01—Abstract
Summary
Summary of the 8-K filed July 18, 2024. Cited figures are marked; the original filing is the authoritative source.
Steel Dynamics, Inc. reported second quarter 2024 net sales of $4.6 billiona, operating income of $559 million, and net income of $428 million, or $2.72 per diluted share.
That compares with net income of $584 millionb, or $3.67 per diluted share, in the sequential first quarter of 2024, and $812 million, or $4.81 per diluted share, in the second quarter of 2023. Adjusted EBITDA was $686 million and cash flow from operations was $383 million. For the first half of 2024, net sales were $9.3 billion and operating income was $1.3 billion, with the company citing lower volume and pricing in its steel fabrication operations.
The decline in earnings was driven mainly by its steel operations. The average external selling price for steel fell $63 per ton sequentially to $1,138c per ton, while the average ferrous scrap cost fell $29 per ton to $388 per ton. Steel operating income was $442 million.
Management said customer order inconsistency, low customer inventories, and a significant increase in steel imports, particularly in coated flat rolled products, weighed on results. Metals recycling operating income rose to $32 milliond, and steel fabrication operating income was $181 million, with its order backlog extending through the fourth quarter of 2024. Management stated that steel pricing has reached a "pivot point to the upside" and that order activity has improved in recent weeks, especially for coated flat rolled products.
The company is ramping four new value-added flat rolled coating lines adding 1.1 million tons of products in the second half of 2024 and fully in 2025, and plans to begin operating an aluminum flat rolled mill in mid-2025. The company ended the quarter with liquidity of $2.7 billion, repurchased $309 million of its common stock (1.5 percent of outstanding shares), and declared dividends of $0.46 per share.
02—Key points
Key Highlights
- Q2 2024 net sales of $4.6 billion, operating income of $559 million, net income of $428 million, and diluted EPS of $2.72, down from $4.81 in Q2 2023 and $3.67 in Q1 2024.
- Adjusted EBITDA of $686 million and cash flow from operations of $383 million in the quarter.
- Steel operating income of $442 million fell sequentially as the average external selling price declined $63 per ton to $1,138 per ton, outpacing a $29 per ton decline in ferrous scrap cost to $388 per ton.
- Metals recycling operating income increased 42 percent sequentially to $32 million; steel fabrication operating income was $181 million, with its backlog extending through Q4 2024.
- Management believes steel pricing has reached a "pivot point to the upside," citing recent positive steel order activity, especially for coated flat rolled products.
- Four new value-added flat rolled coating lines are ramping, expected to add 1.1 million tons of value-added steel products in the second half of 2024 and fully in 2025; an aluminum flat rolled mill is planned to begin operating in mid-2025.
- Liquidity of $2.7 billion at June 30, 2024; $309 million of share repurchases in the quarter (1.5 percent of outstanding shares) and $0.46 per share in dividends declared.
03—Questions
Frequently Asked Questions
Why did Steel Dynamics' earnings decline compared with the prior year and the prior quarter?
Earnings declined mainly because realized steel selling values fell more than scrap costs. Management cited customer order inconsistency, very low customer inventories, and a significant increase in U.S. steel imports, particularly in coated flat rolled products. Steel operating income was $442 million in Q2 2024, lower than the sequential quarter. Steel fabrication operating income was $181 million in Q2 2024, and first-half steel fabrication operating income was $359 million, compared with $1.0 billion in the same period of 2023.
What does management see as the outlook for steel pricing and demand?
Management said underlying steel demand was stable in the second quarter and remains constructive, customer inventories remain low, and scrap prices have steadied. It believes steel pricing has reached a pivot point to the upside and expects market conditions to support solid domestic steel consumption in the second half of 2024. It also expects the automotive, non-residential construction, and industrial sectors to remain steady this year.
What growth projects is the company pursuing?
The company is ramping four new value-added flat rolled steel coating lines that began operating earlier in 2024, which it expects to add 1.1 million tons of value-added steel products in the second half of 2024 and fully in 2025. It is also constructing an aluminum flat rolled products mill, which it plans to begin operating in mid-2025, and intends to supply high recycled content products to the beverage can and packaging industry as well as the automotive, industrial, and construction sectors. Investments in organic growth projects totaled $419 million in the quarter.
How strong is the company's financial position and how is it returning capital to shareholders?
The company reported liquidity of $2.7 billion as of June 30, 2024. In the second quarter it repurchased $309 million of common stock, representing 1.5 percent of its outstanding shares, and paid $0.46 per share in dividends declared. For the first half of 2024, it repurchased $607 million of stock, representing three percent of its outstanding shares, and paid cash dividends of $141 million.
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