Oct. 28, 2015

SDI Profitable Through Challenging Quarter

Steel Dynamics, Inc., Fort Wayne, Ind., reported net income of $60.6 million in the third quarter, a decline of almost 33 percent from the same quarter in 2014, but an increase from the $53.0 million earned during the prior quarter. For the first nine months, SDI earned $123 million on sales of $6.0 billion, down from income of $202 million on sales of $6.2 billion for the same period in 2014.

"The third-quarter 2015 market environment continued to be challenging for our steel and metals recycling operations," said Mark D. Millett, CEO. "Ongoing pressure from steel imports remains high, negatively impacting steel pricing and domestic steel production, resulting in industry utilization not fully reflecting the actual strength in U.S. steel consumption. The automotive market remains strong and construction continues its steady improvement. However, customer steel inventories remain at elevated levels and, when combined with further declining scrap prices, have resulted in hesitant ordering.”

U.S. steel consumption remained steady during the third quarter resulting in relatively flat steel and metals recycling shipments for SDI. Operating income for the company's steel operations increased 25 percent to $127 million as both average steel product pricing and raw material scrap costs improved in the quarter. The average product selling price increased $3 to $665 per ton.

Third-quarter operating income from the company's sheet products increased 6 percent from the second quarter. Although the company's flat-roll shipments decreased 4 percent, improvement in the metal spread more than offset the reduced volume. Flat-roll products, specifically commodity-grade hot-roll, were the most severely impacted by high import volumes, the company said. Operating income from long products increased 21 percent due to improved SBQ shipments and other cost improvements.

Driven by weaker flat-roll volume, the company's capacity utilization rate declined to 82 percent for the third quarter. While that remains higher than the average U.S. mill, it’s lower than the company's second-quarter rate of 87 percent.

SDI’s fabrication operations achieved record profitability for the second straight quarter, demonstrating a continued strengthening of the construction industry. Through the first three quarters, shipments increased 17 percent, while profitability increased 184 percent to $56 million. "Historically, the construction industry has been the largest single domestic steel consuming sector, and it is continuing on an upward trend," said Millett.

"We believe the current elevated level of domestic supply chain inventory, combined with the continuation of excessive steel imports and typical seasonality, could further erode domestic steel industry profitability in the fourth quarter," he said. "While underlying steel demand in certain market sectors remains steady and import levels have somewhat declined, the issue of steel imports persists.”


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Monday, December 18, 2017