NEW YORK Steel
Dynamics Inc.s (SDIs) net income plunged 34.9
percent year on year in the second quarter due to a challenging
finished steel sector coupled with international weakness and
lean inventories by the steel producers customer
attributable to SDI shareholders totaled nearly $29 million in
the three months ended June 30, down from nearly $44.5 million
in the second quarter of 2012. That figure was also lower than
the $48.2 million in net income recorded in the first quarter,
the Fort Wayne, Ind.-based steel producer said late July
Net sales fell
slightly to $1.8 billion from $1.9 billion in the year-ago
period and were flat against the first quarters $1.8
The steelmaker had
previously said during its second-quarter guidance that it
would post lower earnings due to compressed profit margins,
forecasting net income in the range of 10 to 14 cents per
diluted share (
amm.com, June 19). Actual results for the period
came in at 13 cents per share.
A number of factors
were behind SDIs weaker financial results, including a
challenging sheet and structural sector, cautious customers and
oversupplied steel markets.
economic growth in China coupled with suppressed economic
growth in the European community influenced near-term market
sentiment," Mark Millett, president and chief executive
officer, said in a statement. "The persistent uncertainty in
the domestic economic environment continued to influence
customer buying patterns as they maintained low inventory
levels. Domestic oversupply, coupled with increased
quarter-over-quarter steel imports, results in decreased
quarterly selling values."
In its metals
recycling sector, OmniSource Corp., operating income fell 36.8
percent vs. the previous quarter to $15.8 million but more than
tripled from $5.1 million in the second quarter of last year.
While ferrous volumes and metals spreads remained somewhat
flat, nonferrous volumes and margins "contracted meaningfully"
in the quarter, Millett said, citing specific weakness in
copper and stainless steel scrap pricing.
Average external steel
prices were also down in the quarter, falling $8 per ton
sequentially and $73 per ton year on year to $781 per ton. At
the same time, total steel shipments were fairly flat in both
comparisons at 1.5 million tons.
Utilization rates for
SDIs steel mills fell to 83 percent in the second quarter
from 89 percent in the first quarter of 2013, caused by planned
maintenance work in April at its flat-rolled and engineered bar
structural and rail division was a bright spot, with standard
rail volumes increasing 20 percent from the first quarter.
results also included a $9-million loss related to its
Minnesota iron ore operations, down from a $14-million loss in
the first quarter. SDI owns 81 percent of Hoyt Lakes,
Minn.-based Mesabi Nugget LLC.
Looking forward, the
company said it remains optimistic on the back of a strong
automotive market, promising housing starts data and strength
in its newer projects, including its engineered special bar
quality capacity expansion and premium rail product addition,
scheduled to start at year-end.
"We remain optimistic
as the demand for high-quality steel products has not abated,"
Millet added. "The automotive market remains strong, and
manufactured goods is strengthening. Housing start data
continues to suggest increasingly higher potential for a
sustainable recovery in residential construction."