levels, reduced raw material costs,
and increased orders as customer inventory levels decline.
Historically, the construction industry has been the largest single
domestic steel consuming sector. The construction
market grew during 2014, improving meaningfully from the lows
experienced in 2009 and 2010. Despite the first quarter of
each year being historically weaker for the construction industry
due to seasonality, the company's fabrication operations are
expected to achieve solid first quarter 2015 financial
results. These results could approach those achieved in the
third quarter 2014, which is traditionally the strongest
construction quarter of a calendar year. The company believes
this is evidence of the continued growth in non-residential
construction.
Estimated first quarter earnings are lower than the company's
sequential fourth quarter 2014 adjusted earnings of $0.40 per diluted share and similar to prior-year
first quarter earnings of $0.17 per
diluted share.
Due to expected lower steel shipments caused by the inventory
overhang and hesitant customer buying, combined with an expected
metal margin compression, first quarter 2015 profitability from the
company's steel operations is expected to be significantly lower in
comparison to the fourth quarter 2014. The benefit of reduced
scrap pricing will be not be realized in the company's steel
results until the second quarter 2015, due to FIFO accounting and
lower production utilization rates. While the company's steel
operations experienced overall volume and pricing reduction, the
sheet operations were the most significantly impacted.
Metals recycling operations are expected to record a loss for
the first quarter 2015, based on lower metal spread caused by
rapidly decreasing ferrous and nonferrous prices, as well as,
reduced shipments based on lower domestic steel mill
utilization. The company expects margins to improve in the
second quarter 2015, as pricing volatility subsides and steel mill
utilization improves.
As the aforementioned import and raw material changes take
place, the company anticipates both improved metal spread and
increased shipments in the second quarter 2015, and throughout the
remainder of the year. While the company continues to
strengthen its financial position, and execute its long-term
strategy, it is well-positioned to carry on its growth. As a
testament to confidence in the company's long-term cash flow
generation capability, last week the company's board of director's
announced a 20% increase in its quarterly cash dividend, to
$0.1375 per common share. The
company also utilized free cash flow to repay $350 million in debt on March 16, 2015, reducing its annual interest
burden by $27 million. The
company believes these actions reflect the strength of its capital
structure and liquidity profile, and the continued optimism and
confidence in its future prospects.
About Steel Dynamics, Inc.
Steel Dynamics, Inc. is one of the largest domestic steel
producers and metals recyclers in the
United States based on estimated annual steelmaking and
metals recycling capability, with annual sales of $8.8 billion in 2014, over 7,700 employees, and
manufacturing facilities primarily located throughout the United States (including six steel mills,
eight steel coating facilities, two iron production facilities,
over 90 metals recycling locations and six steel fabrication
plants).
Forward-Looking Statement
This press release contains some predictive statements about
future events, including statements related to conditions in the
steel and metallic scrap markets, Steel Dynamics' revenues, costs
of purchased materials, future profitability and earnings, and the
operation of new or existing facilities. These statements are
intended to be made as "forward-looking," subject to many risks and
uncertainties, within the safe harbor protections of the Private
Securities Litigation Reform Act of 1995. These statements speak
only as of this date and are based upon information and
assumptions, which we consider reasonable as of this date,
concerning our businesses and the environments in which they
operate. Such predictive statements are not guarantees of future
performance, and we undertake no duty to update or revise any such
statements. Some factors that could cause such forward-looking
statements to turn out differently than anticipated include: (1)
the effects of uncertain economic conditions; (2) cyclical and
changing industrial demand; (3) changes in conditions in any of the
steel or scrap-consuming sectors of the economy which affect demand
for our products, including the strength of the nonresidential and
residential construction, automotive, appliance, pipe and tube, and
other steel-consuming industries; (4) fluctuations in the cost of
key raw materials (including steel scrap, iron units, and energy
costs) and our ability to pass-on any cost increases; (5) the
impact of domestic and foreign import price competition; (6)
unanticipated difficulties in integrating or starting up new or
acquired businesses; (7) risks and uncertainties involving product
and/or technology development; and (8) occurrences of unexpected
plant outages or equipment failures.
More specifically, we refer you to SDI's more detailed
explanation of these and other factors and risks that may cause
such predictive statements to turn out differently, as set forth in
our most recent Annual Report on Form 10-K, in our quarterly
reports on Form 10-Q or in other reports which we from time to
time file with the Securities and Exchange Commission. These are
available publicly on the SEC website, www.sec.gov, and on the
Steel Dynamics website, www.steeldynamics.com.
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SOURCE Steel Dynamics, Inc.