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Jun 30, 2020
Steel Dynamics Q2 2020 Earnings Report
Steel Dynamics' financial performance declined due to lower selling values and shipments, but maintained strong cash flow and liquidity.
Key Takeaways
Steel Dynamics reported a decrease in net sales and net income for Q2 2020 compared to the previous year and the previous quarter, primarily due to the impact of the COVID-19 pandemic. However, the company's steel mills operated at a high utilization rate, and cash flow from operations increased sequentially.
Second quarter net sales were $2.1 billion, and net income was $75 million, or $0.36 per diluted share.
Adjusted net income for the second quarter was $100 million, or $0.47 per diluted share.
Steel mills operated at almost 80 percent utilization, while the rest of the domestic industry operated at an estimated 55 percent.
The company generated strong cash flow from operations of $486 million and available cash and short-term investments increased $111 million.
Steel Dynamics
Steel Dynamics
Steel Dynamics Revenue by Segment
Revenue by Segment
Steel Operations Revenue
CapyFin.comSteel Fabrication Revenue
CapyFin.comMetals Recycling Revenue
CapyFin.com Forward Guidance
While the full impact of COVID-19 remains uncertain, Steel Dynamics anticipates improved steel and metals recycling demand in the second half of the year as states reopen and automotive production restarts. The company remains focused on long-term value creation through its new EAF flat roll steel mill project.
Positive Outlook
- Steel and metals recycling demand will improve in the second half of the year compared to second quarter 2020 trough results.
- The automotive sector and its related supply chain have restarted production, and the company has started to see some resulting increase in steel demand and prime scrap production.
- The construction sector has remained more resilient and related steel demand has been steady.
- Construction of the new state-of-the art, electric-arc-furnace (EAF) flat roll steel mill is going well within expected capital costs, with plans on schedule to commence operations mid-year 2021.
- Columbus Flat Roll Division team produced their first prime coil July 9th on their new 400,000-ton galvanizing line.
Challenges Ahead
- It is still not possible to determine the full scope of the negative impact COVID-19 will cause to global economies and the related impact to domestic steel demand.
- The weaker sectors continue to be related to energy and general industrial consumers, which likely require a longer recovery period.
- Second quarter 2020 operating income for the company’s steel operations was lower than sequential first quarter results, due to lower selling values and shipments related to the temporary closures of numerous steel consuming businesses.
- The company’s metals recycling operations recorded an operating loss for the second quarter 2020.
- As states issued shelter-in-place mandates and domestic manufacturing slowed, scrap supply and collection declined.
Revenue & Expenses
Visualization of income flow from segment revenue to net income