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Steel Dynamics Reports Third Quarter 2022 Results

STLD

FORT WAYNE, Ind., October 19, 2022 /PRNewswire/ --

Third Quarter 2022 Performance Highlights:

  • Record steel shipments of 3.2 million tons
  • Record steel fabrication operating income of $677 million and record shipments of 218,000 tons
  • Net sales of $5.7 billion, operating income of $1.2 billion, and Adjusted EBITDA of $1.3 billion
  • Record cash flow from operations of $1.5 billion
  • Share repurchases of $482 million of the company's common stock, representing 3.3 percent of its outstanding shares

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced third quarter 2022 financial results. The company reported third quarter 2022 net sales of $5.7 billion and net income of $914 million, or $5.03 per diluted share. Excluding the impact from the company's newly started Sinton Texas Flat Roll Steel Mill of $111 million, or $0.43 per diluted share, the company's third quarter 2022 adjusted net income was $992 million, or $5.46 per diluted share.

Comparatively, the company's sequential second quarter 2022 earnings were $6.44 per diluted share, and adjusted earnings were $6.73 per diluted share, excluding costs of $0.29 per diluted share, associated with startup of the company's Texas Flat Roll Steel Mill. Prior year third quarter earnings were $4.85 per diluted share and adjusted earnings were $4.96 per diluted share, excluding costs of $0.11 per diluted share, associated with construction of the company's Texas Flat Roll Steel Mill.

"The team delivered a strong performance during the quarter," said Mark D. Millett, Chairman, President, and Chief Executive Officer. "Our third quarter 2022 consolidated operating income was $1.2 billion, with adjusted EBITDA of $1.3 billion and record cash flow from operations of $1.5 billion. These results continue to display the power of our highly diversified, value-added, circular manufacturing model — as the strength in our steel fabrication operations meaningfully offset lower earnings in our flat rolled steel businesses, with realized flat rolled steel selling values declining almost 15 percent during the quarter. We achieved record quarterly steel shipments of 3.2 million tons, as a result of steady steel demand, led by the construction industry, and complemented by the automotive, industrial, and energy sectors.

"Third quarter operating income from our steel operations declined to $658 million despite record volume, due to significant metal spread compression within our flat rolled operations, while our long product metal spreads were steady to expanding," continued Millett. "Ferrous scrap pricing indices have decreased each month beginning in May and continued through October 2022, resulting in significantly lower earnings from our metals recycling operations. In contrast, our steel fabrication business achieved another record quarter, with earnings of $677 million, based on higher realized selling values, declining steel input costs, and a continued steady construction demand environment. Steel joist and deck pricing and order entry continues to be steady, supporting a historically strong order backlog and forward pricing outlook."

Third Quarter 2022 Comments

Third quarter 2022 operating income for the company's steel operations was $658 million, or 41 percent lower than sequential second quarter results, due to metal spread compression within the company's flat rolled steel operations, as lower average flat rolled steel pricing more than offset higher flat rolled steel shipments. Demand for the company's long product steel continued to be strong, supporting steady to expanded metal margins. Third quarter 2022 average external product selling price for the company's steel operations decreased $158 sequentially to $1,381 per ton. The average ferrous scrap cost per ton melted at the company's steel mills decreased $66 sequentially to $472 per ton.

Third quarter 2022 operating income from the company's metals recycling operations meaningfully declined sequentially to $10 million, as a result of lower sequential ferrous and non-ferrous scrap pricing and lower volume. The company's realized average ferrous scrap pricing declined almost 30 percent during the third quarter. The company believes scrap prices have stabilized for the remainder of the year.

The company's steel fabrication operations reported record operating income of $677 million in the third quarter 2022, 13% higher than second quarter results, due to higher selling values, lower steel input costs, and record shipments. The non-residential construction sector remains strong, as evidenced by realized product pricing and the company's order backlog extending well into the first half of 2023.

Year-to-Date September 30, 2022 Comparison

For the nine months ended September 30, 2022, net income was $3.2 billion, or $17.21 per diluted share, with net sales of $17.4 billion, as compared to net income of $2.1 billion, or $10.15 per diluted share, with net sales of $13.1 billion for the same prior year period. Excluding the impact from the company's newly started Sinton Texas Flat Roll Steel Mill of $271 million, or $1.01 per diluted share (net of capitalized interest), the company's nine-months ended September 30, 2022, adjusted net income was $3.4 billion, or $18.22 per diluted share. Similarly, adjusting for the company's Texas steel mill construction and startup costs for the same period in 2021, net income was $2.2 billion, or $10.40 per diluted share.

Net sales for the first nine months of 2022 increased 33 percent and operating income increased 51 percent to $4.3 billion, when compared to the same prior year period. Higher earnings were driven by metal spread expansion within the company's steel fabrication business, as increased product pricing and record volume, more than offset increased raw materials costs, resulting in operating income of $1.7 billion for the first nine months of 2022. Operating income from the company's steel operations for the same period was $2.9 billion. The average external selling price for the company's steel operations increased $198 to $1,491 per ton compared to prior year's same period, and the average ferrous scrap cost per ton melted at the company's steel mills increased $62 to $495 per ton.

Based on the company's differentiated business model and highly, variable cost structure, the company achieved cash flow from operations of $3.3 billion during the first nine months of 2022, representing a record performance. The company also invested $565 million in capital investments, paid cash dividends of $177 million, and repurchased $1.4 billion of its common stock representing 10 percent of its outstanding shares, while increasing liquidity to a record $3.2 billion.

Outlook

"Customer order entry activity continues to be healthy across our businesses, with expectations for seasonally moderated volume for our steel and metals recycling operations in the coming months," said Millett. "Despite weaker flat rolled steel pricing, our order activity and backlogs remain solid. We believe North American steel consumption will remain steady, and that demand for lower-carbon, U.S. produced steel products coupled with lower imports will support steel pricing. Our steel fabrication operations order backlog also remains historically high based on volume and forward pricing levels. This, in combination with our existing and recently announced expansion initiatives, are firm drivers for our continued growth in the coming years.

"Operations continue to ramp up at our Sinton Flat Roll Steel Division. The product surface quality is excellent, and grade development and dimensional tolerances have exceeded our expectations. The Sinton team has been running at a rate of 65 percent during October and achieving rates of over 80 percent for several single day periods, supporting our expectations to achieve a run rate of at least 80 percent for the full year 2023. In addition, our four additional value-added flat rolled steel coating lines comprised of two paint lines and two galvanizing lines with Galvalume® coating capability, are expected to begin operating in the second half of 2023. One set will be located onsite at Sinton, providing it with the same diversification and higher-margin product capabilities as our two existing flat rolled steel divisions. The other two lines will be placed at our Heartland Flat Roll Division to support growing coated flat rolled steel demand in the region and to further increase the diversification and cash generation capacity of our existing Midwest operations.

"We are quickly progressing on our aluminum flat rolled products mill and are incredibly excited about this meaningful growth opportunity, which is aligned with our existing business and operational expertise," said Millett. "We have intentionally grown with our customers' needs, providing efficient sustainable supply-chain solutions for the highest quality products. Thus far, this has primarily been achieved within the carbon steel industry — however, a significant number of our carbon flat rolled steel customers are also consumers and processors of aluminum flat rolled products. We are pleased to further diversify our end markets with plans to supply aluminum flat rolled products with high recycled content to the countercyclical sustainable beverage can industry, in addition to the automotive and industrial sectors. We believe our unique performance-based operating culture, coupled with our considerable experience in successfully constructing and operating cost-effective, highly profitable flat rolled steel mills, positions us exceptionally well to execute this strategic opportunity and to deliver strong long-term value creation.

"Our customers and our people are also incredibly excited for this growth opportunity. Our commitment is to the health and safety of our teams, families, and communities, while meeting the growing needs of our customers. Our culture and business model continue to positively differentiate our performance compared to others. We believe there are strong drivers for our continued growth, and we remain in a position of strength. Our planned investments in a new state-of-the-art low-carbon aluminum flat rolled mill and associated recycled aluminum slab centers continues our strategic growth, is aligned with our core steelmaking and recycling platforms, benefits many of our existing customers, and provides for future value creation. We are well-positioned for sustainable long-term growth," concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss third quarter 2022 operating and financial results on Thursday, October 20, 2022, at 11:30 a.m. Eastern Daylight Time. You may access the call and find dial-in information on the Investors section of the company's website at www.steeldynamics.com. A replay of the call will be available on our website until 11:59 p.m. Eastern Daylight Time on October 26, 2022.

About Steel Dynamics, Inc.

Steel Dynamics is one of the largest domestic steel producers and metals recyclers in the United States, based on estimated annual steelmaking and metals recycling capability, with facilities located throughout the United States, and in Mexico. Steel Dynamics produces steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant bar products, specialty steel sections and steel joists and deck. In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap.

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA, and Adjusted EBITDA, non-GAAP financial measures, provide additional meaningful information regarding the company's performance and financial strength. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA, and Adjusted EBITDA included in this release may not be comparable to similarly titled measures of other companies.

Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate","intend","believe","estimate","plan","seek","project", or "expect", or by the words "may", "will", or "should", are intended to be made as "forward-looking", subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) domestic and global economic factors; (2) global steelmaking overcapacity and imports of steel and North American aluminum flat rolled supply deficit, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as the COVID-19 pandemic; (4) the cyclical nature of the steel industry and the industries we serve; (5) volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes, and our potential inability to pass higher costs on to our customers; (6)cost and availability of electricity, natural gas, oil, or other energy resources are subject to volatile market conditions; (7) increased environmental, greenhouse gas emissions and sustainability considerations or regulations; (8)compliance with and changes in environmental and remediation requirements; (9)significant price and other forms of competition from other steel and aluminum producers, scrap processors and alternative materials; (10)availability of an adequate source of supply of scrap for our metals recycling operations; (11)cybersecurity threats and risks to the security of our sensitive data and information technology; (12) the implementation of our growth strategy; (13) litigation and legal compliance; (14) unexpected equipment downtime or shutdowns; (15) governmental agencies may refuse to grant or renew some of our licenses and permits; (16) our senior unsecured credit facility contains, and any future financing agreements may contain, restrictive covenants that may limit our flexibility; (17) the impacts of impairment charges; (18) unanticipated difficulties in integrating or starting up new assets; and (19) risks and uncertainties involving product and/or technology development.

More specifically, refer to Steel Dynamics' more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, in our quarterly reports on Form 10-Q, or in other reports which we file with the Securities and Exchange Commission. These are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on the Steel Dynamics website, www.steeldynamics.com under "Investors — SEC Filings".

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)



















Three Months Ended


Nine Months Ended


Three Months



September 30,


September 30,


Ended



2022


2021


2022


2021


June 30, 2022

















Net sales


$

5,651,707


$

5,088,288


$

17,434,487


$

13,098,193


$

6,212,878

Costs of goods sold



4,187,278



3,487,659



12,304,203



9,497,606



4,329,536

Gross profit



1,464,429



1,600,629



5,130,284



3,600,587



1,883,342

















Selling, general and administrative expenses



132,627



157,526



403,019



461,686



118,377

Profit sharing



105,122



113,880



373,333



244,868



139,742

Amortization of intangible assets



6,836



7,178



21,158



22,054



7,160

Operating income



1,219,844



1,322,045



4,332,774



2,871,979



1,618,063

















Interest expense, net of capitalized interest



25,347



12,704



67,683



44,871



25,667

Other expense (income), net



(13,975)



6,776



2,472



26,886



(4,021)

Income before income taxes



1,208,472



1,302,565



4,262,619



2,800,222



1,596,417

















Income tax expense



289,997



302,406



1,022,138



649,105



381,765

Net income



918,475



1,000,159



3,240,481



2,151,117



1,214,652

Net income attributable to noncontrolling interests



(4,150)



(9,396)



(12,671)



(27,556)



(5,098)

Net income attributable to Steel Dynamics, Inc.


$

914,325


$

990,763


$

3,227,810


$

2,123,561


$

1,209,554

































Basic earnings per share attributable to
















Steel Dynamics, Inc. stockholders


$

5.07


$

4.89


$

17.33


$

10.22


$

6.49

















Weighted average common shares outstanding



180,264



202,450



186,288



207,704



186,442

















Diluted earnings per share attributable to
















Steel Dynamics, Inc. stockholders, including the
















effect of assumed conversions when dilutive


$

5.03


$

4.85


$

17.21


$

10.15


$

6.44

















Weighted average common shares
















and share equivalents outstanding



181,613



204,167



187,531



209,222



187,740

































Dividends declared per share


$

0.34


$

0.26


$

1.02


$

0.78


$

0.34

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)









September 30,



December 31,

Assets

2022



2021


(unaudited)





Current assets







Cash and equivalents

$

1,420,497



$

1,243,868

Short-term investments


583,211




-

Accounts receivable, net


2,333,994




1,916,434

Inventories


3,376,532




3,531,130

Other current assets


99,210




209,591

Total current assets


7,813,444




6,901,023








Property, plant and equipment, net


5,146,606




4,751,430








Intangible assets, net


276,586




295,345








Goodwill


451,594




453,835








Other assets


359,468




129,601

Total assets

$

14,047,698



$

12,531,234

Liabilities and Equity







Current liabilities







Accounts payable

$

1,165,147



$

1,280,555

Income taxes payable


41,121




13,746

Accrued expenses


902,177




835,894

Current maturities of long-term debt


22,951




97,174

Total current liabilities


2,131,396




2,227,369








Long-term debt


3,012,120




3,008,702








Deferred income taxes


856,650




854,905








Other liabilities


112,327




120,087

Total liabilities


6,112,493




6,211,063








Commitments and contingencies














Redeemable noncontrolling interests


172,403




211,414








Equity







Common stock


649




649

Treasury stock, at cost


(4,046,555)




(2,674,267)

Additional paid-in capital


1,219,947




1,218,933

Retained earnings


10,799,863




7,761,417

Accumulated other comprehensive income


(2,748)




(2,091)

Total Steel Dynamics, Inc. equity


7,971,156




6,304,641

Noncontrolling interests


(208,354)




(195,884)

Total equity


7,762,802




6,108,757

Total liabilities and equity

$

14,047,698



$

12,531,234

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)














Three Months Ended


Nine Months Ended


September 30,


September 30,


2022


2021


2022


2021













Operating activities:












Net income

$

918,475


$

1,000,159


$

3,240,481


$

2,151,117













Adjustments to reconcile net income to net cash provided by












operating activities:












Depreciation and amortization


98,714



87,407



281,961



261,373

Equity-based compensation


12,093



9,917



39,681



36,765

Deferred income taxes


3,990



71,008



3,986



188,474

Other adjustments


(12,409)



(781)



(1,892)



(2,915)

Changes in certain assets and liabilities:












Accounts receivable


326,731



(321,771)



(417,550)



(920,877)

Inventories


270,628



(412,952)



154,391



(1,052,475)

Other assets


(15,789)



(20,361)



(9,274)



(18,818)

Accounts payable


(264,313)



48,726



(152,763)



472,562

Income taxes receivable/payable


8,269



(353)



146,822



86,791

Accrued expenses


149,766



169,817



31,132



278,240

Net cash provided by operating activities


1,496,155



630,816



3,316,975



1,480,237













Investing activities:












Purchases of property, plant and equipment


(241,229)



(214,629)



(564,701)



(801,698)

Purchases of short-term investments


(283,188)



-



(634,698)



-

Proceeds from maturities of short-term investments


49,794



-



49,794



-

Acquisition of business, net of cash and restricted cash acquired


(47,638)



-



(47,638)



-

Investments in unconsolidated affiliates


-



-



(222,480)



-

Other investing activities


4,113



1,024



9,340



3,273

Net cash used in investing activities


(518,148)



(213,605)



(1,410,383)



(798,425)













Financing activities:












Issuance of current and long-term debt


348,286



343,007



1,050,933



1,059,912

Repayment of current and long-term debt


(363,060)



(382,489)



(1,127,051)



(1,095,338)

Dividends paid


(62,088)



(53,380)



(177,131)



(161,025)

Purchase of treasury stock


(481,676)



(337,616)



(1,387,890)



(730,814)

Other financing activities


(6,057)



(4,776)



(88,825)



(27,468)

Net cash used in financing activities


(564,595)



(435,254)



(1,729,964)



(954,733)













Increase (decrease) in cash, cash equivalents, and restricted cash


413,412



(18,043)



176,628



(272,921)

Cash, cash equivalents, and restricted cash at beginning of period


1,012,585



1,119,244



1,249,369



1,374,122

Cash, cash equivalents, and restricted cash at end of period

$

1,425,997


$

1,101,201


$

1,425,997


$

1,101,201

























Supplemental disclosure information:












Cash paid for interest

$

9,214


$

9,174


$

59,496


$

62,216

Cash paid for income taxes, net

$

276,948


$

222,691


$

867,350


$

370,835

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

(dollars in thousands)
























Third Quarter


Year to Date











2022



2021



2022



2021



1Q 2022



2Q 2022

External Net Sales




















Steel



$

3,720,826


$

3,667,718


$

11,625,343


$

9,412,921


$

3,762,496


$

4,142,021

Steel Fabrication




1,140,273



493,804



3,156,007



1,081,641



929,981



1,085,753

Metals Recycling




472,065



587,091



1,701,426



1,632,798



579,625



649,736

Other




318,543



339,675



951,711



970,833



297,800



335,368

Consolidated Net Sales



$

5,651,707


$

5,088,288


$

17,434,487


$

13,098,193


$

5,569,902


$

6,212,878

Operating Income




















Steel



$

658,264


$

1,350,736


$

2,931,868


$

3,009,199


$

1,166,945


$

1,106,659

Steel Fabrication




676,767



89,430



1,742,915



127,775



466,916



599,232

Metals Recycling




9,918



46,985



115,693



151,883



48,146



57,629





1,344,949



1,487,151



4,790,476



3,288,857



1,682,007



1,763,520





















Non-cash amortization of intangible assets




(6,836)



(7,178)



(21,158)



(22,054)



(7,162)



(7,160)

Profit sharing expense




(105,122)



(113,880)



(373,333)



(244,868)



(128,469)



(139,742)

Non-segment operations




(13,147)



(44,048)



(63,211)



(149,956)



(51,509)



1,445

Consolidated Operating Income



$

1,219,844


$

1,322,045


$

4,332,774


$

2,871,979


$

1,494,867


$

1,618,063





















Adjusted EBITDA




















Net income



$

918,475


$

1,000,159


$

3,240,481


$

2,151,117


$

1,107,354


$

1,214,652

Income taxes




289,997



302,406



1,022,138



649,105



350,376



381,765

Net interest expense




16,902



12,434



57,116



43,853



16,055



24,159

Depreciation




90,278



78,631



256,011



234,534



78,790



86,943

Amortization of intangible assets




6,836



7,178



21,158



22,054



7,162



7,160

Noncontrolling interest (a)




(4,806)



(9,928)



(13,534)



(28,015)



(3,272)



(5,456)

EBITDA




1,317,682



1,390,880



4,583,370



3,072,648



1,556,465



1,709,223

Non-cash adjustments




















Unrealized (gains) losses




6,053



6,355



(7,648)



808



300



(14,001)

Inventory valuation




7,696



141



28,149



394



11,125



9,328

Equity-based compensation




14,518



9,917



39,794



29,935



19,794



5,482

Adjusted EBITDA



$

1,345,949


$

1,407,293


$

4,643,665


$

3,103,785


$

1,587,684


$

1,710,032

Other Operating Information




















Steel




















Average external sales price (Per ton) (b)



$

1,381


$

1,550


$

1,491


$

1,293


$

1,561


$

1,539

Average ferrous cost (Per ton melted) (c)



$

472


$

489


$

495


$

433


$

474


$

538





















Flat Roll shipments




















Butler, Columbus, and Sinton Flat Roll divisions




1,766,726



1,442,783



5,009,403



4,451,844



1,551,845



1,690,832

Steel Processing divisions (d)




425,304



415,254



1,269,658



1,248,700



411,653



432,701

Long Product shipments




















Structural and Rail Division




477,305



497,016



1,457,296



1,472,782



466,821



513,170

Engineered Bar Products Division




234,993



204,429



688,339



610,262



226,053



227,293

Roanoke Bar Division




161,832



151,751



463,103



463,561



143,619



157,652

Steel of West Virginia




88,697



92,338



276,131



269,972



94,837



92,597

Total Shipments (Tons)




3,154,857



2,803,571



9,163,930



8,517,121



2,894,828



3,114,245





















External Shipments (Tons) (b)




2,694,709



2,366,928



7,796,390



7,281,752



2,409,763



2,691,918





















Steel Mill Production (Tons)




2,793,463



2,528,480



8,039,107



7,448,733



2,508,184



2,737,460

Metals Recycling




















Nonferrous shipments (000's of pounds)




257,710



271,325



785,381



818,993



260,890



266,781

Ferrous shipments (Gross tons)




1,320,117



1,371,126



3,944,068



4,167,416



1,265,222



1,358,729

External ferrous shipments (Gross tons)




423,184



475,567



1,298,413



1,433,475



437,228



438,001

Steel Fabrication




















Average sales price (Per ton)



$

5,245


$

2,339


$

4,896


$

1,855


$

4,424


$

5,001

Shipments (Tons)




218,441



211,197



646,685



584,621



210,237



218,007





















(a) Net of income tax expense (benefit) on noncontrolling interests.













(b) Represents all steel operations













(c) Represents ferrous cost per ton melted at our electric arc furnace steel mills













(d) Includes Heartland, The Techs, and United Steel Supply operations













Cision View original content:https://www.prnewswire.com/news-releases/steel-dynamics-reports-third-quarter-2022-results-301654042.html

SOURCE Steel Dynamics, Inc.

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