Q2 2022 Nucor Corp Earnings Call
And Rex query responsible for sheet and tubular products.
Our mission to become the world's safest steel company is the greatest measure of our culture and our most important value.
Halfway through the year, we are on pace to have our new safest year in history, which is coming off back to back to back record safety years I want to thank each and every member of the Nucor family for your focus and dedication in ensuring every team member is safe.
Turning to our financial performance, we achieved a record second quarter earnings per share of $9 67.
And record first half earnings of $17 30.
This record performance was driven by strength across our diversified portfolio of businesses.
<unk> financial results were recorded by number of our businesses, including bar plate sheet structural joist deck buildings tubular and our raw material operations.
Since entering the steel business, we are focused on growing long term earnings power and shareholder value. This month, we are celebrating 50 years since Nucor was listed on the New York Stock Exchange.
During that time, we have led the transformation of the domestic steel industry and we are the envy of the world in terms of Nucor's environmental footprint safety performance and efficiency as well as profitability.
Nucor has grown revenues by more than 13%.
Per year from $83 million. When we were first listed on the exchange and $19 72 to last year's record of $36 5 billion.
Even as the total size of the domestic industry has shrunk we have also grown our workforce from 800 team members back in $19 72 to more than 31000 team members today and in the process created a huge amount of shareholder value $1 invested in Nucor. When we were first of all.
<unk> would be worth over $1 $6 million today.
Our record first half results continue the history of delivering new highs in profitability and cash flow through successive economic and steel market cycles, demonstrating the sustainability and adaptability of Nucor's business model.
We have world class manufacturing talent, and we're making the right investments to continue our track record of outperformance.
Several of our recently completed organic growth projects in our core steelmaking business.
These are already contributing to our record first half profitability and there is more to come as additional projects ramp up production will come online.
For example, our Nucor steel Gallatin modernization and expansion project is now fully operational having completed the last of their project related outage work on June 6th.
Our Brandenburg, Kentucky played mill is on schedule and on budget for a late 2022 production start with almost 400 team members on board.
This is a game changing mill in the U S plate market that will firmly establish us as the market leader in plate.
And in May the state of West, Virginia prove the air quality.
<unk> for a new sheet mill in Mason County groundbreaking for the project will happen later this year.
Also during the second quarter, we completed our purchase of CACI overhead doors and announced two acquisitions that will lead to the establishment of Nucor towers and structures.
Which will serve the utility transportation and telecommunications sectors. We are so excited to welcome our new team members into the Nucor family.
As we execute on our mission statement to grow the core expand beyond and live our culture.
These investments are excellent examples of what we look for and expand beyond businesses.
Serve growing markets and leverage new cores core manufacturing capabilities, and our safety and team focused incentive driven entrepreneurial culture.
We look forward to rapidly scaling up their operations as we continue to broaden our portfolio of construction market solutions.
As we evaluate growth initiatives, either in our core business or by expanding beyond we focused on driving incremental value by leveraging our capabilities and existing positions of strength as.
As we have done for the last five five decades throughout our history.
Earlier, I mentioned, the 15th anniversary of our New York Stock Exchange listing.
Our July 12, 1972 news release announcing the listing gave our firm's business description as quote the nations largest producer of steel joists and quote.
It had mentioned that the company also produces carbon and alloy steel.
At that time, we just operated one steel mill, which was nucor steel Darlington.
Nucor's tremendous growth and profitability and market value over the past five decades has been fueled by our decision back then to expand upstream into steelmaking.
The result is that today, we are the leading north American manufacturer of a diverse array of steel and steel products, providing essential solutions for construction infrastructure energy transportation automotive capital goods and consumer durable market applications.
Today expand beyond is a disciplined strategy for profitable growth and value creation, just as our expansion into steelmaking was 50 years ago.
With it we are targeting higher growth sectors of the economy, and leveraging nucor's core competency and efficient variable cost based manufacturing as well as our broad product portfolio in existing channels to market.
Turning to policy issues I want to mention that we support Swift passage of legislation to address semiconductor manufacturing and beneficial updates to our trade laws through legislation known as leveling the playing field Act two <unk>.
Congress musket this important bipartisan priority across the finish line since the COVID-19 pandemic first disrupted our lives more than two years ago. It has become clear that the U S needs strong resilient domestic supply chains for all sorts of critical materials, such as semiconductors made by Great American companies.
Re shoring semiconductor production here in America gives us a tremendous opportunity to unleash a manufacturing Renaissance in the United States.
Also last week the U S.
S International Trade Commission unanimously extended anti dumping and countervailing duty orders for an additional five years on imports of corrosion resistant steel from China, India, Italy, South Korea, and Taiwan. While this is a positive development unfairly traded imports remain a concern for our.
Industry.
The ITC is conducting several more five year sunset reviews. This year off key trade orders on flat rolled products. These orders are critical to market stability and industry performance and are an important part.
Of our government <unk> trade enforcement toolkit.
Nucor is working hard to ensure that they all remain in place.
Finally, today's headlines are full of concerns regarding inflation interest rate hikes, and whether we will experience a recession.
While we are all aware of these factors nucor sustainable and flexible business model gives me great confidence in our ability to continue to grow and create value for our shareholders.
Our team is focused on enhancing our capabilities not simply adding capacity.
And on delivering a differentiated value proposition for our customers by reliably and safely providing a broad offering of the most environmentally responsible steel and steel products found anywhere in the world.
Before I turn it over to Steve I want to congratulate our 31000 Nucor team members for a fantastic first half of the year. Thank you for your hard work and dedication and commitment to delivering exceptional customer service.
Let's continue our progress towards delivering the safest cleanest and most profitable year in Nucor's history.
Now Steve will accident will share additional details on our first half performance and our outlook as we move forward into the second half of the year Steve.
Thank you Leon as Leon mentioned this year's second quarter was the best quarterly financial performance in our company's history.
The quarters earnings of $9 67 per diluted share exceeded our prior quarterly record of $7 97 per share by more than 20%.
Operating profits were stronger than we anticipated for all three segments.
I want to thank our 31000 teammates.
For these fantastic results your dedication and efforts are what drive the efficiency of our manufacturing businesses, which enable us to reliably meet the strong demand, we're seeing across our broad array of products.
Comparing the second quarter of 2022 to the first quarter of 2021, all three segments generated higher earnings with pronounced outperformance in our steel products segment.
That segment produced $1 1 billion and operating profits for the quarter.
Our joist and deck business continued to be the largest contributor to this segment's performance.
While the joist and deck shipments were down from the first quarter higher prices more than offset the decline in volumes con.
Contributions from tubular products and metal buildings were aided by both higher volumes and higher pricing during the quarter.
Overall, our steel products segment continues to benefit from strong nonresidential construction demand. This segment's earnings power and strong free cash flow characteristics continue to make key contributions to our overall performance.
In our steel Mills segment shipping volumes were up by 10% most of the increase was in sheet and plate as we were able to take advantage of what we considered to be strong demand leading to attractive pricing in those markets.
Our metal margins decreased by about 5% from the first quarter is $941 per ton to a still robust to $895 per ton.
Offsetting some of the benefits of the stronger metal margins, we have been realizing over the past several quarters.
Are some cost pressures from higher electricity and natural gas pricing.
Our energy cost per ton of steel produced was up approximately 50% year over year.
However for some context energy cost still represent approximately 6% of our overall cost per ton some of the changes in the energy commodity pricing seen in the marketplace overall over the past year were mitigated by Nucor's physical and financial hedges that we had in place.
Our raw materials segment outperformed first quarter results on the back of the increasing selling prices for <unk> and scrap.
Cri benefited from elevated metallics pricing that we use to determine transaction values between segments.
Cash provided by operating activities during the quarter was $2 3 billion, enabling both continued investment to grow nucor's future earnings power and the return of approximately $900 million of our shareholders' valuable capital via dividends and share repurchases.
Our direct returns to shareholders for the quarter was 37% of earnings year to date is 43%.
Our capital allocation priorities remain unchanged, our highest priority as deployment of capital in our businesses to create long term value. We also remain committed to our regular quarterly dividend something Nucor has paid and grown consistently over the last half century and.
And importantly, we remain committed to additional direct returns to shareholders in times of strong performance with an overall payout ratio of at least 40% of net earnings during.
During the five years ending in 2021, we returned approximately 56% of Nucor's net earnings to shareholders.
We remain confident that with the capital we retain and deploy we are building a more resilient more profitable and more cash generative nucor.
During the second quarter, new core funded $520 million in capital expenditures and $3 1 billion in acquisitions.
Between this past December and this year and we expect to have completed three major organic growth projects that will substantially enhance the competitive position of our steel mills segment.
The first Hickman Gen. Three Galvo line was completed this past December the second Gallatin. This modernization and expansion was completed in June .
And third our new state of the art plate mill in Brandenburg, Kentucky is anticipated to start at the end of the year.
We expect these investments to generate at least $370 million of combined annual EBITDA once fully ramped up at mid cycle performance and considerably more and robust market conditions like the ones, we're seeing now.
Nucor has an additional $3 6 billion.
Proved an in process organic growth investments that will be completed by 2025. The largest of these is our west Virginia sheet mill one.
Once these five projects are fully ramped up we anticipate they will contribute a further $700 million and run rate EBITDA and normal market conditions.
As you're also aware we closed on CACI overhead doors in June and with the acquisition of summit utility structures and sovereign steel manufacturing, we've established new core towers and structures.
We expect these businesses along with other new capabilities, we've acquired such as insulated metal panels and warehouse solutions can contribute as much as $600 million of incremental EBITDA annually in future years.
Turning to the balance sheet briefly.
As of the end of June Nucor had debt to capital of 29% and an ample liquidity with $2 5 billion of cash short term holdings in restricted cash holdings, and an undrawn $1 75 billion revolving credit facility.
In May we felt it was prudent to enhance liquidity and raised $500 million of senior notes with a three year maturity and a coupon of 395% and $500 million.
Senior notes with five year maturity and a coupon of four 3%.
Turning to the outlook for the third quarter of 2022.
While we recognize there is considerable economic uncertainty right now demand appears stable and resilient across our key end use markets prices in the steel segment has softened due to import pressures coupled with overall commodity pricing declines globally.
For the third quarter, we expect lower earnings from our steel mill segment relative to Q2, and we expect continued strength in steel products and raw materials with performance roughly in line with the second quarter.
For the year, we expect earnings per share will establish a new annual record for Nucor.
And thinking about the longer term with balance sheet strength and product diversity that is unparalleled in our industry, coupled with our highly variable and adaptive business model. We remain confident the nucor is well positioned to deliver on our commitments to our team our customers and our shareholders over time.
Thank you for your interest in Nucor, operator, we're now ready to take questions.
Thank you if you would like to ask a question simply press the star key followed by the digit one on your telephone keypad.
So if you are using a speaker phone. Please make sure. Your mute function is turned off to allow our signal <unk> equipment.
Its star one if you would like to ask a question or make a comment we will pause for a moment.
And we will first hear from Curt Woodworth of Credit Suisse. Please go ahead.
Yeah, Hey, good afternoon, Leon and team congrats on the exceptional quarter.
First question is just with respect to the plate.
And structural market.
Notice somewhat softer utilization rates for those verticals this year yet pricing.
Pulling up extremely well and basically close to record metal spread today. So just wondering if you could talk to kind of what youre seeing in those markets and maybe long long products more broadly and then how you think about plate volumes into 2003 with respect to ramping Brandenburg.
Yeah.
Yes, absolutely Kurt Thank you and now we're incredibly proud of our team.
Achieving an incredible quarter and an incredible first half of the year at over $17 per diluted share. It's just a.
Tremendous outcome and again something that we and the entire executive team.
I'll be more proud of the 30000 men and women, who make up the Nucor family.
Specifically to your question on structural and played out well, let out there our EVP of plate and structural touch on it I'll just say from a very high level before I turn it to al.
And one of the unique opportunities that we have particularly in structural.
The market share position that we have we are the leading.
Structural manufacturer in the United States, and it's something that we've talked about many times and share with you and other analysts.
Through the cycle, we have seen incredible performance in that sector.
Nucor, Yamato Nucor, Berkeley beams reporting incredible returns and.
Profitability out of those mill even with.
At the time depressed utilization rates.
<unk> low seventies over the last couple of years, that's improved markedly in 'twenty one peak.
Alright, thank you.
Yes.
Business segment.
For us continues to operate and I won't steal your Thunder, but we couldnt be more excited about the shifting what's moving in place.
And the.
The coming online of our plate mill in Brandenburg, but wanted to just touch on that a little bit sure where were at with Brandenburg as well, yes. Thanks, alright. Thanks Lee.
<unk>.
As Leon Thanks, Kurt I'd, just echo on the structural side I'll start there first thing we typically run at utilization there are 60%, 70% and hold that leadership position.
Q2, we saw much of the same so our utilization may have ticked down just slightly and structural side and I'd say, that's just not chasing the chief tons.
Truck and railcar availability remains a bit challenged and probably slowed up a few tons, but our market share position remains strong our utilization remains right on what we had expected and we remain really excited about the opportunities in structural as we've talked to fabricators and we talk to the what I call the cause.
Some demand part of the market the folks that are buying our steel and making something out of it is still really strong.
And we're excited about the rest of this year and we're excited frankly about 2020.
With regard to play I would say.
We've made several changes on how we market that product, how we take it to market, how we price it and how we lowered our order books and we're really pleased with what that has brought to the market in terms of a rationality of pricing and much less volatility in the pricing and.
But supply and demand is still governs the price of that and we publish a price, but the market determines what it really is.
It's quite quite strong our utilization in Q2 was improved from Q1 order book improved when we talk about.
Project work from bridges from infrastructure, which we expect to mainly hit in 2023, but is starting to strengthen even today.
Again fabricators are a big part of that plate business. They remained strong with strong backlogs. So.
Service centers is a big product segment, they remain a bit cautious with their buys the sentiment around that part of the market is perhaps I would say more pessimistic than what the reality is but again the consumptive side really really strong and you asked about 2023 I would just say we would expect.
Continued robust markets nonresidential construction has been one of our most resilient markets across the enterprise and we would expect that continues in 2023, I mentioned infrastructure starting to.
Produce better strength energy, including renewables has been a strong markets when we talk about the.
The buildup to the startup of Brandenburg by the end of this year and the market's it'll start to serve and open up for us in renewables like offshore wind and Sun.
Even specialty pipe work.
It's very exciting we stand as the only mill in North America. The only mill in the Western Hemisphere that can serve that market that is currently served by foreign steel most of the blast furnace steel this will be the cleanest.
Sure.
Offshore powered steel that exists in the world and we stand in perfect position to serve that market. So pretty excited about it our team has done a wonderful job they're navigating the challenges that that project has faced over a couple of years and we sit ready for startup by the end of the year.
We hope this strike at arc as a matter of fact on the hot side, even yet in the next literally day or two so.
Very proud of that team I appreciate your question.
Great and maybe just as a quick follow up.
With respect to Gallatin can you just give us an update on progress there and what your commercial expectations are for volume in the fourth quarter.
Best of luck.
Thanks, Curt I'll ask <unk>, our EVP of sheeting tubular to give an update on <unk>.
Kurt Thank you for the question.
Quick summary, all of our primary steelmaking equipment has been purchased.
Awarded are significant portions of civil and concrete work.
Oh I'm sorry.
Im sorry.
Sorry for talking about.
West Virginia.
I'll hold that for a moment.
And sure there is here.
Perhaps a little later with a question or a follow up.
For Gallatin completed our second quarter.
Outage.
All equipment has been commissioned at this point, we're already expanded have expanded our slab with beyond original capabilities. So we're beyond 68 inches now that new equipment, we're capable of $73 five inches.
And.
We will be ramping up here.
Third quarter by fourth quarter, we expect to be at nameplate capacity.
And as you may recall original.
Original stated capacity for that mill about $1 6 million tonnes.
<unk>.
Expansion will add about one four so we'll be right at 3 million tonne, mark and capable of producing at nameplate capacity during the fourth quarter.
Our ramp up also and what we produce.
Be determined also by what's going on in the marketplace. So I do want to state that and we will gauge that by the demand in the marketplace. So thanks for the question.
Thank you.
And next we'll hear from Seth Rosenfeld of BNP Paribas.
Alright, good afternoon, thanks for taking our question.
I've got two on raw materials strategy. Please.
<unk>.
Iron from the Mills perspective.
Absolutely when we spoke to you a months ago, you emphasized the strategy Derisked pig iron supply.
Full year.
What does that mean for your cost of inventory today, where you ultimately for us to lock in some high price delivery that Mike will be arriving even though spot has declined sharply.
Then secondly from the raw material side I think your guidance includes higher DRA price realizations in Q3.
Can you explain what would drive that given the weaker scrap and pig iron prices that we're seeing in the spot market Q over Q.
Thank you.
Yes, thanks for the question.
Doug Jellison, our EVP of raw materials and logistics.
To provide some background and how that flow through impact of the DIY pricing into the mills works and explain to us a little more detail Doug.
Thanks for the questions.
First thing I want to acknowledge.
Great work at the mill and our raw materials group has done over the last six months.
Tremendous flexibility in execution to react to the changes in the supply chain.
Sure.
Those stops in production, we've cut our peg used by about 50%.
Which also led to a reduction in greenhouse gas emissions.
It's really been a key part of supporting our record earnings So a big shout out to the team and thank you.
You are asking about M&A, if I may.
Okay.
Reliance on ticket.
This year, what it was last year.
There is no overhang or buildup of there is the normal flow of take price.
Purchase deliveries lead times working through inventories, so we see a little bit.
Probably leveling of pig prices through the third quarter declining into the fourth quarter.
As far as the IRI.
Hey, just our cri transfer price monthly.
The transfer price to reflect the market price into the steel mills.
Left in those segment reporting.
And as a result of that we see.
Stable input costs to Eri.
With a still elevated price of transfer price in the third quarter, and then dropping pretty significantly going into the fourth quarter.
That's great. Thank you very much.
Thanks, Ed.
Next we'll hear from Carlos de Alba of Morgan Stanley .
Yes. Thank you very much good afternoon, just maybe just exploring a little bit about the outlook for the steel products business.
The guidance seems to suggest that it should be relatively in line with the with it.
Second quarter, but could you comment a little bit more what you've seen it maintains what is the composition of these basic.
Basically stable.
Operating results is it prices offsetting.
Alright with volumes offsetting price, it's the other way around how do you see margins any color will be helpful. And then if I may squeeze another one.
Is it possible to get a.
An update on how you see capex for the remainder of the year, maybe frame first look at 2023, and how do you see working cap study rolling in the coming quarters. Thank you.
Okay, Carlos let me.
But let me start off with our steel products businesses and it's a good question in terms of how that breaks out because there are segments within the products group that we will continue to have record setting pace in performance and as a group. So in its entirety of the steel joist and deck buildings.
<unk>.
Different segments that are contained in our steel products group.
<unk> had a record quarter in this past quarter and in fact their performance in the quarter was stronger financially than the entire year of 2021, So a $1 $1 billion of net earnings for our products for them. They are setting an incredibly high bar and really operating on all cylinders.
<unk> to Mark it.
It was over our EVP of our products for infants.
Now moving into new markets, Chad wanted to just kind of breakthrough a little bit of that.
That.
Split and how Thats looking what's our forecasting into Q3 and four and then Steve If you would on the Capex.
Thanks Leon.
Yes, similar to what we had in the script, we expect Q3 earnings to be very similar to the record breaking.
Results that we had in Q2, so just a big shout out to all of our downstream product groups as Leon mentioned, we have multiple businesses.
From choice and that rebar fab steel piling racking to be insulated panel.
So that group continues to perform well.
<unk>.
There are indicators that we've come off the highs and some of these businesses as far as backlogs.
I want to remind you how strong those highest score.
And in some of our businesses our backlogs are still at record levels.
Most all of our downstream businesses, our current backlog levels that are 30% to 50% higher than the average backlog that we had in that 2015.
Yes, 2019 prior to the pandemic. So we still see that non res construction space that is the driver for these businesses as al mentioned earlier to be to be a very strong.
Can you expect going forward, even past third quarter.
And into the future.
What I would say is you should expect higher highs and higher lows.
And here is why.
Number one we've been making some changes in our businesses through the years and we've talked about some of those restructuring some of our business to bringing on our construction solutions team.
Even though alignment within our groups to better more effective commercial practices and expectations that drive higher EBIT margins.
Bottom line in terms of our business is downstream we needed to get better we've made progress and I am proud of where the where the team is adding where we're headed.
In addition to that we're bringing on these new businesses and expand beyond so you should expect good results from businesses like our insulated metal panel business as we grow that and as we drive efficiencies through that steel racking.
Steel towers, and obviously the overhead steel doors with the acquisition of CACI. All of these should positively impact our profitability as we fully utilized and integrate these products into our construction solutions portfolio. So.
I guess you can't hear my excitement I'll reiterate again I'm excited about the future of our downstream business.
Chad one thing I'll add and just maybe a further point Carlos too.
Sure. Some of this we get some questions or I've got some questions over the last weeks months.
Why are you so optimistic.
Face of inflation and interest rates.
We just look for example at the warehousing space.
In our forecast by Dodge for 2023 is down about 19%, but as Chad mentioned and I think it is an incredibly important part our industry has shifted and it shifted substantially through reconciliation through through.
Consolidation in through training and as a result, you are seeing higher highs and higher lows, but equally that drop and 19% for 2023 is 60% higher than what we saw our previous record year, which was 2018 prior to two.
2021, so it's 60% higher than what we did in 2018. So in terms of the volume is coming off 19%, but the overall market is still incredibly strong and theres a lot to be optimistic about in that space now the other piece of that when we look at Nucor buildings group the Nucor buildings group.
That's roughly about 10000 buildings annually.
Our Nucor buildings group every one of those buildings have somewhere between four and <unk>.
Well the <unk> doors on every building will now with CACI. It is an incredible marriage as they continue to grow their commercial and to tie in with that dealer network with those businesses and then you think about the rest of the warehousing space with companies like Amazon the Giga factories that chip factories.
Hopefully, we will see that pass here in Washington, DC and the chips act in that incentive package.
Supported to built in onshore and we sure American manufacturing, but that is an incredible.
<unk>.
Construction solution piece, so having CACI now in our portfolio continues to differentiate nucor as a one stop differentiated supplier that can take care of all of the needs and that's how we're thinking about it as we move forward in the types of business as Chad will be responsible for in the expand beyond Canada.
So Ken Thank you Chad, Steve do you want to touch on sort of our capex for the balance of the year. Thank.
Thank you absolutely Hey, Carlos how are you doing Steve you asked about capital through the remainder of the year and.
We have guided to a little more than $2 billion on the year and so I'll give you that same same outlook from where we sit today, we spent about $1 billion. So far. So you can you come back into roughly a 1 billion for the second half of the year and you'd ask about working capital working capital is obviously going to vary.
You believe steel pricing is going to go across our system.
And I'll, let you take your best guess at that you'd probably know better than we do.
Alright, well, thank you very much.
Good luck.
Thank you.
Next we'll hear from Emily Cheng of Goldman Sachs.
Good afternoon, Leon and Steve. My first question is just around infrastructure package that should start to really accelerate in 2023, but how much Ali demand are you seeing that from that materialize. This year and perhaps what are the categories that are taking some of the early wins there.
Yes, Thanks, Emily and look I would tell you that.
Right now they are seeing a lot of dialogue going on but we're not seeing any real movement in terms of material orders, we really think that will start in <unk>.
Ernest in early 'twenty, three and really begin to progress throughout the year of 2023. So.
While our teams are divisions businesses are ramping up and at the ready.
We're still about six months out from really seeing that that move through our company.
Great that makes sense and then my follow up is just on the steel mill side, we've certainly been seeing a little bit more of a bias strike type of activity from customers and as it relates to sort of hot rolled but.
Market participants acting now is there any sort of renewed all early signs of renewed appetite to reengage here.
Yes look I think so and again, if we look at our most recent order books.
She'd strong we're seeing some again the word resiliency is the right word across the non res construction businesses and you'd know oil now and Nucor, that's 50% of our overall mix is into the construction sector. So us providing again a complete solution.
<unk> is a differentiated value proposition, but yes, we are seeing again stable demand and growing in some cases, but it's.
It's.
Certainly not without.
Looking as well as some of the headwinds that are coming from.
Our economy standpoint in the marketplace of interest rates.
Inflation is.
Supply chain and some of those constraints, while there was a real to driving demand factors in our businesses for the most part remains very healthy and automotive.
Automotive is a good example, if we could solve the chip shortage today I think we're going to crest, well over 17 million units sold and while that's a forecast so its easy to say that.
We believe that I think the underlying demand.
The consumable spending.
Appetite in this country still remains fairly high and so again there are some things I think that will begin to loosen up and break loose in the back half of this year and well into 'twenty three.
We'll help in addition to the infrastructure like getting more caught up on the ships and as Al mentioned, the offshore wind and what we saw a precedent Buyten recently announced an executive orders yesterday that we will continue to position Nucor well positioned Nucor play group in particular your Brandenburg.
At an incredible value add opportunity for for our customers.
Thanks, Liana I appreciate the color.
Thanks Emily.
As a reminder, if you would like to ask a question simply press the star key followed by the digit one on your telephone keypad.
We will now hear from Timna Tanners of Wolfe research.
Hey, good afternoon guys.
Good afternoon Timna.
I wanted to ask two questions. One was to kind of probe what was discussed earlier on downtown a little bit more and the other was to ask about follow up to that garage door acquisition.
So with regard to let Ken if I look at your sheet tons here running run rate less than a year ago levels and I know you made the comment that you tailor it to production Q I'm, sorry, any camera production to demand levels.
Allison was in the second quarter and assuming demand allows should we be seeing that one for half of that flow through fully.
Fully in the second half of the year, just trying to square that with the volumes being lower year over year.
And then <unk>.
The acquisition question I just wanted to follow up I know you said that you were looking to start out maybe more overhead garage storage.
Can you kind of get more critical mass like you did with the <unk> structural tubing in the past. So just wondering if you have any updated comments there. Thanks a lot.
Yes, let me start with the back half and then I'll turn it over to you.
Good questions on the Gallatin front of what we've seen.
Today would be very little through the cycle of the overall volume, but I'll, let <unk> touch more on that regarding the CHS acquisition look in our minds, we acquired the very best company out there in that space period bar none so.
Our opportunity really isn't too to move or look for other large garage door companies. We are roughly operating at about 60% total utilization with Chr to date, we have a lot of room to grow and most of that 60% is concentrated sorted.
That mid.
USA levels. The further out towards the coast you get the market share has dropped off a little bit. So you have an opportunity or we have an upper trinity to really grow that business with what we have today, yes. There may be some things that we're looking at that I can't get into that would be very very small that might be complementary but.
We are eggs are in the CACI Baskin couldnt be more excited about Dave Banyard and his leadership team the entire CACI team and welcoming them to the Nucor family and what they're doing in that business segment. We're proud of them already we're proud to call them Nucor team members and the growth that they're going to bring in the coming years is something.
Incredibly exciting for us were actually wanted to touch on the Galaxy <unk> question.
Ted I'll speak first.
I'll speak about the first half of the year, we had some outages with Gallatin is we're installing this equipment. So if you look at the group.
Look the first half of the year.
We're running out of utilization above.
Above the 80% Mark as a group with the outages were are.
A little bit under that Egalet <unk>, we augmented that with other sheet mills and our group. So that was how we handled that took care customers through supply.
Other mills, so now that the outage is complete equipment install our run rate will ramp up and we're putting the equipment through its paces. So.
We're doing a full thickness slab now on the new slab hundred 30 millimeter, but as we start to.
Put the mill through its paces will go wider and wider that'll happen during the third quarter and again, we will have the capability.
What we expect in the fourth quarter to run it really nameplate capacity so.
You would look right at that 3 million ton run rate annualized.
But we'll gauge that to what the market's doing off of off of that tender.
Where we sit and maybe a little more color.
Probably be in the several hundred thousand tonne range based on what we see today that we would produce.
Between now and the end of the year.
From the new.
Expansion part of the Galaxy.
Correct, Okay Super Thanks, very much guys appreciate the color.
Thank you.
Next we'll hear from Michael the shock of Keybanc capital markets.
Hey, good afternoon.
Wanted to follow up on your M&A commentary it sounds like the CACI side will be mostly organic growth from here, but do you see other opportunities to make downstream acquisition. How deep is your pipeline of potential targets right now.
Yes, Mike Thank you for the question.
When I took over in January of 2020, our <unk> mission statement is alive, and well and grow our core expand beyond and live our culture and so deliberate culture patient CCH delivering uncompromising results in every area of our business and doing that while maintaining the safety health and wellbeing.
Our team the core is just that the West Virginia mill, the Lexington, Micro mill expansions and Hickman and the new.
Increases across in Kankakee and other other core assets that we have this expand beyond piece over the last two and a half years.
Driven really by Steve Blackstone before he became CFO and Alex Hoffman is really about finding those companies that provide a differentiated value proposition and moving us shortly that one standard deviation outside of the normal traditional steelmaking lane that having direct steel adjacency, but.
I can offer you some <unk>.
<unk> from the traditional cyclicality of steelmaking.
Hannibal industries, and doing that cornerstone and the insulated metal panel building business is doing that the other side of it and the other filter that we look for is how do we continue to provide sweeping solutions in construction and energy and automotive show that when our commercial teams go.
And meet with the architects engineers owner species.
I can say, we've got the entire solution for you don't have to worry about doors or choice for deck are grading or anything else. We are one stop shop and consolidated entity in the entirety of their niche.
Knees.
So the pipeline is rich I think it will get richer as we move forward.
For for every downturn Nucor has gotten stronger and we continue to invest that.
Our cash flow position the profits we are generating today, but nucor in an ideal position to continue to be very deliberate and very strategic with long term goals to enhance our shareholder value.
Got it thank you.
Hey, Michael Thank you.
At this time there are no further questions I will turn the call back over to Leon for any additional or closing comments.
I'd just like to congratulate our entire team again for a record first half of the year. Thank you for delivering on our mission.
And making 2022, the safest cleanest and most profitable year in our history.
Thank you to our customers and thank you for the trust that you placed in each and every one of our Nucor teams for your business. We will continue to work hard to earn that business well into the future and finally, thank you to our shareholders for the trusted capital that you've placed in our hands we can.
Continue to want to be great stewards and great.
Shepherd to return that valuable shareholder capital. Thank you for your interest in our company have a great day.
That does conclude today's conference. Thank you all for your participation you may now disconnect.
Okay.
Yes.
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