Steel Mills

Steel Dynamics Guides Lower in Q2

June 16, 2017

Steel Dynamics, Inc., reported lower earnings guidance for the second quarter due to operational issues at two of its plants. An upgrade to Steel Dynamics’ galvanizing line at Butler required a three week outage, diminishing second-quarter pretax earnings by $15 million. In addition, quality issues related to start-up of the new Galvalume and paint line at the Columbus Flat Roll Division increased costs and resulted in lower value shipments, reducing pretax earnings by another $15 million.

As a result, SDI announced earnings guidance for the quarter in the range of $0.60 to $0.64 per diluted share, down from earnings of $0.82 per diluted share in Q1 and below analyst consensus.

Increased average steel product pricing in the second quarter will not be enough to offset lower shipments and higher scrap costs during the quarter. SDI noted that 40 percent of its flat roll volume is tied to contracts that lag spot pricing by 1-2 months. Spot pricing for the remaining volume was lower in the second quarter than in the first quarter. SDI reports demand remains strong in automotive and construction, and energy demand is improving.

The company’s earnings from its metal recycling division and fabricated steel joist and deck products is expected to be steady compared to Q1.