Nucor(NUE) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Nucor generated EBITDA of approximately $1.3 billion and earned $2.6 per diluted share in Q2 2025, representing a significant improvement over Q1 results driven by higher average selling prices in the steel mill segment and stable pricing with higher volumes in the steel products segment [5][14] - Year-to-date adjusted earnings were $782 million or $3.37 per share, with Q2 results including pre-operating and startup costs of approximately $136 million or $0.45 per share [14][15] - Total capital return to shareholders for the first half of the year reached $758 million, with $329 million returned in Q2 alone [5][19] Business Line Data and Key Metrics Changes - The steel mills segment generated pre-tax earnings of $843 million, more than triple that of the prior quarter, driven by higher average selling prices, particularly in sheet and plate operations [15][17] - The steel products segment achieved pre-tax earnings of $392 million, a 28% increase over the prior quarter, supported by stable pricing and higher volumes [9][17] - The raw materials segment realized pre-tax earnings of approximately $57 million, an increase of about 95% over Q1 [18] Market Data and Key Metrics Changes - Nucor's steel mills backlog at the end of Q2 was up nearly 30% compared to the same time last year, indicating strong demand [15][16] - The pricing environment for HRC has remained stable, with spot prices within a 5% band around $900 per ton for the past 16 weeks [16] - Bar shipments were 13% higher in the first half of the year, while plate shipments to the bridge market rose 35% for 2025 [21][22] Company Strategy and Development Direction - Nucor is focused on executing its growth strategy and creating value for shareholders, customers, and communities while maintaining a strong safety record [4][5] - The company is expanding its capabilities with new projects, including a rebar micro mill in Lexington, North Carolina, and a melt shop in Kingman, Arizona, which are expected to ramp up production in the coming quarters [7][8][44] - Nucor supports the administration's actions to strengthen tariffs and trade laws to protect domestic steel producers from unfair imports [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand for steel driven by technology and advanced manufacturing projects, infrastructure spending, energy sector growth, and data center construction [20][21][22][24] - The outlook for Q3 indicates nominally lower consolidated earnings compared to Q2, with expectations of modest margin compression in the steel mill segment [25][26] - Management highlighted the importance of maintaining a strong balance sheet and investment-grade credit profile, with a total debt to capital ratio of approximately 24% [19] Other Important Information - Nucor's capital expenditures for the quarter totaled $954 million, with plans to deploy approximately $3 billion in CapEx for the year [5] - The company has a diverse raw material supply chain, allowing it to optimize costs and adapt to changing market conditions [12][13] Q&A Session Summary Question: Can you break down the margin compression in steel products? - Management indicated that margin compression is not due to weak demand but rather a lag effect from orders taken in late Q4 and early Q1, with recent price increases announced [28][31][34] Question: What are the biggest opportunities to displace imports? - Management noted that opportunities exist across various product lines, with utilization rates around 85% and a focus on meeting demand without stockpiling [35][37] Question: Can you discuss the ramp-up of the Lexington and Kingman facilities? - Management expressed excitement about the ramp-up of these facilities, with expectations for positive contributions to EBITDA in Q3 and Q4 [43][44][47] Question: What is driving the expected margin compression in the steel mills segment? - Management cited the impact of tariffs on raw materials and a lag effect in pricing as key drivers of the expected margin compression [55][56] Question: Have you seen any tariff-led costs in Q2? - Management confirmed that there were no tariff-led costs impacting Q2 results [69] Question: What is the outlook for working capital in H2? - Management indicated that a significant build in working capital in H1 is expected to pivot positively in H2, leading to improved free cash flow [78]