Exhibit 99.1
Press Release | |
July 19, 2006 | 
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| 6714 Pointe Inverness Way, Suite 200 |
| Fort Wayne, IN 46804-7932 |
| 260.459.3553 Phone260.969.3590 Fax |
Steel Dynamics Reports Strong Results for Second Quarter 2006
FORT WAYNE, INDIANA, July 19, 2006— Steel Dynamics, Inc. (NASDAQ:STLD) today announced second quarter 2006 net earnings of $97 million, or $1.78 per diluted share, versus $51 million or $1.00 per diluted share in the second quarter of 2005 and $76 million, or $1.52 per diluted share, in the first quarter of 2006. Net sales for the second quarter were $821 million, an increase of 50 percent when compared to the second quarter of 2005 and 23 percent when compared to the first quarter of 2006. Net income was up 27 percent quarter over quarter. Operating income per ton shipped was $127 for the quarter. Consolidated shipments for the second quarter were 1.2 million tons. Second quarter and first half revenues and shipments both set new records for the company.
“Steel Dynamics enjoyed continued strength in the second quarter,” said Keith Busse, President and CEO. “Demand has remained very strong for the entire portfolio of products we produce. We have been able to take advantage of these conditions and continue to ramp up the recent investments we have made in new facilities, additional equipment, and production capability. As a result of higher utilization rates at our facilities, we are maintaining high production rates and shipping volumes, as well as strong profit margins.”
Second quarter 2006 figures include the results of operations of the former Roanoke Electric Steel Corporation from April 12, 2006 forward. Although the Roanoke numbers were somewhat accretive to earnings in the second quarter, the effect of certain purchase accounting adjustments related to the acquisition reduced SDI’s second quarter earnings by approximately $.08 per diluted share. The integration of Roanoke into Steel Dynamics is proceeding smoothly. Both of the merged steelmaking operations, like the rest of SDI, are running very well and are experiencing strong markets and shipping rates. In the third and fourth quarters, the Roanoke operations are expected to be significantly accretive to earnings.
SDI’s average consolidated selling price per ton shipped increased from $631 in the first quarter to $672 in the second quarter due largely to better price realizations and mix, while the cost of steel scrap per net ton charged increased $10 from the first quarter.
Operating highlights for the second quarter include monthly and quarterly production records by the structural division, which continues to improve its production processes and practices. The structural mill continues to benefit from a very strong market for wide-flange beams. Likewise, demand is very strong at the Flat Roll Division, and the Engineered Bar Products Division, which produces SBQ bars, is experiencing a record backlog. All of the steel business units are experiencing favorable pricing trends at this time.
The Engineered Bar Division at Pittsboro, Indiana, has begun operation of its new SBQ finishing facility, providing a number of SBQ value-added operations to meet customer requirements. These services have permitted the mill to increase the proportion of its business under contract, which in turn helps to provide a more stable base load for the mill.
Iron Dynamics, which supplies hot-briquetted iron (HBI) to all of SDI’s Indiana steelmaking divisions and liquid pig iron to Butler, performed well and was profitable for the quarter. The facility is now producing over 20,000 tonnes per month.
In June, the Butler Flat Roll mill completed a scheduled five-day outage to accomplish a number of equipment modifications, including the upgrade of one of the mill’s two casters. These changes, as well as similar modifications to the second caster scheduled for October, should ultimately lead to an approximate 15 percent increase in the facility’s hot-band production capacity. The $10-million investment in upgrades is expected to increase production by approximately 400,000 to 500,000 tons per year, bringing Butler’s capability to nearly 3 million tons per annum.
Looking ahead, Busse said, “The outlook is for continued strength in the steel marketplace in the second half. Recent increases in global steel prices, with the possible exception of China, are better aligning the U.S. market with dynamics elsewhere in the world. Steel imports are expected to decline in the short term, although this can change overnight. In the near term, we see prospects for continued favorable pricing trends, moderating steel scrap costs, and strong shipping volumes leading to a very positive earnings outlook for Steel Dynamics given our continued growth prospects. Our diluted earnings per share will likely be in the range of $2.05 to $2.15 in the third quarter. Barring unanticipated events affecting the steel marketplace in the fourth quarter, it is likely that 2006 results will eclipse our previous annual record of $5.27 per diluted share earned in 2004. With continued strong activity through year-end, we anticipate 2006’s earnings could approach $7.25 to $7.50 per diluted share.”
“We are fortunate to be in a position to capitalize on numerous investments that we have made in modern, productive assets over the past several years. We now have a more diversified product mix with an emphasis on value-added and customer-tailored steel products. A large part of our success flows from our operating culture and the strong performance of our dedicated workforce, which is doing an outstanding job,” Busse said.
Regarding the status of previously announced projects, site preparation has begun and initial equipment orders have been placed for the $200-million expansion project at the Columbia City, Indiana, structural and rail mill. This project includes a new medium-section rolling mill that will facilitate more cost-effective production of current structural steel products, will free up production capacity for rail production on the existing rolling mill, and will provide the capability to produce new light structural steel products that the company does not currently sell. Also, construction is proceeding at Columbia City on a rail-welding facility to produce rail sections a quarter-mile in length. Construction of Dynamic Composites, a joint venture to manufacture composite railroad ties, is also underway.
Equipment orders have been placed for the company’s second paint line, to be built at Jeffersonville, Indiana, and expected to start up in the third quarter of 2007. The Jeffersonville flat-roll finishing facility is dedicated to the coating of thin-gauge, cold-rolled steel that is supplied from the Butler Flat Roll mill. Additional modifications are underway at Jeffersonville to add acrylic coating and the production of Galvalume® coated steels for the construction markets.
Several projects are in progress to modernize and upgrade the three joist production facilities acquired as a part of the Roanoke transaction. These facilities are being integrated into SDI’s New Millennium Building Systems subsidiary and together will provide a network of facilities to better serve the U.S. non-residential construction markets east of the Mississippi River. As a part of this effort, some joist and girder production is being shifted between locations and the capability to produce roof- and floor-decking is being added at the Salem, Virginia, plant. Business remains strong in this business segment.
In the future, we expect to make investments in the Roanoke steelmaking facilities to improve their operating effectiveness and increase production capacities. Engineering studies of various options are in progress.
Galvalume® is a registered trademark of BIEC International, Inc.
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Conference Call and Webcast
On Thursday, July 20, 2006 at 11:00 a.m. Eastern, Steel Dynamics will host a conference call in which Steel Dynamics’ management will discuss second quarter 2006 results. You are invited to listen to the live audio broadcast of the conference call over the Internet, accessible from Steel Dynamics’ Web site:
www.steeldynamics.com
Dial-in information to listen to the call is available on our Web site. Only analysts and other callers identified prior to the call will be included in queue for questions.
No telephone replay will be available. An audio replay of the Webcast will be available on the SDI Web site. Also, using the VCall webcast link, you may download the replay as an MP3 file (podcast).
Contact: Fred Warner, Investor Relations Manager, (260) 969-3564
F.Warner@SteelDynamics.com
Forward Looking Statements
This press release contains some predictive statements about future events, including statements related to conditions in the steel marketplace, Steel Dynamics’ revenue growth, costs of raw materials, future profitability and earnings, and the operation of new or existing facilities. These statements 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. Such predictive statements are not guarantees of future performance, and actual results could differ materially from our current expectations.
Factors that could cause such predictive statements to turn out other than as anticipated or predicted include, among others: changes in economic conditions affecting steel consumption; increased foreign imports; increased price competition; difficulties in integrating acquired businesses; risks and uncertainties involving new products or new technologies; changes in the availability or cost of steel scrap or substitute materials; increases in energy costs; occurrence of unanticipated equipment failures and plant outages; labor unrest; and the effect of the elements on production or consumption.
In addition, we refer you to SDI’s 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 and in other reports which we from time to time file with the Securities and Exchange Commission, available publicly on the SEC Web site, www.sec.gov, and on the Steel Dynamics Web site, www.steeldynamics.com
Forward-looking or predictive statements we make are based on our knowledge of our businesses and the environment in which they operate as of the date on which the statements were made. Due to these risks and uncertainties, as well as matters beyond our control which can affect forward looking statements, you are cautioned not to place undue reliance on these predictive statements, which speak only as of the date of this press release. We undertake no duty to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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