Steel Dynamics hints at modest third quarter 2015 earnings

Steel Dynamics Inc., Fort Wayne, Indiana, has provided third quarter 2015 earnings guidance and has identified its metals recycling operations as one reason for disappointing results.

The company says it expects earnings in the range of 20 cents to 24 cents per diluted share, which it says is higher than its second quarter 2015 earnings of 13 cents per share but less than 2014 third quarter earnings of 38 cents per share.

Second quarter 2015 earnings included expenses associated with idling the company’s Minnesota iron operations while the prior year’s third quarter earnings included acquisition costs and purchase accounting adjustments related to the acquisition of the former Severstal mill in Columbus, Mississippi.

Profitability from the company’s steel operations for the third quarter 2015 “is expected to be slightly improved in comparison to the second quarter 2015 results, based on modest overall metal spread expansion offset by slightly lower steel shipments,” the company says in a news release offering its guidance.

“The company's steel scrap costs are expected to decline in the third quarter 2015; however, based on the company’s inventory accounting methodology, further scrap declines that have occurred in September will benefit the fourth quarter 2015 metal spread,” not the third quarter, according to SDI.

SDI adds, “Metals recycling financial results are expected to decline meaningfully for the third quarter 2015, compared to the sequential second quarter, based on both ferrous and nonferrous metal spread contraction. Sequential quarterly ferrous pricing was down slightly and procurement costs rose; whereas, nonferrous pricing in the quarter declined significantly. Nonferrous market indices have fallen over 10 percent in the third quarter 2015 and spreads have contracted substantially.”

SDI had annual sales of $8.8 billion in 2014 and has 7,700 employees at manufacturing facilities in the United States, including six steel mills, approximately 80 metals recycling locations, eight steel coating facilities, an iron production facility and eight steel fabrication plants. Most of the recycling facilities operate under the OmniSource name.