Steel Dynamics Inc. (SDI), an electric arc furnace steelmaker headquartered in Fort Wayne, Indiana, announced its financial results for the second quarter of the year, reporting record net sales of 4, $5 billion and a net profit of $702 million, or $3.32 by dilution. to share. Excluding costs of approximately $23 million, or 8 cents per diluted share (net of capitalized interest), associated with the construction of the flat-roll steel mill in Sinton, Texas, SDI’s second-quarter 2021 adjusted net income was $719 million, or $3.40 per diluted share.

In the second quarter of 2020, SDI’s net sales totaled $2.1 billion, with net earnings of $75 million, or 36 cents per diluted share, and adjusted earnings were 47 cents per diluted share, excluding impact of the company’s refinancing activities in June 2020 of approximately $25 million, or 8 cents per diluted share, and costs associated with the Sinton plant of 3 cents per diluted share. The company’s sequential earnings in the first quarter of 2021 were $2.03 per diluted share and adjusted earnings were $2.10 per diluted share, also excluding the impact of Sinton-related construction costs of 7 cents per diluted share. .

The increase in profits was mainly the result of the expansion of the gap between metals and steel, as significantly higher average steel sales values ​​more than offset higher average scrap costs. across the steel platform, particularly in the company’s flat-rolled steel operations. Compared to the first half of 2020, SDI reports that the average external selling price for the first half of 2021 for its steel business fell from $403 to $1,169 per ton. The average cost of scrap in the first half of 2021 per ton melted at the company’s steel mills increased by $140 to $406 per ton.

Mark D. Millett, president and CEO of SDI, says. “Our second quarter 2021 operating income increased 61% sequentially to $956 million, with adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of more than $1 billion. We continue to achieve many individual operating and financial records, a truly incredible achievement and a testament to the passion and dedication of our team.

He adds that SDI has maintained “strong liquidity” while supporting increased working capital requirements, significantly growing the business and returning capital to shareholders.

“During the second quarter, steel demand remained robust as shipments and product prices continued their positive momentum across our steel platform,” Millett said. -rolled steel operations, as continued strong demand and historically low customer inventories persisted throughout the supply chain and supported prices. automotive, construction and industrials, while the energy sector continued to show signs of a rebound.”

Millett also states: “Our segment’s operating results have been exceptional. Operating profit from our steel operations in the second quarter reached a record $1 billion and our metal recycling operations maintained strong earnings as increased domestic mill utilization of 81% supported demand and scrap prices. Our steel fabrication operations once again achieved record quarterly shipments and ended June with another record backlog as we are in the middle of the summer construction season.

Quarterly results

SDI’s second-quarter 2021 operating profit from its steel operations was 59% higher than first-quarter sequential results due to a significant expansion in metals mix and record quarterly steel shipments, according to the report. society. Record sales values ​​for flat rolled and solid long products more than offset higher scrap input costs. Average external product selling price in the second quarter of 2021 for the company’s steel operations increased $251 sequentially to $1,292 per ton. Average scrap cost per ton melted at the Company’s steel mills increased $67 sequentially to $439 per ton.

Domestic steel production continued to increase in the quarter, maintaining strong scrap demand and prices. Blue chip scrap price indexes rose about $60 to $70 per gross ton during the second quarter. As a result, operating profit from the company’s metal recycling business in the second quarter of 2021 remained strong at $51 million, according to SDI.

The company’s steelmaking operations posted second-quarter operating profit of $28 million, nearly tripling first-quarter sequential results, according to SDI. Supported by record quarterly shipments, earnings improved significantly as prices rose nearly $350 per ton, more than offsetting higher average steel input costs. Prices for steel joists and decks strengthened significantly to record highs on strong demand and rising steel input costs. Order activity remains extremely strong and customers continue to be optimistic about the projects. SDI says its steel fabrication backlog is at a record high at the end of June.

First half results

For the first half of the year, ending June 30, net income was $1.1 billion, or $5.35 per diluted share, with net sales of $8 billion compared to profit net of $263 million, or $1.24 per diluted share, with net sales of $4.7. billion for the same period in 2020. The company’s adjusted net income in the first half of 2021 was $1.2 billion, or $5.50 per diluted share, excluding costs of nearly $43 million, or 14 cents per diluted share (net of capitalized interest), associated with the construction of the company’s Texas plant.

Similarly, adjusting for construction costs of the company’s Texas steel mill and a June 2020 refinancing, first-half 2020 net income was $291 million, or $1.37 per diluted share, according to SDI. .

First-half 2021 net sales increased 72% and operating income increased 258% to more than $1.5 billion compared to the same period in 2020. offset higher average costs of scrap throughout the steel platform, particularly in the company’s flat-rolled steel operations. Compared to the first half of 2020, SDI reports that the average external selling price for the first half of 2021 for its steel business increased by $403 to $1,169 per ton. The average cost of scrap in the first half of 2021 per ton melted at the company’s steel mills increased by $140 to $406 per ton.

SDI achieved operating cash flow of $849 million in the first half of 2021, representing a record first half performance. The company says it also invested $587 million in equity investments, paid cash dividends of $108 million and repurchased $393 million of its common stock while maintaining strong liquidity.

Outlook

“We remain confident that macroeconomic and market conditions are in place to support strong domestic demand for steel in 2021 and beyond,” Millett said. “We continue to see strong demand for steel coupled with extremely low steel inventories for customers throughout the supply chain. The automotive sector continues to be strong, despite the shortage of microchips, and other sectors such as construction, equipment and transportation remain strong. Incoming order activity continues to be robust across our businesses and, when coupled with low inventory, supports strong steel sales values. We believe this momentum will continue throughout the year and our third quarter 2021 results could represent another record performance. Based on strong domestic steel fundamentals and customer confidence, we continue to be optimistic about the dynamics of the North American steel market. This constructive environment, coupled with our strategic growth initiatives, provides strong drivers for our future growth in the years to come.

“We and our customers continue to be extremely excited about our investment in the Sinton Texas EAF Flat Roll Steel Mill. It represents transformational strategic growth and competitive advantages, with associated long-term value creation for all of our parties. stakeholders. We are currently in the process of commissioning the value-added paint line, and we expect the galvanizing line to be operational next month. The whole team at Sinton is doing a wonderful job. Due to the excessive heavy rains in Texas, actual steel production will be delayed and is now expected to begin mid-Q4 2021. Based on current plans, we believe Sinton shipments could be in the 100,000 tonne range during the rest of 2021 and between 2.2 million tonnes and 2.4 million tonnes in 2022. Based on mid-cycle flat metal spreads, we believe currently Annual full-cycle EBITDA from our Sinton, Texas flat-rolled steel mill once fully operational with access to four value-added coating lines (estimated to 2023) is likely in the $475 million range dollars to $525 million.

“We also plan to invest approximately $450 million to $500 million in four additional value-added flat steel coating lines consisting of two painting lines and two galvanizing lines with Galvalume coating capability, one set of which will be located in the southern United States to provide Sinton with the same diversification and higher-margin product capabilities as our two existing flat-rolled steel divisions The other two lines will be located in the Midwest to support growing demand for coated flat-rolled steel and to further increase the diversification and cash-generating capacity of our existing operations in the Midwest. Based on current estimates, we believe these four lines will likely begin operating in the second half of 2022.

“Our commitment to all aspects of sustainability is rooted in our founding principles – valuing the health and safety of our teams, our customers, our communities and our environment,” says Millett, referring to a recent announcement SDI’s greenhouse gas reduction and renewable energy targets. “We have been a leader in the field for over 25 years through our proprietary use of electric arc furnace technology, the circular manufacturing model and innovative teams creating solutions to increase efficiency, reduce the use of raw materials, reuse secondary materials and promote material conservation and recycling. We are starting from a position of strength but plan to do more. We are competitively positioned and focused on generating long-term sustainable growth for all of our stakeholders. »


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