Bloomberg News

Nucor Profit Tops Estimates After Steel Shipments Increase

October 20, 2011

(Updates with closing share price in sixth paragraph.)

Oct. 20 (Bloomberg) -- Nucor Corp., the largest U.S. steelmaker by market value, posted third-quarter earnings and sales that beat analysts’ estimates after it shipped more metal to customers.

Net income rose to 57 cents a share in the three months ended Oct. 1 from 7 cents a year earlier, the Charlotte, North Carolina-based company said in a statement today. The average of 16 analysts’ estimates compiled by Bloomberg was for 52 cents a share while Nucor last month forecast 45 to 55 cents. Sales gained 27 percent to $5.25 billion topping the $4.85 billion average of 12 estimates.

Nucor said total shipments to external customers rose 3 percent to 5.79 million tons and operating rates at its mills climbed to 74 percent from 68 percent.

U.S. steelmakers are recovering from the collapse in orders from automotive and construction industries that followed the economic crisis in 2008. They used 76 percent of their capacity at the end of the third quarter, up from 71 percent a year earlier, according to data from the American Iron and Steel Institute.

“Look at capital goods: It’s in an expansion phase in the United States,” Mark Parr, an analyst with KeyBanc Capital Markets Inc. in Cleveland, said in a telephone interview yesterday. “It’s fully recovered from the recession and order momentum is higher than it was in 2008.”

Shrinking Margins

Nucor rose 2.9 percent to $35.91 at the close in New York.

Net income advanced more than sevenfold to $181.5 million from $23.5 million in the third quarter. Nucor said the current quarter will be less profitable as margins for steel sheet and plate shrink.

“End markets such as automotive, heavy equipment, energy and general manufacturing have continued to show the most strength compared to 2010 but have shown very little improvement compared to the first half of 2011,” Nucor said in the statement.

David Martin, a New York-based analyst with Deutsche Bank AG, said for U.S. steel producers to be “operating on all cylinders,” will require capacity utilization to increase to the mid-80 percent range.

Growth “is not going to be coming from the end markets that have been driving the business the last couple years,” he said yesterday in an interview. “It’s going to have to come from a pretty significant improvement in the construction industry.”

Nucor said it’s on schedule to complete construction and start production at its direct reduced iron plant in Louisiana in mid-2012.

--Editors: Simon Casey, Steven Frank

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net


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