No Christmas joy at SDI; fourth-quarter soft

Nucor wasn’t alone in facing economic headwinds in the fourth quarter. SDI’s fourth quarter 2017 earnings guidance was in the range of $0.48 to $0.52 per diluted share.  Comparatively, the company’s sequential third quarter 2017 earnings were $0.64 per diluted share, which included debt refinancing and repayment charges of $0.02 per diluted share.  Excluding these items, the company’s third quarter 2017 adjusted earnings were $0.66 per diluted share.

Prior year fourth quarter earnings were $0.08 per diluted share, which included non-cash goodwill and asset impairment charges of $0.31 per diluted share and debt refinancing and repayment charges of $0.04 per diluted share. Excluding these items, the company’s fourth quarter 2016 adjusted earnings were $0.43 per diluted share.

“Despite a lower sequential fourth quarter earnings result, we remain confident that macroeconomic and market conditions are in place to benefit domestic steel consumption in 2018,” said Mark D. Millett, President and Chief Executive Officer.  “Domestic steel inventory levels have moderated as the overhang from “pre-232″ imports has dissipated.  World steel demand and pricing have structurally improved and domestic steel demand remains healthy.  We believe North American automotive steel consumption will be steady, and we continue to gain momentum in that sector.  We also believe that there will be continued additional growth in the energy and construction sectors, including heavy equipment.  In combination with our own SDI initiatives, we believe there are firm drivers for growth in 2018.”

In October the company completed an equipment upgrade and facility expansion at the Butler Flat Roll Division and an equipment upgrade with additional value-add product opportunities at the Columbus Flat Roll Division.  Both projects were successfully executed.  However, the longer than typical outages resulted in higher costs and lower value-add shipments, reducing fourth quarter 2017 pretax earnings by approximately $27-million.

Fourth quarter 2017 profitability from the company’s overall steel operations is expected to decrease in comparison to sequential third quarter results.  The anticipated lower earnings are driven by the company’s flat roll operations.  In addition to the impact from the outages, overall average flat roll steel pricing is expected to decline more than consumed scrap raw material costs.  The company’s long product operations also anticipate lower sequential earnings based on lower shipments, as merchant steel volume remains under pressure from excessive prefabricated steel imports and excess domestic production capability.

Fourth quarter 2017 profitably for the company’s metals recycling platform is expected to remain consistent with sequential third quarter results, despite lower average ferrous selling values, as nonferrous earnings improved.

Demand remains strong for the company’s fabricated steel joist and deck products, in what is typically a seasonally slower quarter, a positive indicator that the non-residential construction market is continuing a growth trend.  Fourth quarter 2017 earnings from the company’s fabrication business are expected to somewhat improve from sequential third quarter results, based on expected record shipments and improved average sales price.

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