Nucor Corporation announced consolidated net earnings of $112.3 million, or $0.35 per diluted share, for the second quarter of 2012. By comparison, Nucor reported net earnings of $145.1 million, or $0.46 per diluted share, in the first quarter of 2012 and net earnings of $299.8 million, or $0.94 per diluted share, in the second quarter of 2011.
In the first half of 2012, Nucor reported consolidated net earnings of $257.4 million, or $0.81 per diluted share, compared with consolidated net earnings of $459.6 million, or $1.44 per diluted share, in the first half of last year.
In late June 2012, Nucor completed the acquisition of the entire equity interest in Skyline Steel LLC and its subsidiaries for the purchase price of approximately $684 million including the most current working capital adjustment estimates. Second quarter results were negatively impacted by non-cash charges of $8.5 million, or $.02 per diluted share, which were not factored into the second quarter earnings guidance that was announced prior to the acquisition. These charges include the impact of purchase accounting adjustments and the elimination of profit associated with our steel mills' sales to Skyline post-acquisition. Based on current projections, the costs associated with inventory-related purchase accounting adjustments will conclude in November 2012. Skyline is now a wholly owned subsidiary of Nucor Corporation and will maintain its main office in Parsippany, N.J. It is a premier steel foundation distributor serving the U.S., Canada, Mexico and the Caribbean. Skyline distributes products to service challenging applications including marine construction, bridge and highway construction, heavy civil construction, storm protection, underground commercial parking, and environment containment projects in the infrastructure and construction industries.
The second quarter 2012 results also include a non-cash impairment charge related to the Duferdofin Nucor S.r.l. joint venture of $30.0 million, or $0.09 per diluted share. Operating performance at Duferdofin Nucor has continued well below budgeted levels through the first half of 2012. This trend, combined with the recently escalated economic and political turmoil in Europe, caused Nucor to conclude that Duferdofin Nucor had a triggering event requiring assessment for impairment in the second quarter. The impairment charge reflects the impact on the fair value model of both deeper expected losses in the near term and a slower projected recovery to historic operating performance levels.
Nucor recorded a credit to value inventories using the last-in, first-out (LIFO) method of accounting of $14.5 million ($0.03 per diluted share) in the second quarter of 2012, compared with a charge of $14.5 million ($0.03 per diluted share) in the first quarter of 2012 and a charge of $32.0 million ($0.06 per diluted share) in the second quarter of 2011. As a result, there was no LIFO charge in the first half of 2012, compared with a charge of $63.0 million ($0.12 per diluted share) in the first half of 2011.
Nucor's consolidated net sales increased 1% to $5.10 billion in the second quarter of 2012 compared with $5.07 billion in the first quarter of 2012 and decreased slightly compared with $5.11 billion in the second quarter of 2011. Average sales price per ton increased slightly from the first quarter of 2012 and decreased 6% from the second quarter of 2011. Total tons shipped to outside customers were 5,925,000 tons in the second quarter of 2012, a slight increase from the first quarter of 2012 and an increase of 6% over the second quarter of 2011. Total second quarter steel mill shipments increased 7% over the second quarter of 2011 and were down 1% from the first quarter of 2012. Second quarter downstream steel products shipments to outside customers increased 10% over the second quarter of 2011 and 19% over the first quarter of 2012.
In the first half of 2012, Nucor's consolidated net sales increased 2% to $10.18 billion, compared with $9.94 billion in last year's first half. Total tons shipped to outside customers increased 2% over the first half of 2011, while average sales price per ton was unchanged.
The average scrap and scrap substitute cost per ton used in the second quarter of 2012 was $427, a decrease of 4% from $445 in the first quarter of 2012 and a decrease of 4% from $444 in the second quarter of 2011. The average scrap and scrap substitute cost per ton used in the first half of 2012 was $436, an increase of 1% over $433 in the first half of 2011.
Overall operating rates at Nucor’s steel mills in the second quarter (76%) were down from the first quarter (79%) and increased from last year's second quarter (71%). Steel mill utilization increased from 75% in the first half of 2011 to 77% in the first half of 2012.
Construction is going well on the company’s 2.5 million tons per annum DRI facility in Louisiana. The majority of the equipment will arrive in 2012, and it is on schedule for completion of construction and beginning of start-up in mid-2013.
Nucor-Yamato Steel Company, a joint venture between Nucor and Yamato Kogyo Co. Ltd., has approved an estimated $115 million plan to expand the production of hot rolled sheet piling. This project is expected to be completed at Nucor's steel mill in Blytheville, Ark., in early 2014. The project will add several new sheet piling sections, increasing the single sheet widths by 22% and providing a lighter stronger sheet covering more area at a lower installed cost.
Nucor’s liquidity position remains strong with $2.17 billion in cash and cash equivalents, short-term investments, and restricted cash and investments and an untapped $1.5 billion revolving credit facility that matures in December 2016.
In June, Nucor's board of directors declared a cash dividend of $0.365 per share payable on August 10, 2012 to stockholders of record on June 29, 2012. This dividend is Nucor's 157th consecutive quarterly cash dividend, a record it expects to continue.
Nucor’s second quarter performance reflected a balance of mixed trends resulting from its diverse steel and steel products portfolio. Its fabricated construction products businesses (rebar fabrication, joist and decking and pre-engineered metal buildings) are generally showing improving trends and Nucor expects the profitability that they experienced in May and June to continue in the third quarter. Nucor’s sheet mills experienced the most severe downward trend during the quarter with profitability in April 2012 that was more than double profits earned in June 2012. The negative factors impacting its steel mills include an import surge across most products that began late in 2011 and continued through the first half of 2012, undercutting seasonal pricing momentum that is normally experienced early in the year. In addition, U.S. sheet steel markets have been negatively impacted by new domestic supply that began ramping up production in 2011, while a combination of political and economic uncertainty is beginning to affect steel buyer confidence for all products. Lower scrap pricing has reduced the profitability of Nucor’s scrap processing business. The company believes that this weakened scrap pricing trend bottomed in early July with a pick-up in scrap export activity, but only time will tell if the early July scrap pricing was a true bottom followed by stability.
Nucor currently expects to see a modest reduction in earnings exclusive of one–time charges for the third quarter of 2012. Continued slow domestic growth, coupled with continued or worsening global economic uncertainty may both become increasing negative factors. The construction market continues to be very challenging. The two-year $60 billion per year extension of the highway bill is good news, but far short of the $400 billion per year needed for the next five to six years to rebuild our crumbling domestic infrastructure, according to the American Society of Civil Engineers' 2009 Report Card for America's Infrastructure. Dan DiMicco, Nucor's Chairman and CEO, stated, "These are investments that must be made and will provide returns many times over during the next 50 years. They must be started now as we are years behind, and we need the millions of jobs and economic growth that are proven to come with REAL infrastructure investments."
Nucor does see its third quarter results benefiting from lower scrap costs in transit and in inventory combined with the positive impact on steel mill customer buying patterns if scrap prices stabilize. It is worth noting several positive factors for sheet steel that should drive favorable pricing momentum by the end of the third quarter. The positive factors include recent reductions in sheet steel imports and shuttered and reduced operating rates by newer domestic market entrants. Markets such as automotive, heavy equipment, energy and general manufacturing remain improved, primarily benefiting demand for special bar quality, sheet and plate products.
Nucor and affiliates are manufacturers of steel products, with operating facilities primarily in the U.S. and Canada. Products produced include: carbon and alloy steel -- in bars, beams, sheet and plate; steel piling; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; steel grating and expanded metal; and wire and wire mesh. Nucor, through The David J. Joseph Company, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.