Strong Report from SDI
Article by KPC Media | KPC News | April 22, 2019
FORT WAYNE — Steel Dynamics, Inc. announced its first-quarter 2019 financial results Monday morning.
The company reported first-quarter 2019 net sales of $2.8 billion and net income of $204 million, or $0.91 per diluted share.
Comparatively, last year’s first-quarter net income was $228 million, or $0.96 per diluted share, with net sales of $2.6 billion.
“The team delivered a strong first-quarter performance in a somewhat challenging flat-roll steel pricing environment,” said Mark D. Millett of Auburn, president and chief executive officer. “A downward trend in flat-roll steel prices began in the second half of 2018 and continued through mid-first quarter 2019, reaching an inflection point in February 2019. … The continued stabilization and improvement in flat-roll steel prices are having a positive impact, resulting in increased flat-roll order activity and solid order backlogs. We are seeing continued strength in the automotive, energy and industrial sectors, and as evidenced by strong steel fabrication backlogs, strength in nonresidential construction.”
The company generated cash flow from operations of $182 million during the first quarter 2019 and maintained liquidity of $2.2 billion at March 31. On March 1, the company used available cash of $93 million to fund the purchase of a 75 percent controlling interest of United Steel Supply, a leading distributor of painted Galvalume flat-roll steel used for roofing and siding applications.
SDI said that as evidence of the confidence in the company’s sustainable long-term cash flow generation capability, the board of directors approved a 28 percent increase in the company’s first quarter 2019 cash dividend, “reflecting the strength of the company’s capital foundation and liquidity profile.” The company also repurchased $84 million of its common stock during the first quarter of 2019.
First-quarter 2019 operating income for the company’s steel operations was $312 million, or 22 percent lower than fourth-quarter 2018 results. The decline in earnings resulted from lower flat-roll steel pricing, which more than offset increased overall steel shipments. The first quarter 2019 average product selling price for the company’s steel operations decreased $38 to $902 per ton. The average ferrous scrap cost per ton melted decreased only $5 to $338 per ton.
First-quarter 2019 operating income from the company’s metals recycling operations increased to $20 million, compared to $17 million in the 2018 fourth quarter, based on improved recycled nonferrous shipments and average pricing.
First-quarter 2019 operating income from the company’s steel fabrication operations was a strong $21 million, or 39 percent higher than 2018 fourth-quarter results. SDI said the steel fabrication platform order backlog remains strong, and customers remain optimistic concerning nonresidential construction projects heading into the summer season.
“We believe the market dynamics are in place for domestic steel consumption to continue to increase this year,” said Millett. “Based on domestic steel demand fundamentals and continued customer optimism, we believe North American steel consumption will experience steady growth. In combination with our existing and newly announced expansion initiatives, we believe there are firm drivers for our continued growth.”
He added, “We are excited about our planned flat-roll steel mill, and the anticipated long-term value creation it will bring through geographic and value-added product diversification.
“We continue to strengthen our financial position through strong cash flow generation and the execution of our long-term strategy. We are well-positioned for growth and remain focused on delivering long-term shareholder value through organic and transactional growth opportunities,” Millett concluded.