Nucor Corporation — Q2 2022 Form 10-Q
Business context and reporting period. Nucor manufactures steel and steel products, produces direct reduced iron, and processes and brokers metals. This unaudited report covers the 13 weeks and 26 weeks ended July 2, 2022; comparisons are with the periods ended July 3, 2021. Amounts below are USD.
Key financial metrics
| Metric | Q2 2022 | Q2 2021 | First six months 2022 | First six months 2021 |
|---|---|---|---|---|
| Net sales | $11.79 billion | $8.79 billion | $22.29 billion | $15.81 billion |
| Net earnings attributable to Nucor stockholders | $2.56 billion | $1.51 billion | $4.66 billion | $2.45 billion |
| Diluted earnings per share | $9.67 | $5.04 | $17.30 | $8.13 |
| Gross margin | $4.10 billion (35%) | $2.47 billion (28%) | $7.56 billion (34%) | $4.10 billion (26%) |
| Cash from operations | Not separately stated | Not separately stated | $4.73 billion | $1.88 billion |
- Q2 net earnings were a company record, surpassing the prior record set in Q4 2021. First-half earnings were also the highest in company history.
- Q2 average selling price per ton rose 44% year over year to $1,690, while outside shipments fell 7% to 6.977 million tons. For the first half, average selling price increased 55% to $1,667 and outside shipments declined 9% to 13.371 million tons.
- Q2 net earnings attributable to Nucor stockholders were 21.7% of sales, versus 17.1% a year earlier; first-half figures were 20.9% and 15.5%.
- At July 2, cash and cash equivalents were $2.00 billion, short-term investments $363 million, and restricted cash $88 million. Total current assets were $14.03 billion and current liabilities $5.36 billion; management reported a 2.6 current ratio.
- Total debt and finance lease obligations on the balance sheet were approximately $7.35 billion, including current maturities. Long-term debt fair value was approximately $6.77 billion. The funded-debt-to-total-capital ratio was 29.2%; no borrowings were outstanding under the $1.75 billion revolving credit facility.
- First-half capital expenditures were $969 million. Cash used in investing was $4.54 billion, including $3.47 billion for acquisitions. Cash used in financing was $614 million, including $1.71 billion of treasury-stock purchases and $272 million of cash dividends.
Material changes and management commentary
- Sales and earnings growth chiefly reflected higher average selling prices, which more than offset lower shipment volumes. Nucor said steel mill prices softened in the first half from Q4 2021, particularly sheet, while steel products pricing continued to rise.
- Steel products segment external sales increased 71% in Q2 and 77% in the first half; management highlighted stronger margins in joist, deck and building systems. Steel mills earnings increased year over year, while raw materials earnings rose in Q2 but declined for the first half.
- Nucor acquired a 51% controlling interest in California Steel Industries (CSI) in February for approximately $400 million, and acquired C.H.I. Overhead Doors in June for approximately $3.00 billion, net of cash acquired. C.H.I. is included in steel products and CSI in steel mills. Purchase-price allocations remained preliminary.
- Debt issuance included $1.1 billion of 2032 and 2052 notes and $1.0 billion of 2025 and 2027 notes. Nucor redeemed $500 million of 2023 notes in April and, after quarter-end, announced it intended to redeem $600 million of 2022 notes on August 15, 2022.
- Share repurchases totaled $1.71 billion in the first half; approximately $2.14 billion remained under the $4.00 billion authorization at quarter-end. The quarterly dividend was $0.50 per share.
Outlook, risks and contingencies
- Management expected Q3 2022 to remain strongly profitable, though below the record Q2, and anticipated 2022 would be Nucor’s most profitable year. It expected steel mills earnings to decline sequentially, steel products earnings to be roughly in line with Q2, and raw materials earnings to improve.
- Management cited stable, resilient demand and strong nonresidential construction demand and backlogs, while expecting lower steel mill shipments and selling prices, particularly in sheet and plate. Scrap prices had decreased entering Q3 after volatility during the first half.
- Management estimated 2022 capital expenditures at approximately $2.35 billion, focused notably on the Kentucky plate mill and West Virginia sheet mill. It said available funds and capital-market access should meet operating, working-capital and capital needs for at least 24 months.
- Risks include steel price and demand cyclicality, competition and imports, raw-material and energy price volatility, inflation and interest-rate changes, supply disruptions, environmental regulation, equipment failures, acquisition integration, and impairment of assets. Nucor described ordinary-course legal proceedings and did not expect them, individually or in aggregate, to materially harm results, financial position or cash flows. No material risk-factor changes were reported.
- The C.H.I. acquisition added substantial acquired intangibles and goodwill; management reported no interim goodwill impairment trigger for Rebar Fabrication. The C.H.I. purchase-price allocation was preliminary.
Important facts for investors to verify
- Whether Q3 pricing, shipment trends, and segment earnings tracked management’s stated outlook, especially steel mills and steel products.
- Integration and performance of CSI and C.H.I., including final purchase-price allocations, acquired intangible amortization, and expected synergies.
- Cash generation and working-capital needs alongside planned capital spending, acquisitions, dividends, and share repurchases.
- Debt and liquidity after the planned redemption of the 2022 notes, and any changes to credit ratings or covenant compliance.
- Exposure to steel, scrap, energy and other input-price movements, as well as the impact of economic conditions and ongoing tax examinations.