SDI revenue up, but profits narrower

Steel Dynamics Inc. (SDI), Fort Wayne, Indiana, has announced second quarter 2015 adjusted net income of $53 million, or 22 cents per diluted share. The results are in line with a forecast given by the electric arc furnace (EAF) steelmaker in late June.

The company says its first-half 2015 results of $62 million in net income on net sales of $4.1 billion compares with net income of $111 million on net sales of $3.9 billion for the first half of 2014. It cites its metals recycling activities in 2015 as having produced declining revenue. “Year-to-date consolidated net sales increased 4 percent, primarily as a result of the acquisition of the Columbus flat roll steel mill in September 2014, resulting in higher first half 2015 steel shipments that more than offset the 26 percent decline in metals recycling revenue,” the company states in the news release accompanying its second quarter 2015 results.

“Year-to-date consolidated operating income decreased $36 million, or 17 percent, as the result of both decreased steel prices and the additional costs incurred in the second quarter 2015 from the company's iron production facilities. Excluding the impact from idling the Minnesota iron production facilities and the Iron Dynamics maintenance outage, year-to-date adjusted consolidated operating income improved 3 percent, to $220 million, based on improved fabrication results.”

The company says the average selling price for its steel in the second quarter decreased $125 per ton, while the average ferrous scrap cost per ton melted fell by $91 per ton. SDI also pointed to imported steel as a factor in its narrower profit margins.

“The second quarter 2015 market environment remained extremely challenging for our steel and metals recycling operations,” says Mark D. Millett, CEO of SDI. “The ongoing flood of steel imports continued to pressure steel product pricing to a greater degree than the benefit realized from lower scrap costs, compressing second quarter steel margins. Steel pricing has recently stabilized and domestic steel consumption from the automotive, manufacturing and construction sectors should support a stronger domestic steel industry in the second half of the year, predicated upon the expectation of reduced levels of imported steel and sustainable lower raw material costs,” he adds.

Regarding the ferrous scrap market, Millett comments, “We believe the key scrap supply factors of export activity and the strength of the U.S. dollar will continue to mute extreme scrap pricing volatility.”