SDI cites “positive momentum” in 2Q 2016 earnings report

Fort Wayne, Indiana-based electric arc furnace (EAF) steelmaker Steel Dynamics Inc. (SDI) has announced second quarter 2016 net income of $142 million, or 58 cents per share, on net sales of $2 billion. The company says its second quarter 2015 sales also were $2 billion, but its net income was just $53 million, or 22 cents per share.

SDI's net sales in the first quarter of 2016 were $1.7 billion, garnering a net income of $63 million, or 26 cents per share.

“During the second quarter 2016, continued positive momentum in the flat roll steel supply environment resulted in significantly improved sequential consolidated operating earnings, which increased over 94 percent to $256 million,” says Mark D. Millett, SDI president and CEO. “Year-over-year first half flat roll steel import levels have declined approximately 25 percent, and customer inventory levels are balanced with current demand requirements, supporting higher domestic flat roll steel mill utilization,” he adds.

Regarding SDI’s customer base, Millet says, “The domestic steel demand outlook is relatively unchanged and steady, with the heavy equipment, agricultural and energy markets remaining weak, while automotive and construction continues to be strong.”

Millet says SDI’s scrap recycling operations, which operate under the OmniSource name, turned in a better quarter than several previous ones. “We saw improved volumes and profitability in our metals recycling platform for the second quarter 2016,” he comments. “Ferrous scrap demand improved, resulting in both higher volumes and expanded metal spread through price increases.”

In the news release accompanying its second quarter 2016 earnings announcement, SDI says the company’s metals recycling operations “achieved a meaningful improvement in profitability based on a 30 percent improvement in ferrous metal margin, combined with increased shipments.”

Second quarter 2016 operating income from the metals recycling operations was $15 million compared with $6 million in the first quarter of 2016. Ferrous scrap demand and pricing improved because of “increased domestic steel mill utilization,” SDI says.

SDI bills itself as one of the largest domestic steel producers and metals recyclers in the United States, with annual sales of $7.6 billion in 2015, approximately 7,500 employees and manufacturing facilities that include six EAF steel mills, 10 steel coating lines, an iron production facility, eight steel fabrication plants and approximately 75 metals recycling locations.