Nucor Sees Profits Decline
For Nucor Corp, a Charlotte based steel manufacturer, it appears that the organization’s profits have dipped during Q1 of this year despite signals of growth from earlier quarters.
According to the company’s first quarter earnings report, net earnings attributable to stockholders fell short in Q1 2023, coming out at around $1.14 billion or roughly $4.45 per diluted share. This less than corresponding figures for both Q4 2022 ($1.26 billion – equaling around $4.89 per diluted share), and even less than those obtained from the same period last year (Q1 2022) amounting to around $2.1 billion, ($7.67 per diluted share).
Notwithstanding this downturn in profitability, it is notable that Nucor’s steel mill segment witnessed impressive progress during this same period, hinged on increased profit margins and output levels. However, its steel products segment reported lower earnings, due to reduced pricing on realized transactions during the fourth quarter of last year.
Raw Materials Segment Reports Growth
Nucor achieved growth within its raw materials sector during Q1 2022 as various factors contributed towards this boost. Namely, increased volume at DRI facilities plus efficacious scrap recycling and brokerage operations.
“We had a very strong quarter, driven by solid performance in our steel products segment and increased demand for steel at our mills,” Leon Topalian, Nucor’s chair, president, and CEO stated.
“Demand from nonresidential construction, our largest end market, continues to be robust, driven by strength in infrastructure and manufacturing investment. Average steel mill utilization rates and profit margins were both up in the first quarter compared to the fourth quarter, with sheet and plate mills seeing some of the largest gains. This, coupled with year-over-year gains in automotive and stability in energy, gives us confidence that 2023 will be another very profitable year for Nucor. My thanks to our 31,000 teammates for their dedication to safely meeting our customers’ needs while executing our strategic growth agenda.”
Despite accruing net sales amounting to $8.71 billion for that period, only slightly lower than previous quarter earnings, it revealed a 17 percent decline compared with last years figures of $10.49 Billion.
By observing the Q4 2022 and Q1 2022 quarters’ per ton basis average sales there was an overall reduction of 18 percent.
Q1 Steel Production Results
A recent report from Nucor has highlighted impressive growth in its external customer shipments during Q1 2023. Figures show an increase of 12 percent since last quarter, and a 1 percent growth pattern observed over the same period last year. The company also recorded high mill shipment numbers with an increase of 18 percent on Q4 figures and a notable four percent year-over-year. Also, internal customers accounted for 20% of total steel mill deliveries worldwide within this timeframe.
However, there was a notable drop off regarding external customer shipments during this time frame, down by three points since Q4 22 numbers. This figure becomes a sharper contrast when viewed through historical data, demonstrating eight points less when compared to same timeframe figures from last years performance results.
Notably, the cost of average scrap and scrap substitutes per gross ton used by Nucor during the first quarter of 2023 was $414, which is a 3 percent reduction from the fourth quarter of 2022’s figure of $427, and a 16 percent decrease when compared to $495 seen during the same period last year.
Moreover another critical factor in Nucor’s financial statement points towards significant operational improvement, steel mills recorded a remarkable rise in utilization rates from 70% during the previous quarter, to an entrepreneurial level of up to 79% which signifies improvements towards capacity planning and development.
Q2 Projections
The first quarter of this year witnessed impressive strides made by Nucor’s recently constructed electric arc furnace (EAF) mill situated in Brandenburg, Kentucky. From October 2022 onwards, production levels displayed a consistent upward trend with caster and rolling mill outputs touching 500,000 tons by April 20th. The company is optimistic regarding profitability at this location, and anticipates achieving a boost by the close of the fourth quarter.
As the year progresses, overall earnings appear optimistic as well as higher than those seen in Q1. Further advancements are also expected from its steel mill division. This is driven primarily via widened margins associated with the company’s sheet mills over upcoming quarters, too.
Nucor forecasts a decline in average selling prices for its steel products segment during Q2, while expecting improved profitability from their DRI facilities when viewed against Q1 2023 results despite cost-related drops.
New Steel Recycling Collaboration
Nucor has made a noteworthy effort towards advancing sustainable practices, as the company formed a partnership centered on recycling alongside renowned manufacturer and supplier, Johnson Controls.
Johnson Controls has a reputation for producing cutting-edge fire safety equipment, HVAC system solutions, and are based out of Milwaukee, Wisconsin.
Having revealed that the organization relies considerably on US based steel sources (70%), and recycled scrap material (45%) for its steel acquisitions, Johnson Controls seeks to maximize recycling by entering into an agreement with Nucor.
A large portion of the company’s secondary scrap steel will be processed for recycling via electric arc furnace technology, found at several Nucor manufacturing sites in the US. Consequently, Nucor can then sell the re-melted scrap steel to Johnson Controls for its manufacturing operations.
“With our smart building technology trifecta—energy-efficient equipment, clean electrification and systemic digitalization—we have already reached the point of being able to help customers reduce building operational emissions to net zero,” Katie McGinty, vice president and chief sustainability and external affairs officer at Johnson Controls stated.
“However, embodied carbon emissions in hard-to-abate sectors like steel are much more challenging. We are unraveling the complexities of embodied carbon by addressing the challenge from different angles: from low-carbon steel purchases to steel recycling, material recycling and overall product footprint reduction.”
She further said that, “This partnership with Nucor will allow us to accelerate upstream decarbonization significantly through the further recycling of thousands of tons of steel every year. We are excited not only about the immediate resource and emissions reductions but also about the long-term ripple effect this closed-loop recycling partnership will have for resource, energy and emissions savings.”
Executive vice president of raw materials for Nucor, Noah Hanners, added, “We formed Nucor Industrial Recycling to work with our steel customers to find new and better ways to return steel scrap directly from manufacturing facilities to our steel mills for re-melting to make new steel products. This closed-loop recycling program is a great example of how we work with our customers to improve resource efficiency in the steel supply chain.”
