The operator introduces Nucor's first quarter 2024 earnings call and Jack Sullivan, General Manager of Nucor Investor Relations. Leon Topalian, Chair, President and CEO, along with other members of Nucor's executive team, discuss the company's financial results and business update. They remind listeners of the use of non-GAAP financial measures and forward-looking information and acknowledge the risks involved. Leon Topalian congratulates Nucor's 32,000 teammates for a safe and profitable start to the year.

In the first quarter, Nucor had strong financial performance with high EBITDA and net earnings. Shipments and pricing remained strong, and the company returned over $1.1 billion to shareholders. They also made progress on key capital investment projects and had their safest quarter in history. Nucor is committed to becoming the world's safest steel company and has a dedicated team focused on achieving this goal.

Nucor is committed to sustainability and has recently signed agreements with Mercedes Benz and Google and Microsoft to reduce carbon emissions and promote clean energy. They have also been recognized for their sustainability efforts by Barron's Magazine. In addition, Nucor has introduced a new weekly pricing update for their hot rolled coil sheet products to better serve their customers.

The company's new pricing model and shorter lead times have received positive feedback from customers. The company has recently acquired Southwest Data Products and launched a new business unit, Nucor Data Systems, to serve the data center market. This acquisition gives Nucor expanded capabilities and access to a growing market. The company is also evaluating other acquisition opportunities in high growth sectors. The CEO also attended a World Steel Association meeting, where he serves as Chair.

In the meeting, the challenges of global production overcapacity were discussed and the U.S. Commerce Department's final rule to strengthen trade regulations was acknowledged. Nucor had a solid start to the year with net earnings of $845 million, but it was slightly lower than their first quarter earnings guidance. This was due to higher administrative costs and intercompany eliminations, which were primarily caused by employee benefits and a timing difference in materials delivery for construction projects.

In the first quarter, Nucor experienced higher activity and profits than expected between its operating divisions. This was due to the company's diverse and integrated structure, which provides long-term strategic benefits but can result in short-term earnings adjustments. The steel mills saw a significant increase in pre-tax earnings, driven by improved results in the sheet business. However, the Steel Products segment saw a decrease in shipments, possibly due to adverse weather conditions. While margins have decreased for downstream steel products, the segment continues to generate strong returns and cash flows. Some product lines, such as tubular products, saw higher pricing and margins, while others, like joist and deck, saw moderating contributions. Overall, the joist and deck business remains the largest contributor to the segment's earnings.

The business has backlogs and lead times of 4 to 6 months, but earnings are expected to stabilize in the second half of the year. The raw material segment produced pretax earnings of $10 million, but margins were compressed due to lower metallics prices. The company has a strong cash position and generated $460 million in cash from operating activities in the first quarter. They have a balanced approach to capital allocation, investing in growth projects and returning over $1.1 billion to shareholders through dividends and share repurchases. The company has a healthy cash and liquidity position, enabling them to continue their expected capital expenditures and pursue acquisition opportunities.

Nucor's balance sheet is strong and they expect lower earnings in the second quarter due to reduced prices in their steel mill and steel products segments. However, their raw materials segment is expected to have higher profitability. Backlogs are healthy and the U.S. economy is showing resilience, particularly in certain industries. Overall, demand appears stable in the near-term.

The speaker remains optimistic about demand for steel products due to reshoring, repowering, and rebuilding. They believe that while there may be some declines in certain product groups like bar and plate volumes, the overall market is still strong and prices are higher than pre-pandemic levels. They expect Q2 to be a little softer, but still generate strong returns for shareholders.

The overall demand for steel is expected to be stable or slightly improving in the second quarter, with the exception of the heavy equipment and transportation markets. The conversion costs for steel mills are expected to decline slightly due to higher utilization rates. The company also expects improvement in raw materials, particularly in DRI and recycling operations, which have been facing margin compression due to declining scrap prices. The commissioning of a new advanced metal recovery plant is expected to incur additional start-up costs.

In the paragraph, the speaker discusses the costs and margins for the company in the second quarter, mentioning the successful execution of extended outages in DRI and the benefits of running higher rates of DRI in the melt pick. They also mention the addition of advanced recycling separation technology at one facility, which incurred a cost of $9 million in the first quarter but will have minimal impact in the second quarter. This technology allows them to recover higher rates of copper and aluminum and they plan to expand it across their recycling platform. The speaker clarifies that this technology is different from the process that allows them to switch between prime and substitute materials at the facility.

The company is upgrading obsolete scrap and shredded scrap at their Berkeley facility, producing 2,500 tons per ship as an offset for prime scrap or pig iron. They plan to expand this capability to other mills as well. In terms of downstream products, joist and deck order entry was up but volume trends were negative. The company expects price stabilization in the back half of the year and historically, joist and deck had an operating margin of 10-15%. The downstream products group has performed well over the last few years, generating $1 billion of net earnings or more for 10-11 quarters.

The speaker expresses pride in the team's ability to provide solutions and serve customers with Nucor's diverse product offerings. They mention moderating pricing but remain optimistic about the resilience of non-residential construction and have seen an increase in quote and booking activity in recent months. The speaker also notes stable market prices and expects improved volumes in the second quarter. They remain optimistic about the future and the megatrends in the industry.

The company's product breadth and solutions focused approach puts them in a good position to benefit from current market trends. The downstream products teams are working together to take care of customers and drive earnings. The segment profits have significantly increased compared to pre-pandemic levels. The company has a diverse mix of downstream products, including joist and deck, pipe and tube, and rebar fabrication. The infrastructure spending outlook is uncertain, but the company's bar and plate volumes are steady. The Brandenburg plate mill is performing well and the company expects similar volume levels as previously guided.

Leon Topalian discusses the impact of recently passed legislation on Nucor's growth strategy. The CHIPS Act, IRA Next, and IIJA are expected to bring in 5-8 million tons of annual production in the next 4-5 years. Nucor is also focusing on growth areas such as data centers and towers, which are expected to have double-digit growth in the next 5 years.

The company's downstream divisions, including playing, sheet beams, and products, will play a significant role in the future. The infrastructure spending delay may affect demand, but the company is optimistic about long-term demand for long products. The Brandenburg ramp up is going according to plan, with a focus on increasing volume in the second half of the year. The company continues to add new capabilities and expects volume to increase. Q2 may mark the trough for the divisions as prices normalize and volume direction improves.

The speaker is discussing the outlook for the H2 earnings and mentions that there is more stability in certain products, such as joist and deck, which could potentially lead to a trough in the division. They also mention the positive trend of stabilization in prices and express confidence in the back half of the year. However, they are hesitant to declare a trough at this point due to the variability in their business model. They also mention that other parts of their portfolio may not have the same level of stability due to their backlogs and lead times.

The speaker is hesitant to say that the second quarter is a trough, but acknowledges the positive position of joist and deck. They also mention that non-res construction is somewhat seasonal, with Q1 having lower volumes and Q2 and Q3 being more robust. They then discuss the potential impact of their recent acquisition in the data center industry, which is projected to have significant growth in the next few years. They highlight the demand for power and infrastructure in this industry and their plans to continue growing and providing holistic solutions to data center builders.

The company is focused on investing in megatrends that will generate strong growth and returns for shareholders, including data centers. They recently acquired a company that specializes in providing furniture for data centers and estimate this market to be worth over $2 billion and growing.

Nucor believes that their recent acquisition of Southland Water Technologies will help them become a preferred supplier to hyperscalers and key co-locators in the data center industry. They are excited about the potential for growth in this space and are already receiving interest from customers. Regarding their Econiq product, Nucor is confident in their sustainability efforts and believes they are ahead of other nations in this area. They are not standing still and are able to continue investing in various industries, such as data centers, thanks to their current success. When asked about the potential premiums for their Econiq product, Nucor explains that it is a nuanced answer due to the complexity of sustainability.

Nucor has recently announced a partnership with Mercedes Benz, which was important for the company to work towards reducing emissions and producing renewable energy. Nucor was the first to provide 100% net zero carbon steel at scale, with the ability to ship over a million tons. The company is focused on identifying solutions for customers who have different needs, such as not wanting to use regulations or offsets. Nucor's starting point for emissions is already significantly lower than traditional steelmaking processes, and their geographic footprint allows them to further lower emissions in certain regions. The company was deliberate in setting their net zero target and is focused on controlling the process without relying on government subsidies or technologies that would make steelmaking too expensive.

The speaker discusses the company's outlook, noting that there will be continued improvement in overall performance. They emphasize the importance of sustainability and flexibility in meeting customer needs. They also mention that there are premiums being achieved in the US and Europe. The speaker is asked for more details on the outlook, particularly regarding the decline quarter-over-quarter. They mention that demand usually improves in the second quarter for key end markets and discuss the impact of corporate eliminations, in-process inventories, and projects on the second quarter guidance.

The speaker, Leon Topalian, discusses the strength of Nucor's diversity and its ability to provide a wide variety of products to customers. He mentions that a significant portion of their revenue comes from internal shipments within the company. This makes it difficult to accurately track and predict the impact of corporate eliminations. The speaker acknowledges that the market is softening, but is optimistic about the back half of the year. Another speaker, Steve Laxton, adds that they see volume increases in both steel and products.

The speaker explains that the quarterly results for the second quarter may be different due to pricing pressures on mills and products. They also address the difficulty in providing guidance for corporate eliminations. They then discuss their approach to managing their balance sheet, mentioning their long-term perspective and discipline in deploying capital. The first quarter saw a significant amount of buybacks, but they still have a strong balance sheet and are actively pursuing growth opportunities.

The speaker discusses the performance of the plate market, noting that while there has been a decrease in apparent consumption and elevated inventories, certain sectors such as power transmission and bridge work remain strong. They also mention upcoming potential growth in the infrastructure and military sectors. The company plans to double production at the Brandenburg plant in the next few quarters.

The paragraph discusses the current state of the plate market, which is experiencing low volume but high margins due to its specialized nature. However, there are weaker segments, such as vertical and high rise construction, which are not seeing much activity. The market is expected to remain steady for the rest of the year, but there may be some slowing in the second half due to the upcoming election. The biggest driver of lower volumes in the first quarter was the lack of restocking, which was seen in the previous year. There is also concern about imports and trade laws, and efforts will be made to compete with them through both commercial and regulatory means.

The speaker discusses the importance of holding countries accountable for agreements and provides context for the play market. They also mention the customer spot index and how it was created in response to customer requests for a more consistent, reliable, and relevant pricing system. The goal of the index is to provide real-time pricing on a weekly basis for top band spot tons, with a commitment to maintaining a relevant price page each week.

The paragraph discusses the drivers behind the decision to create a new pricing system, called the CSP, which aims to reduce volatility and price speculation in the hot band market. The main drivers were customer demand and the desire to stabilize the market. The company will wait for customer feedback before fully implementing the new system, and the goal is to make it easy and transparent for customers. The company also considered past market cycles and how the CSP could potentially prevent speculative buying and maintain stability. Positive feedback has been received from customers so far.

In his closing statement, CEO Leon Topalian thanks Nucor employees for their hard work, emphasizes the company's focus on the health and safety of its team members, and expresses gratitude to customers and shareholders for their trust and support. The conference call is then concluded.

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