Nucor(NUE) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Nucor reported earnings of $3.16 per share for Q4 2023, leading to a full-year earnings of $18 per share, marking the third most profitable year in the company's history [5][6] - Consolidated net earnings for Q4 2023 were $785 million, including $127 million of pre-operating startup costs, exceeding guidance due to better-than-expected performance in the Steel Mills segment [19][21] - The company generated over $1.5 billion in operating cash flow during Q4, with working capital contributing about $250 million [20] Business Line Data and Key Metrics Changes - The Steel Mills Group generated $588 million in pre-tax earnings for Q4, a 33% decrease from the previous quarter, with total steel mill shipments declining by 4% [21] - The Steel Products segment delivered pre-tax earnings of $656 million, contributing over half of the total segment earnings for Q4, marking its second-best year with $3.4 billion in segment earnings for 2023 [22] - The Raw Materials segment posted a pre-tax loss of approximately $14 million for the quarter, with stable pricing but lower output and increased per ton costs due to planned outages [22] Market Data and Key Metrics Changes - The U.S. economy remains resilient, with steel-intensive megatrends driving increased demand for Nucor's products, particularly in sectors like infrastructure and advanced manufacturing [6][15] - Non-residential construction, Nucor's largest end market, is expected to grow double-digits over the next two years, offsetting softness in more rate-sensitive sectors [17] - The company anticipates federal programs supporting megatrends to add between 5 million to 8 million tons of incremental annual demand for steel in the coming years [15] Company Strategy and Development Direction - Nucor's strategy focuses on value creation through prudent capital deployment, with over $12 billion invested in CapEx and strategic acquisitions since 2020 [10] - Sustainability is a key differentiator, with Nucor committing to net-zero steelmaking by 2050 and being the largest recycler in the Western Hemisphere [11][12] - The company is expanding its "Expand Beyond" strategy into steel-adjacent platforms, contributing approximately $415 million in EBITDA for 2023, with a goal of reaching $700 million in the coming years [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term prospects for the steel industry, despite some near-term headwinds such as slower adoption rates for electric vehicles and delays in offshore wind projects [16] - The outlook for 2024 appears stable, with expectations of improved performance in the steel mills and raw materials segments, partially offset by weaker earnings from the Steel Products segment [26][27] - Management highlighted the importance of maintaining a strong balance sheet and liquidity to support growth and capital allocation strategies [24] Other Important Information - Nucor invested $2.2 billion in CapEx and returned $2.1 billion to shareholders in 2023, representing 46% of net earnings [6][23] - The company expects total capital expenditures of approximately $3.5 billion for 2024, with a focus on growth projects [25] Q&A Session Summary Question: Market confidence in commercial construction and infrastructure - Management noted strong performance in long products divisions and increased utilization rates, indicating optimism for continued demand in structural products [30] Question: Update on EBITDA goals from Investor Day - Management reaffirmed confidence in reaching a normalized EBITDA of $6.7 billion, with ongoing projects expected to contribute positively [40][42] Question: Capital allocation and M&A pipeline - Management confirmed a disciplined approach to potential acquisitions, emphasizing the importance of not overpaying for assets while maintaining liquidity for growth opportunities [48][50] Question: Status of Brandenburg plate mill profitability - Management expects Brandenburg to reach breakeven by mid-2024, with ongoing improvements in production capabilities [55] Question: Conversion costs and future expectations - Management indicated that conversion costs are expected to decrease slightly as growth projects stabilize, but not significantly [61]