Q3 2020 Nucor Corp Earnings Call
[music].
Good day everyone.
Come to the Nucor Corporation third quarter of Twentytwenty 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 that involve risks and uncertainties.
We expect believe 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 nucor 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 relating to these forward looking statements may be found in Nucor's latest 10-K, and subsequently filed 10-Q, which are available on the EPS.
<unk> and Nucor's website.
Forward looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them either as a result of new information.
Future events or otherwise.
And now.
For opening remarks and introductions.
I would like to turn the call over to Mr., Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go head good afternoon, and thank you for joining us for our third quarter earnings call 2020 continues to present all of us with challenges from the.
From the pandemic social unrest.
Economic struggles many people are facing.
The wildfires and hurricane that have impacted our country. These last few months.
But we have also seen how these challenges have brought people together to care for the safety health and wellbeing of one another.
I want to thank my Nucor teammates for their continued efforts to take care of our Nucor family and the communities, where we live and work.
Joining me today on the call are the members of the Nucor executive team, including Jim Frias, Our Chief Financial Officer.
They're responsible for plate and structural products correct.
Craig Feldman responsible for raw materials.
Ran a politician responsible for engineered bar products as well as nucor's digital initiatives.
Mary Emily slate responsible for sheet in tubular products Dave.
Dave Sumoski responsible for bar rebar fabrication and construction services.
And Chad Utermark responsible for fabricated construction products.
With regard to our safety performance our team has had another great quarter, we are.
We are on pace to have the safest year in our history.
Want to thank every one of our team members for their hard work and commitment.
At the start of the year I said the challenge for us to become the safest steel company in the world they might be.
My deepest thanks go out to every member of our team for your continued focus on safety and our most important value.
You have remained focus despite the tumultuous year.
15, Nucor divisions have gone more than one year without a recordable injury I want to thank each of you for your continued effort focus and commitment to ensuring that we take care of the most important value in responsibility we have to.
The health and safety of our entire team and family.
Turning to our financial performance in the third quarter business conditions in most of the markets. We serve improved as the quarter progressed, resulting in a rebound in demand for bars beam and she'd products.
Increased demand was reflected in our capacity utilization rate, which for our steel mills improved to 83% from 68% in the second quarter better market conditions combined with continued strong execution by our team enabled us to outperform the expectations, we had at the beginning of the quarter.
Looking at the business conditions in different end use markets during the quarter Nonres construction demand continued to be resilient and in fact is growing for us in areas like our joist and deck businesses, where.
Where orders quotes and backlogs are all up year over year.
More broadly well.
Well third party data tracking construction starts in backlogs have been volatile indicators. They look out further by tracking project inquiries have turned positive in recent weeks.
Much of the activity continues to be in Datacenters in distribution centers, where we've had incredibly strong capability and relationships with owners developers fabricators and designers.
We expect that these two areas will remain strong for the foreseeable future.
We recently launched construction solutions team to better service our customers throughout the construction segment and bring together the breadth of Nucors products for a more coordinated approach to the marketplace.
In the automotive sector, we experienced a strong rebound in third quarter related to automotive demand. Further we are expecting strong automotive production rates in Q4 that could match or exceed the year ago period.
Oh, he ams, you're focusing on rebuilding inventories to meet the continued strong demand for real.
For reference current days on hand inventory levels are at nearly 10 year lows.
We have heard some analysts suggest that consumers are allocating money they would normally spend on travel to upgrade their cars and vehicles we.
We are pleased with our teams performance in this market and are expecting continued profitable share growth as we move forward.
Moving onto oil and gas end use markets Theres been no appreciable change here with both rig counts in underlying commodity prices still being low however, renewable power and energy transmission are showing strong growth despite effects from the pandemic through.
Through late September Steelmaking segment orders related to the renewable power sector have already exceeded 2019 by 15%.
We are excited about the opportunities for our company in the renewables market and we participate in that market through a broad variety of products, including plate tubular beams fabricated rebar sheet piling and fasteners.
The breadth of our product offering and the investments we are making it highly differentiated capabilities present meaningful growth opportunities for us.
Several of our capital investment projects that started operating in recent months are producing excellent results the ramp up of our rebar Micromill in Missouri continues to outperform our expectations.
We generated positive EBITDA through the quarter at Sedalia, congratulations to the entire Nucor Citadel your team for their excellent performance.
Our Kankakee, Illinois Bar mill will complete commissioning of the new Nvq Rolling mill in Q4.
We expect to achieve positive cash flow from this project in Q1 of next year.
While the commissioning schedule was slightly extended due to covert related disruptions customer.
Customer acceptance of the new products has been extremely strong.
This new capability, a kankakee will allow us to provide our customers with a full range of SBQ like shapes and structural angles and channels out of one location in the heart of the Midwestern market.
Our new state of the our Cold Mill and Hickman, Arkansas continues to ramp up production and to diversify its product mix since.
Since commissioning the Cold Mill has added 24, new customers, which has helped the team rapidly grow production and shipments in fact, the third quarter cold rolled shipments surpassed our volumes for the first quarter, which was of course pretty coded.
Product development continues to be a focus including the first trial runs of our third generation advanced high strength steels.
Construction of the Gen three flexible galvanizing line at Nucor, Arkansas continue to progress throughout the quarter.
Equipment installation began in the third quarter and the team anticipates a startup in the second half of 2021.
Our other major investment projects remain on track to start.
The start up of our rebar Micromill in Florida is expected to happen late this year.
And the Gallatin expansion startup is anticipated for the second half of next year with.
With the plate mill in Brandenburg, Kentucky to follow in late 2022.
And before I leave the topic I also want to give a shout out to our team in Marion Ohio.
We don't talk about it as much perhaps it's because it's a modernization and not an expansion, but the team at Nucor steel Merian completed the project to fully modernized our Merian bar mill in the middle of last year. They did so safely on time and within budget.
These investments lowered our cost and our environmental footprint. There in marriage profitability is up almost 200% over last year. So again congrats to the entire team there.
Well, we are always looking for high return growth projects like these we are not overlooking opportunities to improve our performance by proactively managing our existing asset base.
Over the last couple of years, we've had to make some difficult decisions to restructure parts of our metal buildings group to better align our production capabilities with the needs of the market.
Well every team member who has been impacted has had the opportunity to remain with the Nucor family. These decisions are not made lightly or without considerable deliberation.
I want to thank our teammates for their dedication and service to Nucor as we've navigated these difficult changes, we recognize our shared responsibility to effectively steward shareholder capital and deliver world class returns on those investments today and tomorrow.
It is worth noting that Nucor buildings group has generated strong operating profits during both 2019 and 2020, even as their teammates their adjusted to these changes in their business as well as the pandemic.
With the election less than two weeks away, we believe that no matter who sits in the white house or holds the majority in Congress next year, our leaders in Washington must understand the need to move forward with a significant infrastructure spending bill that includes strong by American provisions.
We believe that a long term commitment to modernizing our nation's crumbling infrastructure is long overdue and we.
And we will continue to remind our elected officials of this when the new Congress convenes in 2021.
Real progress on this front would not only boost the economy and create hundreds of thousands of much needed jobs in the short term. It would also be an investment benefiting future generations of Americans.
We are also encouraging the current Congress to pass reauthorization of the water Resource Development Act before they adjourned Florida.
Order legislation funds critical waterway construction projects that are important market for us and improve the waterway transportation system, we used to ship our products.
Before turning it over to Jim I, just want to say how much I appreciate everyone on the Nucor team working safely and for your focus on serving our customers. During these most challenging times.
The nucor team's passion and dedication are getting noticed by existing as well as new customers.
Lets keep it up and never lose sight of the importance of valuing every individual in the contribution they make to our collective success.
Jim.
Thanks, Leon Nuke.
Nucor's third quarter earnings of 63 cents per diluted share exceeded our guidance range of 50 to 55 cents per diluted share.
Results for the month of September exceeded our forecasted almost every business across our diversified portfolio.
Third quarter results included $6.6 million of losses on assets related to our deferred if into core joint venture in Italy, and a $16.4 million restructuring charge related to the further realignment of our metal buildings business that Leon mentioned we've.
We expect this will be the final restructuring charge associated with that initiative.
The combined negative impact of these actions on our third quarter earnings was approximately six cents per diluted share. These.
These charges were not included in our guidance estimates.
Excluding these special charges as well as pre operating and startup costs earnings would have been 75 cents per diluted share.
Cash provided by operating activities for the nine months of 2020 was $2.2 billion. This.
This exceeded the sum of our year to date capital spending of approximately $1.2 billion and cash returns to our shareholders via dividends and stock repurchases totaling $408 million.
Nucor's through the cycle earnings and cash flow benefit from a highly variable low cost structure.
Working capital reductions generally provide a counter cyclical benefit to nucor in downturns like the current one enhancing our cash flow and liquidity year to date cash flow generated from contraction in inventory receivables and payables was $643 million.
As I previously noted we made significant progress in reducing inventory volumes during the second quarter I'm.
Im pleased to say that during the third quarter, we were able to respond to increased order flow and production without increasing our inventory levels are in.
Our investment in scrap Wip and finished goods inventories is basically flat or slightly down from the prior quarter levels on a tons basis.
On the financing front during the quarter, we took advantage of the opportunity to work with Mead County, Kentucky to issue $163 million, but tax exempt industrial revenue bonds to provide partial funding for our new plate mill under construction in Brandenburg, Kentucky.
The bonds are designated Green bonds as proceeds will be used for pollution prevention and control facilities.
The bonds mature in July 2016 this.
This is nucor's longest tenor bond ever issued at 40 years, and our first green bond issuance.
Concurrent with this capital raise standard and Poor's in booties, both reaffirmed nucor's credit ratings of a minus and be doubly one respectively. While also maintaining their stable outlooks.
We continue to hold the highest credit ratings of any steel producer headquartered in North America.
At the close of the third quarter, our cash and short term investments totaled approximately $3.3 billion.
Nucor's liquidity also includes our Undrawn $1.5 billion unsecured revolving credit facility, which does not mature until April of 2023.
Total long term debt, including the current portion was approximately $5.5 billion.
Our debt to total capital ratio net of cash and short term investments was approximately 13.5% at the quarter end.
Our next significant debt maturity is not until September of 2000 $20 million to $600 million of unsecured notes with a coupon rate of 4.125%.
The flexibility provided by Nucor's low cost operating model and financial strength continues to be a critical underpinning to our company's ability to grow long term earnings power and reward our shareholders with attractive returns on capital.
Our team has been working on nine significant organic growth projects, representing a total investment of about $4 billion.
We expect to complete commissioning on six of these projects by the end of this year.
The remaining projects are the expansion and modernization of our Kentucky sheet Mill did.
The addition of our generation three flexible galvanizing line at our Arkansas sheet Mill, and our Kentucky plate mill.
At the close of third quarter of 2020 remaining capital expenditures for these growth initiatives are estimated to be approximately $2.1 billion.
We expect about 300 million of that investment to occur in the current quarter with the balance occurring in 2021 and 22.
We expect that our total capital spending for full year 2020, we will be in the area of $1.7 billion.
Turning to the outlook, we expect nucor's fourth quarter earnings to be improved over our third quarter results.
Most notably our sheet and plate mills will benefit from recent price increases.
2020 has been a challenging year in many respects, but.
But it has served to heighten our already strong confidence and nucor's future.
Our teammates continue to capitalize on nucor's advantage cost position.
Flexible production capability and financial strength to build long term value for our customers and shareholders.
Thank you for your interest in our company.
We are now happy to take your questions.
Thank you, ladies and gentlemen, if you would like to ask a question open today. Please press star and then one.
Sure I honest speaker phone set up you might have to pick up the handset.
Vince on the signal can reach our Clinton.
Again that is star and then one if you would like to ask a question today.
So just a moment to assemble the queue.
And we'll take our first question from Seth Rosenfeld Exxon.
Okay.
Good afternoon sectors and felt thank you mark for taking your questions today.
If I can turn quickly to the question on capital allocation of another follow up on plate.
Putting on capital allocation at the restart of both Gallup and Brandenburg last quarter locks and a great deal of Capex next few years I can you can just touch on.
How we should think about what comes next after these projects through the expected capex to gradually roll off or behind the scenes is there a series of additional projects under development right now that we should expect to be approved as the natural capex budget that decline going forward and tied to that can you confirm if there's been any indication for the 2021.
Capex budget at this stage.
Okay. Certainly said thank you for the question I'll start and then maybe you can jump into some specifics.
As you think about the question.
Framed in the context, as we think about nearly $4 billion, where the capital projects that are either.
Either online or coming online I couldn't be more excited about the EBITDA in the returns in the long term shareholder value that those investments are going to create but the longest of those is the Brandenburg consecutively now, which again in our minds is getting truly.
Change that is the framework in getting Nucor and market leadership position in play in the heart of the large display consuming region in the United States.
But I couldn't be more excited as well as we think about the long term in one of the effects of cobiz as well as its really narrowed the window of a view in scope for people to think month to month quarter to quarter, but these investments are truly for the long term. The next 510 15 20 years of returns for our company. So I couldn't be more excited.
Think about what is next in that high in every executive Vice President.
Hitting or focused on those things that are Nick.
With regard to 21.
Let him kind of jump in here and talk about what.
What we're seeing in trends and just give you a generalization of what we're we're seeing what we anticipate as we move forward can you set. Your question is telling me and said we are excited because we're not we have the financial strength to execute our plans in spite of the co in spite of all the other things it.
They come up and so we're not thinking about how are you today.
The 22, we're actually thinking right now.
300 for the quarter were not ready to talk about those things yet right.
Sure. We're thinking about this is that what's top of mind for us we want our business with a long term perspective. So capex. This year is in the low seven plus range and next year, we haven't gone through the board yet for formal approval, but it's going to be in the neighborhood of $2 billion will come up with a formal number in January the leader.
You are.
Earnings call for year end, and we've been generating a lot of free cash flow, we looked at it and from 2017 through nine months ended its.
In September of 2020, we generated $4.4 billion of free cash flow. So, yes will there be more investments.
You are right that will be whatever they were not really talk on but we're working on.
Great. Thank you and if I could ask slightly shorter term question on the outlook for the site marketplace, obviously placed in a very weak area across the sector over recent months, particularly compared to sheet in recent weeks that we've seen recently a number of price hikes from yourself and your peers.
Sure. It's in the freight market can you walk us through how they would be accepted by customers and also any competency you have with regard to the ability to return to historical metal spread to return to historical relationship versus hot rolled coil prices.
Thank you certainly yeah. Thanks that sounds like that out there are you VP of plate and structural products kick it off and maybe add something now okay.
In terms of the outlook for plate, we're optimistic our outlook for fourth quarter is improved over Q over Q3, our backlog ending Q3 was much stronger than it was Q2 the price increases that we had through the quarter has stuck and it is supported by the market.
Collected 100% of those announced price increases a matter of fact, we went out earlier this week with another price increase on plate. So we see several bits of improvement within the marketing he segments and are optimistic about about our world.
Yes.
Okay. Thank you very much.
Thank you Seth.
Well move on to Andreas Bokkenheuser CBS.
Thank you very much just two questions from me number one can you comment on your scrap market or scrap price expectations here as we as we get into year end kind of look like prices could be trading sideways into November is that your expectation as well and maybe how you think about scrap over the next couple of months after that.
That would be the first question. Please.
Okay, Yes, Andreas I'll ask Craig Feldman, who is in charge of our raw materials can you take us all Craig sure Yep. Thanks for the question.
Right, we do see it I would say fairly stable in the near term November I would say is generally pretty equity pretty flat beyond that we can see from the normal seasonality.
In mid December and into the first of next year, but generally generally speaking we see a pretty stable. So I think your assessment was spot on.
Okay, and then just thinking about you know 2021.
How do you see your product offering and maybe 2022 as well are you are you, bringing new products to the market that you know two markets that.
In a matter of speaking close to you before I mean that was conversation for the integrated producers and the reason I ask obviously as we just continue to see all this R&D among the EPS to bring more and better and better products to the market and taking that market share from the I am sorry from the integrated producers. So we still see doing that.
Or 2021, 2022, and maybe also Youre just thinking about the integrated producers kind of restarting next year is that something Youre refactoring, you know not though somebody launches. That's my other question. Thank you very much.
Andreas I'll I'll begin and then maybe ask maryann, when we find who's already VP of plate and tubular sheet in tubular to them.
Maybe EPS in some detail behind my comments, but to answer your question regards.
To answer your question regarding the differentiated value proposition as you think about nucor's investments, it's really not about capacity, it's about capability and as we think about the investments we're making in our generation three galvanizing line Hickman, Arkansas it'll be the first the producer to be able to produce a 2000.
Pascal material for the automotive market and so as we think about where we're going to be in kind of skating to where the puck is going to be our investment strategy is absolutely about bringing new and innovative products as well as expanding our capabilities for example, our nucor Yamato team in.
Hello, Arkansas has just completed a modernization and installing a tandem no and the reason why is to well in one of those two is the jumbo.
In one of those two is the jumbo line the largest second being the heaviest foot rates and while we are the largest in the market leader in beans in North America. We have invested instead, we said on our world. We have invested significant dollars to continue to expand and open up and by doing this tend to mill project and.
Yes, it's going to allow us to continue to move up in the foot weights in offering the largest heaviest jumbo section being in all of North America, specifically into the feed will allow I'll ask Mariano to comment because I couldn't be more excited about our advances as we move into automotive and the opportunities that we see there anyway.
Thank you Andrea we are excited about this we are so extremely pleased about how we are able and our product offerings.
Hold now.
Okay call now pretty every grade that we currently produce less hopeful things about ultra high strength steel and advanced high strength steels Wiley fields that are made today, but as we see it.
Wonderful.
So that when we design for the teacher that won't really support the cafe standards, so how likely are vehicles.
The galvanizing line that helped.
As it comes out here.
Here with the Gen three offerings it will they be.
Yes.
Feel that they will gain gen. Three at this time and so that really gives us the flexibility to freibel product offerings.
Just two other quick comments on various one is around Gallatin as we think about the expansion in gallatin much of their markets that you're targeting with her hot band today is currently served by the integrated.
Producers and so we see a huge opportunity with the expansion in Dallas into Moon similar products into AG into automotive that we've not been in before and historically again have been supplied to the integrators. The other point I'd add is we think about the largest investment in nucor's history is going to be Brandenburg, Kentucky.
No we will be able to produce three aces in edge all the way up to 14 inches thick out to 168 inches wide that is not an offering today that we can produce in there's only really one other producer that can go that heavy in wide. So our capability to serve our customers and those end use markets is something that.
Nucor supremely focused on.
Okay great.
Edgy and supplier of the year Award and why we only eas producer.
Hi, perceived that wherever award that award and this is the second year in a row.
Can you think about our opportunity here automotive is the largest she is there anything I can say is about 33% as the sheet market and Leah.
Growing our footprint there we haven't landed amount of opportunity to grow I think were about 7% when we got a lot of opportunity.
Second our allowance to do more.
Great. This is Jim you asked the question about integrating restarts and they're going to do what they think is best with business and we respect that.
But we think we've got any advantage business model is the proof is our financial performance and our financial strength.
So we're not really concerned about that way one way or the other we believe we've got a great opportunity to grow our business in places where integrators are contiguous today.
That's very clear I appreciate the interest and so thank you very much.
Thank you.
Our next question comes from Timna Tanners from Bank of America.
Hey, good afternoon guys.
Good afternoon, Tim.
Bob on that last question I guess, given that there will be fewer alternatives for exposed automotive applications.
For assuming that that posed and merger goes through just wondering is it is it too late for any according to kind of expand into even further exposed automotive.
Right and is that something you like.
Consider and then along those lines I know, we're getting a lot of expenses and in Europe I wondering any U.S. If you have a lot of customers that are expressing.
Expressing their preference for buying you know greener steel.
Yeah, Let me let me begin with the first part of your question and no. It's not too late and in fact, the investments in Hickman, the things that Nucor Decatur Nucor, Berkeley have done already supplying all the 14 major own ends in this country tier ones supply. So we can produce today exposed automotive.
As we move forward and we've certainly heard this from many of our automotive customers. They want nucor to having more significant footprint and presence in automotive as we stated.
Not on the last call that I think the one before our focus is to balance our portfolio and offer you know today, we're about one and a half 1.6 million tons a year that go into the automotive sector. We think around that two and a half to 3 million tons is about the right balance for us and so when we have a lot of.
ROE and we'll see how that moves unfolds is as we move forward you know the other investment with our partners in Gafisa in Mexico, and building that galvanizing lines to purely on.
Automotive steels, and so again nucor is well positioned to expand that.
And I forgot your second question what was your second part of your question in Oh, just that they're seeing a similar appetite for greener steel like what we've heard on your EPS.
Yes look it at the end of the day without a doubt as I've taken over as CEO spent.
I spent a lot of time on the road and of late with Covance.
Prior to kind of vision and a lot of zooms calls with different investors. The SP question responsibility. It's nothing that Nucor takes incredibly seriously we are seeing it in our customer base and one of the things that you're going to see nucor unfold in the coming months, it's a very proactive approach in telling our story.
We have an amazing story to tell as you well know Nucor is the largest recycler any product in North America, we cycle over 20 million tons of scrap and a 100% of one new corporate leases is recyclable infill and here again as we move forward.
Amazing story to tell were going to be much more deliberate and proactive in telling that story and sharing it didnt think about the the carbon footprint.
He asked producer with 70% of Nucor's included.
Steel being recycled.
The unique value proposition in that regard and again, we're going to wait to do some very proactive things to tell that story.
Okay Cool I wanted to see if I could I also just ask one question and one other question on the guidance. So that it was interesting you know weve seen things a little bit more sideways in terms of pricing and that bar and structural and plate and then some volumes in plate the a little lower so the guidance implies.
That said she business profitability will offset some of that seasonality and some of that more sideways moves is that is that the way we're taking it or is there less seasonality. This year. Just wondering if you could give us a little more color on what's embedded in that guidance.
It's in the city and I'll, let me take it we understand that the weekend.
Pricing works there is a lack of new consensus pricing and so we didn't get very much benefit in Q3 from price momentum that began in export will get most of it in the fourth quarter. So and then again.
Al touched on this earlier I will be here about the price moves. We've recently made in place they've been accepted by the market. So those things together I can drive better price realization in those two businesses and it's separate from market demand market demand, we expect to be somewhat stable over there is some seasonality, but LCOS capacity. It's important we finished Q3 with a strong.
Our backlog and we finished Q2 employing the same thing is true sheet. Our backlogs were much higher than in Q3, we worked in Q2.
Okay. Thanks, guys.
Thanks Simona.
And we have a question from Phil Gibbs from Keybanc capital markets.
Excellent good afternoon.
And the afternoon how are you.
Great well thank you all.
Maybe if we could we could talk a little bit about.
Right you mentioned in your outlook comments in your release that that business is getting better.
I would think certainly the the increasing price of pig iron is helping that that maybe just give us a.
Maybe just give us a high level view on how some of your operational changes have per.
Perhaps.
Perhaps.
Brought some brought some greater output outcomes.
Yes, absolutely so I'll, let Craig Feldman pretty VP over raw materials kick off can we get some good news regarding the performance and what our teams in both turn is adding Louisiana Downs or Craig Let me provide a little more detail, yes, absolutely Phil.
Really pleased with the performance as you remember.
Second half of last year, we had a pretty significant outage at Louisiana and macys significant improvements in that the operation.
Couldn't have gone better to be honest with you. The improvements we've made really allowed us to set new records and reliability at Louisiana, You got 62 days straddle the second and third quarters of this year.
In terms of uninterrupted up production, so very very pleased there.
With regard to two.
Trinidad Similarly, you know the team has done a remarkable job you know just improving reliability and deal in fact.
Just heard the other day that some of the.
Some of the the ride performance metrics were released and we are at the top of the list in terms of the quality of output from Trinidad as well so very very pleased with the progress to date. The one remaining project. We have will be finished in Q1 of next year and that's the material handling operation.
[music].
[noise] material handling yard that will be completed we should get some operational efficiencies through the beginning of next year on that as well.
No doubt and you referenced that in terms of the pressure.
Breast or or the EPS the price increases that will certainly.
Give us a little bit of a tailwind as we finish out this year and next year.
Okay.
Oil prices or are still there, but certainly the projection is for a normalization of iron ore prices every.
Everything we look at for iron ore prices could give us a little bit of a tailwind as well. So overall very very positive or very very pleased and I want to give a shout out to both of the plants through their performance focus on reliability and very optimistic about where we're at.
Thanks, Greg.
[noise] Atlanta.
Are you all seeing any signs of stabilization or any green shoots in the.
Yeah on the oil and gas side clearly, it's been done weak and continues to be but you know any any push for you know for expedite or early intentions on Capex plans from your customers next year, just any insights there would be helpful.
You know look I think its.
[laughter] optimism in that end market would be a little off right now.
Right now I think it's going to be.
Credibly pressured in Q4 in that area I don't see it does seem that much I think there will be some positive momentum as we get into 21, but again that will remain to be seen but yes.
Nucor stands ready to to supply them market, it's not a huge piece of nucor's business about eight or 9% overall in our maxes into that sector.
No I think as we see one of the key variables will be whether or not we get a vaccine what happens and when does that roll out look like either ended the year and into next year in terms of travel and transportation the airline industries and cruise lines and again, what what does the mobility in that sector look like.
To bring some resurgence intermediaries. So we watch it like you do some today I don't I think it will be pretty flat.
Thanks, and if I could sneak in one more do you think.
The the Gallatin expansion on the on the primary on the primary she's making front is it.
Still.
Mid mid 2021.
Start up is that still your attention as of right now.
Yes. It is it is.
I mean, I think Jim you touched on this in the last call you know as we entered Q2, we put a pause in a couple of bigger projects and when I say pause. It didn't stop the work that was already in place where the engineering like in Brandenburg that was already happening. So in the case of Brandenburg for example that few months it didnt delay the start up at all well Gallatin District.
We have some pressure we still feel very confident that that team has done a really good job of keeping that schedule in mid next year to set a target.
Thank you.
Thank you.
And we have a question from Alex hacking from Citi.
Yeah. Thanks, I just wanted to follow up quickly on the.
On the Arkansas or a HSS capacity is coming online how did.
I have in my notes that that's going to be 500000 tons I wanted to check that and then secondly, I just wanted to ask how.
How quickly do you think the market.
Well, the automotive customers will absorb that product line.
Knocking down your door and they're going to want to go right away or that's going to be a kind of a multi year process.
To build that up thank you.
Thanks, Alex I'll, let maryann, we started though okay. Thank you alley, and getting 500000 tons a year and we've been very pleased we are running 24 seven at this time, we broke perhaps in Mexico.
And what to do that again in October running very close to name plate at this 0.34th quarter. The backlog is strong and we've been very successful in getting contracts for next year. So we look to be about 50% to 60% contract for next year and by the balance by the end of the year.
I think outlying well come up and that part of that that's when we'll see that outline.
Outline.
Okay. Thanks, and just a follow up if I may I mean is that is that being used on the expose side.
No no.
No I didn't.
<unk>.
Hickman, Arkansas as we're more focused on internally.
Internal parts with strength required.
We'll take away.
But at Sterne Agee.
So they are right now we don't have any any.
That said to you any we care a lot for that line.
Thank you.
Thank you.
And we have a follow up question from Seth Rosenfeld.
<unk>.
Thank you for taking the follow up if I may add to question on on this cash expectations from end of the year.
First can you comment on the expected cash tax deferral benefit or maybe this year I think the prior guidance, which for threeq, but given the full year is there any update on that for the cap stack for oil and then you may. Please go on working capital can you just talk through any expectations.
For seasonal working capital release in Q4, obviously demand conditions have been Curveball trial. This year, what should we expect the remainder 2020.
Great questions first on the.
The cash benefits to taxes related to our significant capital spending that we are in the midst of we still believe it's just over 700 million over three years between 2020, 2021, 20 point to this year's numbers going to be in the 170 ish range for that portion because of the timing of when some projects are going to fish and some of thats going.
For the next year the year after that and then what was the last part of your question I I lost track I'm sorry, Sir.
Got it working capital working capital.
Working capital you know.
You're going to have higher prices and she places can you sell working capital receivables and because of the the risk of supply will probably look by quest scrap inventories and pig iron in particular, which has a long lead time to obtain.
In the fourth quarter, she could see selmo growth in working capital on the balance sheet won't be material, maybe between one and 200000 tons.
Oh, Okay got it and I'm, hoping it's a big number on receivables because it's still early days, but I want to get the best prices we can incorporate.
Okay. Thank you very much.
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And well take a question from silicon.
<unk>.
Thanks.
Mary Annaly did I hear you right.
And so much that you said the specialty cold mill is running essentially.
Full out right now.
Yes, yes, they aren't running completely full about 90%.
And that they like to go as it were.
Fills your mind your net net no has the capability to make regular colo as well as advanced high strength steels and so the mix is more towards the.
Well commercial grade coals today, absolutely. So Mary and then maybe you could touch on that because I don't know the details the way you do agree absolutely. So that's a great question because right now we've been really pleased with the quality and performance that we are running are the lower in normal cold RPC is great. We've also done all of our trials.
In the advanced high strength steels, and we've been very successful. So we're really pleased with what we're seeing on that line, we havent been able to satisfy the channel three trials of that this year will be ready when like outline comes up and is ready to right size as we go forward that mix will change only.
It should be higher in tight cotwo products.
Yeah.
Does that help.
Is that is that project itself moved out of startup are you are you, making are you, making cash on that asset right now.
Yes, yes, we are and and expect for the year to be cash.
And then lastly, Jim if I could on the startup costs overall I think you.
Pre operating and startup you said something on 22 million in the release what.
What does that what does that include those.
Those pre operating and startup costs and then when when would the projects within that.
Buckets start to break free.
Well, there's there's several projects in there the biggest single item is and.
And of course deal.
Florida, Susan 9 million range, and then there's 4 million accounting and 3 million in the Brandenburg and then the other equally spread across other smaller projects.
In the fourth quarter, we think it's going to be the neighborhood of 24 $25 million and.
And it was a peak at just over 10 and a half million. We expect also to be in the just under 4 billion range and bring it to the board half million again, the hours that smaller levels. The other projects. So yeah. As we go into next year its too early to tell but four to start falling off but obviously because.
Some ramp up they counted and brand for so if I can make a guessing it's purely guess next year is not going to be materially different maybe just a little bit higher and how we rank startup costs at both Brandenburg Galaxy.
Understood. Thanks for all the color.
Yeah.
And we will now take our final question from Tyler Kenyon Olin.
Hi, Good afternoon hope everyone's doing well thanks for squeezing me in here, Jim I, just I just had a question for you just on the Capex.
In the $1.7 billion budget, just for 2020 here, how much of the $4 billion of major capital projects, how much of that spend.
We'll have been spent by year end and maybe how we should think about that as a component of your.
Earlier comments for 2021 being roughly 2 billion in total capex.
Yeah, I don't have that exact number at my fingertips, but I'm ballparking the price that too I think we're going to do this year somewhere in that range.
Okay, and then just on the 2021 commentary gold around people wanting to come once again, we don't have a final budget. The total number is is is 2 billion will be prepared to give you a better breakdown.
That 2021 number between big parts I know a substantial amount of its carry forward, but it's also carry forward on projects. They don't arent within that 4 billion dollar total we got a lot of small midsize projects going on all the time in the business of our scale. Our base Capex is in that four to 500 million easier. These days just support.
Business.
Thanks very much.
Youre welcome.
Yeah.
Ladies and gentlemen that does conclude today's kinase.
Like to turn the conference back to Leon Thailand for any closing remarks.
Thank you.
Including our call today I want to express our appreciation to our shareholders we.
We value your investment in our company, we think the obligations seriously that comes with it.
I'd also like to thank our customers. We are excited about the capabilities, we're building to better serve you today.
Fortunately for tomorrow.
Thank you for the trust and confidence you, placing the nucor team each day to supply your needs.
Before I conclude I want to impress upon everyone listening today, just how confident I am there's no good going to come out of this challenging here.
Safer stronger more diverse and inclusive and more profitable nucor. Thank you for.
Thank you for the interest in our company.
And once again, ladies and gentlemen that does conclude today's conference I. Appreciate your participation you may now disconnect.
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Mm.
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