July 22, 2015
SDI Reports Dip in Profits
Steel Dynamics, Inc., Fort Wayne, Ind., reported net income of $31.6 million in the second quarter, less than half the total in the same quarter of 2015 and flat with the prior quarter. For the year to date, SDI’s net income declined 43.2 percent to $62.3 million, compared with the first six months of 2014.
SDI’s net sales in the quarter totaled $2.0 billion, 3.1 percent below second-quarter 2014 and a 2.1 percent decrease from the first quarter.
"The second-quarter market environment remained extremely challenging for our steel and metals recycling operations," said CEO Mark D. Millett. "The ongoing flood of steel imports continued to pressure steel product pricing to a greater degree than the benefit realized from lower scrap costs, compressing second-quarter steel margins. However, due to continued solid U.S. steel demand, our second-quarter steel shipments improved, which offset most of the margin compression.”
Millett noted that steel pricing has stabilized recently. Consumption from the automotive, manufacturing and construction sectors should support a stronger domestic steel industry in the second half of the year, assuming import levels decline and raw material costs remain low.
"An important barometer for domestic steel consumption is the strength of the construction industry. Historically, construction has been the largest single domestic steel consuming sector, and it is continuing to strengthen this year," Millett said. "For the second quarter, our fabrication operations achieved record profitability. Strong demand has allowed for stable product pricing, while order inquiries and bookings remain robust, confirming the positive trend in the nonresidential construction market.”
While steel import levels remained high, continued strength in U.S. steel consumption resulted in increased steel and metals recycling shipments. Second-quarter operating income for the company's steel operations decreased 3 percent to $110 million due to metal spread compression, which was largely offset by a 15 percent increase in steel shipments.
The average product selling price for the company's steel operations decreased $101 to $662 per ton. The average ferrous scrap cost per ton melted decreased $57 to $255 per ton.
Second-quarter operating income from sales of sheet products decreased 15 percent compared with the previous quarter. Although flat-roll shipments increased 24 percent, margins were affected by high import volumes. Operating income from long products increased 10 percent, as construction-related and rail volumes improved.
Driven by stronger flat-roll volume, the company's steel production utilization rate recovered significantly in the second quarter to 87 percent—higher than both the average U.S. domestic steel mill utilization rate and the company's first-quarter rate of 73 percent.
SDI's metals recycling operations recorded second-quarter operating income of $12.3 million, up from a slight operating loss in the first quarter, due to increased ferrous shipments and margins as steel mill utilization improved and scrap price volatility subsided.