Steel Dynamics, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; the supplied text does not provide separate fourth-quarter financial results. Steel Dynamics produces steel, recycles metals, and fabricates steel products. In Q4 2023, it began reporting four segments: steel, metals recycling, steel fabrication, and aluminum; prior segment comparisons were recast.
Financial performance
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $18.80 billion | $22.26 billion | Down 16% |
| Gross profit / gross margin | $4.05 billion / 21.5% | $6.12 billion / 27.5% | Margin down about 6.0 percentage points |
| Operating income / operating margin | $3.15 billion / 16.8% | $5.09 billion / 22.9% | Down 38% |
| Net income attributable to Steel Dynamics | $2.45 billion | $3.86 billion | Down 37% |
| Diluted earnings per share | $14.64 | $20.92 | Down 30% |
| Cash flow from operations | $3.52 billion | $4.46 billion | Down 21% |
| Capital expenditures | $1.66 billion | $0.91 billion | Up 82% |
Net margin attributable to Steel Dynamics was approximately 13.0%, versus 17.4% in 2022. Operating cash flow less property, plant and equipment purchases was approximately $1.86 billion in 2023; this is a simple calculation, not a company-reported free-cash-flow measure.
Segment results
| Segment | FY2023 sales | FY2023 operating income | Comparison with FY2022 |
|---|---|---|---|
| Steel operations | $13.07 billion | $1.88 billion | Sales down 13%; operating income down 39% |
| Metals recycling | $4.36 billion | $88.7 million | Sales down 1%; operating income down 24% |
| Steel fabrication | $2.81 billion | $1.59 billion | Sales and operating income each down 34% |
| Aluminum operations | No sales | Loss of $23.8 million | Pre-operating construction and start-up phase |
Liquidity, debt, and capital returns
- Year-end liquidity was reported at $3.54 billion: $1.40 billion cash and equivalents, $951.9 million short-term and other investments, and $1.19 billion of revolver availability.
- Total debt was $3.11 billion; the long-term debt-to-capitalization ratio was 25.8%, down from 27.7% a year earlier. The $1.2 billion unsecured revolver matures in July 2028, with no borrowings outstanding at year-end. The company reported compliance with its debt covenants.
- Approximately $460 million of debt matures in 2024, including $400 million of 2.8% senior notes due December 2024.
- Working capital was $4.5 billion, down $1.2 billion, or 21%, primarily as receivables and inventories declined and 2024 debt maturities were classified as current.
- Capital expenditures were $1.66 billion, principally for aluminum and steel projects. The company reported $1.1 billion of outstanding construction commitments at year-end.
- Dividends declared were $1.70 per share, up from $1.36. The company repurchased $1.45 billion of shares during 2023 and had $1.4 billion remaining under its November 2023 repurchase authorization.
Material changes and management commentary
- Management described domestic steel demand as firm, with support from construction, automotive, and energy markets, and customer inventories below historical averages. Steel operations achieved record shipments of 12.8 million tons, up 5%.
- Lower selling prices more than offset higher volumes: average steel selling prices fell 18% year over year, while metallic raw-material costs per net ton fell 13%. Steel metal spread declined 20%, driving lower steel operating income despite record shipments.
- Metals recycling shipments increased, but lower scrap selling prices limited revenue growth and weaker spreads reduced operating income. Fabrication demand remained solid, though volumes and prices eased from 2022 records; its order backlog extended through the first half of 2024.
- Sinton continued ramping up amid equipment-related challenges; it shipped 1.4 million tons in 2023, up 67% from 2022. Four additional steel coating lines were expected to begin operating in early 2024.
- The company is executing a planned $2.7 billion recycled-aluminum flat-rolled mill and two satellite slab centers. Satellite operations were expected to start in late 2024 and mid-2025, and mill commissioning was expected in mid-2025. Management said available liquidity and anticipated operating cash flow were sufficient for planned 2024 capital requirements.
- No specific earnings or revenue guidance is provided in the supplied filing text. Management’s forward-looking statements are subject to the risks described below.
Risks, contingencies, and unusual items
- Results remain exposed to steel-industry cyclicality, imports and global overcapacity, steel-scrap and other raw-material prices, energy costs, and the ability to maintain product spreads.
- Growth projects carry execution, cost, timing, staffing, and market-demand risks. Sinton has faced equipment and ramp-up issues; aluminum operations remain under construction and have not yet generated sales.
- Environmental laws, permits, remediation obligations, and potential climate-related requirements may raise costs or constrain operations. The company reported $54.6 million of environmental monitoring and compliance costs and $5.4 million of environmental capital expenditures in 2023; environmental remediation accruals totaled $9.2 million.
- Outstanding commodity contracts had a cumulative unrealized loss of $6.8 million at year-end, substantially all expected to settle in 2024. The company said the associated customer contracts were expected to be completed.
- Various legal and environmental proceedings were not expected to have a material effect on financial condition, results, or liquidity; certain fines and penalties disclosed through year-end did not exceed $1 million in aggregate.
- The company reported no goodwill or long-lived-asset impairment charges in 2023. The annual goodwill test involves significant assumptions, including forecast cash flows and discount rates.
Most important facts for investors to verify
- Whether steel prices and scrap costs stabilize or further compress metal spreads and margins.
- Whether Sinton’s operational ramp and the new coating lines meet performance and timing expectations.
- Whether the $2.7 billion aluminum project stays within budget and reaches planned start-up dates, and how it will be funded alongside other capital needs.
- Liquidity and refinancing plans for 2024 debt maturities, construction commitments, dividends, and share repurchases.
- Potential effects of import competition, energy and raw-material volatility, and evolving environmental requirements.
The independent auditor issued an unqualified opinion on the financial statements, and management and the auditor concluded internal control over financial reporting was effective as of December 31, 2023.