Decreased Flat-Rolled Earnings Limit SDI’s Third Quarter
Steel Dynamics Inc., Fort Wayne, Ind., reported income of $43 million on net sales of $2.0 billion in third-quarter 2011. These figures represent an increase from 2010, but a slight decline from the previous quarter.
SDI’s net income was up more than 200 percent from the $19 million reported in last year’s third quarter, while net sales improved 25 percent. But income was down more than 40 percent and sales were off 5 percent from second-quarter 2011.
Through the first nine months of this year, SDI saw net sales of $6.1 billion, up 27 percent from 2010. Net income through three quarters totaled $247.9 million, an increase of 86.2 percent from last year.
SDI’s third-quarter 2011 steel shipments totaled 1.5 million tons, 12 percent higher than the third quarter of 2010 and 1 percent higher than the second quarter of 2011. The average external steel selling price for the third quarter was up $115 per ton shipped, to $897, compared to the same period in 2011, but down $50 per ton compared to the previous quarter.
Based on the tons of scrap melted at SDI’s five mills, the third quarter’s average ferrous scrap cost per ton was up $79 compared to the year-ago quarter and $5 compared to the previous quarter.
“Quarter over quarter, operating income was significantly impacted by decreased flat-rolled earnings,” said Keith Busse, chairman and CEO. “Despite relatively unchanged volumes, earnings from our Flat-Rolled operations declined 60 percent in the third quarter as declines in pricing were matched with increased raw material costs, resulting in significant margin compression.”
SDI’s mills operated at 93 percent capacity during the quarter. The average flat-rolled selling price per ton shipped decreased $95. Company officials believe that with fairly consistent orders, flat-rolled pricing has reached the bottom in the current cycle.
Business at SDI’s Engineered Bar Products Division remains strong, Busse said. The mill’s production of 167,000 tons in the third quarter was at a rate exceeding its theoretical annual capacity of 625,000 tons. During the third quarter, the company’s Structural and Rail Division achieved a 50 percent utilization rate, its highest production rate since the recession lows of 2009. Third-quarter operating losses for the fabrication segment narrowed to $250,000, as compared to $500,000 in the third quarter of 2010, and $1.6 million in the second quarter of 2011l, he added.
“Looking ahead to the fourth quarter, we believe the economic climate will remain challenging in light of decreased consumer confidence, the uncertain domestic political landscape and the European debt crisis,” Busse concluded. “To a large degree these elements are out of our control; however, we remain confident that with our low-cost manufacturing structure, exceptional employee base and superior operating culture, we are prepared to capitalize on all opportunities presented.”