Nucor Corporation — Q1 2024 Form 10-Q
Reporting period: 13 weeks ended March 30, 2024; comparison is the 13 weeks ended April 1, 2023. Financial statements are unaudited. Nucor manufactures steel and steel products and produces and brokers raw materials, reporting steel mills, steel products, and raw materials segments.
Financial performance
- Revenue: $8.14 billion, down 7% year over year. Average selling price per ton fell 3% to $1,307; outside shipments declined 3% to approximately 6.224 million tons.
- Earnings: Net earnings attributable to Nucor stockholders were $844.8 million, down from $1.137 billion; diluted EPS was $3.46 versus $4.45. Earnings before income taxes and noncontrolling interests were $1.225 billion versus $1.597 billion.
- Margins: Gross margin was $1.52 billion, or 19% of sales, compared with $2.00 billion, or 23%. Net earnings attributable to stockholders were 10.4% of sales versus 13.0%.
- Segments: Steel mills pretax earnings increased to $1.102 billion from $838.4 million, while steel products declined to $511.6 million from $970.8 million and raw materials fell to $9.6 million from $58.1 million. Steel-products sales fell 23%; steel-mills sales rose 4%.
- Cash flow and investment: Operating cash flow was $459.7 million, down from $1.207 billion. Capital expenditures were $670.3 million, implying cash flow after capital expenditures of negative $210.7 million. Investing activities used $889.7 million; financing activities used $1.396 billion.
- Liquidity: Cash, cash equivalents, short-term investments, and restricted cash totaled $5.54 billion at quarter-end, versus $7.13 billion at year-end 2023. The current ratio was 4.0, up from 3.6.
- Debt and equity returns: Balance-sheet short-term debt and debt/finance lease obligations totaled approximately $6.85 billion. Funded debt to total capital was 24.0%; no borrowings were outstanding on the $1.75 billion revolving facility. Annualized return on average stockholders’ equity was 16.2%, versus 24.3%.
Material changes and management commentary
Lower steel-products profitability—especially in joist and deck—was the primary reason earnings declined, reflecting reduced selling prices and volumes as results moderated from unusually high recent-year levels. Steel-mills profitability improved, driven by higher selling prices and metal margins, particularly in sheet. Raw-materials earnings weakened due to scrap-processing margin compression and lower DRI profitability. Pre-operating and start-up costs were approximately $125 million, compared with $82 million, primarily related to the Kentucky plate mill and West Virginia sheet mill project.
Management expects Q2 2024 earnings to decrease from Q1, principally because of lower steel-mills selling prices; modestly higher steel-mills volumes are expected to partially offset the decline. Steel-products earnings are expected to decrease moderately, while raw-materials earnings are expected to improve. Management believes steel-products profitability will remain above pre-pandemic averages and that joist and deck prices may stabilize approaching the second half of 2024.
Outlook, liquidity plans, and risks
- Management estimates 2024 capital expenditures of approximately $3.5 billion, compared with $2.2 billion in 2023, for projects including Indiana and West Virginia sheet mills, a North Carolina rebar micro mill, and Towers & Structures locations.
- Management expects available operating funds, cash and investments, and credit facilities to meet existing operations’ capital and working-capital needs for at least 24 months. The quarterly dividend was $0.54 per share; the May 2024 payment was declared and is Nucor’s 204th consecutive quarterly dividend.
- Nucor repurchased 5.538 million shares for approximately $1.00 billion in Q1. Approximately $2.32 billion remained under its discretionary $4.00 billion repurchase authorization at March 30, 2024.
- Key disclosed risks include steel-market cyclicality and pricing, imports and trade policy, demand and construction activity, raw-material and energy costs, equipment disruptions, foreign exchange, environmental regulation, and execution of capital projects and acquisitions. Management reported no material changes to the 2023 Form 10-K risk factors.
Contingencies and other items
Nucor is negotiating a combined settlement concerning alleged Clean Air Act violations at its Louisiana DRI facility; management does not expect the settlement to be material. The company states that other ordinary-course legal proceedings are not expected to have a material adverse effect. The IRS is examining the 2015, 2019, and 2020 federal returns; certain Canadian and other jurisdiction returns are also under examination. Management estimated a 2024 effective tax rate of approximately 22.1%; Q1’s rate was 21.7%, versus 22.9% a year earlier. Disclosure controls were deemed effective, with no material internal-control changes reported.
Important facts for investors to verify
- Whether steel-products prices and volumes stabilize as management expects, particularly in joist and deck.
- Q2 steel-mills price and volume trends and whether raw-materials profitability improves as forecast.
- Returns and timing for the large 2024 capital program, including West Virginia and Indiana sheet-mill projects.
- Cash generation relative to capital spending, dividends, and continued share repurchases.
- Outcome and financial impact, if any, of the Louisiana environmental settlement and open tax examinations.