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Steel Dynamics Inc

Steel Dynamics Reports Record First Quarter 2022 Results

FORT WAYNE, Ind. , April 20, 2022 /PRNewswire/ --

First Quarter 2022 Performance Highlights:

  • Record steel shipments of 2.9 million tons
  • Record net sales of $5.6 billion
  • Record operating income of $1.5 billion and net income of $1.1 billion
  • Record steel fabrication operating income of $467 million and near record shipments of 210,000 tons
  • Record cash flow from operations of $819 million and record adjusted EBITDA of $1.6 billion
  • Increased first quarter 2022 cash dividends by 31 percent and repurchased $389 million of the company's common stock, representing 3 percent of its outstanding shares

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced first quarter 2022 financial results. The company reported first quarter 2022 net sales of $5.6 billion and net income of $1.1 billion, or $5.71 per diluted share. Excluding the impact from the following item, the company's first quarter 2022 adjusted net income was $1.2 billion, or $6.02 per diluted share.

  • Costs of approximately $84 million, or $0.31 per diluted share (net of capitalized interest), associated with the continued startup of the company's Sinton Texas Flat Roll Steel Mill growth investment.

Comparatively, the company's sequential fourth quarter 2021 earnings were $5.49 per diluted share, with adjusted earnings of $5.78 per diluted share excluding additional performance-based companywide compensation of approximately $0.08 per diluted share, a contribution to the company's charitable foundation of $0.04 per diluted share, and costs of $0.18 per diluted share (net of capitalized interest), associated with construction and startup of the Texas Flat Roll Steel Mill. Prior year first quarter earnings were $2.03 per diluted share, with adjusted earnings of $2.10 per diluted share, excluding costs of $0.07 per diluted share (net of capitalized interest), associated with construction of the company's Texas Flat Roll Steel Mill.

"The team delivered another tremendous performance, achieving record quarterly operating and financial performance, including record sales, operating income, cash flow from operations, and adjusted EBITDA," said Mark D. Millett, Chairman, President, and Chief Executive Officer. "Our first quarter 2022 operating income was $1.5 billion, with adjusted EBITDA of $1.6 billion. This record performance displays the power of our highly diversified, value-added, circular manufacturing model — as the strength in our steel fabrication operations more than offset moderation in our flat roll steel business, as realized hot roll coil selling values declined from peak 2021 levels during the quarter. Flat roll steel prices have recently firmed with extending delivery lead-times, related to strong demand dynamics, coupled with higher input costs and global flat roll steel supply disruptions. The automotive, construction, and industrial sectors continue to lead steel demand. We are also starting to see a significant increase in steel demand from the energy sector.

"We also achieved record cash flow from operations of $819 million in the first quarter 2022, while at the same time increasing shareholder distributions, investing in growth, and supporting increased working capital needs based on market dynamics and increased volume," said Millett. "In February, we increased our quarterly cash dividend by 31 percent and authorized an additional $1.25 billion share repurchase program, reflecting our confidence in the consistency and strength of cash generation capabilities, in alignment with our growth initiatives.

"The teams achieved strong operating and financial results across all of our operating platforms," continued Millett. "First quarter operating income from our steel and metals recycling operations remained very strong at $1.2 billion and $48 million, respectively. Earnings from our steel fabrication operations soared to $467 million, more than the entirety of full-year 2021 record results, based on significantly higher realized selling values and a continued strong construction demand environment. Steel joist and deck pricing and order activity continues to be robust, supporting our continued record order backlog with higher forward pricing."  

First Quarter 2022 Comments

First quarter 2022 operating income for the company's steel operations remained strong at $1.2 billion, but lower than record sequential fourth quarter results of $1.4 billion. The decline in earnings resulted from metal spread compression within the company's flat roll operations, as hot roll coil pricing moderated. Alternatively, pricing and metal spreads expanded within the company's long product steel businesses. The first quarter 2022 average external product selling price for the company's steel operations decreased just over $100 sequentially to $1,561 per ton. The average ferrous scrap cost per ton melted at the company's steel mills decreased $16 sequentially to $474 per ton.

First quarter operating income from the company's metals recycling operations remained strong at $48 million slightly above fourth quarter sequential results, based on improved metal spread offsetting modestly lower shipments.

The company's steel fabrication operations reported record operating income of $467 million in the first quarter 2022, almost double sequential fourth quarter results, as significantly higher selling values and strong shipments, more than offset marginally higher steel input costs. The non-residential construction sector remains strong, resulting in a record order backlog with record forward-pricing for the company's steel fabrication platform. The company anticipates this momentum to continue through 2022 based on these dynamics.

Based on the company's differentiated business model and highly variable cost structure, the company generated cash flow from operations of $819 million during the quarter. The company also invested $159 million in capital investments, paid cash dividends of $51 million, and repurchased $389 million of its outstanding common stock representing three percent of its outstanding stock, while maintaining strong liquidity of $2.4 billion as of March 31, 2022.

Outlook

"We remain confident that market conditions are in place for domestic steel consumption to continue to be strong this year and into 2023," said Millett. "Order entry activity continues to be robust across all of our businesses. We believe steel prices will remain supported by strong demand, balanced customer inventory levels, and elevated raw material costs. We believe the automotive, industrial, and energy sectors will remain solid steel consumers this year, with demand from the construction sector at the lead. Our steel fabrication operations order backlog remains at record volume and forward pricing levels. This combined with continued robust order activity and broad customer optimism, supports strong overall demand dynamics for the construction industry. We believe this overall momentum will continue and that our second quarter 2022 consolidated earnings should represent another record quarterly performance.

"We believe there are strong drivers for our continued growth and remain in a position of strength. Operations continue to ramp at our new Sinton Flat Roll Steel Mill. The team has done a great job with commissioning and starting up the steel mill. Based on our current forecast, we estimate 2022 shipments to be in the range of 1.5 million tons. We are also investing approximately $500 million to build four additional value-added flat roll steel coating lines comprised of two paint lines and two galvanizing lines with Galvalume® coating capability, a set of which will be located onsite at our new Texas steel mill, providing our new Texas steel mill with the same diversification and higher-margin product capabilities as our two existing flat roll steel divisions. The other two lines will be placed at our Heartland Flat Roll Division located in Terre Haute, Indiana to support growing coated flat roll steel demand in the region and to further increase the diversification and cash generation capacity of our existing Midwest operations. Based on current plans, we believe these four lines will begin operating mid-2023.

"Our commitment is to the health and safety of our teams, families, and communities, while meeting the current and future needs of our customers. Our culture and business model continue to positively differentiate our performance from the rest of the industry. We are competitively positioned and focused to generate long-term sustainable value," concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss first quarter 2022 operating and financial results on Thursday, April 21, 2022, at 9:00 a.m. Eastern Daylight Time. You may access the call and find dial-in information on the Investors section of the company's website at www.steeldynamics.com.  A replay of the call will be available on our website until 11:59 p.m. Eastern Daylight Time on April 27, 2022.

About Steel Dynamics, Inc.

Steel Dynamics is one of the largest domestic steel producers and metals recyclers in the United States, based on estimated annual steelmaking and metals recycling capability, with facilities located throughout the United States, and in Mexico. Steel Dynamics produces steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant bar products, specialty steel sections and steel joists and deck. In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap.

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA and Adjusted EBITDA, non-GAAP financial measures, provide additional meaningful information regarding the company's performance and financial strength. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA and Adjusted EBITDA included in this release may not be comparable to similarly titled measures of other companies.

Forward-Looking Statements

This press release contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel and recycled metals marketplaces, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate", "intend", "believe", "estimate", "plan", "seek", "project", or "expect", or by the words "may", "will", or "should", are intended to be made as "forward-looking," subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not a guarantee of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) domestic and global economic factors; (2) global steelmaking overcapacity and imports of steel, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as the COVID-19 pandemic; (4) the cyclical nature of the steel industry and the industries we serve; (5) volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes, and our potential inability to pass higher costs on to our customers; (6) cost and availability of electricity, natural gas, oil, or other energy resources are subject to volatile market conditions; (7) increased environmental, greenhouse gas emissions and sustainability considerations or regulations; (8) compliance with and changes in environmental and remediation requirements; (9) significant price and other forms of competition from other steel producers, scrap processors and alternative materials; (10) availability of an adequate source of supply of scrap for our metals recycling operations; (11) cybersecurity threats and risks to the security of our sensitive data and information technology; (12) the implementation of our growth strategy; (13) litigation and legal compliance, (14) unexpected equipment downtime or shutdowns; (15) governmental agencies may refuse to grant or renew some of our licenses and permits required to operate our businesses; (16) our senior unsecured credit facility contains, and any future financing agreements may contain, restrictive covenants that may limit our flexibility; and (17) the impact of impairment charges.

More specifically, refer to Steel Dynamics' more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, in our quarterly reports on Form 10-Q, or in other reports which we file with the Securities and Exchange Commission. These are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on the Steel Dynamics website, www.steeldynamics.com under "Investors — SEC Filings". 

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

(in thousands, except per share data)























Three Months Ended


Three Months



March 31,


Ended



2022


2021


Dec. 31, 2021











Net sales


$

5,569,902


$

3,544,597


$

5,310,657

Costs of goods sold



3,787,389



2,744,331



3,548,820

      Gross profit



1,782,513



800,266



1,761,837











Selling, general and administrative expenses



152,015



149,781



182,290

Profit sharing



128,469



48,848



143,243

Amortization of intangible assets



7,162



7,438



7,178

      Operating income



1,494,867



594,199



1,429,126











Interest expense, net of capitalized interest



16,669



17,269



12,338

Other expense (income), net



20,468



10,071



7,940

      Income before income taxes



1,457,730



566,859



1,408,848











Income tax expense



350,376



128,104



313,151

      Net income



1,107,354



438,755



1,095,697

Net income attributable to noncontrolling interests



(3,423)



(8,248)



(5,192)

      Net income attributable to Steel Dynamics, Inc.


$

1,103,931


$

430,507


$

1,090,505





















Basic earnings per share attributable to










   Steel Dynamics, Inc. stockholders


$

5.74


$

2.04


$

5.53











Weighted average common shares outstanding



192,158



211,015



197,346











Diluted earnings per share attributable to










   Steel Dynamics, Inc. stockholders, including the










   effect of assumed conversions when dilutive


$

5.71


$

2.03


$

5.49











Weighted average common shares










   and share equivalents outstanding



193,241



212,254



198,794





















Dividends declared per share


$

0.34


$

0.26


$

0.26

 

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)
















March 31,



December 31,

Assets

2022



2021


(unaudited)





Current assets







   Cash and equivalents

$

1,189,528



$

1,243,868

   Accounts receivable, net


2,363,668




1,916,434

   Inventories


3,516,815




3,531,130

   Other current assets


79,624




209,591

      Total current assets


7,149,635




6,901,023








Property, plant and equipment, net


4,827,962




4,751,430








Intangible assets, net


288,183




295,345








Goodwill


453,088




453,835








Other assets


337,769




129,601

      Total assets

$

13,056,637



$

12,531,234

Liabilities and Equity







Current liabilities







   Accounts payable

$

1,213,558



$

1,280,555

   Income taxes payable


229,360




13,746

   Accrued expenses


579,338




835,894

   Current maturities of long-term debt


68,390




97,174

      Total current liabilities


2,090,646




2,227,369








Long-term debt


3,010,109




3,008,702








Deferred income taxes


856,790




854,905








Other liabilities


120,918




120,087

      Total liabilities


6,078,463




6,211,063








Commitments and contingencies














Redeemable noncontrolling interests


227,914




211,414








Equity







   Common stock


649




649

   Treasury stock, at cost


(3,050,497)




(2,674,267)

   Additional paid-in capital


1,204,023




1,218,933

   Retained earnings


8,800,883




7,761,417

   Accumulated other comprehensive income


9,296




(2,091)

      Total Steel Dynamics, Inc. equity


6,964,354




6,304,641

   Noncontrolling interests


(214,094)




(195,884)

      Total equity


6,750,260




6,108,757

      Total liabilities and equity

$

13,056,637



$

12,531,234

 

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

( in thousands )














Three Months Ended


March 31,


2022


2021







Operating activities:






   Net income

$

1,107,354


$

438,755







   Adjustments to reconcile net income to net cash provided by






      operating activities:






      Depreciation and amortization


87,546



86,919

      Equity-based compensation


16,519



17,040

      Deferred income taxes


2,632



66,744

      Other adjustments


11,157



(662)

      Changes in certain assets and liabilities:






         Accounts receivable


(447,234)



(394,545)

         Inventories


14,315



(374,588)

         Other assets


19,402



5,828

         Accounts payable


(75,971)



360,681

         Income taxes receivable/payable


341,905



59,593

         Accrued expenses


(258,657)



(3,574)

      Net cash provided by operating activities


818,968



262,191







Investing activities:






   Purchases of property, plant and equipment


(159,330)



(309,863)

Investments in unconsolidated affiliates


(222,480)



-

   Other investing activities


410



390

      Net cash used in investing activities


(381,400)



(309,473)







Financing activities:






   Issuance of current and long-term debt


319,779



297,441

   Repayment of current and long-term debt


(349,272)



(304,284)

   Dividends paid


(50,699)



(52,729)

   Purchase of treasury stock


(389,190)



-

   Other financing activities


(22,527)



(16,598)

      Net cash used in financing activities


(491,909)



(76,170)







Decrease in cash, cash equivalents, and restricted cash


(54,341)



(123,452)

Cash, cash equivalents, and restricted cash at beginning of period


1,249,369



1,374,122

Cash, cash equivalents, and restricted cash at end of period

$

1,195,028


$

1,250,670













Supplemental disclosure information:






   Cash paid for interest

$

9,168


$

11,315

   Cash paid for income taxes, net

$

9,948


$

2,142

 

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

( dollars in thousands )













First Quarter






2022



2021

Q4 2021

External Net Sales









   Steel



$

3,762,496


$

2,510,684

3,786,221

   Steel Fabrication




929,981



256,985

680,006

   Metals Recycling




579,625



470,007

550,674

   Other




297,800



306,921

293,756

Consolidated Net Sales



$

5,569,902


$

3,544,597

5,310,657

Operating Income









   Steel



$

1,166,945


$

641,439

1,366,880

   Steel Fabrication




466,916



9,895

237,639

   Metals Recycling




48,146



53,933

43,581





1,682,007



705,267

1,648,100










   Non-cash amortization of intangible assets




(7,162)



(7,438)

(7,178)

   Profit sharing expense




(128,469)



(48,848)

(143,243)

   Non-segment operations




(51,509)



(54,782)

(68,553)

Consolidated Operating Income



$

1,494,867


$

594,199

1,429,126










Adjusted EBITDA









      Net income



$

1,107,354


$

438,755

1,095,697

      Income taxes




350,376



128,104

313,151

      Net interest expense




16,055



16,815

11,999

      Depreciation




78,790



77,888

77,438

      Amortization of intangible assets




7,162



7,438

7,178

      Noncontrolling interest (a)




(3,272)



(8,422)

(5,242)

EBITDA




1,556,465



660,578

1,500,221

      Non-cash adjustments









         Unrealized (gains) losses




300



(6,852)

(2,856)

         Inventory valuation



11,125



109

6,101

         Equity-based compensation




19,794



10,210

20,948

Adjusted EBITDA



$

1,587,684


$

664,045

1,524,414

Other Operating Information









   Steel









      Average external sales price (Per ton) (b)



$

1,561


$

1,041

1,662

      Average ferrous cost (Per ton melted) (c)



$

474


$

372

490










      Flat Roll shipments









         Butler, Columbus, and Sinton Flat Roll divisions




1,551,845



1,496,531

1,416,890

         Steel Processing divisions (d)




411,653



422,850

404,733

      Long Product shipments









         Structural and Rail Division




466,821



478,687

460,651

         Engineered Bar Products Division




226,053



200,628

199,546

         Roanoke Bar Division




143,619



136,420

132,318

         Steel of West Virginia




94,837



87,158

86,381

                                      Total Shipments (Tons)




2,894,828



2,822,274

2,700,519










                            External Shipments (Tons) (b)




2,409,763



2,410,817

2,277,865










                              Steel Mill Production (Tons)




2,508,184



2,476,939

2,395,437

   Metals Recycling









      Nonferrous shipments (000's of pounds)




260,890



280,809

274,479

      Ferrous shipments (Gross tons)




1,265,222



1,395,843

1,275,062

            External ferrous shipments (Gross tons)



437,228



437,182

434,335

   Steel Fabrication









      Average sales price (Per ton)



$

4,424


$

1,406

3,325

   Shipments (Tons)




210,237



184,243

204,497










(a)   Net of income tax expense (benefit) on noncontrolling interests.

(b)   Represents all steel operations

(c)   Represents ferrous cost per ton melted at our electric arc furnace steel mills

(d)   Includes Heartland, The Techs, and United Steel Supply operations

 

 

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SOURCE Steel Dynamics, Inc.