SDI reports profitable end to 2022

Fort Wayne, Indiana-based electric arc furnace (EAF) steelmaker Steel Dynamics Inc. (SDI) has reported fourth quarter and annual 2022 financial results that include net income of $635 million for the quarter and a record $3.9 billion for the year.

By the evening of Wednesday, Jan. 25, Wall Street seemed pleased with the results, with SDI stock trading at more than $110 per share at that time, up by $2.38 per share compared with where it started the day.

For the year’s final quarter, SDI reports net sales of $4.8 billion and net income of $635 million, or $3.61 per diluted share. For the entire year, SDI’s net record income of $3.9 billion led to $20.92 per diluted share of earnings.

The steelmaker, which also operates the OmniSource network of scrap recycling yards, says it recorded net sales of $22.3 billion in 2022. Those figures compare with net income of $3.2 billion, or $15.56 per diluted share, with net sales of $18.4 billion in 2021.

As far as operating conditions in the final three months of 2022, SDI says its net income was lower than in the prior quarter in part because of “seasonally lower shipments and metal spread compression, particularly within the company’s flat-rolled operations.”

The metal spread compression issue was tied to “high-priced pig iron ordered in early 2022 in reaction to the Ukraine and Russia supply-chain disruptions.” While SDI melts predominantly ferrous scrap at most of its mills, its flat-rolled operations sometimes require pig iron and scrap alternatives.

Per conditions at its other mills, “The average ferrous scrap cost per ton melted at the company’s steel mills declined $58 to $414 per ton” in the fourth quarter of 2022 compared with the third quarter, the company says.

In terms of fourth-quarter expenses, SDI reports awarding “additional performance-based companywide special compensation" of $24 million, or 9 cents per diluted share, to all nonexecutive, eligible team members "in recognition of the company’s exceptional annual performance.”

The company also spent $168 million in the fourth quarter on costs “associated with startup of the company’s Sinton, Texas, flat-rolled steel mill growth investment.”

“The team delivered a tremendous operational and financial performance during 2022, achieving record net sales of $22.3 billion, operating income of $5.1 billion and adjusted earnings before interest, taxes, depreciation and amortization {EBITDA] of $5.5 billion,” SDI President and CEO Mark D. Millett says. “Numerous individual operating and financial records were attained during the year.”

Millett adds, “Domestic steel demand was solid throughout the year supported most significantly by the construction, automotive, industrial and energy sectors. The strength in the nonresidential construction market drove earnings for our steel fabrication business, resulting in record annual shipments of 856,000 tons and record 2022 operating income of $2.4 billion.”

On the scrap recycling front, Millett says, “Despite a challenging pricing environment throughout much of the year, our metals recycling teams achieved operating income of $130 million. The strength of our diversified, value-added circular manufacturing model was certainly evidenced in 2022.”

“We believe we are already one of the lowest carbon emission steel producers in the world, yet our teams continue to make great progress toward achieving our decarbonization goals," he adds. "We have a firm foundation for our continued long-term, strategic growth and ongoing value creation.”

Looking at the year just started, Millett says, “Customer order entry activity continues to be healthy across our businesses. Steel pricing has firmed, and our order activity and backlogs remain solid. We believe North American steel consumption will increase in 2023, and that demand for lower-carbon emission, United States-produced steel products coupled with lower imports will support steel pricing. Based on our current forecast, we expect Sinton’s annual utilization to be around 80 percent for 2023.”

Specific to recycling, Millett adds, “Since acquiring Roca in October [2022], their integration into our Mexican metals recycling operations is also proceeding well and will benefit our scrap and steel businesses in 2023. This environment, in combination with our existing and recently announced expansion initiatives, are firm drivers for our continued growth in the coming years.”

Regarding the company’s announced investment in the aluminum sector, Millett says, “We are quickly progressing on our aluminum flat-rolled products mill and are incredibly excited about this meaningful growth opportunity, which is aligned with our existing business and operational expertise. The team has placed orders for critical equipment, and the rolling mill site location in Columbus, Mississippi, is exceptional.”

Millett says recycling will be a key aspect of the operation. “We are pleased to further diversify our end markets with plans to supply aluminum flat-rolled products with high recycled content to the countercyclical sustainable beverage can industry, in addition to the automotive and industrial sectors," he adds. "Our planned investments in a new state-of-the-art low-carbon aluminum flat-rolled mill and associated recycled aluminum slab centers continues our strategic growth, is aligned with our core steelmaking and recycling platforms, benefits many of our existing customers and provides for future value creation.”