Steel Dynamics Inc. is expecting third-quarter 2020 earnings to be slightly better than the previous quarter due to stronger results from recycling and steel fabrication operations and lower costs associated with construction of the new mill in Sinton, Texas.
Steel operations earnings are expected to be lower in the third quarter. The division experienced metal spread compression during Q3, which more than offset increased shipments driven by improved automotive and construction demand, said SDI. Lagging price-indexed contracts, which offset lower average scrap costs, resulted in lower average realized quarterly flat roll steel product pricing. SDI notes that pricing stabilized and improved during the second half of the quarter, supported by customer demand and raw material pricing.
The company’s recycling operations are expected to show a meaningful increase in earnings due to higher scrap shipments in response to improved domestic steel production.
Construction demand buoyed SDI’s steel fabrication operations during the quarter. Order backlog remains strong and customers are optimistic about future non-residential projects. “Third-quarter 2020 earnings from the company’s steel fabrication operations are expected to be at or near record results, based on anticipated record shipments and margin expansion as product pricing is expected to improve while steel input costs decrease,” said SDI.
Earnings are expected in the range or $0.42 to $0.46 per diluted share compared to $0.36 per diluted share in the second quarter of 2020. Both the second and third quarter included costs associated with construction of the new flat roll mill in Texas ($0.04 EPS in Q3 vs. $0.08 EPS in Q2). Excluding those costs, adjusted earnings are expected in the range of $0.46 to $0.50 per diluted share for Q3 compared to $0.47 per share in Q2.
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