Nucor Announces 2018 Financial Results

2018 record earnings per diluted share of $7.42 is 24% higher than previous record earnings of $5.98 per diluted share reported in 2008

CHARLOTTE, N.C. — Nucor Corporation (NYSE: NUE) announced today record consolidated net earnings of $2.36 billion, or $7.42per diluted share, for 2018 compared to $1.32 billion, or $4.10 per diluted share, for 2017. The new earnings record of $7.42 per diluted share in 2018 is a 24% increase as compared to the Company’s previous record earnings of $5.98 per diluted share reported in 2008.

Nucor reported consolidated net earnings of $646.8 million, or $2.07 per diluted share, for the fourth quarter of 2018. By comparison, Nucor reported consolidated net earnings of $676.7 million, or $2.13 per diluted share, for the third quarter of 2018 and $383.9 million, or $1.20 per diluted share, for the fourth quarter of 2017. Consolidated net earnings of $646.8 million reported in the fourth quarter of 2018 represents the strongest fourth quarter performance in the Company’s history.

“The best way to sum up 2018 is this – it was a record year for Nucor. We posted record earnings per share and record revenue, and we shipped a record amount of steel,” said John Ferriola, Nucor’s Chairman, Chief Executive Officer and President. “Over the past decade, we have been positioning Nucor to take full advantage of an upturn in the steel market. During that time, we invested more than $9 billion to increase the Company’s peak earnings power. These investments enhanced our competitive strengths by building on our product diversity and market leadership positions. Our 2018 financial results demonstrate that Nucor’sdisciplined strategy of investing for profitable growth is working.”

Selected Segment Data

In the first quarter of 2018, the Company began reporting its tubular products and piling businesses as part of the steel products segment. These businesses were previously included in the steel mills segment. All prior period segment data presented in this news release has been recast to reflect this change. Earnings (loss) before income taxes and noncontrolling interests by segment were as follows for the fourth quarter and full year 2018 and 2017 (in thousands):
 Three Months (13 Weeks) Ended Twelve Months (52 Weeks) Ended 
$ 877,276$ 322,241$ 3,229,391$ 1,749,957
Dec. 31, 2018Dec. 31, 2017Dec. 31, 2018Dec. 31, 2017
Steel mills$ 882,438$ 324,275$ 3,500,085$ 1,953,075
Steel products86837100515467105337978
Raw materials5577326721236241129296
Corporate
/eliminations
-147772-129270-974040-670392

Financial Review

For 2018, Nucor’s consolidated net sales increased 24% to $25.07 billion, compared with $20.25 billion for 2017. In 2018, Nucor posted its highest consolidated sales in the Company’s history, surpassing Nucor’s previous record by 6%. Total tons shipped to outside customers in 2018 were 27,899,000, an increase of 5% from 2017, while average sales price per ton increased 18%.

Nucor’s consolidated net sales decreased 7% to $6.30 billion in the fourth quarter of 2018 compared with $6.74 billion in the third quarter of 2018 and increased 24% compared with $5.09 billion in the fourth quarter of 2017. Average sales price per ton decreased 2% compared to the third quarter of 2018 and increased 21% compared to the fourth quarter of 2017. Total tons shipped to outside customers were 6,687,000 tons in the fourth quarter of 2018, a 5% decrease from the third quarter of 2018 and an increase of 2% from the fourth quarter of 2017. Total fourth quarter steel mill shipments decreased 6% from the third quarter of 2018 and increased 2% from the fourth quarter of 2017. Fourth quarter downstream steel products shipments to outside customers decreased 10% from the third quarter of 2018 and decreased 1% from the fourth quarter of 2017.

Third quarter 2018 results included a non-cash impairment charge of $110.0 million, or $0.26 per diluted share, related to our proved producing natural gas well assets. Also included in the third quarter of 2018 earnings was a benefit of $24.8 million, or $0.06 per diluted share, related to insurance recoveries. Fourth quarter of 2017 results included a net benefit of $175.2 million, or $0.55 per diluted share, related to the impacts of U.S. federal tax legislation enacted in the fourth quarter of 2017.

The average scrap and scrap substitute cost per gross ton used in the fourth quarter of 2018 was $359, a 4% decrease compared to $374 in the third quarter of 2018 and a 13% increase compared to $317 in the fourth quarter of 2017. The average scrap and scrap substitute cost per gross ton used for the full year 2018 was $361, an 18% increase from $307 for the full year 2017.

Overall operating rates at our steel mills decreased to 88% in the fourth quarter of 2018 as compared to 92% in the third quarter of 2018 and increased compared to 82% in the fourth quarter of 2017. Steel mill operating rates for the full year 2018 increased to 91% as compared to 86% for the full year 2017.

Total steel mill energy costs in the fourth quarter of 2018 increased approximately $2 per ton compared to the third quarter of 2018 and increased approximately $1 compared to the fourth quarter of 2017. The increases from the third quarter of 2018 and fourth quarter of 2017 were mainly due to higher natural gas unit costs. Energy costs for the full year 2018 decreased approximately $1 per ton from the full year 2017 mainly due to lower unit costs for natural gas.

Our liquidity position remains strong with approximately $1.4 billion in cash and cash equivalents as of December 31, 2018 and an untapped $1.5 billionrevolving credit facility that does not expire until April 2023.

During the fourth quarter of 2018, Nucor repurchased approximately 8.4 million shares of its common stock for an average price of $60.19 per share. At December 31, 2018, Nucor had approximately 305,591,000 shares outstanding and approximately $1.5 billion available under its share repurchase program.

Recent Developments

In January 2019, Nucor announced that it will build a state-of-the-art plate mill in the U.S. Midwest. Nucor’s board of directors approved an investment of $1.35 billion to build the mill, which is expected to be fully operational in 2022 and will be capable of producing approximately 1.2 million tons per year of steel plate products. This advanced mill will provide us enhanced ability to serve customers in the region, which is the largest plate-consuming area in the U.S., and to meet all the steel needs of customers around the country. The site for the new mill is anticipated to be selected early this year.


Fourth Quarter Analysis

As expected, the fourth quarter of 2018 was another strong quarter for Nucor. Earnings in the fourth quarter of 2018 declined from the third quarter of 2018 due in part to typical seasonality. The profitability of the steel mills segment decreased from the third quarter of 2018 due to lower shipments across the segment and lower average selling prices at our sheet, bar and structural mills. The performance of our steel products segment decreased from the third quarter of 2018 due to some decline in our tubular products group, which experienced a strong third quarter, and our rebar fabrication businesses. The raw materials segment’s performance decreased in the fourth quarter of 2018 as compared to the third quarter of 2018 due to decreased earnings of our DRI businesses.

Outlook

Following 2018’s record-setting earnings performance, we believe that 2019 will be another strong year as we expect the earnings performance to be one of the best in Nucor’s history. As we enter 2019, we have a positive outlook on end-use demand and general economic conditions.

We expect another strong quarter for earnings in the first quarter of 2019. Although sheet pricing and margins are expected to decrease in the first quarter of 2019 as compared to the fourth quarter of 2018, this will be partially offset by expected increases in profitability of our bar mills and structural mills. The performance of the raw materials segment is expected to decrease in the first quarter of 2019 as compared to the fourth quarter of 2018 due to the decreased performance of our DRI businesses, which continue to be negatively impacted by declining average selling prices for raw materials that began in the fourth quarter of 2018. The profitability of our steel products segment in the first quarter of 2019 is expected to be similar to the fourth quarter of 2018. We expect first quarter of 2019 earnings to be much stronger than the first quarter of 2018.

About Nucor

Nucor and its affiliates are manufacturers of steel and steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel — in bars, beams, sheet and plate; hollow structural section tubing; electrical conduit; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating; and wire and wire mesh. Nucor, through The David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and hot briquetted iron / direct reduced iron; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America’s largest recycler.

Forward-Looking Statements

Certain statements contained in this news release are “forward-looking statements” that involve risks and uncertainties. The words “believe,” “expect,” “project,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements. Factors that might cause the Company’s actual results to differ materially from those anticipated in forward-looking statements include, but are not limited to: (1) competitive pressure on sales and pricing, including competition from imports and substitute materials; (2) U.S. and foreign trade policies affecting steel imports or exports; (3) the sensitivity of the results of our operations to prevailing steel prices and the changes in the supply and cost of raw materials, including scrap steel; (4) market demand for steel products; and (5) energy costs and availability. These and other factors are discussed in Nucor’s regulatory filings with the Securities and Exchange Commission, including those in Nucor’s 2017 Annual Report on Form 10-K, Item 1A. Risk Factors. The forward-looking statements contained in this news release speak only as of this date, and Nucor does not assume any obligation to update them.

More information at Nucor.com

Deteriorating Trading Conditions Unnerve the Emerging Steel Market

Brazil

Brazilian steelmakers remain optimistic regarding the growth prospects for domestic steel consumption. Import penetration is relatively low. Nonetheless, the Instituto Nacional dos Distribuidores de Aço (Inda) reports that, in January 2019, domestic finished steel sales are expected to total 264,000 tonnes – down 7.0 percent, compared with last year’s figure. Distributor and service centre inventory levels, at the end of December 2018, stood at 939,400 tonnes, equivalent to 5.5 months of sales.

Russia

The outlook for the Russian steel market is unchanged. Distributors are holding off purchasing to see how demand develops, citing anxieties regarding the new VAT rate (20 percent) and weakening economic fundamentals. Nevertheless, pipe and tube fabricators are optimistic. They are forecasting firm demand, from the construction and energy industries, at the end of the country’s inhospitable winter season (in mid-April). Overseas business is competitive.

India

Weak purchasing activity prevails, in India, after the year-end holiday break. Local service centres are reviewing their inventory levels and are very cautious about order placement, as a result. Furthermore, price competition in the long products market is forecast to intensify ahead of the interim budget, on February 1, 2019. Third country flat product import offers are available, but buyers show little interest.

China

In January, Chinese traders have been more cautious in their operations. Similarly, end-users are adopting a wait-and-see approach. Reduced production rates are expected in the run up to the forthcoming Lunar New Year festival season. Meanwhile, the Ministry of Ecology and Environment (MEE) stressed that it would not relax environmental protection targets, in 2019. Export business opportunities are poor, at present.

Ukraine

In Ukraine, purchasing activity is weak. Service centres resumed trading, on January 8. Exporters cut their selling figures, weighed down by a fall in the cost of billet and slab, and the increased availability of Chinese finished steel products in the market. The local association of metal producers, Metallurgprom, reported that finished steel production, in December 2018, totalled 1.519 million tonnes – up 3.1 percent, month-on-month. 

Turkey

The business climate in Turkey is unchanged since our December report. Slow construction activity is curbing buying interest in the country’s main cities. Buyers exercised caution in the period surveyed, noting unfavourable economic fundamentals. Exporters have expressed concerns about their ability to sell the full range of products overseas – preferring to focus on wire rod, rebar and hot rolled coil.

United Arab Emirates

Demand in the United Arab Emirates, in general, is flat, with minimal signs of growth. Buyers at service centres are extremely reluctant to purchase material, in what they deem, as precarious trading conditions. Export opportunities are limited outside the GCC region.

South Africa

Negative price expectations are gaining momentum, in South Africa, fuelled by political uncertainty and waning economic fundamentals. Bearish stockists are reluctant to sign contracts with the mills, at the moment. We note a reluctance on the part of end-users to commit to forward orders.

Mexico

Purchasing volumes, in Mexico, are forecast to be stable, at best, in the next trading period. Distributors conveyed frustration with the price increases proposed by their domestic suppliers. The latest initiative is viewed as unjustified and is not supported by underlying demand. Construction activity in the public sector is subdued.

Source: MEPS Developing Markets Steel Review

Sluggish Start to 2019 for The Global Steel Market

The recovery in global steel prices has stalled. A proportion of the steelmakers’ price gains secured in 2017/18 were lost in the final few months of last year. Import protection methods, via Section 232, in the US, and safeguarding measures, in the EU, failed to halt the slide of steel prices. Owing to a significant reduction in demand, most notably from the automotive sector, talk of mill price hikes, in Europe and North America, quickly subsided. The negative sentiment has continued, this month, across flat products, in particular. Steel market participants are, generally, unsure about the future pricing trend, due to a number of political and economic uncertainties.

MEPS’ January research indicates that a lack of seasonal restocking has been noted, so far, this year. Many steel buyers remark that they are reluctant to place new orders, in anticipation of further price reductions being offered. It is highly likely that the worsening macroeconomic climate in a number of European countries, and the UK’s impending exit from the European Union will give further cause for concern, during the course of the year.

Few indicators give reasons for optimism, currently, in the North American steel sector. The slowdown in auto sales, the diminishing impact of Section 232 measures and an uptick in domestic supply have contributed to a rapid decline in flat product selling values, in recent months. Many US steel buyers remark that further price erosion is likely, in the near term.

Despite existing trade legislation, MEPS highlights that the global steel market is hugely exposed, either directly or indirectly, to the actions of the world’s largest steelmaker, China. The recent deterioration in Chinese domestic and export prices appears to have been halted, ahead of the Lunar New Year holidays. It is projected that Chinese values will increase, in the spring of 2019, as local demand improves.

It is widely expected that the traditional recovery in flat products prices, at the turn of the year, will be delayed. Inventory replenishment, in the global steel market, is likely to take place in the second quarter. MEPS believes that the scale of any pricing revival will be modest – with political and economic uncertainty expected to continue to undermine market sentiment.

Source: MEPS International Steel Review

Photo by chuttersnap

New Year Fails to Lift European Steel Prices

European strip mill product prices declined for the fourth successive month, in January 2019. Market conditions are weak across the region. Buyers are reluctant to make purchasing decisions, amidst rising political uncertainty and a lack of clarity regarding the EC safeguard quota system. Softening demand in a number of countries, particularly from the automotive sector, is also a factor. Moreover, inventories, especially at the service centres, are sufficient for current requirements – allowing companies to adopt a ‘wait and see’ attitude. Consequently, sales volumes, in January, were small. The talk of price increases subsided. The traditional restocking, around the turn of the year, has been delayed. Competitively priced imports are still available, either as new orders or, ex-stock, from the ports. Turkey is the most aggressive non-EU supplying country, currently, but Indian mills are also prepared to lower their offers.

Germany

In Germany, Brexit and the USA’s trade policies are creating uncertainty. Investments are being postponed. Strip mill product prices continued to slide, in January. European steelmakers, with plenty of capacity to fill because of a lack of demand from the automakers, discounted basis values. Service centres reduced their inventories at the end of 2018. A number of them are now restocking. The year started quietly, with less activity than in the previous January. Buyers are wary and only order for their immediate requirements, in anticipation of further price reductions. Offers, from overseas suppliers, continue to be low cost.

France

With demand prospects, for 2019, below those of last year, French strip mill product buyers remain cautious. Nonetheless, activity, in January, was expected to be in line with that which was experienced during the last months of 2018. The slowdown in the auto industry continues to be of concern to market participants. Demand in January remains strong because customers need to refill inventories, but activity levels in February may prove to be more problematic.

Italy

Political difficulties and a subsequent lack of investment decisions continue to negatively affect the Italian economy. Steel selling figures were still under downward pressure, in the latter part of December, but some buyers report price stabilisation in early/mid January. Nevertheless, sentiment remains poor. Only modest improvements are anticipated, for demand and prices. Inventory levels are slightly reduced. This may lead to a degree of stock replenishment.

United Kingdom

UK service centres reported an acceptable level of sales at the start of 2019. However, the country’s impending exit from the EU continues to cause great concern in business circles. Companies tried to run down their inventories, in December, with little sign of any restocking, so far, in January. Resale values are well below the level required by most distributors. Several companies continue to sell material very cheaply, in order to generate cash. Ex-mill basis values show signs of weakness.

Belgium

Belgian business activity is quiet, with further downward pressure on strip mill product prices. Buyers adopt a ‘wait and see’ position as uncertainty persists. Many annual contracts, between OEMs and mills, have yet to be settled. In the general market, the steelmakers are willing to make price concessions, in order to secure business. Competition between distributors is fierce.

Spain

The Spanish manufacturing sector continued to expand during December 2018, albeit at a slower rate than in previous months. Steel market participants are concerned about the current situation, notably, the state of European economies, Brexit and escalating trade tensions worldwide. Steel buyers held off purchasing, as a consequence. Local steelmakers continued to adjust basis values downwards, for February/March deliveries. The move was driven by the continuing decline in import prices. Service centres report muted demand with negative pressure on resale figures.

Source: MEPS European Steel Review

Photo by Christian Wiediger

Nucor-Yamato Steel Selects SMS Group for Upgrade of The No. 2 Rolling Mill

From left to right: Austin Pitzer, Controller, Nucor-Yamato Steel; Waldemar Vogel, Sales Engineer, SMS group; Jason Ciepiela, Mill Maintenance Supervisor, NYS; Chris Ziegler, Roll Shop Supervisor, NYS; Thomas Maßmann, Vice President Section and Billet Mills, SMS group; Thad Solomon, Vice President and General Manager, NYS; Jim Shelton, Rolling Mill Manager, NYS; Mario Fabro, Long Product Sales Manager, SMS group and Dirk Köhler, E&A Process Engineer, SMS group.

From left to right: Austin Pitzer, Controller, NYS; Waldemar Vogel, Sales Engineer, SMS group; Jason Ciepiela, Mill Maintenance Supervisor, NYS; Chris Ziegler, Roll Shop Supervisor, NYS; Thomas Maßmann, Vice President Section and Billet Mills, SMS group; Thad Solomon, Vice President and General Manager, NYS; Jim Shelton, Rolling Mill Manager, NYS; Mario Fabro, Long Product Sales Manager, SMS group and Dirk Köhler, E&A Process Engineer, SMS group.

Nucor-Yamato Steel Company (NYS) has selected SMS group for the replacement and upgrade of rolling equipment at their heavy section mill in Blytheville, Arkansas, USA. NYS is comprised of two rolling facilities commonly referred to as Mill 1 and Mill 2, capable of producing an annual capacity of 2.4 million tons of finished product. SMS group will upgrade Mill 2, which produces large wide flange and H-pile sections. The core of the upgrade is the substitution of the UR-E and UF stands with a modern tandem-reversing mill type CCS 1500.

“The upgrade will allow Nucor-Yamato to expand our production capabilities and include new high-strength steel grades,” said Thad Solomon, Vice President and General Manager of Nucor-Yamato Steel. “We are committed to growing our market leadership position in structural steel and this project advances that goal.”

Thomas Maßmann, Vice President Section and Billet Mills of SMS group said, “This project solidifies the excellent relationship between our two companies following the successful outcome on the earlier upgrade project SMS completed on Mill 1.”

SMS group will supply the mechanical equipment and the mill control automation. The start-up of the new tandem reversing mill is planned for the second half 2020.

SMS group is a group of companies internationally active in plant construction and mechanical engineering for the steel and nonferrous metals industry. It has some 14,000 employees who generate worldwide sales of about EUR 3 billion. The sole owner of the holding company SMS GmbH is the Familie Weiss Foundation.

Source: SMS group

AOD converter modernized by Primetals Technologies started up at Outokumpu in Tornio, Finland

In December 2018, the no. 1 AOD converter modernized by Primetals Technologies was started up at the Tornio works of Outokumpu Stainless Oy, a Finnish stainless-steel producer. The project involved fitting the converter with a new tilting drive, trunnion ring and other associated equipment, including the electrical installations and automation. The Vaicon Drive Damper system developed by Primetals Technologies was also installed on the tilting drive. It reduces the vibrations produced by the blowing processes and thus the mechanical loads acting on the entire system from the converter down to the foundations. The patented system reduces wear and maintenance costs while also lengthening the service life of the plant. It can be installed in new plants or retrofitted on existing converters.

Outokumpu is one of the world’s leading producers of stainless steels. The company employs around 10,000 people in over 30 countries, and has its headquarters in Helsinki, Finland. The works in Tornio, Lapland, is an integrated production complex with a cold rolling capacity of 1.2 million metric tons per annum. The chromite ore used in the works comes from a mining operation in nearby Kemi, which is also run by Outokumpu.

Primetals Technologies was responsible for the planning, manufacturing and supply of the new converter equipment. This covered the trunnion ring, tilting drive, including the damping system, the rotary joint and the pipework. The scope of supply also included the level 1 software and hardware for the tilting drive and damping system. The major components are a safety PLC, remote IOs, frequency converter, local control pulpits, engineering station and a process data recording system. The process images required for visualization are integrated into the existing control system. Primetals Technologies also handled supervision of the installation, commissioning and start-up of the AOD converter.

The AOD (argon-oxygen-decarburization) refining process is used to produce stainless and high-alloyed steels. Large quantities of oxygen, argon and nitrogen are injected laterally to mix the bath thoroughly and minimize the unwanted slagging of alloying elements. This process-related lateral injection during the refining process sets the bath and the several hundred metric tons of the AOD converter in vibration. This causes dynamic stresses, which reduce the service life of the mechanical components of the plant, and increase the amount of maintenance required, especially on account of premature wear on the bearings and gearing of the tilting drive.

The Vaicon Drive Damper developed and patented by Primetals Technologies reduces the induced vibrations and the associated mechanical stress on the converter mechanism by more than 50 percent. The damping system consists of two hydraulic dampers developed jointly with Hainzl, an Austrian company, as well as measuring systems, and evaluation and control software. The dampers are installed parallel to the torque support of the converter tilt drive, and are driven independently of it. This design ensures high availability and also makes it easy to retrofit in existing plants. Each damper has a closed hydraulic circuit, which makes an additional, external hydraulic system unnecessary. The damping effect is achieved by means of an electrohydraulic proportional throttle valve, and is therefore continuously adjustable. The thermal energy generated by the damping is dissipated by an integrated water cooling system.

The dampers are equipped with a position measuring system as well as pressure and temperature sensors. All process data – such as vibration displacement, temperature, pressure and damping force – is recorded and evaluated by software developed by Primetals Technologies. This facilitates a fast, effective response to the momentary vibration state of the converter.

Source: Primetals Technologies