Nucor Corp. announced a consolidated net loss of $189.6 million on consolidated net sales of $2.65 billion for the first quarter of 2009.
The $189.6 million consolidated net loss ($0.60 per diluted share) compares to net earnings of $409.8 million ($1.41 per diluted share) in the first quarter of 2008, and net earnings of $105.9 million ($0.34 per diluted share) in the fourth quarter of 2008.
The $2.65 billion consolidated net sales reflect a 47% decrease compared with consolidated net sales of $4.97 billion in the year-ago first quarter due to a 43% decrease in total tons shipped to outside customers and a 7% decrease in average sales price per ton. Consolidated net sales decreased 36% compared with $4.15 billion in the previous quarter due to a 14% decrease in total tons shipped to outside customers and a 26% decrease in average sales price per ton.
The average scrap and scrap substitute cost per ton used at $333 remained flat as compared to the first quarter of 2008, and reflects a 23% decrease from $435 in the fourth quarter of 2008.
In the first quarter, Nucor incurred a $105 million credit to value inventories using the LIFO method of accounting, which compares to a $69 million charge in the first quarter of 2008 and an $81 million credit in the fourth quarter of 2008. Nucor also incurred a charge of about $60 million in the quarter to write down inventories to the lower of cost or market.
Low Utilization, Higher-Cost Iron Units—Nucor’s steel mill utilization rate decreased to approximately 45% in the first quarter from 92% in last year's first quarter and 48% in the previous quarter. The decreased utilization caused total energy costs to increase approximately $11 per ton from the first quarter of 2008, and to increase approximately $5 per ton from the fourth quarter of 2008.
The dramatically lower production rates also slowed the rate at which the company’s sheet mills were able to consume higher-cost iron units (particularly pig iron inventories) that were purchased prior to the collapse in both the economy and scrap/pig iron pricing in last year's fourth quarter. The company expects the impact from higher-cost scrap to disappear during the second quarter. However, if the current production rates continue, the company said the overhang from the high-cost pig iron would continue to impact results through the third quarter.
Nucor increased pig iron consumption midway through the first quarter, and is expecting the increased consumption rate to result in approximately $80-million higher raw material costs at its sheet mills for the second quarter. Nucor noted that its raw material destocking process would benefit from any significant improvement in order entry and operating rates; this would also help to improve earnings.
The company said that its liquidity position remains strong with $1.9 billion in cash and cash equivalents and an untapped $1.3-billion revolving credit facility that matures in November 2012. Nucor has maintained its strong liquidity position despite a $175-million debt maturity in January, and payments in the first quarter of approximately $305 million for profit sharing and extraordinary bonuses related to the company’s record performance in 2008.
Outlook—Looking forward, the company noted that business and market conditions have continued to worsen each succeeding month, beginning in September 2008. Nucor said it is expecting continued deterioration in both the U.S. economy and steel market conditions to result in a greater second-quarter loss than in the first quarter. Nucor said that earnings would continue to be negatively impacted by persistent low operating rates, lower pricing, and the consumption of high-cost pig iron inventories at its sheet mills.
The company it would provide only qualitative second-quarter guidance at this time, with an update planned for midway between the first and second quarter earnings releases.
Nucor and affiliates manufacture steel products, with operating facilities primarily in the U.S. and Canada. Products produced include carbon and alloy steel bars, beams, sheet and plate; steel joists and joist girders; steel deck; fabricated concrete reinforcing steel; cold finished steel; steel fasteners; metal building systems; light gauge steel framing; steel grating and expanded metal; and wire and wire mesh. Nucor, through DJJ, also brokers ferrous and nonferrous metals, pig iron and HBI/DRI; supplies ferro-alloys; and processes ferrous and nonferrous scrap. Nucor is North America's largest recycler.