Steel Dynamics’ fabrication operations
Previously, we noted that lower steel prices took a toll on Steel Dynamics’ 2Q15 earnings. However, its fabrication operations delivered record earnings in the quarter. The segment’s performance has improved significantly over the last few quarters. Steel Dynamics has six fabrication plants spread across different regions. It manufacturers products like joists and girders. They’re mainly used in nonresidential construction.
The above chart shows the financial performance of Steel Dynamics’ fabrication operations. In 2Q15, the segment generated record operating income of $28 million—27% more than the previous record. The operating income per ton also rose 30% over 1Q15 to a record $252 per ton. The strong underlying demand from the nonresidential construction industry boosted the segment’s earnings.
US construction spending has exceeded $1 trillion on a SAAR (seasonally adjusted annual rate) for two consecutive months. Strong construction markets benefit companies like Commercial Metal Company (CMC) and Gerdau (GGB) as well. They’re leading rebar suppliers. Rebars—or reinforcing bars—are widely used in nonresidential construction.
Outlook for fabrication operations
According to Steel Dynamics, the record per ton profitability of fabrication operations might not be sustainable in the second half of the year. However, strong volumes could more than offset any decline in the per ton profitability. Construction indicators have been quite strong over the last few months.
Meanwhile, after posting an operating loss in the previous quarter, Steel Dynamics’ metal recycling operations also posted profits in 2Q15. We’ll discuss this in detail in the next part of the series.
Steel Dynamics had a capacity utilization ratio of 87% in 2Q15. This compares favorably with an industrywide utilization ratio of ~74%.
Verizon Communications stock (VZ) closed down 2.09% on Tuesday after the leading US mobile carrier reported mixed results for the first quarter of 2019 before the market bell yesterday.
Several European auto companies want Nokia’s (NOK) patent business subjected to an antitrust probe.
The first-quarter semiconductor earnings season has begun, and the stock market is showing bullish sentiment as investors buy ahead of earnings releases.
Netflix (NFLX) is working its way through a series of price increases in several markets, including the United States and parts of Europe.
Netflix (NFLX) is aiming to add 14.6 million paying subscribers in the first six months of 2019.
Earlier today, the second-largest US automaker, Ford Motor Company (F), announced a plan to invest $500 million in Plymouth-based automotive company Rivian.