Steel Dynamics, Inc. has updated its outlook for the second quarter of 2009, saying that it now expects to report a loss of $0.10 to $0.15 per diluted share.
The company noted that the second quarter earnings guidance takes into account the recent issuance of common stock and convertible securities, indicating that the effect of the increase in share count on diluted earnings per share would predominantly be offset by expenses related to the repayment of its term loan in June.
"As we expected early in the quarter, we have experienced some improvement in flat-roll steel order entry and shipping volumes as the quarter progressed while, at the same time, pricing continued to erode," said Keith Busse, Chairman and CEO. "I do believe, though, that flat-roll pricing has finally bottomed and is currently moving higher.
“Our principal weakness in steel operations remains at our Structural and Rail Division, with our other steel operations experiencing steady or improving results,” continued Busse. “On balance, we expect our steel operations to produce a small operating profit in the second quarter while operating at a quarterly utilization rate of about 50%. Our metals recycling operations are now expected to produce a small second-quarter operating loss, although showing month-to-month improvement and an expected profit for the month of June.
"Regarding costs, we have benefited from consuming lower-cost scrap at our steel mills during the quarter,” added Busse. “We are, at all of our operations, exercising tight cost control, implemented successfully through the cooperation, support, and ideas of our dedicated employees. During the first half of this year we have right-sized the workforce at OmniSource operations by approximately 20% based on a review of the ongoing staffing levels required to maintain future operating volumes and customer service.
"The outlook for the remainder of the year remains uncertain, but is improving, as demand is strengthening for some of our steel products and recycled metals,” added Busse. “We now expect to be profitable in the third and fourth quarters of 2009 assuming only a modest increase in production volume.
“Steel Dynamics is in an excellent position to take advantage of any improvement in order flow in the second half as our operations are poised to increase production rates. Our production facilities are in top-notch operating condition with adequate raw materials on hand or available, and our trained workforce is 'at the ready'," Busse concluded.
The company had previously provided qualitative guidance suggesting the possibility of improving results in the second quarter, indicating that the second quarter could be close to breakeven, possibly showing a small loss or a small profit. Although it will be below that breakeven point, the expected second quarter loss does compare favorably to a reported first-quarter loss of $0.48 per diluted share.