Steel Dynamics Reports $5.4 Million Net Income in Second Quarter

Steel Dynamics, Inc. announced second quarter earnings of $5.4 million, compared to earnings of $17.7 million in the second quarter of 2002. Net sales for the second quarter of 2003 were $219 million, compared to $214 million in the second quarter of 2002.

Compared to the year-ago quarter, SDI's lower second quarter 2003 earnings resulted primarily from higher scrap costs coupled with the lower selling prices associated with a softer steel marketplace. SDI's average consolidated selling price per ton declined to $335 per ton, compared to $340 per ton in the second quarter of 2002 and $363 per ton in the first quarter of 2003. Lower prices resulted primarily from weaker pricing in flat-rolled products, as the average price per ton of structural products increased $18 per ton from the first to the second quarter. Second quarter scrap prices increased $8 per ton, compared to the first quarter of 2003, but were $25 per ton higher than in the second quarter of 2002.

SDI's second quarter consolidated shipments were 653,000 tons, 4 percent higher than the 628,000 tons shipped in the second quarter of 2002, and about one percent higher than the first quarter's 648,000 tons. Production at SDI's steel operations was 720,000 tons, compared to 600,000 tons in the second quarter of 2002 and 685,000 tons in the first quarter of 2003. Finished goods inventories increased moderately, primarily in flat-rolled products.

"We are satisfied with the quarter's results in light of soft market conditions," said Keith Busse, president and CEO. "Comparing the second quarter to the first quarter of 2003, the combination of weaker flat-rolled steel prices and modestly higher steel-scrap prices resulted in lower earnings, much in line with our April prediction. Nonetheless, I am pleased with our continued strong operating results. We believe the company's operating profit of $29 per ton shipped is notable, considering our Structural and Rail Division is still in the midst of its start-up and is producing at only about 50 percent of its capacity. This new division's operating losses are moderating and it is likely that it will turn cash-positive by year-end.

"In the second quarter, the Structural and Rail Division increased its beam shipments by more than 40 percent from the first quarter and continued commissioning new products. Installation of equipment for the manufacture of rail sections was completed and initial production trials are expected to take place in July. We are excited about the progress that has been made by the Columbia City team in their first twelve months of manufacturing and selling structural products," Busse said.

"The Butler Flat Roll Division continued to perform very well. First-half volume basically matched the first half of 2002, which means Butler has maintained a strong order book in spite of a more competitive environment. During the quarter, the company concluded its export shipments to China, and no additional orders are in hand," Busse said. "The Division's newly acquired Jeffersonville, Indiana, galvanizing facility has begun production, which will allow us to diversify our cold-rolled, galvanized steel production to include lighter gauges, thereby gaining entry into a variety of new construction materials markets. In addition, Butler's new paint line is expected to begin production tests in the third quarter, and painted products are expected to begin shipping in the fourth quarter."

Work is proceeding well at SDI's new Bar Products Division in Pittsboro, Indiana, toward a planned start-up early in 2004. An environmental permit that is required before mill modifications and improvements can be made is now under review by the Indiana Department of Environmental Management (IDEM). Barring any unforeseen complications, the new air permit could be in place by the end of the third quarter. Construction is set to begin as soon as the permit is approved and work will continue into 2004. With the added manufacturing capabilities, the mill's portfolio of products will be expanded to include merchant shapes, such as angles, channels, flats, and rebar. Special-bar-quality (SBQ) steels should represent 50 percent of the expanded mill's capacity, which is expected to reach 500,000 to 600,000 tons per year.