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Steel Dynamics Reports Second Quarter 2019 Results

Steel News - Published on Wed, 24 Jul 2019

Image Source: Steel Dynamics, Inc.
Steel Dynamics, Inc announced second quarter 2019 financial results. The company reported second quarter 2019 net sales of USD 2.8 billion and net income of USD 194 million. Comparatively, prior year second quarter net income was USD 362 million with net sales of USD 3.1 billion. Sequential first quarter 2019 net income was USD 204 million, with net sales of USD 2.8 billion. Mr Mark D Millett, President and Chief Executive Officer said that "Our second quarter 2019 consolidated operating income was USD 285 million and adjusted EBITDA USD 365 million. The team delivered a solid second quarter performance in a challenging steel pricing environment. A weakening scrap price environment coupled with steel inventory destocking led to steel buying hesitancy. Despite these challenges, supported by the addition of United Steel Supply and the continued ramp-up of Heartland, our steel platform shipments improved. As underlying steel demand remains constructive and scrap prices have steadied, we have recently seen stabilization and improvement in flat roll steel prices, resulting in increased flat roll order activity and improved order backlogs. However, structural, merchant bar, and reinforcing bar steel pricing remain pressured from domestic and import market competition. Underlying domestic steel demand remains intact, and we are seeing continued positive activity across most of the steel consuming sectors, including automotive, energy and industrial customers. Additionally, as evidenced by our strong steel fabrication backlog, strength continues in non-residential construction."

Second quarter 2019 operating income for the company's steel operations was USD 295 million, or six percent lower than sequential first quarter 2019 results. The decline in earnings resulted from metal spread compression which more than offset the three percent increase in overall steel shipments related to the ramp-up of the Heartland facility and the recent addition of United Steel Supply. The sequential earnings decline was primarily driven by lower shipments and product pricing within the company's long product steel operations. The second quarter 2019 average external product selling price for the company's overall steel operations decreased USD 23 sequentially to USD 879 per ton. The average ferrous scrap cost per ton melted at the company's steel mills decreased USD 22 to USD 316 per ton.

The company's steel processing locations (Heartland, Techs, United Steel Supply and Vulcan) represented 16 percent of the shipment mix in the second quarter 2019, compared to 13 percent in the sequential quarter and nine percent in the prior year second quarter. These locations use steel products as their primary raw material, and the associated steel procurement cost represented 18 percent of the steel operations cost of goods sold for the second quarter 2019, 15 percent for the sequential quarter, and nine percent for the prior year second quarter.

Second quarter 2019 operating income from the company's metals recycling operations decreased to USD 11 million, compared to USD 20 million in the sequential first quarter, as a result of both lower nonferrous shipments and ferrous selling values. Both prime and obsolete scrap indices fell almost USD 90 per gross ton from March to June 2019. As scrap flows started to slow based on lower procurement values, scrap pricing appears to have stabilized in July.

Second quarter 2019 operating income from the company's steel fabrication operations was a strong USD 31 million, or 49 percent higher than sequential first quarter results. Earnings improved as higher shipments and lower raw material steel input costs, resulted in expanded profit margins. The steel fabrication platform order backlog remains strong, and customers remain optimistic concerning non-residential construction projects.

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Posted By : Ratan Singh on Wed, 24 Jul 2019
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