Nucor Corporation (NUE) reported an increase in profit of around 229% to $299.8 million or 94 cents per share (excluding special items) in the second quarter of 2011.
That compares with $91 million or 29 cents per share (excluding special items) in the same quarter of 2010.
The result also beat the Zacks Consensus Estimate by 81 cents per share. The performance was driven by increases in demand and steel mill products prices.
Consolidated sales surged 22% to $5.11 billion due to an increase of 21% in average price per ton and a rise of 1% in shipments (to 5.6 million tons) to outside customers. However, results were slightly lower than the Zacks Consensus Estimate of $5.14 billion.
Pre-operating and start-up costs of new facilities were $31.4 million in the second quarter of 2011, compared with $43.4 million in the prior-year quarter. The decrease in costs was driven by the improved performance at the Special Bar Quality (SBQ) mill in Memphis, Tennessee and the wire rod products mill in Kingman, Arizona.
Steel mill shipments grew 6% to 4.8 million tons during the quarter. The average scrap and scrap substitute cost per ton accelerated 19% to $444.
Overall operating rates at steel mills were 71%, flat year over year. Utilization rates were negatively impacted by downtime caused by weather related events and resulting power outages. Total energy cost increased approximately $3 from the prior-year quarter, driven by inefficiencies caused by lower operating rates.
Nucor’s liquidity position remained strong at the end of the quarter. The company had cash and cash equivalents and short-term investments of $2.28 billion as of July 2, 2011. It has an untapped $1.3 billion revolving credit facility that will mature in November 2012. The company’s long-term debt remained unchanged at $4.28 billion as of the above date.
In June 2011, the board of directors declared a cash dividend of $0.3625 per share payable on August 11, 2011 to stockholders of record as of June 30, 2011.
In the quarter, Nucor had cash flow of $292.7 million from operations compared with an outflow of $293.8 million in the same quarter of the prior year. The improvement in cash flow was attributable to higher profit. Meanwhile, capital expenditure increased to $212.9 million from $163.2 million a year ago.
Nucor expects third quarter results to be lower than the second quarter, driven by some market weakness that may impact results. Furthermore, the company continues to see slow but steady improvement in real demand in certain end markets.
Nucor Corp. faces stiff competition from Commercial Metals Co. (CMC) and United States Steel Corp. (X). We currently provide a long-term Neutral recommendation on the stock. The company has a Zacks #3 Rank (Hold).
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