FORT WAYNE, Ind., April 19, 2023 /PRNewswire/ --
First Quarter 2023 Performance Highlights:
- Record steel shipments of 3.3 million tons
- Net sales of $4.9 billion, operating income of $835 million, and adjusted EBITDA of $950 million
- Strong cash flow from operations of $734 million
- Share repurchases of $354 million of the company's common stock, representing 1.7 percent of its outstanding shares
- First quarter 2023 cash dividend increase of 25 percent
Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced first quarter 2023 financial results. The company reported first quarter 2023 net sales of $4.9 billion and net income of $637 million, or $3.70 per diluted share. Excluding the impact from the company's newly started Sinton Texas Flat Roll Steel Mill of $77 million, or $0.31 per diluted share, the company's first quarter 2023 adjusted net income was $691 million, or $4.01 per diluted share.
Comparatively, the company's sequential fourth quarter 2022 earnings were $3.61 per diluted share, and adjusted earnings were $4.37 per diluted share, excluding additional performance-based companywide special compensation of approximately $0.09 per diluted share (awarded to all non-executive, eligible team members in recognition of the company's exceptional annual performance) and costs of $0.67 per diluted share associated with startup of the company's Texas Flat Roll Steel Mill. Prior year first quarter earnings were $5.71 per diluted share and adjusted earnings were $6.02 per diluted share, excluding costs of $0.31 per diluted share, associated with construction and startup of the company's Texas Flat Roll Steel Mill.
"The team executed well and delivered a strong first quarter performance from all of our operating platforms," said Mark D. Millett, Chairman and Chief Executive Officer. "Our first quarter 2023 operating income was $835 million, with adjusted EBITDA of $950 million . The sequential improvement in earnings was driven by our steel and metals recycling businesses and supported by continued strong results from our steel fabrication operations. Across the company, our teams achieved best-in-class performance, while keeping each other safe and further improving safety performance.
"First quarter operating income from our steel operations was $345 million, almost double fourth quarter sequential results, due to record shipments more than offsetting metal spread compression related to lower realized selling values. Steel pricing has since strengthened, and steel producer lead times have extended as steel demand is strong. The automotive, non-residential construction, energy, and industrial sectors continue to lead demand. Operating income from our metals recycling platform increased over threefold compared to sequential results, as demand from the domestic steel industry strengthened, resulting in higher scrap pricing and shipments. First quarter 2023 earnings from our steel fabrication operations remained historically very strong, but lower than record fourth quarter results based on seasonally lower shipments combined with customer supply-chain constraints. Extending steel fabricator project logs and lack of sufficient construction materials and skilled labor have resulted in some projects being delayed to later this year. The non-residential construction sector remains strong, as further evidenced by a solid order backlog extending into the fourth quarter of 2023, combined with robust forward-pricing. In addition, the continued onshoring of manufacturing, coupled with the robust U.S. infrastructure program and industrial build-outs, supports strong demand for 2023 and beyond.
"We also achieved strong cash flow from operations of $734 million in the first quarter 2023, while at the same time increasing shareholder distributions and investing in growth," continued Millett. "In February, we increased our quarterly cash dividend by 25 percent, reflecting our confidence in the consistency and strength of our cash generation capabilities, in alignment with the execution of our transformational growth initiatives."
First Quarter 2023 Comments
First quarter 2023 operating income for the company's steel operations was $345 million, or 93 percent higher than sequential fourth quarter results, due to increased demand resulting in record first quarter steel shipments of 3.3 million tons, partially offset by metal spread compression resulting from lower realized selling values associated with lagging indexed-contracts within the flat rolled operations. Metal spread compression was amplified by an estimated $50 million in the first quarter 2023, due to higher raw material costs, as the company's steel operations worked through the remaining higher priced pig iron ordered in early 2022 in reaction to the Ukraine and Russia supply-chain disruptions. The first quarter 2023 average external product selling price for the company's steel operations decreased $44 sequentially to $1,080 per ton. The average ferrous scrap cost per ton melted at the company's steel mills decreased $1 sequentially to $413 per ton. Operations continue to ramp at the company's Sinton Flat Roll Steel Division, and the company estimates 2023 shipments to represent close to 80 percent of the plant's annual capacity.
First quarter operating income from the company's metals recycling operations increased significantly to $43 million, based on increased demand supporting higher volumes and product pricing for both ferrous and nonferrous materials. Domestic steel production utilization increased from 73 percent in the sequential fourth quarter to 75 percent in the first quarter 2023.
The company's steel fabrication operations achieved historically very strong operating income of $551 million in the first quarter 2023, but below record fourth quarter results, based on seasonally lower shipments coupled with steady metal spread. The non-residential construction sector remains strong, as order entry significantly improved in the first quarter from seasonally lower activity in the second half of 2022, resulting in a strong order backlog that reaches into the fourth quarter of 2023 with strong forward-pricing.
Based on the company's differentiated business model and highly variable cost structure, the company generated cash flow from operations of $734 million during the quarter, despite being reduced by $422 million due to the company's annual March payout of its companywide profit-sharing program based on the company's record 2022 pretax income. The company also invested $226 million in capital investments, paid cash dividends of $59 million, and repurchased $354 million of its outstanding common stock, representing 1.7 percent of its outstanding shares, while achieving record liquidity of $3.5 billion as of March 31, 2023 .
Outlook
"We remain confident that market conditions are in place for domestic steel consumption to be solid," said Millett. "Order entry activity continues to be strong across all of our businesses. We believe North American steel consumption will increase in 2023, and that demand for lower-carbon emission, U.S. produced steel products coupled with lower imports will support steel pricing. We believe the automotive, non-residential construction, and energy sectors will remain solid steel consumers this year. Our steel fabrication operations order backlog remains elevated with strong forward pricing levels. The combination of robust order activity and broad customer optimism supports strong overall demand dynamics for the construction industry. This environment, in combination with our existing and recently announced expansion initiatives, are firm drivers for our continued growth in the coming years.
"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. "The team has placed orders for critical equipment, and the rolling mill site location in Columbus, Mississippi is exceptional. 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 steel industry - however, a significant number of our 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 current and future needs of our customers. Our culture and business model continue to positively differentiate our performance from the rest of the industry. We are competitively positioned and focused to generate long-term sustainable value," concluded Millett.
Conference Call and Webcast
Steel Dynamics, Inc. will hold a conference call to discuss first quarter 2023 operating and financial results on Thursday, April 20, 2023, at 10:00 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 April 27, 2023 .
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, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as COVID-19 or its variants; (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 supplies, 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; and (17) the impacts of impairment charges.
More specifically, we refer you to our 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 reports are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on our 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 | Three Months | ||||||||
March 31, | Ended | ||||||||
2023 | 2022 | Dec. 31, 2022 | |||||||
Net sales | $ | 4,893,206 | $ | 5,569,902 | $ | 4,826,287 | |||
Costs of goods sold | 3,837,084 | 3,787,389 | 3,838,740 | ||||||
Gross profit | 1,056,122 | 1,782,513 | 987,547 | ||||||
Selling, general and administrative expenses | 144,309 | 152,015 | 142,602 | ||||||
Profit sharing | 69,575 | 128,469 | 79,218 | ||||||
Amortization of intangible assets | 6,878 | 7,162 | 6,679 | ||||||
Operating income | 835,360 | 1,494,867 | 759,048 | ||||||
Interest expense, net of capitalized interest | 22,507 | 16,669 | 23,855 | ||||||
Other expense (income), net | (34,936) | 20,468 | (23,257) | ||||||
Income before income taxes | 847,789 | 1,457,730 | 758,450 | ||||||
Income tax expense | 203,456 | 350,376 | 119,439 | ||||||
Net income | 644,333 | 1,107,354 | 639,011 | ||||||
Net income attributable to noncontrolling interests | (7,023) | (3,423) | (4,147) | ||||||
Net income attributable to Steel Dynamics, Inc. | $ | 637,310 | $ | 1,103,931 | $ | 634,864 | |||
Basic earnings per share attributable to | |||||||||
Steel Dynamics, Inc. stockholders | $ | 3.71 | $ | 5.74 | $ | 3.63 | |||
Weighted average common shares outstanding | 171,597 | 192,158 | 174,706 | ||||||
Diluted earnings per share attributable to | |||||||||
Steel Dynamics, Inc. stockholders, including the | |||||||||
effect of assumed conversions when dilutive | $ | 3.70 | $ | 5.71 | $ | 3.61 | |||
Weighted average common shares | |||||||||
and share equivalents outstanding | 172,479 | 193,241 | 175,892 | ||||||
Dividends declared per share | $ | 0.425 | $ | 0.34 | $ | 0.34 | |||
Steel Dynamics, Inc. CONSOLIDATED BALANCE SHEETS (in thousands) | ||||||
March 31, | December 31, | |||||
Assets | 2023 | 2022 | ||||
(unaudited) | ||||||
Current assets | ||||||
Cash and equivalents | $ | 1,604,943 | $ | 1,628,417 | ||
Short-term investments | 714,769 | 628,215 | ||||
Accounts receivable, net | 2,126,974 | 2,056,051 | ||||
Inventories | 2,988,852 | 3,129,964 | ||||
Other current assets | 127,022 | 195,371 | ||||
Total current assets | 7,562,560 | 7,638,018 | ||||
Property, plant and equipment, net | 5,491,201 | 5,373,665 | ||||
Intangible assets, net | 260,629 | 267,507 | ||||
Goodwill | 502,067 | 502,067 | ||||
Other assets | 403,303 | 378,727 | ||||
Total assets | $ | 14,219,760 | $ | 14,159,984 | ||
Liabilities and Equity | ||||||
Current liabilities | ||||||
Accounts payable | $ | 1,138,966 | $ | 1,017,238 | ||
Income taxes payable | 129,082 | 6,520 | ||||
Accrued expenses | 506,046 | 951,204 | ||||
Current maturities of long-term debt | 46,452 | 57,334 | ||||
Total current liabilities | 1,820,546 | 2,032,296 | ||||
Long-term debt | 3,014,358 | 3,013,241 | ||||
Deferred income taxes | 898,112 | 889,103 | ||||
Other liabilities | 180,321 | 129,539 | ||||
Total liabilities | 5,913,337 | 6,064,179 | ||||
Commitments and contingencies | ||||||
Redeemable noncontrolling interests | 186,205 | 181,503 | ||||
Equity | ||||||
Common stock | 650 | 650 | ||||
Treasury stock, at cost | (4,800,513) | (4,459,513) | ||||
Additional paid-in capital | 1,194,079 | 1,212,566 | ||||
Retained earnings | 11,940,621 | 11,375,765 | ||||
Accumulated other comprehensive income | 1,800 | 889 | ||||
Total Steel Dynamics, Inc. equity | 8,336,637 | 8,130,357 | ||||
Noncontrolling interests | (216,419) | (216,055) | ||||
Total equity | 8,120,218 | 7,914,302 | ||||
Total liabilities and equity | $ | 14,219,760 | $ | 14,159,984 | ||
Steel Dynamics, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) | |||||
Three Months Ended | |||||
March 31, | |||||
2023 | 2022 | ||||
Operating activities: | |||||
Net income | $ | 644,333 | $ | 1,107,354 | |
Adjustments to reconcile net income to net cash provided by | |||||
operating activities: | |||||
Depreciation and amortization | 107,694 | 87,546 | |||
Equity-based compensation | 16,078 | 16,519 | |||
Deferred income taxes | 9,008 | 2,632 | |||
Other adjustments | (10,006) | 11,157 | |||
Changes in certain assets and liabilities: | |||||
Accounts receivable | (70,922) | (447,234) | |||
Inventories | 141,112 | 14,315 | |||
Other assets | 7,842 | 19,402 | |||
Accounts payable | 117,312 | (75,971) | |||
Income taxes receivable/payable | 189,247 | 341,905 | |||
Accrued expenses | (417,915) | (258,657) | |||
Net cash provided by operating activities | 733,783 | 818,968 | |||
Investing activities: | |||||
Purchases of property, plant and equipment | (226,319) | (159,330) | |||
Purchases of short-term investments | (356,777) | - | |||
Proceeds from maturities of short-term investments | 271,107 | - | |||
Investments in unconsolidated affiliates | - | (222,480) | |||
Other investing activities | 2,343 | 410 | |||
Net cash used in investing activities | (309,646) | (381,400) | |||
Financing activities: | |||||
Issuance of current and long-term debt | 393,910 | 319,779 | |||
Repayment of current and long-term debt | (405,279) | (349,272) | |||
Dividends paid | (58,798) | (50,699) | |||
Purchase of treasury stock | (353,997) | (389,190) | |||
Other financing activities | (23,449) | (22,527) | |||
Net cash used in financing activities | (447,613) | (491,909) | |||
Decrease in cash, cash equivalents, and restricted cash | (23,476) | (54,341) | |||
Cash, cash equivalents, and restricted cash at beginning of period | 1,633,919 | 1,249,369 | |||
Cash, cash equivalents, and restricted cash at end of period | $ | 1,610,443 | $ | 1,195,028 | |
Supplemental disclosure information: | |||||
Cash paid for interest | $ | 9,596 | $ | 9,168 | |
Cash paid for income taxes, net | $ | 4,703 | $ | 9,948 | |
Steel Dynamics, Inc. SUPPLEMENTAL INFORMATION (dollars in thousands) | ||||||||||
First Quarter | ||||||||||
2023 | 2022 | Q4 2022 | ||||||||
External Net Sales | ||||||||||
Steel | $ | 3,060,821 | $ | 3,762,496 | $ | 2,937,034 | ||||
Steel Fabrication | 868,768 | 929,981 | 1,089,979 | |||||||
Metals Recycling | 583,468 | 579,625 | 463,282 | |||||||
Other | 380,149 | 297,800 | 335,992 | |||||||
Consolidated Net Sales | $ | 4,893,206 | $ | 5,569,902 | $ | 4,826,287 | ||||
Operating Income | ||||||||||
Steel | $ | 345,356 | $ | 1,166,945 | $ | 178,487 | ||||
Steel Fabrication | 551,313 | 466,916 | 681,904 | |||||||
Metals Recycling | 42,930 | 48,146 | 14,240 | |||||||
939,599 | 1,682,007 | 874,631 | ||||||||
Non-cash amortization of intangible assets | (6,878) | (7,162) | (6,679) | |||||||
Profit sharing expense | (69,575) | (128,469) | (79,218) | |||||||
Non-segment operations | (27,786) | (51,509) | (29,686) | |||||||
Consolidated Operating Income | $ | 835,360 | $ | 1,494,867 | $ | 759,048 | ||||
Adjusted EBITDA | ||||||||||
Net income | $ | 644,333 | $ | 1,107,354 | $ | 639,011 | ||||
Income taxes | 203,456 | 350,376 | 119,439 | |||||||
Net interest expense (income) | (3,470) | 16,055 | 5,032 | |||||||
Depreciation | 99,210 | 78,790 | 93,960 | |||||||
Amortization of intangible assets | 6,878 | 7,162 | 6,679 | |||||||
Noncontrolling interest (a) | (8,649) | (3,272) | (4,839) | |||||||
EBITDA | 941,758 | 1,556,465 | 859,282 | |||||||
Non-cash adjustments | ||||||||||
Unrealized (gains) losses | (8,142) | 300 | 8,361 | |||||||
Inventory valuation | 2,191 | 11,125 | 9,143 | |||||||
Equity-based compensation | 13,877 | 19,794 | 29,425 | |||||||
Adjusted EBITDA | $ | 949,684 | $ | 1,587,684 | $ | 906,211 | ||||
Other Operating Information | ||||||||||
Steel | ||||||||||
Average external sales price (Per ton) (b) | $ | 1,080 | $ | 1,561 | $ | 1,124 | ||||
Average ferrous cost (Per ton melted) (c) | $ | 413 | $ | 474 | $ | 414 | ||||
Flat Roll shipments | ||||||||||
Butler, Columbus, and Sinton | 1,893,940 | 1,551,845 | 1,761,738 | |||||||
Steel Processing divisions (d) | 435,602 | 411,653 | 404,309 | |||||||
Long Product shipments | ||||||||||
Structural and Rail Division | 495,551 | 466,821 | 408,109 | |||||||
Engineered Bar Products Division | 231,723 | 226,053 | 206,035 | |||||||
Roanoke Bar Division | 157,024 | 143,619 | 126,346 | |||||||
Steel of West Virginia | 95,456 | 94,837 | 87,701 | |||||||
Total Shipments (Tons) | 3,309,296 | 2,894,828 | 2,994,238 | |||||||
External Shipments (Tons) (b) | 2,833,469 | 2,409,763 | 2,614,079 | |||||||
Steel Mill Production (Tons) | 2,939,032 | 2,508,184 | 2,681,597 | |||||||
Metals Recycling | ||||||||||
Nonferrous shipments (000's of pounds) | 285,837 | 260,890 | 268,471 | |||||||
Ferrous shipments (Gross tons) | 1,452,821 | 1,265,222 | 1,357,706 | |||||||
External ferrous shipments (Gross tons) | 567,403 | 437,228 | 527,699 | |||||||
Steel Fabrication | ||||||||||
Average sales price (Per ton) | $ | 5,021 | $ | 4,424 | $ | 5,222 | ||||
Shipments (Tons) | 173,021 | 210,237 | 208,956 | |||||||
(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 | ||||||||||
SOURCE Steel Dynamics, Inc.
