Steel Dynamics Reports Fourth Quarter and Record Annual 2022 Results

News provided by

25 Jan, 2023, 16:30 ET

Share this article

FORT WAYNE, Ind., Jan. 25, 2023 /PRNewswire/ --

Annual 2022 Performance Highlights:

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter and annual 2022 financial results. The company reported fourth quarter 2022 net sales of $4.8 billion and net income of $635 million, or $3.61 per diluted share. Excluding the impact from the following items, the company's fourth quarter adjusted net income was $769 million, or $4.37 per diluted share:

The company also realized a fourth quarter 2022 benefit of $19 million, or $0.11 per diluted share, related to state and federal prior year return to provision reconciliations.

Comparatively, the company's sequential third quarter 2022 earnings were $5.03 per diluted share, and adjusted earnings were $5.46 per diluted share, excluding costs of $0.43 per diluted share associated with the startup of Sinton. Prior year fourth quarter earnings were $5.49 per diluted share and adjusted earnings were $5.78 per diluted share, excluding costs of $0.18 per diluted share associated with Sinton, additional performance-based companywide special compensation of $0.08 per diluted share, and a contribution to the company's charitable foundation of $0.04 per diluted share.

"The team delivered a tremendous operational and financial performance during 2022, achieving record net sales of $22.3 billion, operating income of $5.1 billion, and adjusted EBITDA of $5.5 billion," said Mark D. Millett, Chairman, President, and Chief Executive Officer. "Numerous individual operating and financial records were attained during the year. Across the company, our teams achieved best-in-class performance, while keeping each other safe. I am proud to work alongside each of them. Based on their performance, we achieved record annual cash flow from operations of $4.5 billion and ended the year with record liquidity of $3.4 billion, while at the same time meaningfully growing our business through significant organic growth investments, acquisitions, maintaining a positive cash dividend profile, and executing on our share repurchase program. We believe we are already one of the lowest carbon emission steel producers in the world, yet our teams continue to make great progress toward achieving our decarbonization goals. We have a firm foundation for our continued long-term, strategic growth, and ongoing value creation.

"Domestic steel demand was solid throughout the year supported most significantly by the construction, automotive, industrial, and energy sectors," continued Millett. "Customer steel inventories remained at below historical averages for most of the year, allowing for steady order patterns. Our steel operations achieved record 2022 annual shipments of 12.2 million tons and its second highest annual operating income of $3.1 billion. The strength in the non-residential construction market drove earnings for our steel fabrication business, resulting in record annual shipments of 856,000 tons and record 2022 operating income of $2.4 billion. Despite a challenging pricing environment throughout much of the year, our metals recycling teams achieved operating income of $130 million. The strength of our diversified, value-added circular manufacturing model was certainly evidenced in 2022."

Fourth Quarter 2022 Comments

Fourth quarter 2022 operating income for the company's steel operations was $178 million, lower than sequential third quarter results, based on seasonally lower shipments and metal spread compression, particularly within the company's flat rolled operations. Metal spread compression was amplified by higher raw material costs, as the company's steel operations work through high priced pig iron ordered in early 2022 in reaction to the Ukraine and Russia supply-chain disruptions. The fourth quarter 2022 average external product selling price for the company's steel operations decreased $257 sequentially to $1,124 per ton. The average ferrous scrap cost per ton melted at the company's steel mills declined $58 to $414 per ton.

Fourth quarter operating income from the company's metals recycling operations improved sequentially to $14 million, based on stronger shipments and increased metal margins, which more than offset lower ferrous and nonferrous scrap selling values. The company believes North American scrap prices have firmed with expectations for somewhat seasonally stronger pricing in the first quarter 2023.

The company's steel fabrication business achieved another record quarter, with operating income of $682 million, based on steady realized selling values, lower steel input costs, and a continued steady non-residential construction demand environment. Fourth quarter 2022 steel fabrication shipments of 209,000 tons were strong, and the outlook remains positive, supported by strong product pricing and the company's order backlog extending well into 2023.

Annual 2022 Comparison

Annual 2022 net income was a record $3.9 billion, or $20.92 per diluted share, with record net sales of $22.3 billion, as compared to net income of $3.2 billion, or $15.56 per diluted share, with net sales of $18.4 billion in 2021. Excluding the impact from the following items, the company's 2022 adjusted net income was $4.2 billion, or $22.68 per diluted share:

Similarly, adjusting for the company's Texas steel mill construction costs, performance based special compensation, and a contribution to the company's charitable foundation, annual 2021 net income would have been $3.3 billion, or $16.09 per diluted share.

Annual 2022 record net sales increased 21 percent and operating income increased 18 percent to a record $5.1 billion, when compared to 2021. Higher net sales and earnings were driven by record product pricing and volume within the company's steel fabrication business, resulting in record annual segment operating income of $2.4 billion. In comparison to last year, average 2022 annual steel fabrication selling values more than doubled to $4,976 per ton. Operating income for the company's steel operations was $3.1 billion in 2022, based on record volume and stable average steel product pricing coupled with a six percent increase in average per ton melted scrap costs.

Based on the company's differentiated business model and highly, variable cost structure, the company achieved record annual cash flow from operations of $4.5 billion during 2022. The company also invested $909 million in capital investments, funded growth acquisitions of $357 million, paid cash dividends of $237 million, and repurchased $1.8 billion of its common stock representing 12 percent of its outstanding shares, while increasing liquidity to a record $3.4 billion as of December 31, 2022.

Outlook

"Customer order entry activity continues to be healthy across our businesses," said Millett. "Steel pricing has firmed, and our order activity and backlogs remain solid. We believe North American steel consumption will increase in 2023, and that demand for lower-carbon emission, U.S. produced steel products coupled with lower imports will support steel pricing. Our steel fabrication operation's order backlog also remains historically strong based on volume and forward pricing levels reaching past the first half of 2023. Since acquiring ROCA in October, their integration into our Mexican metals recycling operations is also proceeding well and will benefit our scrap and steel businesses in 2023. This environment, in combination with our existing and recently announced expansion initiatives, are firm drivers for our continued growth in the coming years.

"Steel Dynamics is in a position of strength as we enter 2023. We are ramping up operations at our new state-of-the-art electric arc furnace flat rolled steel mill located in Texas. The product quality is excellent, and grade development and dimensional tolerances have exceeded our expectations. Based on our current forecast, we expect Sinton's annual utilization to be around 80 percent for 2023. Also, our four additional value-added flat rolled steel coating lines comprised of two paint lines and two galvanizing lines with Galvalume® coating capability, are expected to begin operating in the second half of 2023. One set will be located onsite at Sinton, providing it with the same diversification and higher-margin product capabilities as our two existing flat rolled steel divisions. The other two lines will be placed at our Heartland Flat Roll Division to support growing coated flat rolled steel demand in the region and to further increase the diversification and cash generation capacity of our existing Midwest operations.

"We are quickly progressing on our aluminum flat rolled products mill and are incredibly excited about this meaningful growth opportunity, which is aligned with our existing business and operational expertise," said Millett. "The team has placed orders for critical equipment, and the rolling mill site location in Columbus, Mississippi is exceptional. We have intentionally grown with our customers' needs, providing efficient sustainable supply-chain solutions for the highest quality products. Thus far, this has primarily been achieved within the steel industry — however, a significant number of our flat rolled steel customers are also consumers and processors of aluminum flat rolled products. We are pleased to further diversify our end markets with plans to supply aluminum flat rolled products with high recycled content to the countercyclical sustainable beverage can industry, in addition to the automotive and industrial sectors. We believe our unique performance-based operating culture, coupled with our considerable experience in successfully constructing and operating cost-effective, highly profitable flat rolled steel mills, positions us exceptionally well to execute this strategic opportunity and to deliver strong long-term value creation. Our customers and our people are also incredibly excited for this growth opportunity.

"Our commitment is to the welfare and safety of our teams, families, and communities, while meeting the growing needs of our customers. Our culture and business model continue to positively differentiate our performance compared to others. We believe there are strong drivers for our continued growth, and we remain in a position of strength. Our planned investments in a new state-of-the-art low-carbon aluminum flat rolled mill and associated recycled aluminum slab centers continues our strategic growth, is aligned with our core steelmaking and recycling platforms, benefits many of our existing customers, and provides for future value creation. We are well-positioned for sustainable long-term growth," concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss fourth quarter and annual 2022 operating and financial results on Thursday, January 26, 2023, at 10:00 a.m. Eastern Time. You may access the call and find dial-in information on the Investors section of the company's website at www.steeldynamics.com. A replay of the call will be available on our website until 11:59 p.m. Eastern Time on February 1, 2023.

About Steel Dynamics, Inc.

Steel Dynamics is one of the largest domestic steel producers and metals recyclers in the United States based on estimated annual steelmaking and metals recycling capability, with facilities located throughout the United States, and in Mexico. Steel Dynamics produces steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant-bar products, specialty steel sections and steel joists and deck. In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap.

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA and Adjusted EBITDA, non-GAAP financial measures, provide additional meaningful information regarding the company's performance and financial strength. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the company's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, Adjusted Net Income, Adjusted Diluted Earnings Per Share, EBITDA and Adjusted EBITDA included in this release may not be comparable to similarly titled measures of other companies.

Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate","intend","believe","estimate","plan","seek","project", or "expect", or by the words "may", "will", or "should", are intended to be made as "forward-looking", subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) domestic and global economic factors; (2) global steelmaking overcapacity and imports of steel and North American aluminum flat rolled supply deficit, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as the COVID-19 pandemic; (4) the cyclical nature of the steel industry and the industries we serve; (5) volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes, and our potential inability to pass higher costs on to our customers; (6) cost and availability of electricity, natural gas, oil, or other energy resources are subject to volatile market conditions; (7) increased environmental, greenhouse gas emissions and sustainability considerations or regulations; (8) compliance with and changes in environmental and remediation requirements; (9) significant price and other forms of competition from other steel and aluminum producers, scrap processors and alternative materials; (10) availability of an adequate source of supply of scrap for our metals recycling operations; (11) cybersecurity threats and risks to the security of our sensitive data and information technology; (12) the implementation of our growth strategy; (13) litigation and legal compliance; (14) unexpected equipment downtime or shutdowns; (15) governmental agencies may refuse to grant or renew some of our licenses and permits; (16) our senior unsecured credit facility contains, and any future financing agreements may contain, restrictive covenants that may limit our flexibility; (17) the impacts of impairment charges; (18) unanticipated difficulties in integrating or starting up new assets; and (19) risks and uncertainties involving product and/or technology development.

More specifically, refer to Steel Dynamics' more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, in our quarterly reports on Form 10-Q, or in other reports which we file with the Securities and Exchange Commission. These are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on the Steel Dynamics website, www.steeldynamics.com under "Investors — SEC Filings".

Steel Dynamics, Inc.

Three Months Ended

Year Ended

Three Months

December 31,

Ended

2022

2021

2022

2021

Sept. 30, 2022

Net sales

4,826,287

5,310,657

22,260,774

18,408,850

5,651,707

Costs of goods sold

3,838,740

3,548,820

16,142,943

13,046,426

4,187,278

Gross profit

987,547

1,761,837

6,117,831

5,362,424

1,464,429

Selling, general and administrative expenses

142,602

182,290

545,621

643,976

132,627

Profit sharing

79,218

143,243

452,551

388,111

105,122

Amortization of intangible assets

6,679

7,178

27,837

29,232

6,836

Operating income

759,048

1,429,126

5,091,822

4,301,105

1,219,844

Interest expense, net of capitalized interest

23,855

12,338

91,538

57,209

25,347

Other expense (income), net

(23,257)

7,940

(20,785)

34,826

(13,975)

Income before income taxes

758,450

1,408,848

5,021,069

4,209,070

1,208,472

Income tax expense

119,439

313,151

1,141,577

962,256

289,997

Net income

639,011

1,095,697

3,879,492

3,246,814

918,475

Net income attributable to noncontrolling interests

(4,147)

(5,192)

(16,818)

(32,748)

(4,150)

Net income attributable to Steel Dynamics, Inc.

634,864

1,090,505

3,862,674

3,214,066

914,325

Basic earnings per share attributable to

Steel Dynamics, Inc. stockholders

3.63

5.53

21.06

15.67

5.07

Weighted average common shares outstanding

174,706

197,346

183,393

205,115

180,264

Diluted earnings per share attributable to

Steel Dynamics, Inc. stockholders, including the

effect of assumed conversions when dilutive

3.61

5.49

20.92

15.56

5.03

Weighted average common shares

and share equivalents outstanding

175,892

198,794

184,622

206,615

181,613

Dividends declared per share

0.34

0.26

1.36

1.04

0.34

Steel Dynamics, Inc.

CONSOLIDATED BALANCE SHEETS

(in thousands)

December 31,

Assets

2022

2021

(unaudited)

Current assets

Cash and equivalents

1,628,417

1,243,868

Short-term investments

628,215

Accounts receivable, net

2,056,051

1,916,434

Inventories

3,129,964

3,531,130

Other current assets

195,371

209,591

Total current assets

7,638,018

6,901,023

Property, plant and equipment, net

5,373,665

4,751,430

Intangible assets, net

267,507

295,345

Goodwill

502,067

453,835

Other assets

378,727

129,601

Total assets

14,159,984

12,531,234

Liabilities and Equity

Current liabilities

Accounts payable

1,017,238

1,280,555

Income taxes payable

6,520

13,746

Accrued expenses

951,204

835,894

Current maturities of long-term debt

57,334

97,174

Total current liabilities

2,032,296

2,227,369

Long-term debt

3,013,241

3,008,702

Deferred income taxes

889,103

854,905

Other liabilities

129,539

120,087

Total liabilities

6,064,179

6,211,063

Commitments and contingencies

Redeemable noncontrolling interests

181,503

211,414

Equity

Common stock

650

649

Treasury stock, at cost

(4,459,513)

(2,674,267)

Additional paid-in capital

1,212,566

1,218,933

Retained earnings

11,375,765

7,761,417

Accumulated other comprehensive income (loss)

889

(2,091)

Total Steel Dynamics, Inc. equity

8,130,357

6,304,641

Noncontrolling interests

(216,055)

(195,884)

Total equity

7,914,302

6,108,757

Total liabilities and equity

14,159,984

12,531,234

Steel Dynamics, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Three Months Ended

Year Ended

December 31,

2022

2021

2022

2021

Operating activities:

Net income

639,011

1,095,697

3,879,492

3,246,814

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation and amortization

102,241

86,280

384,202

347,653

Equity-based compensation

19,559

20,950

59,240

57,715

Deferred income taxes

33,200

133,533

37,186

322,007

Other adjustments

(325)

(1,795)

(3,240)

Changes in certain assets and liabilities:

Accounts receivable

306,990

(23,639)

(110,560)

(944,516)

Inventories

258,871

(633,359)

413,262

(1,685,834)

Other assets

2,390

16,327

(6,884)

(2,491)

Accounts payable

(136,279)

85,173

(289,042)

557,735

Income taxes receivable/payable

(115,199)

(192,712)

31,623

(105,921)

Accrued expenses

32,547

135,974

63,679

414,214

Net cash provided by operating activities

1,143,428

723,899

4,460,403

2,204,136

Investing activities:

Purchases of property, plant and equipment

(344,201)

(204,541)

(908,902)

(1,006,239)

Purchases of short-term investments

(292,886)

(927,584)

Proceeds from maturities of short-term investments

248,156

297,950

Business combinations, net of cash acquired

(86,452)

(134,090)

Investments in unconsolidated affiliates

(222,480)

Other investing activities

6,497

3,546

15,837

6,819

Net cash used in investing activities

(468,886)

(200,995)

(1,879,269)

(999,420)

Financing activities:

Issuance of current and long-term debt

414,324

456,644

1,465,257

1,516,556

Repayment of current and long-term debt

(380,424)

(426,664)

(1,507,475)

(1,522,002)

Dividends paid

(60,032)

(51,943)

(237,163)

(212,968)

Purchase of treasury stock

(413,015)

(329,818)

(1,800,905)

(1,060,632)

Other financing activities

(27,473)

(22,955)

(116,298)

(50,423)

Net cash used in financing activities

(466,620)

(374,736)

(2,196,584)

(1,329,469)

Increase (decrease) in cash, cash equivalents, and restricted cash

207,922

148,168

384,550

(124,753)

Cash, cash equivalents, and restricted cash at beginning of period

1,425,997

1,101,201

1,249,369

1,374,122

Cash, cash equivalents, and restricted cash at end of period

1,633,919

1,249,369

1,633,919

1,249,369

Supplemental disclosure information:

Cash paid for interest

41,498

41,158

100,994

103,374

Cash paid for income taxes, net

196,494

366,322

1,063,844

737,157

Steel Dynamics, Inc.

SUPPLEMENTAL INFORMATION

(dollars in thousands)

Fourth Quarter

Year to Date

2022

2021

2022

2021

1Q 2022

2Q 2022

3Q 2022

External Net Sales

Steel

2,937,034

3,786,221

14,562,377

13,199,142

3,762,496

4,142,021

3,720,826

Steel Fabrication

1,089,979

680,006

4,245,986

1,761,647

929,981

1,085,753

1,140,273

Metals Recycling

463,282

550,674

2,164,708

2,183,472

579,625

649,736

472,065

Other

335,992

293,756

1,287,703

1,264,589

297,800

335,368

318,543

Consolidated Net Sales

4,826,287

5,310,657

22,260,774

18,408,850

5,569,902

6,212,878

5,651,707

Operating Income

Steel

178,487

1,366,880

3,110,355

4,376,079

1,166,945

1,106,659

658,264

Steel Fabrication

681,904

237,639

2,424,819

365,414

466,916

599,232

676,767

Metals Recycling

14,240

43,581

129,933

195,464

48,146

57,629

9,918

874,631

1,648,100

5,665,107

4,936,957

1,682,007

1,763,520

1,344,949

Non-cash amortization of intangible assets

(6,679)

(7,178)

(27,837)

(29,232)

(7,162)

(7,160)

(6,836)

Profit sharing expense

(79,218)

(143,243)

(452,551)

(388,111)

(128,469)

(139,742)

(105,122)

Non-segment operations

(29,686)

(68,553)

(92,897)

(218,509)

(51,509)

1,445

(13,147)

Consolidated Operating Income

759,048

1,429,126

5,091,822

4,301,105

1,494,867

1,618,063

1,219,844

Adjusted EBITDA

Net income

639,011

1,095,697

3,879,492

3,246,814

1,107,354

1,214,652

918,475

Income taxes

119,439

313,151

1,141,577

962,256

350,376

381,765

289,997

Net interest expense

5,032

11,999

62,148

55,852

16,055

24,159

16,902

Depreciation

93,960

77,438

349,971

311,972

78,790

86,943

90,278

Amortization of intangible assets

6,679

7,178

27,837

29,232

7,162

7,160

6,836

Noncontrolling interest (a)

(4,839)

(5,242)

(18,373)

(33,257)

(3,272)

(5,456)

(4,806)

EBITDA

859,282

1,500,221

5,442,652

4,572,869

1,556,465

1,709,223

1,317,682

Non-cash adjustments

Unrealized (gains) losses

8,361

(2,856)

713

(2,048)

300

(14,001)

6,053

Inventory valuation

9,143

6,101

37,292

6,495

11,125

9,328

7,696

Equity-based compensation

29,425

23,119

69,219

80,163

19,794

5,482

14,518

Adjusted EBITDA

906,211

1,526,585

5,549,876

4,657,479

1,587,684

1,710,032

1,345,949

Other Operating Information

Steel

Average external sales price (Per ton) (b)

1,124

1,662

1,399

1,381

1,561

1,539

1,381

Average ferrous cost (Per ton melted) (c)

414

490

475

447

474

538

472

Flat Roll shipments

Butler, Columbus, and Sinton

1,761,738

1,416,890

6,771,141

5,868,734

1,551,845

1,690,832

1,766,726

Steel Processing divisions (d)

404,309

404,733

1,673,967

1,653,433

411,653

432,701

425,304

Long Product shipments

Structural and Rail Division

408,109

460,651

1,865,405

1,933,433

466,821

513,170

477,305

Engineered Bar Products Division

206,035

199,546

894,374

809,808

226,053

227,293

234,993

Roanoke Bar Division

126,346

132,318

589,449

595,879

143,619

157,652

161,832

Steel of West Virginia

87,701

86,381

363,832

356,353

94,837

92,597

88,697

Total Shipments (Tons)

2,994,238

2,700,519

12,158,168

11,217,640

2,894,828

3,114,245

3,154,857

External Shipments (Tons) (b)

2,614,079

2,277,865

10,410,469

9,559,617

2,409,763

2,691,918

2,694,709

Steel Mill Production (Tons)

2,681,597

2,395,437

10,720,704

9,844,170

2,508,184

2,737,460

2,793,463

Metals Recycling

Nonferrous shipments (000's of pounds)

268,471

274,479

1,053,852

1,093,472

260,890

266,781

257,710

Ferrous shipments (Gross tons)

1,357,706

1,275,062

5,301,774

5,442,478

1,265,222

1,358,729

1,320,117

External ferrous shipments (Gross tons)

527,699

434,335

1,826,112

1,867,810

437,228

438,001

423,184

Steel Fabrication

Average sales price (Per ton)

5,222

3,325

4,976

2,236

4,424

5,001

5,245

Shipments (Tons)

208,956

204,497

855,641

789,118

210,237

218,007

218,441

(a) Net of income tax expense (benefit) on noncontrolling interests.

(b) Represents all steel operations

(d) Includes Heartland, The Techs, and United Steel Supply operations

SOURCE Steel Dynamics, Inc.

Steel Dynamics, Inc.