Market Segment
Nucor and SDI Guide to Lower Earnings in Q2
Written by Sandy Williams
June 18, 2019
Two of the biggest steel companies in the U.S. are expecting earnings to decline in the second quarter. Nucor and Steel Dynamics both cite lower shipments and inventory destocking as contributing factors.
In guidance released on Monday, Nucor forecast earnings in the range of $1.20 to $1.25 per diluted share compared to $1.63 per share in the first quarter of 2019.
Destocking is impacting order rates, resulting in a decline in performance of Nucor’s steel mills, said the company.
“Increased domestic supply and a declining scrap price environment have led to aggressive inventory management by our customers,” added Nucor. “We still see stability in most of the end-use markets that we serve, with some softening in automotive.”
Nucor expects its steel products segment to show a quarterly improvement from the first quarter as a result of the nonresidential construction markets.
Margin compression in Nucor’s DRI business is expected to negatively impact the second quarter. The Trinidad DRI facility began a planned 25-day outage in June. The Louisiana facility will take a 60-day outage beginning in August to improve operations.
Steel Dynamics is expecting earnings in the range of $0.86 to $0.90 per diluted share compared to $0.92 in the first quarter and $1.53 per share in Q2 2018.
Average product pricing declined across the SDI steel platform in the second quarter, but earnings were especially impacted by lower shipments and metal spreads in the long product steel operations.
“Underlying domestic steel demand remains intact, although steel buying hesitancy and inventory destocking have resulted from a weakening scrap price environment,” said SDI in its guidance release.
Lower average pricing for scrap is expected to have a negative effect on the company’s metals recycling platform.
Steel fabrication is getting a boost from non-residential construction projects entering the summer construction season, although weather has caused some delays. The order backlog is stronger than it was in last year’s second quarter and customers are optimistic, said SDI. Strong demand, declining steel input costs, higher shipments and metal spread expansion should result in improved sequential first-quarter results for SDI’s steel fabrication division.
Sandy Williams
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