The operator introduces the Nucor 2023 Fourth Quarter Earnings Call and turns it over to Jack Sullivan, General Manager and Investor Relations. Leon Topalian, Chair, President and CEO, along with other members of Nucor's executive team, will discuss the fourth quarter and year end 2023 earnings and business update. The call will include the use of non-GAAP financial measures and forward-looking information. Leon congratulates Nucor's 32,000 teammates for delivering strong financial results.

Nucor had a successful 2023, with the third most profitable year in the company's history. They invested in capital expenditures and returned a significant amount to shareholders. The U.S. economy is strong and there is increased demand for their products. Safety performance also improved, with the lowest injury rate in Nucor's history. However, the company will not celebrate as they lost a team member in a workplace accident and prioritize the safety and well-being of their employees.

Nucor's team members are committed to delivering the company's mission of becoming the world's safest steel company. With a focus on EAF steelmaking and an entrepreneurial culture, Nucor is the largest and most diversified steel producer in North America. They prioritize value creation for shareholders, with a high ROE and EPS growth rate. Nucor is highly efficient and serves a wide range of end markets. Sustainability is a key focus for the company, as they are the largest recycler in the Western Hemisphere and have low greenhouse gas intensity. They are constantly striving to supply customers with sustainable solutions.

The company has taken steps to reduce its carbon footprint by joining the Global Steel Climate Council and committing to net zero steelmaking by 2050. They are investing in sustainable raw materials and advanced technologies to reduce emissions. They are also focusing on higher margin products and expanding into adjacent industries. These efforts have resulted in significant EBITDA contributions and the company is confident in reaching its goal for Expand Beyond divisions in the future.

The American steel industry is experiencing growth in certain markets, such as bridge and highway construction, semiconductor chip plants, EV factories, and renewable energy. Federal programs supporting these trends are expected to increase annual demand for steel. However, there have been some setbacks, such as slower adoption rates for electric vehicles and delays in offshore wind projects. Nucor remains optimistic about the long-term prospects for these markets, as non-residential construction is proving to be resilient. The company's business model has also been successful, generating significant earnings and returns for shareholders.

Nucor has maintained a strong balance sheet, allowing for growth through investments in higher margin businesses. The company exceeded expectations in the fourth quarter of 2023, generating $785 million in net earnings. The Steel Mills segment saw a decrease in pre-tax earnings due to lower shipments and pricing, but an uptick in customer confidence led to increased volumes and higher pricing towards the end of the quarter. Nucor's operating cash flow for the quarter was over $1.5 billion, with working capital contributing $250 million.

In the first quarter of 2024, Nucor expects further improvements in shipments and pricing to positively impact results. The Steel Products segment had a strong quarter, contributing over half of the total segment earnings for the fourth quarter and generating $3.4 billion in segment earnings for the year. The Raw Materials segment had a pre-tax loss of $14 million due to lower output and higher costs. Nucor has a balanced approach to capital deployment, with $2.2 billion in capital spending and $2.1 billion in shareholder returns in 2023. They have increased their dividend by 42% and reduced their shares outstanding by 23% since 2018, and plan to continue returning at least 40% of net earnings to shareholders through dividends and share repurchases. Maintaining a strong investment grade credit rating and liquidity is a key part of their capital allocation framework.

Nucor's balance sheet is in a strong position to support their capital allocation philosophy, with low debt ratios and a history of effectively using and returning capital to shareholders. They expect to end 2024 with a lower cash balance due to their ambitious growth plans. In 2023, they had a strong cash position due to robust cash flows, timing delays in capital spending, and preserving liquidity for potential acquisitions that did not materialize. As they begin construction on a new project in West Virginia, their capital spending is expected to increase in 2024. They are also actively seeking value-creating acquisition opportunities. In the first quarter of 2024, they expect higher earnings from their steel mills and raw materials segments, but lower earnings from their steel products segment.

The company's current backlogs and margins are consistent with historic norms, and they expect modest profitability in the Raw Materials segment. The U.S. economy appears healthy, and market expectations for interest rate declines could lead to increased demand for consumer durables and construction. Nucor is well-positioned to benefit from positive demand drivers and has a strong midterm growth potential. The company also had a strong safety performance, but unfortunately lost a team member in November. The company has a generally constructive outlook for commercial construction and infrastructure.

The volume performance of the Bar and Beam mills and plates has been inconsistent for the past two years. However, Nucor's CEO, Leon Topalian, is confident that the market will improve. He mentions increased bidding activity on the Highway Bridge side and a strong order book as signs of improvement. Topalian also acknowledges the importance of Nucor's team members and their role in delivering results. He addresses concerns about new market entrants and increased demand flattening the cost curve, stating that the long products division has been performing well and generating high returns for the company. Nucor-Yamato, in particular, has been operating at a higher utilization rate, leading to increased profitability.

The speaker, Dan Needham, discusses the current outlook for the company's structural and loan products, stating that demand remains optimistic and consistent returns are expected into 2024. He also mentions the trends in the market, such as reshoring in advanced manufacturing and increased activity in energy projects due to funding programs like IRA and CHIPS. However, there are also some headwinds, including labor constraints and delays due to regulations around access to energy and environmental permitting.

The speaker discusses the timeline for infrastructure projects and the company's positive outlook. They also address a question about pricing weakness and margins in the Steel Products segment, expressing confidence in the team's performance and expecting improvement in the future.

Nucor's safety performance has improved, leading to a significant increase in earnings. While Joist and Deck has received a lot of attention, Nucor's Downstream Products division has also had a successful year, with record or near-record sales in various product groups. This diverse range of products allows Nucor to take advantage of strength in different market segments, such as advanced manufacturing, infrastructure, healthcare, and warehousing. Demand is expected to remain strong, with a healthy backlog and stable pricing. As they enter 2024, Nucor is optimistic about their market activity and momentum.

At Nucor's Investor Day in 2022, they presented their goal of reaching $6.7 billion in normalized EBITDA through their CapEx investments. As of now, they are on track to reach this goal, with $7.4 million in EBITDA for the third year. They have ongoing projects, such as building galv lines and a new micro mill, that will contribute to their success. The team is proud of their earnings and disciplined growth strategy, resulting in $30 billion in revenue, $20 billion in net earnings, and $10 billion returned to shareholders in the past 4 years. They will continue to be disciplined in their capital allocation.

The company's upcoming projects, including the West Virginia project and investments in Expand Beyond, are expected to contribute significantly to the company's earnings in the future. The Brandenburg plate mill is expected to produce 500,000 tons in 2024 and the team is focused on expanding into new markets and generating strong returns. The team has achieved impressive milestones, such as shipping 120-foot long plates to a bridge fabricator, and is confident in their projections for the mill's production.

Timna Tanners from Wolfe Research asks about Nucor's capital allocation and the company's lower cash balance. She also inquires about Nucor's potential involvement in the acquisition process for U.S. Steel. Nucor's CEO, Leon Topalian, responds by stating that they will not overpay for any assets and will remain disciplined in their approach to growth. He also mentions that Nucor is undervalued and the industry leader in terms of market cap.

The company is focused on disciplined growth and making strategic investments that deliver results for shareholders. They are also expanding into steel-adjacent downstream businesses to diversify their portfolio. They have a good opportunity for growth and plan to maintain enough liquidity to pursue it. They will spend $3.5 billion on CapEx this year and continue with share buybacks. The Gallatin plant is ramping up well and the team is executing effectively.

The company has seen record production levels at one of its facilities and is operating at a high level. They expect to continue this trend in 2024. In regards to the plate market, there is some weakness but also bright spots in areas such as power transmission and railcar manufacturing. The Skyline business is also a major source of plate demand.

Nucor believes that the plate market will remain steady with tailwinds to offset other forces. They expect to hit breakeven in the middle of the year. In terms of decarbonization efforts, the company has a multi-faceted approach and plans for CCS in 2026. They are one of the top recyclers and their EAF technology means they don't have to make expensive transitions like other companies in Europe. The focus is on transitioning to a greener and more sustainable platform as the digital economy grows.

The speaker discusses the challenges of transitioning to electric vehicles and the need for infrastructure and resources. They mention partnerships and investments, such as the Louisiana project, which will pay off in 2025 and have not been a significant financial burden for Nucor. They also mention exploring technologies for low-carbon production and strategies for sourcing raw materials.

Leon Topalian, CEO of Nucor, discusses the company's strong position in terms of capital intensity and their goal to continue improving. He also mentions the potential for Scope 2 emissions reduction through investments in nuclear technology. During the Q&A portion, a question is asked about conversion costs, which have remained around $465 per ton year-on-year. The company expects some decrease in costs as start-up expenses for growth projects subside, but not a significant amount.

The speaker discusses the strong performance of Gelatin and the plate and structural products. He explains that while there was year-on-year growth, there was a decrease in the fourth quarter due to not chasing cheap tons. The speaker also mentions the resiliency of the market and the success of Nucor's portfolio. He concludes by saying that the company's success is a multilayered story and the numbers reflect that.

The speaker thanks the questioner for their questions and congratulates them on their long-term return profile. They discuss the company's capital allocation and mention that they are primarily focused on opportunities within the U.S. rather than abroad. They also mention that their strategy is to generate 20-25% of their revenues through "expand beyond" businesses in the next 5-6 years. The speaker also notes that Nucor will likely stay in North America due to their understanding of the market and their customers.

The speaker discusses the company's investments and their goal to create capability sets for customers. They also mention the demand trends in the rebar market and their bullish outlook for the future. The weakness in heavy equipment and earthmoving machinery is discussed, but the speaker believes it will be offset by more supported construction and infrastructure projects. Metal spreads for plate have been steady in January.

Al Behr, CEO of Steel West Virginia, discusses the decline in the heavy equipment sector and the overall outlook for the company's plate business. He mentions that while the decline may continue, there are other end markets such as infrastructure and non-residential construction that will provide some growth opportunities. The company is also expecting to see incremental growth from the ramp-up of their Brandenburg plant. The next question from Curt Woodworth asks about the capital spending outlook, specifically how much of the projected growth capital will carry over into next year and the timeline for the ramp-up of Steel West Virginia. Steve Laxton, the company's CFO, responds that the $3.5 billion projection is for 2024 and mentions a potential new micro mill bar project in the Pacific Northwest.

The speaker discusses the potential impact of projects like West Virginia on the company's capital spending in the future, estimating it will likely be above $3 billion but below $3.5 billion. They also mention plans to continue evaluating the Pacific Northwest market. The speaker thanks team members, customers, and shareholders and emphasizes the importance of prioritizing health and safety. The conference has now concluded.

This summary was generated with AI and may contain some inaccuracies.