SDI Reports Record First Quarter Results

Article by KPC News | April 19, 2021

FORT WAYNE — Steel Dynamics Inc. on Monday reported record-setting first-quarter 2021 financial results.

The company listed first-quarter 2021 net sales of $3.5 billion and net income of $431 million, or $2.03 per diluted share.

Excluding the impact from costs of approximately $20 million, or $0.07 per diluted share associated with construction of the company's Sinton, Texas, flat roll steel mill investment, the company's first-quarter 2021 adjusted net income was $445 million, or $2.10 per diluted share.

Comparatively, 2020 first-quarter net sales were $2.6 billion, with net income of $187 million, or $0.88 per diluted share. The company's fourth-quarter 2020 earnings were $0.89 per diluted share, and adjusted earnings were $0.97 per diluted share.

"The team delivered a tremendous first-quarter performance, achieving record quarterly net sales, operating income and adjusted EBITDA," said Mark D. Millett of Auburn, president and CEO of Steel Dynamics.

"Our first-quarter 2021 operating income increased 130% sequentially to $594 million, with adjusted EBITDA of $664 million. Numerous individual operating and financial records were attained — a truly amazing achievement and a testament to the passion and dedication of our team,” Millett added. 

“Based on their performance, we achieved solid cash flow from operations of $262 million in the first quarter 2021, while at the same time supporting increased working capital needs, meaningfully growing our business through significant organic growth investments, increasing our quarterly cash dividend by 4, and maintaining strong liquidity of over $2.4 billion.

"During the first quarter, steel demand remained robust and product pricing gained momentum across our entire steel platform. Higher flat roll steel selling values were the most significant drivers for our record quarterly earnings, as demand strength and historically low customer inventories throughout the supply chain supported prices. Domestic steel consumption remained strong from the automotive, construction and industrial sectors, and energy has shown some signs of rebounding,” Millett said.

Steel Dynamics operates its original flat roll steel mill southwest of Butler, alongside a New Millennium Building Systems steel fabrication plant. It operates an OmniSource metals recycling station in Auburn.

"Despite the challenges of the pandemic, as a result of our safety culture and spirit of excellence among our teams, our first-quarter 2021 segment operating results were once again phenomenal," continued Millett. "First-quarter operating income from our steel operations was a record $641 million, and our metals recycling operations nearly doubled their earnings sequentially, as improved domestic steel mill utilization increased ferrous scrap demand. Our steel fabrication operations also displayed a solid performance, achieving record quarterly shipments and ending March with a record order backlog that is over 50%t higher than our previous high point, as we head into the summer construction season."

First quarter 2021 operating income for the company's steel operations was a record $641 million, or 115% higher than 2020 fourth-quarter results, due to significant metal spread expansion and near-record steel shipments. Record flat roll and strong long-product steel realized selling values more than offset higher scrap input costs.

The first-quarter 2021 average external product selling price for the company's steel operations increased $227 sequentially to $1,041 per ton. The average ferrous scrap cost per ton melted at the company's steel mills increased $93 sequentially to $372 per ton.

As domestic steel production continued to rise in the quarter, demand and pricing for recycled scrap significantly improved. Ferrous prime scrap pricing indices increased approximately $170 per gross ton during the first quarter. As a result, first-quarter 2021 operating income from the company's metals recycling operations nearly doubled to $54 million, compared to the preceding quarter.

The company's steel fabrication operations reported operating income of $10 million in the first quarter 2021, over 60% lower than the 2020 fourth quarter results. Notwithstanding achieving record quarterly shipments, earnings declined as significantly higher steel input costs more than offset higher realized selling values, due to the timing of matching a six-month backlog to more current higher-priced steel inputs.

Lower earnings for steel fabrication are not a reflection of weaker demand, as order activity is extremely strong and customers continue to be optimistic concerning non-residential construction projects, SDI said. The company's steel fabrication order backlog is at a record level at the end of March, 85% higher than its previous peak. Steel joist and deck product pricing has also strengthened significantly to record levels due to the strong demand environment and higher steel input costs.

"We remain confident that market conditions are in place to benefit the domestic steel industry in 2021 and beyond," Millett said. "While global economies are still recovering from the shock of COVID-19, we are seeing strong steel demand coupled with extremely low customer steel inventory throughout the supply chain.”

He added, “The automotive sector has experienced the strongest recovery, despite the electronic chip shortage, and the construction, equipment and transportation sectors are also strong. Our order entry continues to be robust across our businesses, and when coupled with historically low inventories, supports continued strong steel selling values. We believe this momentum will continue throughout the year and that our second-quarter 2021 earnings will be even higher than our record first-quarter 2021 results.

“We also believe U.S. trade policies and existing steel trade cases will continue to moderate steel imports. Based on strong domestic steel fundamentals and customer optimism, we continue to be confident regarding North American steel market dynamics. This positive environment coupled with our strategic growth initiatives provide firm drivers for our further growth in the coming years.”

Millett added, "We and our customers continue to be extremely excited about our Sinton. Texas, flat roll steel mill investment. It represents transformational competitively-advantaged strategic growth, with associated long-term value creation for all of our stakeholders. The facility is designed to have product capabilities beyond that of existing electric-arc-furnace (EAF) flat roll steel producers, competing even more effectively with the higher-carbon emitting integrated steel model and foreign competition, providing a broader steel portfolio and a climate-conscious supply option for our customers.”

He said construction at Sinton continues to go well and remains within the expected project cost of $1.9 billion, with plans to commence steel production late summer 2021.

“We have executed agreements with several customers to co-locate on our site, currently representing over 1.3 million tons of annual steel consumption and processing capabilities, and we are still in discussion with others. Our recent acquisition of a Mexican scrap company is also providing a key support for Sinton's ferrous scrap needs,” Millett said.

"Additionally, as recently announced, we are planning to add four additional value-added flat roll steel coating lines comprised of two paint lines and two galvanizing lines with Galvalume® coating capability. The sites for these lines are still to be determined but two lines comprised of one paint line and one galvanizing line will be located in the Southern U.S., to provide Sinton with the same diversification and higher-margin product capabilities as our Butler and Columbus Flat Roll Steel divisions.”

Millett concluded, "Our commitment is to the health and safety of our teams, families and communities, while meeting the current and future needs of our customers. Our culture and business model continue to positively differentiate our performance from the rest of the industry, and we are in a place of strength. We are competitively positioned and focused to generate long-term sustainable value for all of our stakeholders."

Article source: https://www.kpcnews.com/thestar/article_466355a8-9a72-59f2-a526-57db32141feb.html