Q4 2019 Earnings Call
The standby we're about to begin.
Good day, everyone and welcome to the Nucor Corporation fourth quarter of 2019 earnings call. As a reminder, today's call is being recorded later, we will conduct a question and answer session and instructions will come at that time certain statements made during this conference call will be forward looking statements and involve risks and uncertainties. The words we.
Expect belief anticipate and variations of such words and similar expressions are intended to identify those forward looking statements, which are based on management's current expectations and information that is currently available although new core believes they are based on reasonable assumptions. There can be no assurance that future events will not affect their accuracy more information about the risks and uncertainties real.
Leading to these forward looking statements may be found a nucor's latest 10-K, and subsequently filed 10-Q's, which are available on the Fccs Nucor's web site.
Forward looking statements made in this conference call speak only as of this state and Newport does not assume any obligation to update them either as a result of new information future events or otherwise.
Now for opening remarks, and introductions I would like turn the call over to Mr. Leon to Polyone.
President and Chief Executive Officer of Nucor Corporation. Please go ahead Sir.
Good afternoon, and thank you for joining us for our fourth quarter earnings call in my first call as CEO of Nucor.
Honored there'll be opportunities to lead this company.
And to serve alongside the 27000 men and women of Nucor will inspire me every day.
Joining me on the call today or the members of Nucor's executive team, including Jim Frias, Our Chief Financial Officer.
Greg Feldman responsible for raw materials in logistics Ladd Hall responsible for flat rolled products.
Right in a politician responsible for engineered bar products as well as Nucor's digital initiatives Mary Emilie slate responsible for plate structural in tubular products.
Dave Sumoski responsible for merchant bar, and we bought a products.
Dan Chad Utermark responsible for fabricated construction products.
I also want to thank John Ferriola for his leadership during the past seven years as CEO and the impact. He has made over his 28 years with our company. We thank him for his many contributions to nucor and wish him all the best in his retirement.
At Nucor, our greatest competitive advantage is our culture.
And the greatest measure of that culture is how we care for one another through the value of safety.
2019 was the safest year in our history and I'd like to thank all of my teammates for achieving this tremendous result.
Nucor is a continuous improvement company.
Our challenge and opportunity is to achieve breakthrough improvements in this quarter value.
Over the last several months I've engage our team to ask how we can continue to improve our performance and safety.
And we plan to work together with our teammates to implement their ideas and strategies I look forward to making 2020 and even safer year for Nucor together.
In 2019, Nucor recorded earnings of $4 in 14 cents per diluted share.
This was a good result, given the challenging steel market conditions that prevailed throughout much of the year.
Strong performance in many of our steel products businesses helped to partially offset the destocking that negatively impacted our steelmaking operations.
In particular, I'd like to recognizable Vulcraft, verco, and our buildings group, which each achieved their most profitable year ever.
As well as our rebar fabrication operations, which posted much improved results over 2018, reflecting both strong execution and favorable nonres construction market conditions.
Thank you for this result.
We believe that inventory destocking concluded in the fourth quarter when customers resume more normal buying patterns.
General business conditions also improved as the fourth quarter progressed due to a number of factors, including a rate cut by the federal reserve.
The new Labour agreement between the United Automobile workers MGM as well as progress on Us China trade relations.
And the passage of the U.S., Mexico, Canada trade agreement by Congress.
With regard to the U_s_m_c, we applaud the house and Senate for passing the agreement with overwhelming bipartisan support.
The new trade deal with Canada, and Mexico is significant wins for the U.S. steel industry, especially given the revamp rules of origin that will greatly incentivize the use of North American steel in autos auto parts and other products containing steel.
All in all we sense noticeably more optimism about the outlook for the US economy as we head into 2020.
I'd like now to share with you my most immediate priorities for our company as I began my tenures Nucor CEO .
There are four key areas that we as a leadership team will focus on hand to execute on.
First.
We use a team care for one another through the value of safety.
To further strengthen our culture, which is a key driver of our success.
Secondly.
The execution of the $3.5 billion of growth projects, we are bringing online.
Execution begins with bringing these projects online safely.
And we've been doing that once they begin operating we need to ensure that we stay focused on generating appropriate returns from these investments.
All of these investments are focused on nucor's goal of being the supplier of choice both today and tomorrow.
We're staying ahead of the curve in adding the high value products that our customers are asking for.
Third effective management of our portfolio of businesses to maximize our earnings potential.
Ensuring our future success requires both making sound growth investments and addressing areas of underperformance.
We will harnessed nucor's culture of continuous improvement to achieve the full return potential across our entire asset base.
Finally have taken over the leadership of the company, whose ability to attract retain and develop great people has always been key to our success.
So we will remain relentlessly focused on talent.
Our team members create the true value in our company, we have more than a 90% retention rate and I believe we have the most engaged passionate and driven team members in the world.
We will continue to attract great team members by making sure the talent and passion of our team is more broadly recognized outside the company.
And we are committed to further enhancements of our programs to develop and retain our valuable team members.
There will be more to come in all four of these areas as the year progresses, but I wanted to share. These initial priorities with you today.
Let me conclude by prepared remarks. This afternoon with an update on some of our more significant capital projects.
We achieved important milestones on several of them during the quarter.
And our D.R.I. plan and Louisiana, the critical work of replacing the convection section of our process gas here as well as realigning the reactor refractory was completed in November .
Work was done safely on time and within budget.
We expect these projects will further improve the plant reliability.
My Thanks, and congratulations to the team in Louisiana for their successful execution from this key phase of project 8000 and for their performance in 2019, which was our second best year ever for uptime and output. Despite the 70 day planned outage.
Two of our growth projects for specialty Cold mill complex at Nucor Steel Arkansas.
And the new Galvanizing line at Nucor steel Gallatin continue to ramp up production during the fourth quarter feedback from our customers on the product set of Gallatin and Hickman has been excellent.
Now there were operating we've seen even more opportunities to align with our customers.
Realization at Gallatin Galvanizing line is already over 50%.
Hickman as new Cold Mill is operating 24, seven we add contract customers for 31% of the new Cold mills capacity at year's end.
Qualifications are ongoing and we expect to be IC ATM certified by mid 2020 at Hickman, New state of the art reversing cold mill.
Several other growth projects are coming online early in 2020, as well, including our new rebar Micromill instead Dahlia, Missouri.
The new merchant bar quality mill at Nucor steel Kankakee.
And our JV Galvanizing line located in Central Mexico that we were operating with JMP steel of Japan.
We have arc, both the Eas and LMS furnaces at Sedalia in recent days and our new teammates there are hitting the ground running.
Already serving customers with product made from billets.
We expect to ramp up to continue to go well.
Thank you key experienced some delays in equipment deliveries in the permitting process, but we expect to come in at our initial capital budget of approximately $190 million.
We expect to start shipping product during the second quarter.
At our joint venture with JMP in Mexico, We look forward to beginning trial, shortly and serving our automotive customers in central Mexico. The facilities opening has been delayed due to some challenges that we did not anticipate for example, more difficult soil conditions require incremental piling, resulting in higher costs than budgeted.
We also found that the local electrical system infrastructure was insufficient for our needs.
And decided to acquire additional land for our operational footprint.
These events increased the total capital budget from our initial estimate of $270 million to approximately $360 million when nucor's share these amounts being 50%.
While this was disappointing JMP and Nucor remains very excited about the jvs prospects and are very confident in the product and our partnership.
This is especially so following the recent passage of the U_s_m_c, a with its north American content rules.
Finally, we are excited to report that we have teammates on the ground and have begun excavation work for our new plate mill and Brandenburg, Kentucky.
The mill is the largest investment in our company's history and when it begins to operate in 2022, Nucor steel Brandenburg, we'll be able to produce 97%.
Plate products demanded in the United States market.
With that let me turn it over now to Jim Frias, who will discuss our financial results in greater detail.
Thanks Leon.
Nucor reported fourth quarter of 2019 earnings of 35 cents per diluted share.
Included in these results were noncash impairment charges of $66.9 million or 17 cents per diluted share.
That amounts to $35 million or nine cents per share related to our natural gas well assets.
$20 million or five cents per diluted share related to a long lived asset impairment in the steel mills segment, and $11.9 billion or three cents per share related to the write down of certain intangible assets in the steel products segment.
These results exceeded our fourth quarter 2019 guidance range of 25 to 30 cents per share.
The amounts of these noncash impairment charges were not included at the time, we issued our guidance on December 12.
Our fourth quarter included better than expected performance across most of the steel Mills segment.
Our fourth quarter results included approximately $35 million or nine cents per diluted share of pre operating and startup costs related to strategic investment projects.
That compares to approximately $28 million in the third quarter of 2019, and approximately $17 million in the year ago quarter.
Excluding profit attributable to non controlling interests the effective tax rate was approximately 24.5% for the full year.
Going forward, we expect nucor's effective tax rate to continue to be in the range of 24% to 25% barring any unusual items.
In 2019 is challenging steel market conditions Nucor generated record operating cash flow of approximately $2.8 billion.
Capital expenditures for 2019 totaled approximately $1.5 billion.
For 2020, we expect capital spending to exceed $2 billion.
Major components of this year's capital budget include the Brandenburg Greenco plate mill.
The Gallatin sheet Mills Hot band production capacity expansion.
Hickman, she knows new galvanizing line, and our Florida Rebar Micromill.
In addition to investing for long term profitable growth.
Nucor's disciplined and balanced approach to capital allocation rewards our shareholders with attractive cash returns.
Cash returned to shareholders during 2019 totaled $791 million or 62% of net income for the year.
We paid dividends of $492 million.
We also repurchased approximately $299 million of our stock about 5.3 million shares at an average cost of just over $56 per share.
With the dividend increase announced in December Nucor has increased its base dividend for 47 consecutive years.
Every year since it first began paying dividends in 1973.
Over the 10 year period, ending in 2019, Nucor's returned a total of more than $6 billion to our shareholders through dividends and share repurchases.
Our focus continues to be on effective stewardship of our shareholders valuable capital via both disciplined investments that we expect will generate returns well in excess of our cost of capital as well as attractive cash returns to our shareholders.
Nucor's financial condition remains strong we ended 2019 with $1.8 billion in cash and short term investments.
With total debt outstanding of approximately $4.3 billion, our gross debt to capital ratio was 29% at the end of the fourth quarter.
Our $1.5 billion unsecured revolving credit facility remains undrawn and does not mature until April of 2023.
Our next significant debt maturity is in 2022 for approximately $600 million.
Now turning to the outlook.
Nucor's earnings in the first quarter 2020 are expected to increase as compared to the fourth quarter 2019.
We are encouraged by improving conditions in the us steel markets entering 2020.
We believe this reflects the ended the severe inventory destocking that occurred last year and ongoing modest growth in end use markets overall.
We expect first quarter earnings and the steel mill segment to increase from the fourth quarter due to price increases and expected higher volumes.
It is worth noting that December a stokely week month was the highest profit month in the fourth quarter for steel Mills segment.
The profitability of the steel product segment is expected to decrease as compared to the fourth quarter due to normal seasonality. The performance. The raw materials segments is expected to increase compared to fourth quarter due to improved pricing for raw materials.
It's worth noting the outlook from an end use markets perspective, we see stable growing end use markets accounting for approximately 70% of our shipments.
Leann mentioned the strength of non residential construction markets, we see this continuing into 2020.
Nonresidential isn't important demand driver for our industry.
Boats order rates and backlogs are up across our buildings group and in our joist and deck business. We're also hearing similar things from our structural fabrication customers.
Nucor is the leading supplier of structural being for use with the broadest product offering it's a privilege to support our fabricator customers on important projects across the country.
Thank you for your interest in Nucor I'll now turn the call back over to Leon.
Thanks, Jim.
At this time, we're now ready to take your questions.
Thank you, Sir and ladies and gentlemen, if you'd like to ask a question at this time. Please signal by pressing star one on your telephone keypad and if you're using a speaker phone. Please make sure you function has turned off to higher signal to reach our equipment on CMS star one the signal for a question at this time.
Well take our first question from the line of Martin Englert with Jefferies. Please go ahead.
Hi, good afternoon, everyone.
Good afternoon Marty.
So you provided some commentary on the demand front and maybe if you could frame up what your expectations are for us steel demand in 2020 versus.
Yes, you're talking about some of the puts and takes amongst the end markets and then also based on the activity that you're seeing today and the order books, what type of sequential change might you be expecting within steel volumes and first quarter here.
Okay.
Let me begin first by stating how humbled and excited on into the leading the Nucor team.
Stand shoulder to shoulder the greatest manufacturing team assembled anywhere in the world.
And I'm sure I noted for the most experienced executive team in the industry and share as I mentioned, the opening comments, we do see 2020 being a shaping up to be a better year than 2019 Nonres construction is strong.
We believe de stocking.
Many been completed in Canada, restocking, but as we talked about we're encouraged like the there was a marked improvement in Q4, you see that continuing what backlogs are still as Jim mentioned in his comments the fabrication community in their backlogs are very strong into 2020, so we see the outlook in general share.
Really optimistic as we move into 2020.
Okay.
Sorry go ahead.
It was deducted volumes were anticipating in Q1, we don't give that specific guidance, they'll say qualitatively, especially regarding our sheet business. We've had 15th straight weeks, where orders significantly exceeded I say significantly, but more than 10% exceeded our production capacity. It's we've built.
Our backlog by about two weeks suits dated September it's about two weeks longer show, we're going to run a sheet business at least near full for the first quarter.
Rest of our business, if not really running full consistently for a number.
For a number of years other than play periodically launch full but we'll feel very comp issue. One full we're not going to give guidance about volume overall, others to maybe get that data point I think it's also worth noting that.
Last week the third week of January was when the strongest weeks of order input we paid sheet since the improvements began in mid October .
It sounds like a stronger start maybe on a sequential basis than what we've seen and the couple of prior past few years, though based on your commentary.
The maybe than last year the year before that it's going be hard to beat [laughter] pretty strong first quarter pickup in 2018.
Okay understood and if I could one more.
Gross growth Capex, increasing could you touch on any need to draw on the revolver, perhaps increase other debt to support the growth initiatives and also remind us have minimum cash balances and leverage targets that the company.
Sure. So yeah, we're starting your with a very strong liquidity position $1.8 billion in cash and short term investments and so on we're going to have peaked capex over the next two years and then as should taper off based on the products, we've announced in had in our pipeline actively today and so we could be slightly cash when negative over the next.
Two years, and then but over the next five years, we would expect to be.
Strong cash flow positive so.
Right now we would not expected drawn revolver, we would be more likely to issue CTF, we got that like over the $1.8 billion cushion I don't see that likely this year.
Okay. So rather other debt funds as opposed to the revolver if needed, but you don't anticipate it at this point.
That's correct.
Okay, I guess to.
You need about 34 to 500 cash you asked that question I Didnt answer that part.
Disorder supported liquidity in the business.
Okay. Thanks for all the detail there and congratulations for a strong finish for the year.
Okay. Thank you Marty.
Thank you. Our next question comes from Chris Terry with Deutsche Bank. Please go ahead.
Oh, Atlanta, and Jim and congrats on the new role Leon question I wanted to dig into a little bit malls song on Capex you touched on it on that on that last question, but just a few more specifics.
For my she said I think 2 billion or around that level for 2020.
You said 3.5 few total projects.
So from that from the calculation we've done we've still got about 2.3 bill of 3.5 still to spend.
Can you maybe just give some color on how we will go out 2021 will shape up as you go through the numbers and maybe off dominated expansions what the sustaining level would look like to thank you.
Yes, our maintenance Capex, we think of is being in the range of $500 million per year.
That's embedded in that more than 2 billion and expect to spend 2020 . It's too early to save 21, but I think 21 would be similar in levels to 20.
For years to be in the neighborhood of 2 billion or well just north of there and then would be a fairly significant drop off relative to the stage. We've committed to you at this point in time, we could of course identify other projects between now and then that that would increase that.
And.
Gifting is.
Each year as part of a year in process, we put up some slice it give color too.
Our capex spending.
Items, and we will be putting those up today after the call on our website for investors to see.
Okay. Thanks for that and that includes the what's the additional spending for the pipe launch. So you announced in December Roche and Thats around the 100 mill level assumption coming in that ballpark.
Yeah, Chris is we and we're very excited about the announcement in a row paint line in broadening our downstream offering to our customers we've not released that number.
You gave you entered this you mean kind of completing the engineering review as we get to get that finalize we'll announce that you you ensure that maybe in the coming weeks.
Okay. Thanks, Thanks for that so just to reiterate for the full for the first question. So you're steps or is that through the next couple of years, you're comfortable funding that dividend and maintain the business out to the till the capex drops off you're comfortable.
Managing your sort of the capital management part of the business.
Even though you have the capex will be elevated for those two years.
That's correct Chris.
Right Okay.
And the last one from a just just in terms of the new Missouri male just wanted if you could give a few more specifics on the ramp up of that and then just just what you're saying the rebar markets specifically thanks.
Yeah, we're very excited about the strategy behind the micro mills and I'll ask Dave Sumoski here in a minute to you all have you forgot to update on Sunday, specifically, but that investment strategy and our capital allocation philosophy to two to become and maintain the world cost position and we borrowed by serving those markets, where our customers rat.
Hi, propensity to scrap is critically important new all too often maintaining that they have anything you'd like to figuring I'd add on that.
I mean you hit.
If you look at just to name plates that.
It would indicate that we're at about 700000 tons of additional reward.
Theres more to our strategy than that we have a very deliberate process to rely on product mix in the bars are in another groups.
Great you're talking about the Burger listen close producing higher value products at similar sort of broader divisions and that process has begun.
It's been thought through four for some period of time and I'll just share a couple of examples you at Texas facilities now on pace to make about 150000 tons of SBQ and our Darlington mill now makes about 300000 tons of rod and when they add dirty gas are down there to move up live up to value chain, even more on the broad market and I will start producing more SBQ.
So we are shifting rebar from some of our durations to these new locations.
Where it makes more sense. They ended a day, we're going to move up the value chain, but will not applications are not abdicate markets that customers have been very good to us over the years, specifically on the startup or.
We had told that we're going to melt the heat we're going to go from melt shop or through the process on Thursday.
Already commissions and some of the proper or some of the processes.
On some village due to one ship set another tons out of there from a other divisions. Just so you can get our ERP system up and work that's worth.
David that address your question Chris.
Yeah, that's got it. Thanks, Thanks, guys that's it from there.
Okay. Thank you.
Thank you. Our next question comes from Timna Tanners with Bank of America. Please go ahead.
Hey, good afternoon, happy new year end Leann winds up in prior to commencing.
Good afternoon Harrington.
All right. Thanks, So just wanted to step back and after a couple of high level question, if I could.
If you look at that steel products segment and profitability in 2019 to step up from 28 team I'm just trying to figure out how much if any of that was related to declining steel prices how much might have been related to some of that Greg Patrick If we look out say 2020 for example, like 2018 under earning.
And Tony 19 over earning or how should we consider it to be building from missing here.
Yeah, Let me, let me start out and I'll frame it at a high level, maybe ask Jeff even more encouraging to could chime in one of the areas Tim that I mentioned in my opening comments was to really begin to look at how we scrutinized some of the businesses that were not meeting our expectations. So one of the examples I'll share with you.
In our products and chat in the teams have done an amazing job of rationalizing in markets that for many years was about 2 million tons that shifted down over the last six or seven years to about 1.2 million times. So we've moved operations combined difference manufacturing plants in brands within the same plan.
And really block the market need to fit our supply framework and by doing so it's really created a very positive cash position. So I would say that impact in the result of the team achieving a record year is largely based on those decisions that we made as opposed to judge.
The the declining steel prices, which did have some factor, but chad anything you'd like to add on that.
Yeah. Thanks, Lee on Oh, yeah, Thanks, Tenda for recognizing that obviously lower raw material cost as well as the solid nonres construction market than we had an impact the positive wages at a record we said.
But that record performance of the fabricated steel products segment has also benefiting from lightly on just talked about this restructure in particular, our metal buildings business as well as rebar fabrication business.
We're seeing the result of restructure is resulting in a lower cost structure.
Some of the capital investments in new equipment changes to our process flow and the volume impact associated especially with metal billing oil producing multiple brands at the same plan is really paying off. So we're excited I think there's even further opportunity for us going forward.
For us to improve our performance downstream.
Yeah. The thing I'd is this weve retail sell through awards from the changes we've made to those businesses that Chad talked about middle buildings, and rebar fabrication, but we expect to reap further rewards from those changes in 2020 . It's we're optimistic that 2020 is likely to be very or the other thing I'd say is.
Our to business, which we go through Q3 acquisitions, a couple of years ago.
Didnt have expressed your they were much better in 18 than they were 90, and we expect that business to do better in 20 as well. So we think 2020 should be appreciate your first is to get products.
Okay, and then a kind at the same questions about raw materials and long products to CAD 20, a team that they really didn't hear try 19 that they're not so good year and all those categories and that's like a raw materials I can tell much fluctuation like how should we think about quote unquote normal EBITDA per ton or my competitor, having I think about it.
Same question for buying in the long products like they fell off in 2019, and it's a kind of think about how some of these on expansions are enhancing its can't myself and better 2020, and thanks for that.
Okay again, so I guess, the raw material the long products group in the game that maybe has created challenging here, but look at the end of the data was business for us we feel very profitable second quarter business.
Marketing leadership in beans allows us to calculate in the roughly 65% to 70% range through most of 18, but again as we talked about in sheet and Jim mentioned, specifically, both quite an beans, you've also seen a market shift in order inquiries and backlogs and so we're seeing that market improved from 19 again.
I think a factor that is the destocking that took place throughout 2019 and as we move into 2020, I think you'll see a.
A much more level and tempered.
Business conditions, as we move through whether its scrap or an order entry range. We believe will be more stabilizes. The we hit 20, I think 18, we sell customers older buying demand and 19, we saw them under buying I think you'll see that more more balanced Craig maybe that's in total other raw material sure I think.
Yeah Im not no doubt about at the margin compression, we talked about on prior calls, particularly the dry plants has been a real it's on both sides just on the supply side of course, our selling prices were challenged and 29 team.
Going forward, we really don't share any EBITDA per ton numbers in that regard in raw materials group.
Just characterize it as a lot of a heavy lift that we've done over the last a year or so.
Right. It project 8000, a number of times on the call and improvements that we've made it really focused on reliability going forward. So that by middle of the year I would say that we will be tour a towards a more normalized run rate I suspect that we'll see some relief on the iron ore pricing standpoint, as well and we feel very.
Good about the work that we've done related capex, improving reliability going forward.
The team, Louisiana moved from between 250 terms and our closer to 280 tons an hour so feel very good about the the.
Operational improvements that we've made there and generally speaking, we don't know where orders for relevant third fairly positive outwork. Once we get passed the first half of this year.
Yes, Dave I, just make one comment on belongs.
If you're just looking at bars and the numbers there.
Q2 different businesses. So you got the SBQ product and then you get the rebar in India and DQ product and then on the reborn SBQ product 18 was a great here, but we're tracking ahead of 2017. So if you look at that you're on the pure bar side, so that that industry or that that business is this.
Orders by the construction industry, that's why we still feel there's a strong construction market out there moving forward.
Yes.
Everything right now.
Mm.
Oh I just can't ran right.
Speaking on engineered bar excuse me [laughter] engineered bar kind of lives in the in argument in different ecosystem.
And so we don't really sell into the construction market a couple of our major markets oil and gas and the AG equipment were actually down we have to combine factors of de stocking with both Oems in service centers. So despite that our engineered bar group special bar quality picked up share.
In 2020 airplane 19, excuse me, so again not not construction related but a different market situation. So excuse me can continue to fluctuate.
No not at this time makes any sense that sounds like 28 key peptide versus 20, Nineteenx back and not the same de stocking better buying and then bank line on organic improvements and and that's how we should be thinking about 2020.
Yes. It is look I think underlying demand is there I think it stable in some of the sectors. They Dave in both Ray mentioned construction and particularly strong in she said she said improvements.
Yeah.
Great. Thank you.
Thank you. Our next question comes from Curt Woodworth, Yeah with credit Suisse. Please go ahead.
Yeah, Good afternoon, and I guess my first question.
Hey, you know, we and I guess, I mean, nucor's had a pretty consistent operating philosophy for for a long time and it seems like.
The.
It's definitely sort of accelerate a more of a build for spot mentality with lot of the capex. So yeah I'm just curious it with new leadership that are coming this new prospective new opportunities as you know what you know what do you see kind of changing at Nucor, where do you think and thus opportunity for improvement lives and how do you think you're.
You know maybe near term agenda will be different from.
In a prior prior agendas my first question.
Okay.
Frame it up this way it's much easier for me to talk about those things that are not going to change our focus focus on our core.
Culture is going to remains very much intact.
How do we care for our 27000 men and women of the Nucor family is critically important they are the value generators for our future the $3.5 billion of investment projects. We've cited or equipment. There are things that can be bought our team is one revolutionizes and changes the market coming to terms that were able to machines and so I couldn't be prouder of.
Our team and we are laser focused after the value of safety hurt on executing on that 3.5 doing it is the second focus for our entire organization that we bring those project can safely on time and ahead of schedule and so that is where our focus is that and then third we move to really the portfolio management, how do we continue to.
Think about growth.
In a short and medium term in long term and then coupling that with how do we see that those businesses that have not return.
The levels of profits in shareholder returns, we've come to expect to their settled and the analyst and investors September expected losses. So you know based on those those focus I would tell you that there's not a shift in what what and how John later, well Dan to make a read what I would tell you is the destinations are very similar the last week.
Okay to get there might be slightly different no different than me.
All of us use wager or Google maps to get into the city I May go into New York City, five different ways flags updates in a row.
But you know how I communicate are the things that we do to achieving resulting results are a focused on the safety of our team in executing really well in the.
Valuable shareholder capital that they trust us with every day.
Okay, Yeah that that makes sense, and then I guess with respect to capital.
Spending I'm sort of dating myself, a little bit here, but if I look at kind of your plate capacity since 2005, it's been pretty consistent around 2.8 million tons and your 15 year utilization rate of spend about 80% and you were at roughly 70% the last two quarters. So I'm wondering.
You know tactically, if if we get into a demand situation, where plate stays finance stays weak would you contemplate.
Postponing, placing all capex.
Yeah, Let me begin in the short answer is no isn't showing through the longer answer remains you know we've been in this business now for 20 years.
I understand the markets, we serve we understand the customer base that is asking for this and this is something that we've contemplated he's going back to 2008. So our focus is for the long term I understand there's going to be enforced in the market. It's a cyclical business and it's a business. We know when we've done in in a portal for over 50 years. So.
We think about plate don't we started the fact that we will have the most important product offering of any mill in one location located in the heart.
The largest play consuming region in the United States and so by doing so we really believe we have a differentiated value proposition to offer our customer base that puts us in a low cost position a market leadership position and I'm incredibly encouraged.
I would buy what Mary Emilion, Johnny tickets in the team at branded burden going to be able to do in our future in plate.
Great Thanks, and best of luck in the future.
Thanks for.
Thank you we'll next go to Andrew cost growth with Bloomberg Intelligence. Please go ahead.
Hi, Thanks for taking my question I'm trying to start off and see if you could shed some light on the non residential exposure by by product I, you sheet bar plate and structural if.
That's helpful.
Hey.
Andrew give give me more coal.
I'm trying to figure out here, so just trying to square up yeah, and I'm just trying to square up just the exposure to from area, you know whether sheet bar, playing structural and the non Raz segment I mean on any reason I ask because.
Just trying to make sense of I mean long products and I mean, all volumes are down pretty precipitously and 2019 Nonres construction was up.
You know low single digit I understand there were some destocking, but I guess I'm just trying to see if nonresi still going to be strong them or not going to get destocking.
Oh I get restocking the share you know where that might be felt the most.
Yeah look I would tell you certainly I think in a rebar rebar fabrication businesses that are headedly.
Oh put into the construction market certainly some of the a structural capacity that we have as it is a big part of that and then the downstream products and buildings and that was all craft all factors in Nonres construction. So that's the biggest side.
The markets, we serve roughly about 40% of our overall products.
Moving to that into that space, but one of the think humid dimension I would.
I'd characterize it little bit differently, we think some of the restocking Jody occurs and again as we mentioned earlier comments I do believe you can see more balanced approach to 2020 in terms of the both service in an OEM buying patterns and so we do believe demand is healthy and we're optimistic to Uh huh.
As we head into 20 save lives or something like that yeah, I'll just I'll just add that although there's no no federal infrastructure go up there so.
States are really stepping up to the plate and they're doing a lot of work. So that's really going to boost in the nonresidential construction market to says one bad debt.
Okay.
Thank you and then I guess.
One on plate I mean plate imports last year were down 20 ish percent and then obviously play shipments for were also down 12% on your guys trying I guess I'm just trying to again is that often this down to de stocking or is there I guess, maybe if you could give some color on specific end markets, where there was some weakness and plate, specifically and maybe how you.
Kind of see them shaping up right now.
Well look out I'll start it in their Mariama, maybe youre trying to me if I read anything out, but if we think about the play any import levels I would tell you one of the most impactful things is what we've been able to do over the last couple of years. We've won 12 trade cases since 2016 in place that is dramatically shifted the import Uh huh.
Going into this country survey to 32 is help however, it is the long term betrayed cases that we won and something over 160 cases that we've won some dating back in play to 1999, so our position through the long term.
I see seeing the department of Commerce, and commend them for what they've done and are doing but that that site has got to remain ever vigilant and so that is a big part of why you saw the drop off in play imports.
Great and away anything you got data on.
Got it color on that you're right, we had the lowest level of imports in the last five years last year leases.
Great and me.
The overall market retracted that namely that why did it de stocking activity.
Okay, there's still seven key.
Trade cases going on September 2020, we'd really like the activity and consistent we feel like they're looking at a decent 23 going forward. Thank you.
Okay, great. Thanks, so much on best to like this year.
Thanks, Andrew.
Thank you we'll next go to Phil Gibbs with Keybanc capital markets. Please go ahead.
Hey, good afternoon.
Afternoon, Phil and welcome to the a the homeland congratulations.
Thank you very much very exciting very humble.
Hi in terms of the rebar color. It sounds like you're you just you just getting the Missouri mill started in the last last week or two.
What's the thought around the the ramp timeline there and then can you give us any color on.
The the Florida knows well because I know that was something that was supposed to be around mid.
2020.
Secondly, yes. This is good at a high level, what I would tell you fill is yet.
Micromill into Dahlia.
It's coming online as we speak the team has done a great deal of and taking care of the teams from safety perspective operating cost in schedule. So we're excited about that and then in the Michael Millman Flashpoint, Florida is still slated to come online in December of this year. So you know the other part of that and maybe I'll ask.
Jim to frame some color because we do think about how how are these investments returning and what does that long term out what could you maybe Jim you could add some color those projects when it first of all specific to your question I think it's likely that today have you reached breakeven sometime in Q2.
And and overall you know like to Galv line. It at Gallup. It is already making a positive contribution we had pre operating startup costs in the quarter of I think it was $36 million into fourth quarter, that's going to come down slightly in Q1, because some of these projects are starting to ramp.
You know the Hickman coal Bill is starting to ramp so their pre operating startup cost so called come down as they go towards breakeven on sedalia is going to start to habits pre operating startup costs come down as they strive towards breakeven.
Now later in the year, we'll probably have other projects increased the pace of pre operating startup costs, but the projects. There that are coming online right now and that includes the guideline at galaxy. The Hikmet Cold Mill, Sedalia Bar mill, and the Kankakee merchant Bar mill.
Those four and make a a nice contribution to nucor, but ended this year in a really good contribution Nucor next year and you know you get into broader number that to the kills of projects have $600 million of EBITDA value I would you say if you do the math and the Capex is priced you see a nice jump that EBITDA is gonna be.
The new core 21, and we'll start to see some of that food by the end of this year.
[noise] at a high level, Jem and the startup costs, saying that coming down a little bit sequentially here in the first quarter, but are you expecting the pre operating startup costs.
In total to be lower in 20, then the 19 or is that but not eliminate.
Hey, I say truly say because you've got two big projects getting it ramp, enabling and because they're bigger they will have bigger CEOC and startup costs. So you know the expansion of capacity at Gallatin and the brand or for any but when they when they come on its good pride greatly increase are you happy startup costs for a period of time.
And I don't have we don't forecast out more than one quarter taps played with those numbers are then Q1, it's probably could be slightly down, but I would expect for the year it might actually be slightly because of those those two bigger projects starting to ramp up the costs.
Okay Fair enough and then the comment on I think you made Jim on being cash flow negative for the next couple of years given the Capex are you a throwing in the dividend in that and that discussion meeting your your including the dividend in terms of the view being cash on I'm going to.
Yes, let's say given his plus capex, maybe against against operating or cash from operations will probably stay okay. So you're not to your so you're not seeing free cash flow and I get or you're just saying after after dividends.
Yeah.
Well the early century castle negative.
I'm, saying after capex and dividends.
Okay.
And then lastly, just in terms of first quarter. So we're thinking about this right.
Seemingly some operating leverage should at least in the sheet division from better volumes in Q1, but.
Overall as we look at the steel business should we think that.
Realized metal spreads will be will be a positive contributor versus the fourth quarter.
Yeah, I think still fill in the again as we look at scrapping obviously, you know a whole lot of discussions.
Craig May want to add some color here, but you know the market.
Demand sampling is still strong and I think one of the drivers that's not discussed an awful lot as we look at scrap is really the export market in the demand outside of the U.S. It has an impact on that so like anything you want to animal material stuff. So yeah, Justin just in general.
I would say that the yeah, there's lot of commentary around an interest in the scrap market as it relates to seal, but I think the key driver is feels a man and the Koreans count as a rest of the teams I think you hear a fair amount of optimism here and that's what we're saying we're seeing the domestic demand for scrap is relatively strong so oh absent the normal gyro.
Patients in the market I would say, yeah, we see a fairly a relatively stable price environment again, driven by the steel demand underline steel demand.
Thanks, so much desolate HM.
Just one one point I want to clarify that made the statement earlier that frost proof is expected to come online. This summer, we'll start commissioning, but it will really come online in Q4 this year.
Perfect. Thanks very much.
[noise]. Thank you all next move to Alex hacking with Citi. Please go ahead.
Yeah, Good afternoon, and let me add my congratulations.
On the new role.
I just had one.
Sure I just have a one question Jim much about follow up on the.
Capex guidance only just makes private straight I think you said.
Slide 21 would be you know 2 billion issue from a lot to 2020, you know if we take out 500 million here for sustaining.
That's about 3 billion on on growth projects for the next two years I guess that that seems a little high compared to what we were thinking you know we were thinking total budget of around three and a half billion.
With about.
Two of <unk> billion left to spend I mean, I guess can you.
Can you help me.
Can you help me click click up a little bit I know you mentioned that personnel.
There's some projects that aren't big enough that we are forced to call out that are embedded in there as well that our improvement projects that we don't think it was being capex, but they're not building new middle type projects, we don't call them out. So there's some other capex in there for things should that our improvement projects as well.
Okay makes sense. Thank you.
Yes.
So.
Thank you and it does appear we have no further questions. At this time next turn the conference back over to Mr. Atlanta Allianz for any additional closing remarks.
Thank you there before concluding our call today I want to express our appreciation to our shareholders.
Value your investment in our company. He takes the obligation curiously that comes with it.
And we will treat your investment with good care.
I also want to thank our customers. We are excited about the capabilities. We are building to better serve you today and most importantly for tomorrow.
Thank you for your trust and confidence they place in the Nucor team each day to supply your needs.
For the building powerful partnerships to generate powerful results.
Into our Nucor team.
Thank you for what do you are doing for Nucor and our customers every day and most importantly, thank you for doing it safely.
We are committed to strengthening this poor value by doing sale helped to improve the safety of or Nucor family and our industry.
I'm excited for Nucor's future.
For all of US working together to expand beyond and take Nucor to new Heights.
Thank you everyone on the call for your interest in Newport had a great day.
Thank you again that does conclude today's call again, we thank you for your participation you may now disconnect.
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