Q3 2022 Nucor Corp Earnings Call
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 and nucor's websites.
The 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.
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 thank you for joining us for our third quarter earnings call. Joining the call today are other members of Nucor's executive team, including David <unk>, Chief Operating Officer, Steve <unk>, and Chief Financial Officer, Al Behr responsible for plate and structural products, John Hollatz responsible for bar and.
<unk> bar and rebar Fab, Greg Murphy responsible for business services, and our General Counsel, Dan Needham responsible for our commercial strategy Rick's query responsible for sheet and tubular products and Chad you to Mark responsible for new markets and innovation.
As our teammates continue to serve our customers and what we anticipate will be a record year for nucor financially we've not lost focus on our most important goal of becoming the world's safest steel company.
After two record setting safety years in 2020 and 2021, we are on pace for the safest year in Nucor's history in 2022.
I want to acknowledge the progress demonstrated by all of our teammates as they continue to take care of our most important value I'd also like to thank and give a shout out to our sheet and engineered bar teams for achieving world class safety performance. So far this year.
And I want to encourage all of our team members to maintain their focus on safety. So we can again achieve our most important goal that we've set for our company.
Regarding our financial results in the third quarter, we posted earnings of $6 50 per share.
And through the first nine months of this year, we have earned $23 85 per diluted share setting an all time record for Nucor Corporation.
Our earnings in the third quarter were down compared to the record high levels. We achieved in the first two quarters of the year.
And as we indicated in our guidance earnings from our steel mill segments were lower in the third quarter due to metal margin contraction and reduced shipping volumes, particularly at our sheet and plate mills prices have decreased more rapidly than our raw material costs and.
And we've also had planned outages at several of our mills.
The ongoing war in Ukraine dynamic changes in energy costs, and shifting monetary policy have amplified economic uncertainty.
Even with this uncertainty we continue to see good demand here in the United States, particularly in our steel products segments, which had strong earnings again in the third quarter.
<unk> performance was largely the result of continued robust demand from the non res construction market.
U S census Bureau data reflects that the total domestic non res construction spending hit a record in August at $79 $4 billion Steve.
Steve <unk> is going to provide more details on the financial performance of our three business segments and the outlook for the final quarter of the year.
Although increased economic uncertainty and lower pricing for many steel grades means it's unlikely you will see more record highs for the rest of the year, we believe that the medium and long term outlook for our business is quite positive.
We continue to execute on our various capital investment projects, so that we're well positioned to seize market opportunities as they evolve.
Consistent reinvestment in our businesses has been the critical factor, enabling value creation by our team over the years.
The construction and startup of our Nucor steel Brandenburg plate mill continues to progress incredibly well with respect to safety budget and schedule. The Brandenburg team is delivering one of the safest construction projects and Nucor's history.
The Brandenburg team is already commissioned the electric arc furnace.
The ladle metallurgical furnace and anticipates commissioning the vacuum tagged gasser and caster and the next several weeks commissioning is also underway in the rolling mill area positioning the team to produce its first plate products by year's end.
The startup this year, we'll have our state of the art mill ready to enter the market in 2023.
We also announced that Brandenburg as publicly registered to pursue LEED version four for building and design certification and a continued trend of environmental leadership as a company Nucor steel Brandenburg as the first steel mill in the world to pursue certification under lead version four which is more stringent.
Previous lead rating systems, the new plate mill will play a key role in supplying sustainable steel to build our clean energy infrastructure.
It will be one of very few mills worldwide and the only one in the western hemisphere capable of supplying that critical steel components required to build offshore wind farms.
I'd like to congratulate our entire Nucor Brandenburg team.
The ramp up at Nucor steel Gallatin continues to progress, although we anticipated a full run rate production by the end of this year. We now expect that this will occur in Q1 of 2023.
The majority of our startup delays have centered around equipment sequencing and remembering that this upgrade was the complete modernization of the entire facility, including new automation software throughout the mill.
This investment combined with the Galvanizing line, we added in 2019. The addition of the recently purchased Pickle line and the two mill currently under construction dramatically expands the breadth of market solutions. Our Gallatin mill can provide collectively these efforts positioning gallatin with a higher more Val.
<unk> added product suite and will enable our team to generate higher profit margins as we move forward.
We're proud of the work our team is doing to safely bring the gallatin facility to its full production capability for our customers.
The third quarter was also the first full quarter of operating CACI overhead doors since closing on the acquisition in June .
We continue to work closely with the CACI team to integrate them into Nucor and we are already realizing supply chain efficiencies because of the acquisition. We're also working to capitalize on incremental sales opportunities now that CACI is part of Nucor.
We are very excited about the growth potential of this new portion of our business.
And we are on track for a record 2022 and ahead of our acquisition model expectations.
We also announced in the third quarter that we will be adding a melt shop at our Kingman, Arizona facility.
The new $100 million melt shop will have the capacity to produce 600000 tons annually and create approximately 140, new full time jobs. Kingman is currently a rolling mill and we're leveraging that existing footprint and adding melt shop capacity there to efficiently meet the growing demand for rebar.
In the Western U S.
Lastly at the end of the third quarter, we announced that the <unk> Board of directors approved the construction of our galvanizing line at our Nucor steel Berkeley sheet mill that is expected to begin operations in mid 2025.
The board also approved an additional galvanizing line to be constructed in the western United States.
With details to be announced at a future date.
The new Berkeley line will be our eighth wholly owned Galvin. These investments further advance our strategy of shifting our mix to higher margin value added products and capitalizing on sustainability trends that are driving more growth opportunities for nucor.
Turning to Washington for a moment during the third quarter Congress passed the chipset and the inflation reduction act two pieces of legislation that will strengthen domestic manufacturing and create opportunities in the future for the American steel industry.
The chips act promotes semiconductor manufacturing here at home, which is strengthening our supply chains and helping us unleash a manufacturing renaissance across the United States the.
The inflation reduction act invest in the domestic manufacturing of clean technologies to reduce emissions. It also contains provisions that encourage their procurement of American made steel products in clean energy infrastructure.
Incentives to build our clean energy future with low emission steel produced by the U S industry give us a competitive advantage and finally as we've mentioned in previous calls we expect to start seeing the impacts of new federal infrastructure spending in 2023 as states continue to move forward with their projects.
<unk>.
With our expanded capabilities and sustainable steel products, we are well positioned to supply the broad array of solutions that are essential to these efforts.
And we are confident that as we do so our efficient and flexible business model and diversified product portfolio will enable us to deliver very attractive returns on our shareholders' valuable capital.
Before I turn it over to Steve I want to thank our Nucor team for your incredible hard work and great performance through the first nine months of this year and.
And as we navigate the volatility uncertainty in the market, we must stay focused on working safely and operating reliably to take great care of our customers, let's finish this year, having 2020 to be the safest and most profitable year in nucor's history.
Now Steve will accident will share with you additional details about our third quarter performance and our outlook through the end of the year Steve.
Thanks, Leon this quarters earnings of $6 50 per diluted share represent the fifth best quarterly results ever posted by Nucor.
Year to date earnings per share of $23 85.
Actually beats the record we established last year for a full year EPS of $23 16.
And operating cash flow through the first nine months of the year was approximately $7 5 billion also setting a new annual record.
The entire nucor team should be very proud of these results.
Comparing this quarter's results to the prior quarter, our steel segment earnings were down about 55%.
Shipment volumes were down about 9% with sheet and plate volumes relatively weaker and long products more stable.
Overall metal margins contracted by approximately 11% as lower realized pricing for sheet plate and bars more than offset reduced.
Reduced metallics cost.
Conversion costs were higher due to lower utilization and higher energy costs.
Energy cost per ton produced increased by 17% during the quarter and now constitute about $57 per ton.
Some of these costs were offset by natural gas hedges, we had in place as well as increased earnings from our producing gas wells in the Piceance basin of Colorado.
We continue to see very strong performance from our steel products segment that.
That segments earnings were up about 6% on last quarter's record performance joist and deck results improved from the second quarter, while tubular products profits declined joist and deck volumes, both increased slightly and pricing on orders shipped during the quarter also rose while substrate costs declined.
Pipe and tube shipments were down almost 16% and realized prices were off about 11%.
Leon has already referenced the excellent results posted by CACI overhead doors CACI is one of several moves the company has made recently to leverage our capabilities products and channels and new businesses that have good margins.
Strong free cash flows.
And good growth attributes we.
We call these efforts expand beyond <unk>.
Other platforms in our expand beyond efforts include insulated metal panels and warehouse systems.
During the quarter these businesses produced $29 million and $28 million and EBITDA, respectively. While it's early in the new core life of these three expand businesses all three met or exceeded the targets for the third quarter in our acquisition model assumptions.
I want to thank our teammates for the excellent work, they're doing running and integrating these businesses.
Raw materials segment earnings were up slightly from the second quarter with higher profits from our <unk> operations more than offsetting lower results from D. J J.
Cash provided by operating activities during the quarter was $2 $8 billion, while capital expenditures totaled approximately $460 million year to date capital expenditures totaled 143 billion.
For the full year, we now expect capital expenditures to be approximately $2 billion.
During the quarter, we repurchased five 3 million shares and paid $132 million in dividends for a total capital return to shareholders of $784 million or 46% of net earnings.
Total capital returns to shareholders through the first three quarters of the year via dividends and repurchases were approximately $2 $75 billion or 44% of net earnings.
During August we also retired $600 million of senior notes that were set to mature in September .
We have pre funded this maturity and some other outstanding debt back in March of this year with opportunistic issuance of $1 $1 billion in new senior notes split evenly between 10, and 30 year maturities. The coupon on the maturing notes was four and one 8% the blended coupon on the March issuance was three 5%.
Nucor continues to enjoy excellent access to capital due to our position as a leading manufacturer across a broad array of steel products are efficient and highly variable cost structure and our consistent commitment to maintaining a strong balance sheet with good financial liquidity.
Speaking of the balance sheet.
We finished the quarter with a debt to capital ratio of 26% and ample liquidity with $3 $5 billion of cash short term holdings and restricted cash holdings, and our $1 75 billion revolving credit facility was undrawn.
Turning to the outlook for the fourth quarter, we expect our steel mill segment earnings to decline meaningfully relative to the third quarter.
Fourth quarter shipments are projected to be lower compared to the third quarter, primarily due to seasonality customers delaying orders due to economic uncertainty as well as some of the planned outages in our own fleet.
We expect lower realized prices in the quarter for most of our mills due to some of the same factors.
The most pronounced effects will be felt in our sheet business lower raw materials cost will partially offset some of these impacts.
We expect lower but still very strong earnings from our steel products segment in the fourth quarter.
Primarily due to seasonality and softer demand.
Raw material earnings will also declined sequentially, primarily on lower pricing and shipping volumes from <unk>.
Several factors are combining to create a more dour economic outlook. The ongoing war on Europe , other geopolitical tensions and rapid monetary policy actions attempting to tame inflation likely mean tempered near term demand and stronger U S. Dollar both challenging elements for Nucor's customer base service centers in particular our cost.
At this time.
While there are still headwinds in the economy. We also have tailwind supporting our overall demand just a few of those factors include nonresidential construction, particularly in warehousing and re shoring of manufacturing as well as energy and projects funded by the infrastructure investments and jobs Act some of which should see commencement next year.
Thank you for your interest in Nucor, operator, we're now ready to take questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad. If you are using a speaker phone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question is from Carlos de Alba with Morgan Stanley . Please go ahead.
Yes, good afternoon, everyone. Thank you very much.
And getting back on the volumes.
The volume growth that you have experienced in the third quarter. It seems that on a year on year.
And most of the declines were in structural and plate lines total shipments.
But by the same token it seems that the.
The long products in the nonresidential construction markets are the ones that are holding up a little bit better. So can you help us reconcile.
This.
Seemingly contradictory trends and how should we think about it in the coming nickeline months quarters. Thank you.
Yes, Carlos I want to make sure I understand your question is it.
While the long products businesses are seeming to do a little bit more stable on the marketing our flat products businesses.
Right. So that is what I understand.
In the commentary around the end markets, but in the shipments in the total shipments that were reported at least on a year on year basis. There was a significant decline in our structural and plate.
Volumes total volumes total shipments.
And she'd only came down around 4%.
So yes.
Understand.
These trends.
Yeah, absolutely I'll make a couple comments, maybe ask al Behr.
In charge of our claim structure.
To make a few comments, but overall long over many decades now has been our most consistent performance in the marketplace.
Historically again pre sort of 'twenty, one 'twenty two levels for.
For example, we were in our structural businesses.
Hello, 70% utilization rate and made very very good returns based on that level again market leadership position helped that but also.
The breadth of products at Nucor.
Bronze and producers to take care of the customer base also helps we did see some meaningful declines in place and again, maybe just touch on that and then we'll come back to structural.
Thanks, Lee I'm happy to do that thanks, Charles for the question I'll handle the structural question first yes, that's more stable than some of the other markets like Leon has talked about we would see some decline.
First any of the comps over last year, our tough comps because last year, we were at or near our record shipments in many product categories, including plate structures, so depending on whether youre looking over quarters. We're looking over years that perspective, I think you've got to maintain.
So on the structural side, we see some softness from service centers, you've heard that in the opening commentary.
We see resilient demand from fabricators, especially large fabricators that new complex work like chip plant JV plants battery plants.
We've had more of a decline in place I think maybe that's where you see more of the volume drop.
Certainly the same dynamic with service centers, where they've been destocking through the year. They continue to be very cautious buyers. Despite resilient demand from Oems fabricators, we've seen an increase in imports into that market as well, particularly in coil form and particularly from Canada and Mexico. So that's a factor.
And when we look at it our strategy is to drive value in is to focus on the profitability of these markets and not just chase cheap tons and so we've been very strategic about about how we handle the business and how we go about loading our order book as we look into Q4, I think we will see an improvement in shipments, particularly in <unk>.
Due to project work.
Bucket some tons that become available prior to transactional tons. So these are non res contracts Theyre bridge work infrastructure, we've seen an uptick there and continue to see that into 'twenty three.
And I'm happy to provide some comments about 23% I hope I'm addressing your question about the decline at least year over year.
Yes.
That's great.
If you could comment on what Youre seeing unfortunately there'll be also great. Thank you.
Yes.
So all of this to say, we recognize we're headed into some economic uncertainty, but there is a lot of positive reasons for optimism that we see particularly and this is just plate structural one is infrastructure spending we've always said that infrastructure is going to be a 2023 and beyond play and we continue to see that and hold that view.
Another is the energy energy and particularly renewables have been very strong through the year, we continue to see that manifesting as well as a pickup in oil and gas we see in the 2023.
Then key markets within non res so although there may be softness overall, the areas, where we play in non res.
Competitively advantaged. So these are the warehouses and the data centers the chip plants. The manufacturing re shoring those areas, where we are positioned the best are the areas that show strength in non res construction.
I can't talk about 2023 without talking about Brandenburg and really what we're most excited about is the opening of our Brandenburg plant. So we're going to bring that online at the end of this year, we're ready for an on time startup and we're going to we're going to bring up the most broadly capable plate mill in the western hemisphere, and so that story that strategy has always been about capability.
And that capacity.
And we will be very strategic about how we bring those tons online, but we're ideally suited to serve customers that we couldn't serve before we will have a product portfolio in place that's unmatched.
Yes.
<unk> put in place the strategies to drive value as we bring those assets online and that team has done a tremendous job of executing the project Leon talked about that in the opening comments.
There are a bunch of rock stars if I can put it very plainly than what they've come through from 2019 to today to bring a construction project online on budget and on schedule as of <unk>.
Julian effort and couldn't be more proud for those folks.
Thank you Antonio.
The next question is from Timna Tanners with Wolfe Research. Please go ahead hey.
Good afternoon, everyone.
Timna.
I wanted to explore the contract side of your business, if we could for a little bit.
Just also following up with the Q4 sequential move, especially given how much contracted tons you have for seat can you remind us of your percentage there and how we balance the growth in gallatin with that guidance.
And then secondly on the contract side as we head into 2023.
The commentary we're hearing is that this will be.
A different year for negotiations with nice to say after last year's strong negotiating position with lower prices, maybe seeing something on the CRE you discount that's a little steeper.
I'm just wondering if you could comment on how that might look year over year any any thoughts on early negotiations. Thanks.
Yes.
I'll start us off and interaction.
Anything I missed.
Jump in.
It's too early to talk about our overall percentage of mix. We're in the middle of our contract season, and historically <unk> been in that 70% to 75% range.
Again, I'm not sure I see a meaningfully different.
Again, we're not through that yet.
Comment a little more.
Clearly as we enter the Q4.
Earnings call in January of next year, but one of the things Thats.
And al touched on it.
So really a dichotomy in the markets, where we sit today, we're facing 40 year high inflation supply chain constraints the warrant.
That continues to provide some disruption monetary policy thats going to raise interest rates until we roughly double our current unemployment rate. So you've got all of these.
Negative sentiments in the marketplace and at the same time, we've got some positive we've got automotive as you are well aware of forecasting an additional million tons or 1 million units.
New light vehicles coming into the United States and 23 energy as Al just mentioned, particularly in renewables infrastructure spending thats going to.
Begin to take off and then the other side of that non res construction that nucor's heavily positioned to take care of our customer base and advanced manufacturing like Shh battery plant cold storage.
And so what I would share with you and give you a little more than ambiguous for generalized statements as we look at the contracts, particularly with Oems that have been placed so far this year for 2023 and beyond the long term play as we see it today and the contracts that have been established are forecasting up and volumes about.
15% for.
For next year. So again, we see some encouraging signs that our order book and our customers' customers are forecasting out beyond that so again some positive news.
Again against the backdrop it.
<unk> is a little fuzzy as we walk into the new year.
Okay. Sorry, My question was more about contract pricing, but thats helpful. Information for sure I guess I'm, just wondering if last year, the CRE discounts or a 1% 2%.
This year could we see something closer to 5678.
Anything you can tell us about how the discussions are going or if context, there will be a little more flexible this year after being really strict in 2022.
Hey, Timna. This is Rex query I'll comment some of it may may overlap with Leon just stated.
Yes, the comment he made about the success, we're having with partnering with our Oems.
That's resulting what we're seeing at this point.
As a willingness.
To sign up for multiyear contracts and we're seeing improved margins. So when you talk about.
What the discounting as we look at our business from a margin business.
Got a fixation on volume we want to make sure.
That we offer the value that we have customers willing to pay for and so what we're seeing is improved margins.
Particular, with the Oems and multiyear contract sign up at this point I.
I would also comment that we're seeing the recognition of our various product mix.
Our iconic brand.
Products with zero carbon offerings, our sustainability all of that's been recognized in particular at this point in the contract season with our Oems.
Alright.
Okay, if I could sneak one more in I just wanted to ask about that.
The business on your raw material side, we had some reports in saying that you were taking the DRAM modules offline in the fourth quarter. When you guided lower can you just tell us if it might be comparable to the year ago levels or if we're talking about something in between that and the recent results that'd be really helpful. Thanks again.
Now I'll ask Dave Samarskite, you may be provide a couple of comments.
All materials secondary and our outage plants sure. Thanks Liana. Thanks.
Yes, we moved two of our outages from Q2 to Q4 based on Russia.
The Russian nation of Ukraine, and its kind of result in about a 30% reduction in shipments.
This and the drop of transfer pricing based on the lower pig iron pricing.
What's really driving the lower results from the raw materials.
There is some margin compression on the recycling side, but most of it most of it is going to come through the cri facilities based on that 30% reduction in shipments and production.
Okay I'll leave it there thanks again.
Thanks.
The next question is from Tristan <unk> with BNP Paribas. Please go ahead.
Yes, hi, Thanks, a lot for taking my questions. The first one is I know you commentary around demand and market conditions deteriorating into year end.
For which end market have you seen more weakness over recent weeks and if you could give us maybe a brief update by end market that would be greatly appreciate it. Thank you.
Yes Tristan.
I'll jump in and begin.
Some other comments please.
Touch base, but as we look at some of the strengths we pointed out some of the motto sector. In 'twenty. Three again is forecasting up about 1 million units for next year, the solar and wind, particularly offshore wind as al mentioned.
The positioning and timeliness of Brandenburg couldnt be more ideally suited theres very few mills in the world that can provide that offshore wind sizing and platform of in range of grades and so again incredibly well positioned and excited about that opportunity and again youre seeing that match with the current administration's continued effort.
To ensure that the incentives are there for those build outs continue to occur.
Within the non brands again, there is some some pressure, but there's also some pockets of excellence that.
That we see continuing again the chips act that was passed.
Recently in Congress, that's going to have a wonderful reassuring impact to the United States and bringing shifts.
Chip supply right here domestically, the continuation and build out of Giga factories in battery plants for the electric vehicles will continue and again, we see great strength in that cold storage farmer.
Couple of other areas in distribution in Datacenters.
Really really strong.
Growth as we look at.
Maybe some other sectors.
Heavy industry and there were heavy equipment and AG.
Yes.
Notably fair, but I am not sure its going to meaningful meaningfully increase for 'twenty three.
And really that's probably.
Best sectors as we look at the markets. So we tracking supply into most for 'twenty, three are showing stable or improving and so.
Not a whole lot of decline overall in the markets.
Alright. Thank you that's that's really good.
Good color Mike.
My second question, if I may.
I just wanted to know if you could provide us.
An update on <unk> sales and the partnerships on low carbon steel and sizable over recent months.
And if you can share if you have any target for 2023, and if you've seen any appetite was those low carbon sales outside the U S. Thank you.
Yes, absolutely I would tell you I couldn't be more excited about.
What our team has done from an environmental and a commercial position to bring us to the point, where we can offer <unk> X deals and so I would tell you the demand continues to increase.
Obviously were very public.
As we went into 2022, the first coil shipped in January of this year to general Motors.
However, after that we have seen great interest from the auto Oems, but also broader or seeing heavy manufacturing <unk> we've had.
Some very public announcements as well on the HVAC with train.
About that partnership in there.
Their pledges to meet their sustainability goals.
There are long term reduction in their carbon footprint.
Only gets accelerated with a net incoming steel of zero. So we're seeing great interest in that and I think that will continue in the years to come our move in the U S economy to build out of Green and digital economy will be built with steel and the steel that gets filled with matters and again, what you're offering the cleanest field.
The safest manufacturing and most efficient and diverse product offering anywhere in the western hemisphere. So again to your question Tristan that that move to.
Cleaner steel.
Neared net zero steel is going to continue that trend in the coming years and beyond.
Any targets you can share at this stage or not yet.
We haven't released any targets in terms of our volume and what we're going to supply an iconic well we have targeted and been very public about is our 35% reduction in greenhouse gases by 2035.
<unk> thousand 30, excuse me and so that would take us roughly from that 0.48 tons of Cotwo.
Per ton of steel produced somewhere in the 0.42 range and so.
0.38 range and so again.
Sure.
We're making strides in investments every day to continue to stay very close to new technologies carbon sequestration hydrogen reforming and the like and that will continue meaningfully in the years to go so that again, we can offer more and more of the net zero steels to our customer base.
Alright, I appreciate the color. Thank you. Thanks.
Thanks Kristen.
The next question is from Emily Chang with Goldman Sachs. Please go ahead.
Good afternoon Liana, Steve My first question is just around non resi construction one small when you think about the mix shift and nonresident instruction that is giving you confidence on the outlook there.
How should we be thinking about the steel intensity of the new projects coming on line versus maybe some of the pockets of weaknesses like warehousing for instance, or is it really the pace and number of new projects being sanctioned right now that's offsetting that.
Weaker pockets that underpinning your positive outlook there.
Yes look I appreciate the question and then shortly and again there is a lot to unpack whether its in non res or.
Flash in the sheet business in terms of.
Economic signals, and then true demand and so.
Sure and a couple of times on the call parts of that non res story that we see strength, so what I'm going to do with maybe Chad you Tomorrow.
For our products group, just provide a little more detail and background and what you are seeing in terms of.
Customer to customer.
And put in what we're seeing in terms of that strength of demand Chad.
Thanks, Leon and thanks for the question Emily.
As has been mentioned before and I'll Echo we continue to remain very bullish and excited about 2023 and the non risk space.
Yes breakdown what gives us that optimism is first of all our backlogs are at historically high levels, while we're off the peak.
That was unprecedented levels. We saw last year. There is still very very high and a lot of these projects. So they're already moving dirt has already been moved concrete being poured. So we have a lot of confidence that we'll see those projects come to fruition. Furthermore, with our breadth of products and connections and relationships, we have with our customers the feedback we're getting.
Adding from our fabricator base as Al mentioned, especially the larger fabricators as theyre very very optimistic and their backlogs go well out into next year and in some cases, even further also as you look at the two main indicators and then a lot of US track Dodge and Abi They continue to point to strong activity or your <unk>.
Question was about the steel intensity of these projects I would say when you start talking about manufacturing plants EV related facilities data centers call storage a lot of these big projects, they're very steel intensive so we're.
Right in the sweet spot, we feel like at Nucor to supply and meet those needs. So and then it was mentioned infrastructure.
Huge part we believe in 2023 and 2024 to support.
Nucor's efforts not only in downstream, but in our plate business in our structural business and in our bar business.
Great I appreciate the additional color.
A follow up I had was just around what.
Maybe sort of lumped into sort of conversion costs.
I appreciate the comments earlier on energy and apologies if I missed something on other components of the cost pressures that you're seeing that but anything that you would be able to share around cost inflationary pressures and whether or not those are sticking or you're seeing them come off.
Yes. This is Steve.
Thanks for that question energy as the most pronounced cost increase we've seen that's about 50% year over year and we gave you some numbers in the.
Script.
We are.
Two other parts are also.
Outside of the metal spreads.
The.
The substrate is obviously the largest cost inputs that we have.
Freight and labor costs are also year over year, that's consistent with probably what every company in America is saying.
But I would remind you Emily.
About 85% of our cost and our steelmaking is variable.
That's a decided advantage for new for over many of our competitors that have much less flexibility and adaptability to respond to dynamic conditions and cost cost overall so.
We're not necessarily happy about cost going up but as Albert mentioned earlier, we run up margin business. So we manage everything to the margin not necessarily to the absolute cost.
Got it that's really helpful. Thank you.
Thanks Emily.
Again, if you have a question. Please press Star then one the next question is from Phil Gibbs with Keybanc capital markets. Please go ahead.
Hey, good afternoon.
Good afternoon Phil.
I just wanted to stick with Emily's question, a bit longer because my model kind of exploded here in terms of costs, because my spreads were better, but my steel profits, where we're not and the sequential pick up on my model was pretty pretty substantial for conversion costs. So.
Even on a sequential basis, so I'm just trying to think through.
Through that.
And then maybe.
Maybe just expand the conversation a little bit because there wasn't just a little bit of a pickup.
Yes, Phil I think the other.
In addition to talking about cost.
The volumes were down for us so that's an important part of it.
Maybe then you may have missed in your model assumptions heading into the quarter relative to what actually happened.
Volumes were pretty much there and revenues were actually a little bit better than what I had and so just to solve solve solve for that.
It adds.
<unk> had some that I don't know if you loaded a bunch of maintenance in the quarter and that was substantial I'm not really sure, but it's just really stood out.
No, we really didn't and I apologize I can't see into your excel spreadsheet from where I'm sitting.
Our pre operating startup costs were in line with the prior quarter, Utah.
Utilizations were down that's going to drive your cost somewhat.
But the other costs are in line with what Youre seeing overall in the marketplace.
We're certainly happy to follow up with you, Phil and dig into that in more detail and try to help dial into.
So maybe what's being missed there.
Okay.
And then DNA was was up substantially quarter on quarter was that his brandenburg as coming out of startup and then.
Full phasing was that the biggest pickup.
Yes.
The two big drivers on that really.
I have more to do with some of the startups, but also the CACI acquisition that was done.
Those two things if youre, if youre picking up amortization in your in your DNA number then and Youre grabbing that one.
Okay.
And then just lastly on.
Looking probably a little over 2 billion of Capex next year I think you had laid that out prior so just want to reiterate that if you could.
And then anything that you can comment on in terms of working capital.
In Q4, and what the size of the magnitude it could be the draw.
Yes, Phil.
The Capex side.
Do you have about $4 5 billion.
Projects that we've announced it will be will be.
We're working on between now and 2025, so we will have an elevated level of capex here for at least for next year.
So what we likely north of 2 billion, we'll refine that further as we go into the end of the year here and finalize our budgets.
On the working capital as you said, we released.
Just under $600 million in the quarter on working capital depending on where your model is assuming.
On volumes and prices you could see a similar number or even slightly higher in the fourth quarter.
Thank you.
Thank you Phil.
This concludes our question and answer session I would like to turn the conference back over to Leon Topalian for any closing remarks.
Thank you I'd like to thank our team for the incredible nine months of 2022 and ask that each of you to stay focused on delivering the safest and most profitable year in our history. Additionally, I want to thank our customers who enable our success. We appreciate the trust you place in Nucor with every order and we will continue to work hard to earn your.
Business and finally, thank you to our shareholders with the trust that you place in Nucor, we take our responsibility seriously and we will work daily to continue to be great stewards of the valuable shareholder capital you Entrust us with thank you for your interest in Nucor has a great day.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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Sure.
Yes.
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