Steel Dynamics, Inc. (STLD), one of the leading domestic steel producers in the U.S., reported net loss of $45 million or 19 cents per share in the fourth quarter of 2014 compared to earnings of $54.7 million or 24 cents in the year-ago quarter.
The results were negatively impacted by the non-cash fixed asset impairment charges of 55 cents per share. The charges were related to company's Minnesota Operations, and post-acquisition purchase accounting and market inventory adjustments of 4 cents per share. Excluding the above adjustments, earnings came in at 40 cents per share, in line with the Zacks Consensus Estimate.
Steel Dynamics reported operating loss of $81.2 million in the fourth quarter compared to operating income of $107.8 million in the year-ago quarter.
For full year 2014, excluding non-cash asset impairment charges in the fourth quarter and purchase accounting and acquisition costs related to Columbus Steel Mills during the year, Steel Dynamics recorded adjusted earnings of $1.35, in line with the Zacks Consensus Estimate.
The company’s sales were $2,517.1 million in the fourth quarter, up 35% year over year. However, sales fell short of the Zacks Consensus Estimate of $2,598 million. Sales for full year 2014 were at a record high of $8,755.9 million, up 19% from $7,372.9 million recorded in 2013. However, sales missed the Zacks Consensus Estimate of $8,773 million.
Steel Dynamics’ shares fell 4.3% to close at $16.94 yesterday.
Segment Details
Steel Operations
The average external sales price in the fourth quarter was up 0.1% to $806 per ton from $805 per ton in the previous-year quarter. Average ferrous scrap cost decreased 3% to $346 per ton from $356 per ton a year ago. Total sales in this segment also rose 50.8% to $1,843.9 million from $1,222.9 million in the year-ago quarter.
Operating income in this segment increased 36.9% year over year and 5% sequentially to $212.3 million. The improvement in operating income was driven by record quarterly shipments and high volumes of sheet products.
Metals Recycling and Ferrous Resources
Total sales in this segment increased 7.2% to $972.8 million from $907.7 million in the year-ago quarter. Operating loss from the segment was $17.5 million in the fourth quarter compared with $13 million in the year-ago quarter.
Operating income for the company's metals recycling operations decreased roughly 75% to $3 million in the fourth quarter of 2014 compared with $11.7 million in the prior-year quarter. Profitability was negatively impacted by lower ferrous metal spreads and overall shipments due to lower scrap exports, increasing domestic scrap supply.
Steel Fabrications Operations
Total sales increased 56.8% year over year to $191 million from $122 million a year ago. Shipments also improved 35.4% year over year to 136,917 tons in the quarter. Operating income for the company's fabrication operations increased significantly to $21.7 million in the reported quarter from a loss of $0.12 million in fourth-quarter 2013. The growth was driven by record quarterly sales, expanding margins and increased market share.
Financial Position
Steel Dynamics’ cash and cash equivalents were $361.4 million as of Dec 31, 2014, down 8.6% from $395.2 million in the year-ago quarter. Long-term debt was $2,977.7 million as of Dec 31, 2014, roughly 68.6% higher than $1,766 million a year ago.
Guidance
Steel Dynamics envisions continued growth in the U.S. economy in 2015. However, instability in global market growth and falling oil prices may weigh on its first-quarter 2015 results. Steel Dynamics sees growth in major steel markets including automotive, manufacturing and non-residential construction.
Steel Dynamics remains optimistic about the growth in non-service sectors of the U.S. GDP as it can boost steel consumption. The acquisition of Columbus Steel Mills has broadened the company’s geographic footprint and increased product diversification. Steel Dynamics also expects its organic growth projects in SBQ and rail to boost growth and help in product diversification in near term.
Steel Dynamics currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks from the steel and related industry include LB Foster Co. (FSTR), Mechel OAO (MTL) and RTI International Metals, Inc. (RTI). Each of these stocks hold a Zacks Rank #2 (Buy).
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