Q2 2021 Nucor Corp Earnings Call
Yeah.
[music].
Good day, everyone and welcome to the Nucor Corporation second quarter of 2021 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 will be forward looking statements that involve risks and uncertainties. The words, 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 for 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, Qs which are available on the SEC's and Nucor's website.
The forward looking statements made in this conference call speak only as of the state and Nucor does not assume any obligation to update them either as a result of new information future events or otherwise.
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 ahead Sir.
Good afternoon, and welcome to our second quarter earnings call. Joining me on the call today are the members of Nucor's executive team, including Jim Frias, Our Chief Financial Officer, Dave Some asking Chief operating officer Al Behr responsible for plate and structural products, Doug Jellison responsible for raw materials.
Logistics, Greg Murphy responsible for business services, and our general counsel, Dan need him responsible for bar and rebar fabrication products Rex query responsible for sheet and tubular products Mary Emily slate responsible for enterprise commercial strategy and Chad you to Mark responsible for <unk>.
Engineered bar and fabricated construction products.
Thank you for joining us today with demand for steel remaining strong and most of our facilities operating at peak performance. We have not lost focus on our goal of becoming the worlds safest steel company.
We continue to perform well on the safety front as we look to make 2021, our safest year ever besting our record set just last year in particular I want to acknowledge the progress demonstrated by our sheet mills and our 2 DRA facilities for achieving world class safety performance. So far this year.
I encourage all of our teammates to maintain their focus on safety. So we can achieve the most important goal that we have set for our company.
Consistent with last month's guidance Nucor posted record quarterly earnings in the second quarter, our earnings of $5.04 per share surpassed our previous earnings per share record set last quarter. Our first half earnings of $8.13 per share exceeds our full year EPS record of 742 said in 2000.
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All 3 operating segments are continuing to generate robust profits due to strong demand higher average selling prices and excellent execution across nucor and.
In our steel mill segment, we saw the greatest improvement in profitability from our sheet and plate mills.
The performance of our steel products group also improved compared to the first quarter.
Jim will provide more details about our performance this quarter and our outlook for the third quarter in a few minutes.
This level of performance is the result of years of work strategically growing and positioning our company to thrive in market conditions like we are experiencing today, Mike congratulations to the entire Nucor team.
There are several fundamental drivers of the strong market conditions Nucor is benefiting from today.
Most important of these is robust demand virtually all the steel end use markets that we monitor are growing some of this growth may simply be catch up from the pandemic induced economic level, we experienced here in the U S. But we think it goes beyond the temporary rebound.
1 sign of this is the increasing confidence about next year that we sense from our customers ranging from automotive trucking heavy and AG equipment and across the construction sector. There are noteworthy new drivers for growth in steel demand warehouses for ecommerce renewable energy projects and an increase in U S.
<unk> investment focused on greater supply chain resiliency are all creating new market opportunities for nucor.
Very strong housing and automotive markets are also creating incremental steel demand not to mention activity by state Dot's, whose infrastructure investment spending has held up better than expected we.
We are fortunate that several of our strategic growth investments have come online during this period and our results reflect better than expected contributions from Nucor steel mills in Sedalia from proof Kankakee, Marion Gallatin, New Galvanizing line and Hickman, New Cold mill, my thanks, especially to our teammates at these locations.
Who have worked safely to ramp these projects have quickly to meet market demands.
Our strategy continues to be grow the core expand beyond and live our culture, we are continuing to make targeted investments and acquisitions to grow our share in attractive markets and increase our long term earnings power.
We are complementing our investment strategy with a sharpened commercial focus that is enabling us to leverage our broad portfolio and deliver increased value to our customers with more integrated solutions acquisition.
Acquisition announcements, we made in the second quarter are focused on the expand beyond part of our mission statement, our pending acquisition of cornerstone building brands insulated metal panels business.
<unk> for short is squarely aimed at some other fastest growing markets. I've mentioned for example distribution center investments driven by evolving consumer preferences regarding e-commerce and grocery delivery as well as the expansion of data centers in server farms, which all require temperature controlled environments.
Cornerstones ISP business as a market leader and innovator in the growing <unk> product category.
<unk> products are gaining market share as companies and institutions continue to focus on environmental performance and energy efficiency.
The superior insulating performance of ISP products reduces energy usage and overall operations related greenhouse gas emissions. Additionally, E&P products are easier to install with lower maintenance cost versus other wallen roofing solutions.
Cornerstones A&P business is an excellent fit with Nucor buildings group and we are confident that we can help the team there take performance to an even higher level. We also announced earlier this week our agreement to acquire Hannibal industries, 1 of the largest steel pallet rack manufacturers in the U S. Hannibal provides racking solution.
To warehouse, serving the e-commerce, industrial food storage and retail segments.
Adding hannibal to Nucor creates a new growth platform that broadens, our offering to the distribution center market, including beams joist deck metal buildings and of course insulated metal panels.
As an employee owned company, we are optimistic that Hannibal industries will be a great fit with the Nucor culture.
Also on the expand beyond front, we continue to build out our own growth platform in industrial gases, enabling lower cost supply to our steel mills, while also creating additional streams of revenue with sales to third parties.
The team that joined Nucor with our acquisition of Universal Industrial gases in 2019 continues to do a great job executing these initiatives.
We have an operating air separation unit at Nucor, Hartford and are actively selling liquid gases on the open market. We will continue to have more asu's supporting our other mills up and running in the coming months, we are bringing the safety focused performance driven team oriented nucor culture to each of these businesses and we are excited to.
Welcome these teammates to the Nucor family.
As 1 of the cleanest steel producers on the planet Nucor will continue to take our environmental leadership position, even further our new greenhouse gas reduction commitment, we will take our carbon intensity down to 77% below today's world average our commitment is to reduce our scope, 1 and 2 greenhouse gas emissions intensity.
By a combined 35% this.
This commitment will be measured against the 2015 baseline the year the Paris climate agreement was signed.
At our current greenhouse gas intensity Nucor has already achieved the steel sector benchmark established in the Paris agreement. Our performance today is what many of our competitors around the globe are aspiring to achieve by 2030, 40, 50 and beyond and compared to many of our integrated competitors, our starting point is already better.
<unk>, then they're near and intermediate goals.
And now we're going to get even better we are later today and sustainable steel production and our commitment to further reduce our emissions intensity will keep us a leader as we move forward.
Turning to infrastructure, we urge Congress to make good on the recent bipartisan framework reached in the Senate income together to pass a significant infrastructure funding Bill we strongly believe that modernizing our infrastructure will boost our nation's economic competitiveness.
Tim mentioned, making us all safer.
Federal infrastructure spending plans currently under consideration are expected to increase U S steel demand by as much as 5 million tons per year for every $100 billion of new investments Nucor is incredibly well positioned to provide steel for infrastructure projects across the U S.
We are encouraged that the president and members from both parties continue to focus on this issue and we are hopeful that they can come together to form a bipartisan solution.
Again, it is gratifying to see how years of hard work and planning are paying off in this incredibly strong steel market. We're excited about the expanded capabilities. We can offer our customers because of our capital investments and acquisitions. We have made in recent years to the entire nucor team. Congratulations on an excellent first half of 2021.
Let's continue to execute and make this our safest and most profitable year.
Now, Jim Frias, who will provide more details about our performance in the second quarter Jim.
Thanks, Leon second quarter earnings of $5 <unk> per diluted share exceeded our guidance range.
Better than expected results for the month of June were achieved across a broad group of businesses, including our beam Mills bar mill's sheet mills, rebar fabrication tubular products and joist and deck.
Nucor's diverse portfolio of products and capabilities is consistently a powerful driver of value creation for nucor shareholders and customers.
Recently completed capital projects made significant and above budget earnings contributions in the first half of this year.
These projects are the rolling mill modernization at our Ohio Rebar mill, the Hot band Galvanizing line at our Kentucky sheet mill the.
The specialty cold Rolling mill at our Arkansas sheet mill.
The rebar micro mill in Missouri in Florida, and the merchant bar Rolling Mill at our Illinois Bar Mill.
These targeted investments are enabling nucor to earning a growing and profitable share of the markets we serve.
The Hickman, Arkansas specialty Cold Mill is an excellent example of nucor's growth strategy.
There are no other carbon steel mills in North America that match, our new range of capabilities.
In the second quarter, the Hickman specialty Cold mill ran at 118% of rated capacity more than double its originally projected production ramp timeline.
Since beginning operations in mid 2019, this project's life to date profitability also substantially exceeds its initial forecast.
And the Hickman team is looking ahead to further expanding long term earnings power as it begins the work of commissioning its third generation flexible galvanizing line equipment.
The state of the art capabilities of these new assets will position Nucor to further grow our automotive footprint.
We will provide our automotive customers the greenest, most advanced high strength steels in the industry.
These deals will provide our customers the ultimate solution that satisfies their needs long into the future.
Our success, bringing strategic projects like this online reflects the nucor team's commitment to being effective stewards of our shareholders' valuable capital.
Our growth investments are targeted at defined market objectives and opportunities to generate attractive returns with reduced volatility through the economic cycle.
Financial strength continues to be a critical underpinning to nucor's ability to grow long term earnings power.
At the close of the second quarter, our cash short term investments and restricted cash holdings totaled $3.2 billion.
Compared with the end of the first quarter position, our second quarter cash position increased by about $226 million.
That increase is after funding share repurchases of $614 million.
Cash dividends of $123 million capital expenditures of $389 million and a working capital expansion on the inventory receivables and payables line items totaling about $945 million.
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 $5.3 billion at quarter end.
Gross debt as a percentage of total capital was approximately 30% while net debt was 12% of total capital and remains well below our targeted range of 18% to 23%.
We remain materially under leveraged on the spaces, but we anticipate that this will change somewhat as we deploy capital to acquire cornerstones E&P business and Hannibal industries.
We're excited to be moving forward with these new growth platforms. We.
We expect that these businesses along with the numerous internal growth projects, we have been executing on will materially add to nucor's earnings and cash flow generation in the years ahead.
Cash provided by operating activities for the first half of 2021 was $1.9 billion.
New course free cash flow or cash provided by operations minus capital spending was $1.2 billion.
Nucor's financial strength and robust through the cycle cash flow allows for a consistent balanced approach to capital allocation.
We now estimate total year capital spending of approximately $1.8 billion.
Each of our 3 most significant capital projects.
The expansion and modernization of the Gallatin, Kentucky sheet mill.
The generation III flexible galvanizing line at the Hickman, Arkansas sheet mill, and the Greenfield Brandenburg, Kentucky plate mill remains on schedule.
At Brandenburg the timing of some equipment deliveries has been delayed but overall the project remains on schedule for late 2022 commissioning.
During the second quarter, we continued to see attractive value in our shares repurchasing 6.7 hundred 65 million shares at an average cost of approximately $91 per share.
Over the first half of this year Nucor share repurchases totaled more than 12 million shares at an average cost of about $75 per share.
Shares outstanding have been reduced by approximately 3% from the year end 2020 level.
For the first half of 2021 total cash returned to shareholders through dividends and share repurchases totaled just under $1.2 billion.
Representing approximately 47% of net earnings for the period.
As we have said previously we intend to return a minimum of 40% of our net income to nucor shareholders.
We are rewarding shareholders with substantial cash returns, while continuing to invest for future profitable growth and maintaining a strong balance sheet.
Turning to the outlook for the third quarter of 2021, we are encouraged by a number of positive factors impacting our markets.
As Leon mentioned, we see improving or stable market conditions, where the vast majority of the end use markets served by Nucor.
In fact order backlogs at most of our businesses suggest strength well into 2022.
Further supporting our optimistic outlook inventories throughout the supply chain remain lean.
We expect earnings in the third quarter of 2021 to again set a new record.
Compared to the second quarter, we expect earnings growth at all 3 of our segments, most notably our steel mill segment.
Additionally, with our expectation of a strong fourth quarter. We believe second half of 2021 earnings will exceed first half of 2021 earnings.
Nucor's record results highlight the success of our 27000 team members building, a stronger and more profitable nucor.
Our teams 2021 performance is simply outstanding.
We remain excited by the opportunities ahead for our company, we have great determination to deliver increasing long term value for our shareholders.
Living our culture means driving sustainable performance.
You for your interest in our company now we'd be happy to take your questions operator.
Yeah.
Thank you and if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again, everyone. If you'd like to ask a question. Please press star 1 on your telephone keypad will pause for a quick moment.
Yeah.
And we will take our first question from Emily Chang with Goldman Sachs. Please go ahead.
Good afternoon, Leon and Jim Thanks, Dan Thanks for the update today.
I'd like to start off with sort of the M&A strategy that that you guys have.
Clearly you've focused on through the downstream fabrication type of assets, so far but when you look ahead and think about the opportunity set that's out there.
More of the same.
Type of assets that you've looked at currently.
That would be potential for steel production capacity consolidation.
Or even further upstream.
Yes, thanks for the question Emily.
Look I would tell you broadly as I mentioned in my opening remarks, our mission is to grow the core expand beyond analytic culture, we see opportunities as we think about growing the core that's the expansion at our Hickman.
Advertising line can become the first eas to be able to produce a full generation 3 steel for the automotive sector expansion at our Gallatin sheet mill and expanding that footprint into a more attractive returns in different sectors like automotive energy and our combination with <unk>.
The largest single investment in Nucor's history, our plate mill in Brandenburg, Kentucky, that's going to be brought online next year, that's going to be.
Located in the heart of the largest plate consuming region in the United States and from a timing perspective, as we think about the renewable energy market and sector that mill is incredibly ideally positioned and well suited to meet the demands of both onshore wind, but particularly offshore wind as that grows as a as a business but.
We also see opportunities as we think about growth in the core outside of that and so there are times that youre going to see Nucor continue to look within the framework of traditional steelmaking lanes that we've operated in for the last half a century, but also expanding beyond and that is the recent acquisitions with both cornerstone and.
Hannibal that fit nucor's long term strategic objectives for maximizing shareholder returns, but also Emily.
A focus on moving into markets that are truly growing.
As you know steel is a cyclical business and the industry and what we see in the renewable space, what we see in the Green economy digital economy is a fast growing and an increasing market opportunity for nucor to maximize and leverage its strength.
Cultural stewardship and to bring a leadership perspective into those businesses.
That's really helpful and makes sense 1 quick follow up I know you mentioned updated time ill sort of reiteration of the timing of the brand back startup.
Can you provide some similar details of the Golan Hot band capacity expansion.
The galvanizing line that have been please thank you.
I'll turn that to James from Oscar <unk>, Chief operating officer to provide a little more color on both of those products. Both those projects are scheduled to come up at the end of this year.
Still on target for that and as Jim.
As mentioned, we're really excited about the expanded capabilities that those projects.
Those projects will bring.
Recent projects that came up in the success that we've had and the team has shown in me and been able to do.
It gives us a lot of confidence and a lot of excitement.
These projects will come up and I will come up running better than ever.
Faster than ever if you think about the gallon.
Yes.
Galvanizing line.
Running that way past nameplate capacity, Jim mentioned, Nicole mill over in Arkansas.
So daily basically ran.
Slightly higher than the nameplate as well in Florida, Florida is moving right on the radio so very excited about about the team and the team's capabilities.
These projects bring these projects online safely.
1 clarification when day said, both these projects I think you're referring to the Hickman outline and Galton Brandenburg is not until late 2022.
Yes.
Finally, I'd like to share as we think about growth and really as a backdrop as nucor filters through all of our strategic growth Strat.
Strategies as Nucor is not looking to build capacity, we're looking to build capability and so as we think about our growth strategy, it's not about a volume play.
It's about offering a differentiated value proposition for our customers to create again long term shareholder value.
That's very clear looking forward to the update thanks, everyone.
Thank you.
And our next question will come from Carlos de Alba with Morgan Stanley. Please go ahead.
Yes, thank you very much everyone.
Very solid quarter. So a couple of questions. If I if I may just 1 is on working capital obviously.
It consumed cash this quarter, how do you see that progression in the second half of the year prices remain quite a strong volume is also quite solid so should we assume assuming that our run rate in the coming quarters or more of a stable 70 station at these levels and then if I may ask if you have any comments about how the H b.
Our operations performed and what is the outlook for Brian scrapped in the coming quarters that that'd be great.
Yeah.
I'll take the first 1 out Leon decide who's going to talk about <unk>.
But working capital yes, Okay, we look at working capital as inventory receivables and payables it consumed over $900 million from cash in Q2, we expect that to moderate and the balance of the year, it's still going to require some increase.
Depending on how much scrap prices go up.
And of course, we know sheet pricing is going up because from the way. We see are your contracts are impacted I think we just recently announced price increases and some other products as well. So you will see some price inflation that will cause a working capital further.
Further probably not at the same pace as we experienced in Q2.
Yes.
Second part Carlos.
Johnson, our EVP of raw materials to give you.
On our Q DRA facilities.
Hey, Carlos both of our facilities are operating very well the teams are performing at world class reliability and uptime the quality is outstanding.
We see the balance of the year being just pretty standard.
Routine no excitement there.
Scott.
The prime scrap market, we see a pretty steady flow.
Kind of a leveling off.
Off price in the prime scrap in there.
Alright, Thanks, John Thank you very much gentlemen.
Thanks, John Yes, right yes.
I've heard so much API had recently.
No worries.
Alright, and up next we'll hear from Curt Woodworth with credit Suisse. Please go ahead.
Yes. Thanks, good afternoon lands haven't Greg everyone hope everyone's well.
Thank you and good afternoon Kurt.
First question I know the sheet market seems to get you know.
A lot of positive press, but we've seen pretty significant recovery in the play than most of the long product markets and we've heard that some of the specialty beam sizes have actually been sold out.
6 to 7 months. So I was just hoping if you could provide a little bit more color on what youre seeing across plate in long products and how you would kind of compare those markets be it lead times backlog levels relative to what youre seeing in the sheet market.
Yes, maybe I'll kick it off and then.
I wanted to dive in a little bit deeper on plate and then Rex maybe on the sheet side.
It's a great point and Youre right from a lot of obvious reasons as we think about sheet. It does get a lot of press, it's a 60 million ton a year market.
An important segment for Nucor.
Certainly front of mind as we think about the opportunities for us as we move more into the automotive sector, but to your point as we think about the contrast.
<unk>.
Several of my years.
At the <unk> mill at Nucor, Yamato and over the last decade.
So I would say Nucor Yamato has averaged in that 70% utilization range. They are approaching 90% today and we've not seen that for.
Nearly a decade and show the performance of that mill has been exemplary through that period profitability wise, but now in this market, we're seeing an incredible strength.
Backlogs are improving order conditions are improving and the forecast as we move not just through the rest of the year, but some.
Some cases well into 'twenty 2 strength.
Through the cycle and many of those groups all of that is to say none of that is to say rather.
4 includes any thought of what a meaningful infrastructure bill being passed in the United States could do and include and again, we have room, we have opportunity in terms of creating.
And generating more steel for that sector, but at the same conditions exist in long products.
Wanting to touch on plate and then Dan for Exxon non sheet, yes.
Yes, Thanks, Kurt I think Lee uncovered that really well.
Construction is obviously a huge market for beam than it is for <unk> as well and it speaks to the strength of non res construction that we've seen all this year a lot of that construction is centered on low rise industrial warehouse distribution data centers.
What's left to start showing some life is high rise, which has only continued tailwind for the <unk> market.
The highlights constructions and very very slow the last year or so, but it's starting to show some signs of life in the <unk>.
Plate market, specifically really all markets are quite strong heavy AG market.
Transportation with railcars.
Even oil and gas is starting to come back now that it's been 1 of the weaker markets, but we're starting to see activity in oil and gas.
Take cars, you've got to move oil 1 way or in other than a it's not in the pipeline is in the tank car.
And so we.
Continued strength in the plate market, we see.
Good balance between supply and demand that's what drives the pricing of the product and we see continued strength through the second half of this year and then zone.
Alright.
Yes.
Kurt <unk>.
So just a couple of comments to add.
Yes.
Very very comparable to what al mentioned backlog remains very strong.
To follow on comment from Leon about building capability.
Not necessarily capacity on the <unk>.
<unk> side with the projects that <unk>, you mentioned that Dave mentioned, we've got both.
We have the capabilities going increasing at Hickman with the Gao the capacity coming online at Gallatin sex.
Sectors are strong, but on a construction energy more on the renewable side that we see.
We're squeezing some of our outages were not going to compromise our reliability, but we are pulling some days out when we can on on our outages on the sheet side, so that we're able to produce more and.
<unk> has tested right now so we haven't seen that when the chip issues that are going on so we see there's future opportunity as that comes it comes about to see strength in the future on that so thats the sheet side.
Great. Thanks, and as you think about.
Longer term progression of the business, becoming more value added more specialty plate.
Assume that would drive incremental demand for higher quality mentality and there's been a lot of debate in the market about shortages of prime scrap.
Being overly dependent I would say you know pig iron from Russia, and things like that do you think there's scope for additional.
Investment and into DIY or additional facilities to support D. J J just curious.
How do you think that fits in and how does that fit into also the carbon strategy. Thanks, a lot guys.
Thanks, Curt and Mark I'll touch on and ask Jim or Doug just to chime in as we think about.
Youre framing youre right as we think about nucor expanding in some of our competitors expanding further upstream into more value added businesses on the Eas side. The demand for prime is going to get tighter and that is why nucor long ago began a very thoughtful.
And wall term strategy to control more of our Metallic's inventory and Thats why we built the facility in Louisiana and again I'm proud of the team are proud of the work that they've done.
Way too many years on this call we shared.
1 reliability issue after the next.
Downturn that they took back in 2019 to fix the reliability issues has manifested itself to what Doug shared earlier in terms of World class reliability now operating not just in Trinidad which is done for a long time, but now marrying that up with our.
Capability in Louisiana, So under New course control, we have about $4.5 million.
Tons of Cri of Metallics that are in our direct control of that offers us a unique.
Material advantage as we move forward and as we think about expansion and the demand on the metallic side is our opportunity I think there's some opportunity as we think about.
John.
Is there an opportunity in this country for certain integrated competitors to bank pig iron and those facilities have a sure fire in the United States, absolutely and Nucor would be.
Oh, absolutely supportive of that strategy, but again thats for them to sort through and work through but again, we're confident in our capability today.
I think this much Dan.
You did a good job on that.
Thank you.
And now we'll hear from Phil Gibbs with Keybanc capital markets. Please go ahead.
Thank you.
Good afternoon.
Good afternoon, Phil how are you doing well thanks very much.
What are your expectations right now.
Third quarter versus the second quarter, just in terms of overall steel volumes, they've obviously been very strong in the first half of the year, sometimes you get seasonality, sometimes you don't I know, you're taking outages here and there.
So what are your expectations just for the steel volumes.
Yes look I would tell you that we're expecting at or slightly higher than what we saw in Q2, so not substantially greater but we do see some improving.
And markets and we think the opportunities there for us to run a little bit stronger in Q3.
Okay.
And I did notice just on your cash flow statement that you had some.
Some inflows from from taxes, and I know some of that was anticipated with putting some new assets into service.
Can you just remind us Jim how much you have left in terms of cash tax avoidance, maybe for the balance of the year and then and then.
2022.
Im sorry, I got interrupted estimate can Phil.
No I, just said I noticed on the cash flow statement that you had some some cash tax.
Inflows. So you avoided some some cash taxes in the first half of the year I think it was around $300 million from from memory what day.
You have in the back half if anything in terms of.
The difference between your effective and cash taxes, and what could cause that inflow be if anything and then in 2022.
As Galton comes into services Theyre more.
Cash tax inflows coming from from from that.
I don't have it at my fingertips pulse right here and he's trying to whispered to me and Im not understanding pulpwood given the number.
<unk> hundred $50.250 million about this year, Phil and probably about another $2.50, or so in 'twenty 2 from accelerated depreciation methods.
Phil the number you saw on our statement of cash flow just to be clear that's not initially that exactly it's more of the timing of our accrual.
Versus the payments, we make quarterly so I wouldnt construe that as purely being related to the benefits we get from accelerated depreciation on those capital investments okay.
Okay. So the $2.50, just take.
Other portion.
Yes go ahead.
What we're going to get to 50 of benefit and what we pay.
Versus what we accrued this year and $2.50 next year, but it's not just as simple as looking at that line in the statement of cash flows this year okay.
And then in terms of end demand I know you had said a lot of your.
End markets in the right direction.
Right now automotive has been.
Sort of a squishy given the push outs in.
In the second quarter and some of the downtime of the manufacturers have taken on 1 of your competitors earlier today said that they had to withhold some some volume and kept on their inventory.
That they hope to let later this year.
Any thoughts in terms of what you all are seeing on automotive and what are the signals signal spend and what are you planning for it because it's been very tough to read from our standpoint.
Yes.
Let me begin with the kind of the backdrop of you know as we think about semiconductors and 1 other things that I think most Americans have learned through this pandemic.
This nation needs to be a nation that built that makes things again, and we've got a Richard manufacturing in this country, whether it be pharma PPE medical equipment devices and semiconductors.
But directly to answer your question when you think about the days on hand in the automotive world of about 27 days on hand inventory numbers are staggering low we think about the rental car fleets across this nation, it's going to take a long time to replenish the dealer inventory networks as well as the rental car side.
As we mentioned our investment strategies.
Our move into automotive is really exciting for nucor.
1.5 million tons today into the automotive sector.
And our focus is true in the next several years double that.
Our OEM relationships that we've built over the years now becoming general motors supplier of the year back to back to back years 3 years in a row.
Our team has done a phenomenal job I couldn't be more proud of the work that's done and so while I do think we're going to see some constraints, obviously, you're reading the headlines as we are in talking to our customers.
There's going to be a lot of pressure right GM.
GM announced theyre going to take some downtime on some other.
Silverado's and building out of their pickup trucks, none of that is.
By design brightest because they can't get the parts that they need so while it will have an overall material impact to the industry Nucor's volume should not significantly off and we have a unique platform, where our <unk> OEM direct customers that we have today are asking nucor to take bigger shares and that is <unk>.
Again, an exciting opportunity as we think about marrying up the investment strategy to where our long term goals, we want to be in automotive.
Thanks, Lee and I appreciate it and then if I could ask 1 more.
Kind of a 2 part I guess, what are you seeing right now in the oil and gas.
Sector I think 1 of your competitors essentially some of the drilling side is getting better and the transmission sides walkie because of some fill the pipelines.
And then what are you also seeing any ASP PQ.
Supply chain, thanks very much.
Sure.
We will begin with an Chad if you wanted to maybe just provide us.
John do you know Mark is responsible for our engineered.
Barr group chat when we start there and then I'll touch on the oil and gas.
Thanks Leon.
Yes, overall, the BQ market, which probably lagged a lot of our markets as we came into 2021, we're starting to see that strength come back.
I would classify it as becoming strong and getting stronger led.
Led by auto.
2 a part obviously there as we talked about some other constraints on auto, but the heavy truck transportation heat.
Heavy equipment all of those things, we're starting to see pickup, even though oil and gas. So overall I'm optimistic as we move forward in the SBC markets.
Sure.
Yes.
I'd, just say I mean to your question around oil and gas obviously, the weakest at the end markets through 2020.1.
Obviously ongoing recovery in energy prices suggest improving CTG in line pipe demand ahead.
Difficult to forecast as we move forward, we do see signs of life and some from improved activities there but.
I think of the end markets we serve.
Certainly the most.
Or the longest to recover I think that'll continue through the rest of this year as we move into 'twenty..2 we're cautiously optimistic that it will continue to improve.
Thanks, everyone.
Thank you.
And that concludes our Q&A session for today I will turn the call back over to Mr. Leon Topalian for any additional or closing remarks.
Thank you I'd like to conclude today by once again thanking our nucor teammates for your focus commitment to living our culture and how we take care of our team customers shareholders and for delivering on our most important value the health safety and wellbeing of the entire Nucor family. Thank you.
For your interest in our company and have a great day.
And this concludes today's call. We do thank you for your participation and you may now disconnect.
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