Steel Dynamics Beats Guidance

The third largest steel maker in the US, Steel Dynamics Inc. (STLD - Snapshot Report) reported net income of $69 million − or 30 cents per diluted share − for the third quarter of 2009, after reporting losses for three consecutive quarters. The earnings, which were driven by cost reduction through higher production and shipping volumes at the Flat Roll Division and better-than-expected performance in the Metals Recycling segment, were higher than the Zacks Consensus Estimate of 23 cents. However, on a year over year basis, earnings were down 69%.

Last month, Steel Dynamics had raised its earnings guidance for the reported quarter to a range of 20 cents to 25 cents per share from its previous guidance of 10 cents to 20 cents per share, citing continued strength in orders for flat-rolled steel and stronger volumes in Metal Recycling business.

Net sales of $1.2 billion reflected an improvement of 48% sequentially but were down 54% from the year ago period. Sequentially, shipping volumes in all segments except fabrication were up in the reported quarter.


Steel Operations segment: Net sales of $782 million for the quarter represented 63% of the company’s total sales. Shipments of 1.2 million tons included 877,000 tons of flat-rolled steel shipments. Flat-rolled products accounted for 70% of the quarter’s steel segment shipments, 11% was structural steel shipments, 8% was merchant bars, 6% was engineered bars and 5% was Steel of West Virginia shipments. Average selling price per ton in the segment was $627, an increase of $33 per ton from $594 in the second quarter of 2009 and a decrease of $559 per ton from the year-ago quarter.Quarterly operating profit for the Steel segment was $128 million, or $105 per ton shipped, compared to an operating profit of $41 per ton in the previous quarter.

Metals Recycling and Ferrous Resources segment: This segment produces pig iron for the Flat Roll Division. Net sales of $555 million represented 33% of the company’s total sales for the quarter. Operating income for this segment was $45 million. Total ferrous scrap shipments in the segment were down 54% year over year to 1.3 million tons. However, shipments were up 26% sequentially. While Non-ferrous scrap shipments increased 28% to 217 million pounds sequentially, these were 11% lower than the year-ago quarter.

Steel Fabrication Operations segment: This segment produces joists, trusses and steel deck used in the construction of non-residential buildings. Net sales were $33 million or 3% of Steel Dynamics’ sales for the quarter. The segment reported an operating loss of $3 million. Shipments totaled 35,000 tons at an average selling price of $953 per ton. Shipments were 56% lower than in the year-ago quarter, and 2% lower than the previous quarter.

For the fourth quarter, Steel Dynamics expects operating rates to decline and earnings to be lower than the reported quarter due to seasonally lower shipments of flat-rolled steel.

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