Steel Dynamics Inc. (SDI), Fort Wayne, Indiana, has reported slightly lower sales for its first quarter of 2020 compared with the first quarter of 2019. The company achieved first-quarter 2020 net sales of $2.6 billion and net income of $187 million. Comparatively, prior-year first-quarter net sales were $2.8 billion, with net income of $204 million, SDI reports in a news release on its first-quarter earnings.
Sequential fourth-quarter 2019 net sales were $2.4 billion, with net income of $121 million. SDI reports the lower figures in the fourth quarter of 2019 were associated with planned maintenance outages at its two flat-roll steel mills.
“The team delivered a strong first quarter 2020 performance in a challenging operating and market environment,” says Mark D. Millett, president and CEO at SDI. “Solid underlying steel demand during the first quarter combined with our value-added product capabilities allowed us to achieve record quarterly steel shipments. Our first quarter 2020 consolidated operating income was $274 million with adjusted [earnings before interest, taxes, depreciation and amortization] EBITDA of $356 million.”
The COVID-19 virus and restrictions play into the firm’s outlook, Millett says. “It is still too early to determine the full scope of the negative impact COVID-19 will cause to global economies and the related impact to domestic steel demand. At this time, domestic steel orders related to certain sectors have slowed considerably due to the temporary closures of numerous steel-consuming businesses.” He says the automotive industry shutdowns, in particular, have pinched steel demand.
Millett says the economic turbulence has not changed SDI’s plans in Sinton, Texas, where it is investing $1.6 billion to build what he calls a “new state-of-the-art, electric-arc-furnace (EAF) flat roll steel mill.
“We remain excited about this strategic project and the associated long-term value creation it will bring through geographic and value-added product diversification. We entered this crisis in a position of strength with ample cash and available liquidity. Our differentiated business model and performance-driven culture has proven our ability to generate strong cash flow during challenging times such as these," he continues.
Although the automotive hiatus has hurt sales, Millett adds, “Conversely, construction is the largest single domestic steel-consuming sector, and while some projects have been disrupted or postponed, at this time the sector still remains intact. Our steel order activity from construction customers, as well as our strong steel fabrication order backlog, supports this sentiment. When states begin to ‘reopen’ across our nation, we believe steel demand will likely respond quickly based on current customer buying patterns and already low steel inventories throughout the supply chain.”
Update on COVID-19
In the company’s latest earnings report, Millett adds that SDI has been very focused on protecting the health and well-being of its employees.
“We are closely monitoring the COVID-19 situation and have implemented numerous additional practices throughout our organization to protect each of us,” he says. “I want to thank our more than 8,400 team members for remaining steadfast and passionate. We continue to operate safely with a spirit of excellence, and I am incredibly proud to work alongside each one during this unprecedented time. Our commitment is to the health and safety of our people, our families, and our communities while serving our customers. This commitment is supported by the strength of our capital foundation and unmatched cash flow generation capability that exists in both strong and weak demand environments.”