NUE
#Thanks <UNK>
Nucor reported third quarter of 2017 earnings of $0.83 per diluted share
Nucor's third quarter performance represents a decrease compared to second quarter of 2017 earnings of $1 per diluted share and year ago third quarter earnings of $0.95 per diluted share
Our earnings for the first nine months of 2017 of $2.94 per diluted share compared to $1.99 per share for the first nine months of 2016. The first nine months of 2017 earnings actually exceed annual earnings achieved every year since 2008, a cyclical peak year
Nucor's disciplined strategy for profitable growth is working
During the steel industry's protracted downturn, we have invested aggressively to increase our capabilities for delivering value to our customers and profitable growth for our shareholders
We're achieving these improved results when large parts of our business including rebar, merchant bar, special bar quality steel, plate steel, structural steel, and DRI are operating well below peak performance
Our team is encouraged but not satisfied by the initial returns we have realized this year
Compared to second quarter 2017, our third quarter earnings decline were largely reflected lower capacity utilization rates and metal margins at our steel mills segment, as well as the impact of an unplanned outage at our Louisiana direct reduced iron ore DRI plant
The facility stopped production in late July, and resumed operations in early October
Third quarter earnings before income taxes and noncontrolling interests in the raw material segment declined approximately $56 million compared to the second quarter
The vast majority of this decline was driven by the unplanned outage at Nucor Steel Louisiana, the last of the majority of the third quarter
The profitability of our steel products segment improved in the third quarter from the second quarter
Our comment about our tax rate as it can be confusing due to the impact of profits from noncontrolling interests
Excluding profits belonging to our business partners, the effective tax rate was 29.3% for the third quarter and 32.1% for year-to-date 2017. Third quarter of 2017 results included a benefit totaling $0.04 per diluted share related to tax return true-ups and state tax credits
This benefit was incorporated in our guidance issued in mid-September
Nucor's financial position remains strong
With total debt outstanding of $4.4 billion our gross debt to capital ratio was 33% at the end of the third quarter
Cash and short-term investments totaled over $1.6 billion
Nucor's strong liquidity position also includes our $1.5 billion unsecured revolving credit facility which remains undrawn
The facility does not mature until April 2021. For 2017 we estimate capital spending of approximately $500 million and depreciation and amortization of about $730 million
During the third quarter of 2017, Nucor repurchased 1,591,000 shares of its common stock at a cost of about $90 million or just under $57 per share
Nucor's capital allocation priorities are clear and they have been consistently practiced over many years
Our first priority is to invest for profitable long-term growth
Nucor's growth investment strategy is simple and flexible
We are leveraging our five drivers to profitable growth
Our second priority is to pay cash dividends consistent with our success in delivering long-term earnings growth
Nucor has increased its space dividend for 44 consecutive years
We believe that record is strong evidence of both the sustainability of our business and our disciplined approach to capital allocation
Our third priority is to opportunistically repurchase our stock when our cash position is strong and our shares are attractively priced
From 2004 to the just completed quarter, Nucor has cumulatively returned $8.3 billion to our shareholders via regular dividends, supplemental dividends and share repurchases
These returns to shareholders represent approximately 39% of Nucor's cash from operations generated over that period
We are confident that Nucor's significant competitive advantages, highly adaptable business model, and proven strategies will allow our team to continue to deliver profitable long-term growth and attractive returns to Nucor's shareholders
Approaching the end of 2017, we are encouraged by number of positive factors impacting our markets going into 2018. We see generally stable or improving conditions for our most important end markets including nonresidential construction, automotive, energy, heavy equipment and agriculture
Although illegally traded imports remain at unacceptable levels, we are encouraged by the cumulative benefits of the U.S
steel industry's successful trade cases
We expect fourth quarter earnings to be similar to slightly decreased from the third quarter exclusive of the previously mentioned tax benefit recognized in the third quarter
The raw materials segment's performance should improve significantly driven by more consistent DRI production
The steel products segment is likely to benefit from margin improvement
The steel mills segment will see some decline largely due to weakness in plate and typical seasonality
Thank you for your interest in our company
<UNK>?
Let me start by saying that we do not buy our electrodes on spot markets
We have long established contractual relationship with our suppliers and as a result we feel pretty good about our position
First, the most important thing we think a look at it as our availability, we make sure that we do have electrodes and we have right now we think our inventory will get us through the first quarter of next year, so we're feeling very confident about that and we have letters of intent from our suppliers to be able to supply us with electrodes for the rest of 2018. So for us supply is really not an issue and because of the contractual arrangements - all the hype that you’re reading about the spot price increases really doesn’t pertain to us and we have pricing through the first half of next year
And we expect to see increases in the second half of next year in pricing but again availability is really not an issue for us
We buy, we buy almost all of our electrodes domestically and well rather, let me rephrase that we buy none of them from China
And so we don’t see any issue with the Chinese issue of supply
The other thing that I would point out that gives me quite a little bit of advantage on this is our DRI usage
Through our DRI we’re able to accomplish what we call single charging and that reduces our power on times that our EAF - and reduces this is the energy consumption that we have as well as the electrode consumption by about 10% which is pretty significant
And a result of us not requiring us to swing the roof off as a result of using the DRI and the feeding of the DRI through the roof of a furnace
So all those reasons we feel pretty good about where we are both on availability and where we are on pricing and frankly our position on terms of consumption of electrodes as a result of our DRI usage
Since we pack on plate, I might just make an additional comment that when I look at the work we’re doing on grades at our Tuscaloosa facility, as well as our Hertford facility we are now qualified and in some cases in the process of being qualified to be able to supply most of the plates that goes into the large pipe and transmission lines and that's very exciting
One more point on this because I hear this all the time about the U.S
industry as a whole and that is that we’re not able to produce all of the products necessary to appease the tight market in the United States
While Nucor cannot supply all the grades, they’re all available within the U.S
market and there is no reason therefore to have any exceptions on the trade cases relative to pipe
So now while we move on to your final question was on Louisiana, okay and I’ll make some comments on that and Jim you can jump in if there is anything you’d like to add to it
One of the things as we said in the script while we’re looking to accomplish with the modifications that we have to our long-term process that we have been using what we call HYL the new process, we were looking to accomplish improvements in our quality and at the same time decrease the amount of issues of missions and therefore improve the environmental friendliness of the process
And in those two metrics, we’ve been very successful
We’ve been very pleased with the quality of the product that's come out of Louisiana and we’ve been very pleased with the reduction and emissions by using this technology
The challenge of course is mainly liability and we recognize that and we are now in the process of taking time to look at the entire - the engineering of the entire process, making the necessary adjustments as we referred to and taking a holistic approach to the entire process from beginning to end and making the changes that we believe are necessary to improve reliability
And as we go forward in that study we of course will be tapping in for the talent and the lessons that we learnt in our Trinidad facility which is frankly world known for its reliability, as well as quality but particularly its reliability
So that process we expect to take the next couple of months at the end of that period we’ll be able to give you a better explanation of the time that would be involved to make any repairs that we feel are required
That’s a good point Jim because I should have pointed out we might go through this process in segue and reengineering it taking a hard look at from a holistic engineering perspective and come to the conclusion that the improvements that we have made to the process to-date both in the process gas heater and in the furnace itself have rectified the issues
I mentioned several times on this call and I’ll repeat it, the technology itself doesn’t seem to be the issue, it's the equipment that has enabled the technology to result in less emissions in particular that’s been a major change that has given us the most heartburn with the facilities
So we’ve taken a hard look at that we want to find a solution that allows us to continue the improved environmental aspects of producing DRI while still having the improved reliability
There is a big logistics play and we always approach these markets regionally and we feel that this technology that's proven will allow us to expand on that on that regional approach and focusing where we have scrap available to us and where there are markets already existing
I guess on the brighter side we look forward going into the end of the fourth quarter, end of the year and into next year because of the decrease in imports now it’s going to take a while for that surge to work its way through the system no doubt about that
But we will continue to see and we believe we will continue to see imports will lower and that excess demand has been holding steady and possibly maybe improving a little bit again if we see that infrastructure build and other things that are happening, some of the results frankly said it was the devastation from the hurricanes that might though result in a little bit more demand on rebars like we build parts of areas devastated
So all said we think it will pick up a little bit and we love to continue to keep the imports down, you asked a question about 232, so I think so I can take just a minute of your time and I will share with you my thought, you summed it up well
I said this many time, I’m getting a little concerned about the length of time and taking for this to be implemented and I’m concerned about the surge of illegally traded imports that are coming in as a result of the delays
With that said, I’m still confident that President Trump will fulfill his commitments to our industry and that we will see 232 hopefully early part of next year absolutely may be there will be a nice Christmas gift to the industry and we will see at the end of this year
But certainly needed and it has been, we have a commitment to get it and I think as you look at some of the things that are happening even outside of our industry, for example with the Whirlpool 201, which is a different action of course but still points to severity of the imports and the type of holistic remedies that can be offered by Washington and we’re counting on getting one from the steel industry
I probably should have said easier about just saying we want the same rules applied to 232 that do exist for critical circumstances
And I got to tell you this is critical circumstances, I mean you even the G-20 has come out and they called the crisis in steel today a crisis, okay that needs immediate action that’s the G-20. And the OECD that’s made a very similar comment and I’ll just point out this is that the United States are suffering through this surge and results follow the capacity in China
It’s Europe and Europe is quietly quickly taking action then we are then moving much quicker on to get relief for their steel industry, as well as other regions
India just recently a few months ago put tariffs on all of the Chinese products that come into the country so it’s a global problem other regions are reacting much quicker than the United States sadly which means that we remain the market that they can get in to while our government is dealing more slowly with the issues that other government have dealt with more quickly
