Steel Dynamics, Inc. (STLD - Free Report) recently announced plans to expand its value-added flat roll steel products by adding a new galvanizing line in Columbus, MS. It intends to invest roughly $140 million for adding a third galvanizing line at its Columbus Flat Roll Division. Construction is expected during the next 24 months while operations are likely to start mid-2020.
After completion, the company will have nine value-added galvanizing lines with total annual coating capacity of roughly 3.8 million tons situated throughout eastern half of the United States. Moreover, after completion of the recently announced planned acquisition of Heartland, it will have 10 flat roll steel galvanizing lines with roughly 4.2 million tons of coating capacity. The move will strengthen Steel Dynamics’ position as the largest provider of non-automotive galvanized flat roll steel in the United States.
The new galvanizing line will produce gauges between 0.013 inches and 0.160 inches, and of 36-72 inches widths. The company plans to invest $90-$100 million during the next 24 months in addition to the usual capital reinvestment at Columbus. It will be done to upgrade process lines and hot strip mill capability, increasing through-cycle profit margin capability by increased process efficiency and product diversification. The additional investment is expected to boost margin production capability, increase the range of complex grade and continue improving the process control needed for advanced high-strength steel grades used in the automotive industry.
Steel Dynamics’ shares have gained 3.8% in the past three months against the industry’s 3.6% decline.
Earlier this month, the company provided an upbeat earnings guidance for second-quarter 2018. The company expects earnings for the quarter in the band of $1.46 to $1.50 per share. That is an increase from 96 cents per share recorded in the previous quarter and 63 cents it earned a year ago.
Steel Dynamics expects profitability from its steel operations to improve meaningfully on a sequential basis in the second quarter on the back of higher steel shipments and metal spread expansion. Also, average quarterly steel product prices are expected to increase more than scrap costs. This is because prices of steel across the platform improved throughout the quarter aided by strong steel demand in the domestic market, the company noted.
Zacks Rank & Stocks to Consider
Steel Dynamics currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the basic materials space are The Chemours Company (CC - Free Report) , FMC Corporation (FMC - Free Report) and Westlake Chemical Corporation (WLK - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chemours has an expected long-term earnings growth rate of 15.5%. Its shares have gained 24.3% in a year.
FMC Corp has an expected long-term earnings growth rate of 14.3%. Its shares have moved up 20.8% in a year.
Westlake Chemical has an expected long-term earnings growth rate of 12.2%. Its shares have rallied 62.9% in a year.
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