SDI’s record performance continues

SDI’s record performance continues

The company posts record steel, steel fabrication and metals recycling segment earnings in 2021.

January 25, 2022

Fort Wayne, Indiana-based electric arc furnace (EAF) steelmaker Steel Dynamics Inc. (SDI) has reported record results for the fourth quarter of 2021 and for the full year. Its quarterly net sales totaled $5.3 billion, while its net income was $1.1 billion, or $5.49 per diluted share. For the year, SDI’s net sales totaled $18.4 billion, while operating income was $4.3 billion and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) totaled $4.6 billion. The company anticipated record performance for the quarter when it issued earnings guidance in December of last year. 

In the third quarter of 2021, SDI’s earnings were $4.85 per diluted share, while fourth-quarter 2020 earnings were 89 cents per diluted share.

Mark D. Millett, SDI chairman and CEO, says, "Numerous individual operating and financial records were attained during the year. Across the company, our teams achieved best-in-class performance while keeping each other healthy and safe.”

He credits the company’s employees for its record annual cash flow from operations of $2.2 billion. SDI ended 2021 with liquidity in excess of $2.4 billion despite investing in organic growth. 

"Domestic steel demand was strong throughout the year, supported most significantly by the construction, automotive and industrial sectors," Millett says. "Customer steel inventories also remained historically low as steel supply was not sufficient to meet robust demand requirements during much of the year. This strong market environment drove significantly higher realized steel selling values, resulting in meaningful steel metal spread expansion. In combination with the symbiotic relationships among our three primary operating platforms, we achieved record annual financial and operational performance. Our steel operations achieved record annual 2021 shipments of 11.2 million tons and record operating income of $4.4 billion. Our metals recycling and steel fabrication operations also achieved record 2021 annual operating income of $195 million and $365 million, respectively."

Quarterly results

Fourth-quarter 2021 operating income for the company's steel operations was a record $1.4 billion, aligned with sequential third-quarter results, attributed to meaningful metal spread expansion across the entire steel platform. Coupled with flat scrap input costs, record flat-roll and strong long product steel selling values more than offset seasonally lower steel shipments. The average external product selling price for SDI’s steel operations increased $112 sequentially to $1,662 per ton. The average ferrous scrap cost per ton melted at the company's steel mills remained static at $490 per ton.

Fourth-quarter OmniSource operating income, the company's metals recycling division, remained strong at $44 million based on improved metal margins offsetting lower ferrous shipments, SDI says. Many domestic steel mills had planned maintenance outages throughout the fourth quarter, which lowered ferrous scrap demand. Ferrous scrap prices moderated in September and October, recovering to an extent in the latter half of the fourth quarter, resulting in modestly lower average realized selling values, the company notes.

Its steel fabrication operations reported record operating income of $238 million in the fourth quarter, more than two-and-a-half times higher than sequential third-quarter results. Supported by strong shipments, earnings increased as pricing increased $986 per ton, more than offsetting the continued increase in average steel input costs, the company says. 

Annual results

Annual 2021 net income was a record $3.2 billion, or $15.56 per diluted share, with record net sales of $18.4 billion. In 2020, net income totaled $551 million, or $2.59 per diluted share, with net sales of $9.6 billion. 

SDI awarded performance-based special compensation of approximately $21 million to all eligible nonexecutive team members in recognition of its record annual performance. The company also contributed $10 million to its charitable foundation during the fourth quarter.

Annual 2021 record net sales increased 92 percent and operating income increased more than four times to a record $4.3 billion when compared with 2020, SDI notes. The company attributes its higher earnings to steel metal spread expansion, as significantly higher average steel selling values more than offset higher average ferrous scrap costs across the steel platform, especially within its flat-roll operations. Compared with 2020, the average 2021 external product selling price for the company's steel operations increased $611 to $1,381 per ton. The average 2021 ferrous scrap cost per ton melted at SDI’s steel mills increased $179 to $447 per ton.

Outlook

"We believe the market dynamics are in place for domestic steel consumption to further increase in 2022 when compared to 2021," Millett says. "Based on domestic steel demand fundamentals and customer confidence, we believe North American steel consumption will experience steady growth, supported by the construction, automotive and industrial sectors. Our Structural and Rail Division and steel fabrication operations provide us with more specific insight into the non-residential construction sector, which is the single largest domestic steel-consuming sector. Based on our record steel fabrication order backlog extending through most of 2022, combined with the continued strength of order activity and broad customer optimism, we believe construction will remain strong in the coming year. In addition, we believe the more severe supply chain challenges within the North American automotive sector will abate during 2022, supporting stronger production for vehicles that are in high demand and short supply.”

Millett acknowledges challenges with the start-up of its new EAF steel mill in Sinton, Texas. "We had planned to be further along with commissioning the hot side of the steel mill, but supply-chain and COVID challenges delayed the project by several weeks.”

However, he adds that the rolling mill and two value-added finishing lines were successfully commissioned “ahead of the melting and casting operations in preparation of full operations commencing before the end of February 2022.”

Millett says SDI’s Sinton mill expects shipments to be roughly 2 million tons in 2022.

"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 on-site 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,” he says. “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.”