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Nucor Corporation Q1 2010 Earnings Call Transcript

Nucor Corporation Q1 2010 Earnings Call Transcript

Nucor Corporation




Q1 2010 Earnings Call Transcript

April 22, 2010 2:00 pm ET


Dan DiMicco – Chairman, President and CEO

Jim Frias – CFO, Treasurer and EVP

John Ferriola – COO of Steelmaking Operations

Ham Lott – EVP

Keith Grass – EVP


Kuni Chen – Bank of America/Merrill Lynch

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Michael Gambardella – JP Morgan

Timna Tanners – UBS

Mark Parr – KeyBanc Capital Markets

Luke Folta – Longbow Research

Michael Willemse – CIBC

Sal Tharani – Goldman Sachs

Charles Bradford – Affiliated Research Group

Mark Liinamaa – Morgan Stanley



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Good day everyone and welcome to the Nucor Corporation first quarter 2010 earnings call. As a reminder, today's call is being recorded. Later we will conduct a question-and-answer session and instructions will come at that time. Certain statements made in this conference call are forward-looking statements that involve risks and uncertainties. Although Nucor believes they are based on reasonable assumption, there can be no assurance that future events will not affect their accuracy.

Some of the important factors that may cause actual results to differ from predictions are listed in the, of course, SEC filings. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume obligation to update them. For opening remarks and introductions, I would like to turn the call over to Mr. Dan DiMicco, Chairman, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Dan DiMicco

Thank you, Lora. Good afternoon and thank you for joining us for Nucor's conference call. As always, we appreciate your interest in Nucor. Joining me for today's call are other members of the Nucor senior management team, Chief Financial Officer, Jim Frias, Chief Operating Officer for Steelmaking Operations, John Ferriola, and Executive Vice President, Keith Grass, Ladd Hall, Ham Lott, Mike Parish and Joe Stratman.

After reviewing our first quarter results and our work growing Nucor's long-term profitability, we will take your questions. First, most importantly, I want to thank everyone on our team at Nucor and at our Harris Steel and David J. Joseph operations for all of your hard work in dealing with historically bad markets that we have been in and getting the job done safely in the first quarter.

While somewhat improved economic and steel market conditions remain challenging and volatile and that's to say the least. You focus on safety, working safely, working together, is what drives Nucor's success through the cycles and builds attractive long-term value for our shareholders. Thank you again and keep up the good work and stay safe.

Our first quarter earnings of $0.10 per diluted share represents significant improvement from the loss of $0.60 per diluted share reported in last year's first quarter. These results were also better than guidance range from a loss of $0.05 per share to earnings of $0.05 per share.

Profit improvement gained momentum throughout the quarter finished by a solid performance in March. Excluding the effects of LIFO, operational results improved substantially in the first quarter of 2010 over the fourth quarter of 2009.

In our steel mill segment, the improvement in operating profits was approximately 50% but our sheet mills improving by about 80%. Our overall performance benefited from improving profits that our flat-rolled raw materials and coal finished bar businesses. And their raw material segment includes both David J. Joseph and Trinidad DRI operations.

As expected, the most challenging markets are those impacted by severely depressed non-residential construction activity. This impact was particularly happening in the fabricated construction products businesses such as metal buildings, joist, deck and rebar fabrication.

As we discussed on our last conference call and last month's guidance press release, first quarter 2010 earnings were also significantly impacted by LIFO inventory accounting, LIFO expense of 24 million for the just completed quarter compared to a LIFO credit of $117 million in last year's fourth quarter and a credit of $105 million in last year's first quarter.

This swing is largely due to recent increases in scrap and other raw material costs. Also as mentioned in our updated earnings guidance, this was an after tax impact from approximately $0.29 per share. Our team also continues to make investments to increase Nucor long-term earnings power.

First quarter results included more than $50 million startup costs for new facilities. This is up from pre-operating startup costs of $33 million in the year ago first quarter and $48 million in last year's fourth quarter. These costs for the most recent period were incurred at a Memphis, special bar quality mill, our Decatur galvanizing facility and our Arkansas CASTRIP plant.

We expect our focus on building for the long-term. We'll continue to reward our shareholders for the track of returns. Nucor has a long history of using economic downturns as opportunities for reaching new levels of growth. Earlier this month, we completed our previously announced plans to acquire 50% equity interest in NuMit LLC.

NuMit has a joint venture with Mitsui's wholly owned U.S. based subsidiary. Before NuMit with Mitsui to be in additional growth platform for investing in steel or steel related activities both in North America and globally. Consistent with our long established joint venture growth strategy, the NuMit partnership combines Mitsui's experience in Global steel markets with Nucor operational and technological expertise.

Together, we expect to be able to capitalize on opportunities for profitable growth that would not otherwise exist for either partner on a standalone basis. Mitsui has contributed NuMit's first investment all of the assets, operations and businesses of Steel Technologies Inc. We have received many questions about the valuation of our Steel Tech joint venture investment.

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