Q4 2022 Nucor Corp Earnings Call
He began his career with Nucor in 2011 at Nucor Steel Darlington and has worked at several of our divisions. Most recently, serving as vice President and General manager of the David Joseph Company.
Doug Jellison previously EVP of raw materials has accepted the newly created role of EVP for strategy.
Doug has been with Nucor for more than 30 years and has a great understanding of all of our business segments.
As we continue to grow Nucor, Doug will continue to help ensure we are further leveraging our competitive advantages across the enterprise congratulations to both Noah and Doug.
Now turning to our year end review I am proud to announce that 2022 was the safest and most profitable year in nucor's history, breaking prior record set in 2021 in the face of uncertain and at times volatile market conditions. We stayed focused on our goal of becoming the worlds safest.
Steel company and our mission to grow the core expand beyond and live our culture.
In terms of safety, we established another record low injury and illness rate for the fourth consecutive year.
<unk> Nucor divisions went the entire year without a single recordable injury, and we set new records across each of the four primary safety metrics that Nucor tracks.
And we achieved all of this during a period of rapid growth welcoming over 2000, new team members to the Nucor family throughout the year.
I am inspired by the way each member of the Nucor team has embraced our most important value the health safety and wellbeing of all 31000 team members, who make up our family.
Turning to financial performance, we earned $4 89 per share in the fourth quarter of 'twenty two on our way to setting a new earnings record of $28 79 per share for the full year.
This represents a 24% increase over the annual EPS record. We previously set in 2021, our operations continue to generate strong cash flow with a record 11 $6 billion of EBITDA.
This allowed us to advance our strategy along several fronts. While also returning $3 3 billion to shareholders through dividends and share repurchases consistent with our capital allocation strategy of returning at least 40% of earnings to Nucor shareholders.
Our return on invested capital stands at a healthy 35% and we closed out the year by announcing the 50 <unk> consecutive annual increase to our regular dividend. Following nucor's original listing on the New York stock exchange and $19 72.
This places Nucor among an elite group of roughly 40 dividend kings, referring to publicly traded companies that have consistently increased annual dividends to shareholders for over half a century.
These successes were in large part made possible through their hard work and dedication of the Nucor team, who executed our strategy to achieve world class performance.
As most of you know we share our profits with our team.
And just a few weeks, we will reach a milestone never achieved before nucor's history, delivering nearly $1 billion back to our teammates.
In 2022, we made considerable progress along all of our strategic initiatives deploying approximately $2 billion in Capex and completing five acquisitions valued at approximately $3 6 billion.
To grow our core and expand beyond but we didn't just invest in new assets and business lines, we invested in a more sustainable future.
We did this through new partnerships and capital commitments toward technologies that can help reduce our carbon footprint even further.
In December we announced an equity investment in electric a boulder based startup that has developed a process to produce carbon free iron used in making steel.
In November Nucor became the first major industrial company in the world to join the United Nations 2047, carbon free energy global compact, which aims to accelerate the world's transition to clean affordable and reliable electricity.
Nucor also co founded the global steel client Council.
International coalition advocating for a single transparent global emission standard that is focused on steelmaking emissions and last week. The NRC officially certified new scales designed to build a small module reactor. The first of its kind approved for use in the United States Nucor's minority investment in <unk>.
New scale will continue to support the development of this technology with the goal of producing 100% carbon free electricity.
Our mission to grow the core expand beyond and live our culture is delivering results for our company and our shareholders and our steelmaking operations, we invested in new capabilities to produce more value added products and improve operating efficiencies that can earn a higher and more sustained margins.
In our downstream operations, we continue to expand into new steel adjacent markets, where we can offer differentiated solutions, including overhead doors and utility towers.
These represent unique opportunities and faster growing markets, where nucor can leverage its core competencies supply chain efficiencies and market channels to create incremental value for shareholders.
And we lived our culture for over 50 years Nucor's unique culture has created value for shareholders as it empowers and incentivize teammates to take ownership of decision making drive efficiency.
And pursue innovation.
Let me provide an update on some of our larger initiatives to grow the core starting with our Brandenburg plate mill nearly four years. After it was first announced the Brandenburg team rolled their first steel plate on December 30th.
We're now focused on final commissioning of the mill and plan to begin customer shipments by the end of the quarter.
Last week, we announced the Brandenburg mill would produce a new product called <unk>.
Sustainable heavy gauge steel plate designed to meet the growing demands of the offshore wind industry. Congrats to the entire Nucor Brandenburg team for delivering one of the safest mill startups and Nucor's history and for completing it on time and on budget.
Turning to our sheet operations, we announced plans to build a continuous galvanized at California steel industries to serve construction markets in the western United States.
Recent closures of galvanizing capacity by other suppliers in the west presented Nucor, a unique opportunity to better serve this region. This new galvanized along with aligned we completed at Nucor Gallatin in 2019, and future lines planned for Berkeley, and Nucor West, Virginia will position the company as a supplier of choice for the.
Cleaner value added sheet products, our customers are seeking in several key markets.
Investments like this help forge, even stronger relationships with our key customers like Trane technologies, which honored Nucor last week with our 2022 supplier of the year Award.
Now shifting to our expand beyond strategy I'd like to provide an update on a few of our recent acquisitions. We've completed beginning with our mid year purchase of CACI overhead doors.
When we announced this transaction and held a special Investor call last May we spoke about CHF $230 million LTM EBITDA.
It's 30% EBITDA margins and average annual revenue growth of 10% in the last six months. Following our June closing CACI generated record EBITDA of nearly 170 million, finishing the full year with over $320 million of EBITDA and expanding margins within the first six.
Months of closing we've taken our implied trailing EBITDA acquisition multiple down from 13 times to just over nine.
Going beyond the strong financial results I want to commend the entire <unk> team for executing such a quick and seamless integration into Nucor, we're already seeing the benefits of our combined operations, including improvements to CHS safety performance.
Thank you team CACI and all of the Nucor team members have come together to make this an incredibly successful transition.
And we're starting to realize supply chain synergies as well with Chr developing plans to source most of its sheet bar and tube from new core divisions. The.
The sales team at <unk> is collaborating with Nucor's regional commercial groups and cross selling efforts have begun at CACI grows its share of the commercial overhead door market.
Last year, we also acquired summit utility structures producer of steel structures for the utility telecommunications and transportation sectors.
An area that we see considerable growth potential in.
Then in December we announced plans to construct two new state of the art tower production plants. These highly automated facilities will help meet the growing need for utility infrastructure as our nation's electric transmission grid is modernized and hardened.
Turning to the broader economic backdrop, we recognize there continues to be uncertainty, but we also see tailwind that should benefit nucor as well as the American steel industry throughout this decade, including the Infrastructure's Act the chips Act.
Foray that are all starting to work their way into the steel sector. These programs align perfectly with Nucor is unmatched and unrivaled product capabilities to meet the growing demand of our customers today and well into the future.
With that let me turn the call over to Steve <unk>, who will share more about our Q4 performance Steve.
Thank you Leon as Leon mentioned, our earnings of $28 79 per share established a new record for the company. These.
These results highlight the earnings power of Nucor's diversified portfolio and industry leading capabilities.
2022 was also a noteworthy year for cash flows at Nucor for the year cash from operations exceeded $10 billion for the first time in our history and free cash flow topped $8 billion.
Over the past five years, Nucor's generated $16 6 billion and free cash flow.
During that same time period, we returned $9 7 billion directly to shareholders through dividends and share repurchases, while at the same time investing over $12 8 billion and our business.
Through capital expenditures and acquisitions to further strengthen and grow our earnings base.
These results demonstrate continued and consistent adherence to our balanced capital allocation framework nucor's efficient.
<unk> manufacturing business model is a powerful through cycle cash flow generator.
Turning to our financial results for the fourth quarter earnings for the steel Mill segment were down nearly 60% from the prior quarter.
Shipment volumes fell, 13%, reflecting normal seasonal weaknesses and some purchasing hesitancy as prices were trending lower for much of the quarter overall.
Overall metal margins contracted as lower realized pricing outpaced lower cost for metallics.
Conversion costs were slightly lower compared to the third quarter, despite lower utilization rates in part due to energy cost, which fell approximately 10% on a per ton basis.
Alloys, and consumable cost also trended slightly lower.
Shifting to our steel products segment, we continue to see very strong performance with segment earnings of $1 1 billion in the fourth quarter.
This is down about 10% from the third quarter's record results, but still represents the third best earnings quarter ever for this segment.
Contributions from most product lines were down from the respective third quarter levels, reflecting normal seasonality CACI overhead doors was a notable exception as Leon touched on earlier, posting fourth quarter earnings 20% higher than the prior quarter.
Turning to raw materials. This segment saw a negative earnings for the quarter as the euro and scrap processing results were impacted by lower volumes and falling prices for much of the quarter.
We also took both DRA facilities offline for planned maintenance and elected to extend those outages for additional services until we saw signs of improving conditions later in the quarter.
On the capital deployment front nucor's capex for the quarter totaled approximately $520 million, bringing total capex for the year just under $2 billion.
We're forecasting capex in 2023 at $3 billion.
Including some catch up spending originally slated for 2022, new growth initiatives and general maintenance.
The earnings presentation, we posted on our Investor Relations site. This morning has additional details on our 2023 capital spending plan, including projected allocations among primary capex categories and a preliminary look at the anticipated pace of spending on a few of our major growth projects over the next couple of years.
I'd like to take a minute and provide an update on the strong results and we're already seeing from recently completed investments.
While strong conditions in 2022, certainly aided performance. We believe these were prudent timely and well executed investments that are yielding excellent returns and positioning the company for continued future success.
The roughly $2 $2 billion, we invested in sheet and bar projects that have been up and running for the past few years generated an estimated $620 million in EBITDA for 2022.
And the businesses, we acquired over the last two years for around $4 5 billion, establishing for new downstream platforms generated EBITDA of nearly $500 million over the course of the year.
We believe this puts us well on our way to reaching our annual run rate EBITDA goal of $700 million.
For our expand beyond businesses collectively these strategic investments and those to come provide significant earnings catalyst in positioning nucor for sustained value creation long term turning to our balance sheet. We finished the year in a very strong liquidity position with over $4 9 billion in cash and short term investments and our one.
$7 billion revolving credit facility remains undrawn.
We've been intentional about building liquidity towards the end of the year in light of uncertain economic conditions, coupled with near term uses of cash, including our 2022 profit sharing payouts that are earned by our teammates our capital spending plans.
In maintaining our commitment to meaningful direct returns to shareholders and.
In addition to ample near term liquidity nucor's balance sheet continues to be in a position of strength with total debt to capital of around 25% at the end of the year and debt to EBITDA well under one turn.
Earlier this week Fitch ratings published its first credit rating on Nucor with long term and short term unsecured ratings of AA minus and the F. One respectively. We were pleased to see Fitch recognized new course credit strength.
During the quarter, we repurchased $3 1 million shares valued at $403 million and made dividend payments of $130 million for a total of $533 million return directly to shareholders, which represents more than 42% of our quarterly net earnings.
Over the last five years, we've returned $9 7 billion to shareholders, representing approximately 52% of total net earnings for the period.
As we look ahead to the first quarter of 2023, we expect earnings from our steel Mills segment to increase compared to fourth quarter results on higher shipments improved metal margins and expected higher realized prices.
In our steel products segment, we expect lower earnings in the first quarter compared to the fourth quarter due to seasonally lower volumes and lower pricing in some products. However, it's worth noting that earnings are expected to remain higher than the first quarter of 2022.
Our raw materials segment earnings are expected to improve on more stable pricing and higher shipment volumes.
While operating income from these three segments is expected to be higher compared to the fourth quarter. We expect consolidated earnings for the first quarter to be lower due to higher intercompany eliminations and the absence of one time state tax benefits that were realized in the fourth quarter.
We remain relatively optimistic 2023 will be another strong year of earnings for Nucor, Despite entering a period of increased economic uncertainty.
Overall nonresidential construction spending continues to be robust federal support for infrastructure and energy projects will begin to show impacts on demand in 2023.
Are there positive drivers of demand include re shoring of manufacturing energy infrastructure demand clean energy and storage projects EV factories and semiconductor plants.
In closing, we believe medium and long term fundamentals of our industry and key demand drivers remain relatively positive this coupled with our growth initiatives and investments that advance our strategy to grow our core and expand beyond position nucor for strength well into the future.
With that we'd like to hear from you and answer any questions. Operator. Please open the line for Q&A.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If youre using a speakerphone please pick up your hedge before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause just momentarily to assemble our roster.
And our first question here comes from Lawson Winder with Bank of America. Please go ahead.
Good noon Leon good afternoon, Steve. Thanks for the presentation also congratulations to Doug on the new roles and also just say nice work to whoever else create those slide deck looks great. So.
I wanted to follow up on your last comment on market demand.
<unk>.
Maybe provide a sense to the extent to which Dan demand might be driven also by restocking versus some of these actual real demand drivers that you're highlighting.
And.
And then in terms of these real demand drivers.
You highlighted.
I'll, let electricity grid.
Which is moving the needle most during the quarter.
Thank you.
Okay, well listen I'll start us off and ask Dan Needham, our EVP silver commercial to jump in and paint some.
Perspective around what we're seeing in terms of the traction we're getting from some of the programs.
We discussed, but I want to begin with saying thank you for recognizing that and thank you to the 31000 team members, who made a historic year for our company. Thank you to our customers who made all of that possible I couldnt be more proud that our team executed its fourth consecutive safest year in our history. It is the most important.
And the value that we have at Nucor and.
None of us and our executive team take that for granted and I look forward in 2023, setting a new safest year in our history. So as we unpack. The first question that you began with our started and really understanding the.
Yeah.
Demand trends versus the restocking look I think.
It certainly hit the bottom as we think about distribution in and we're going to see that continue to restock as we move into the Q1, but that to me is not what's driving demand. If you actually look over the let's say the last eight or 10 weeks in the sheet.
For example.
Our bookings are up 45% to 50% during that time period, our backlogs over the last I don't know.
Let's say Q over Q and climbed about 16% so.
That drive us there that demand is there that's pulling that the other side is in non res construction, obviously new for us.
Channel in that market is over 50%. So we're heavily invested in that but there are so many incredibly positive signs in well.
2022 was a historic year and were slightly off in terms of order activity. We think it's going to be another very strong year.
Non res construction will remain robust as we can.
Move forward and there are several things that are going to drive that.
We'll touch on here in just a second.
And then really the other pieces.
Our <unk> strategy and long product strategy that continues to.
To produce and perform incredibly well as we move.
Through the back half of 'twenty two into 'twenty, three but as we talk about the infrastructure Act that chipset inflation reduction Act automotive improvement for 2023, all of those are going to have meaningful intangible impacts to our business that is going to touch on our second the infrastructure Bill, but I just wanted to.
Put some context to the chipset, that's a $55 billion package that Congress passed.
What does that translate to about 27 different meaningful chip plants that are going to be produced some of which are pushing $20 billion on their own individual clients well what does that what does that actually translate what's that look like.
That market segment as we think about advanced manufacturing is requiring something different for our future our customers in that sector are requiring the most sustainable comprehensive differentiated value products and solutions.
<unk> available to the market and of course incredibly well positioned to meet that growing demand in every category in every sector. So we feel very good as we enter 2023 that will be a strong year, maybe not as strong as 22, but a continued strong year, but and one of you paint a little context around the infrastructure action, what we think we will see.
In 2023, Okay I appreciate the question Lawson.
In particular, what we're seeing forecasts out there from construction indices or are predicting infrastructure starts increased 16% in 2023, and additionally, 10% in 2024, but more specific to that we are seeing activity today on the infrastructure Bill.
In January the Biden administration announced $2 1 billion in funding for four major bridge projects. The most notable being the bridge over to Ohio River, connecting Ohio, and Kentucky on I 75 to 971.
You also asked a little bit and Leon touched on the advanced manufacturing, but the other thing around the advanced manufacturing the activity is increasing.
Tremendously in that space not only in ships, but also on the EV space in batteries, but those plants are quite large and requirements from a grade and size standpoint, theres only a few suppliers that are capable capable of serving that nucor is well positioned to do that.
If you think about the breadth of our products.
Our capabilities.
The construction side from structural buildings to racking systems, and now insulated metal panels and garage doors or capabilities are unparalleled.
One thing you also mentioned was inflation reduction act or around energy.
And activity grow in that space as well.
Additionally, our breadth of capabilities fit that space.
Well Additionally, and if you think about our leading low greenhouse gas intensity offerings.
The requirements in that space, we're well poised to help the energy U S energy market move towards de Carbonization.
So the last point I'd like to make is in all of these are not mutually exclusive they are all interconnected and we have customers in the space is in automotive and energy that have requirements on the construction side and a couple of years ago, We created our focus on our solutions teams and we have teams.
Around construction automotive and energy that our best poised to recognize these opportunities early and to design conceptual phase of these projects and work with the owners developers engineers should provide a valued solution for all involved including new core.
Yes. Thank you Dan Thank you Leah fantastic color.
Maybe just one follow up for me if you could comment perhaps on the ramp ups at Gallatin.
Brandenburg through 2023.
Getting your thoughts on profitability.
Yes, absolutely.
As we touched on in my opening comments on Brandenburg, we're incredibly proud of the team the work that they've done what they've been able to accomplish and again I've been a new quarry a long time now in 26 years.
From a construction standpoint from a safety standpoint from a budget standpoint. This project exemplifies the very best of what our team has done and produced out there who will share a few more highlights of that because we've got some recent.
Milestones team has reached.
Here in just a moment turning to Gallatin.
Again.
We're about six months behind where we want it to be it.
On the ramp up however over the last few months that team has done a phenomenal job of bringing that.
New cash rent equipment online as I mentioned during the last call.
This really wasn't just a brownfield it wasn't complete mill modernization with software and automation tying that entire complex together. So it was a significant undertaking and all that being said the bottom line at Gallatin.
In Q2, we expect them to be at full run rate capability.
See how their market needs and demands.
Meet that demand, but the other piece in point.
Point that I would share is we expect can be profitable in the second quarter as well. So maybe you want to touch on a few other things that Brandenburg, yes, I'd be happy to Liana. Thanks Lawson.
We love talking about Brandenburg, obviously, we're really excited about it.
We're sitting here today.
Exactly where we wanted to be and likely on said I'll just congratulate not only the Brandenburg teammates that have just crushed it in building this project and bringing it in on time and on budget, but also a greater playgroup teammates at Hartford at Longview at Tuscaloosa that have created an environment in which this mill is going to be excited so.
And as Leon alluded to just yesterday I'm happy to report that we made our first customer shipment out of Brandenburg. So we are on the board and we're ready to go.
In terms of the ramp up and how we're thinking about 2023 I'll share with you that we've got really three focus areas lots and that we're going to think about number one is the teammates that we just talked about that they are the difference makers. They are a competitive advantage you've seen what they've done on this job site.
In the market and what they've created we're going to continue to focus on them, but also that those are the men and women to take care of our customers, which is the second area of focus so with our customers. We've got existing customers that have helped us get at this point with our plate business, but also new customers and new markets that are new areas for us to go and serve.
We couldnt touch before that if you remember back in 2019, the strategy around Brandenburg and build the most broadly capable mill in the western hemisphere and put it in the biggest plate market in the U S. That's what we've got we've built that capability set and we intend to go use it so with those two focuses than at least the third one which is driving incremental returns.
For the enterprise, we have had the support from teammates customers and our shareholders to put this project on the ground and now we just couldn't be more excited to start driving returns with it and we're excited about what 2023 O'brien.
Thanks Al.
Excellent thanks very much.
And our next question will come from Phil Gibbs with Keybanc capital markets. Please go ahead.
Hey, good afternoon.
Hey, Phil how are you.
Doing well thank you.
How do you guys see the global pig Iron trade unfolding this year, given the 25% reduction in 2022 do you see.
Supply chains, having reoriented at this point is there a reduced dependency on it given some of the new projects that have been announced by the.
Blast furnace folks or others, just what's the what's the reconstruction of that market right now.
Yes, I'll kick it off Phil and then ask Noah handlers.
Overall materials to comment on that.
I just wanted to point out because no one was in the <unk>.
The vice President of rollover D. J J at the time and again as we've mentioned a few times on this call. The day that the Russians invaded Ukraine was the last day, we took a any material.
From them and so it requires nucor to pivot incredibly quickly.
And the entire D J&J team stepped up.
Our teams across Nucor stepped up.
Because of the long tenured relationships that we have around the globe because of the relationships that <unk> built with partners and customers.
South America, we were able to pivot.
Move very very quickly.
Bringing new supply.
Enter new core at the same time, our teams have also technically figured out how to reduce our use and move from roughly what it was about 10% of our pig iron use across the <unk> group down to five or 6%. So.
Overall.
Tragedy that is still continuing to unfold in Ukraine.
The silver lining for Nucor in how we think about raw materials are positioning strategy and our overall use and consumption, but maybe no. One just paint the picture as we think about 'twenty, three and how thats going to shape out yes first of all thanks for the question, Phil and really for the opportunity to.
Talk about our team and the performance through 2022, because I think it was really formative for how we think about employing raw materials going forward.
So the short answer I think to your question about the balanced global pig iron suppliers Ukraine.
Ukrainian invasion of Ukraine was was really impactful is roughly 50% of the supply that went offline when when Russia invaded.
But more important to us the strength of our raw material models and the flexibility. We have if you think about how we operate about one third of our raw materials are self sourced between the IRI plants and our recycling group asset. So you combine this with.
What's really unmatched coverage of the market through our D J J brokerage team.
And the flexibility of our mills in terms of what they can melt to make our products for our customers and we can be extremely agile. So we are able to as Leon described quickly change our melt mix is maintain our focus on value and use.
While minimizing our cost and making the products our customers need.
Again, if you look back to 2022, it's a testament to this flexibility.
We prepared.
Prepared for the invasion to the best of our ability we had indications that was coming we were able to quickly pivot and adjust our melt mixes at the mills minimize our pig iron and immediately cease purchasing from Russia. So I am extremely proud of our team for the 2020 for.
For the 22 performance.
They executed.
And I'm also confident in our flexibility and the strength that provides us going forward.
Thank you and then in fabrication.
Gave us a range basically somewhere between the fourth quarter of 'twenty two in the first quarter of $2000 in the first quarter 'twenty two given profits should we should we essentially split the split the difference there or is it going to be closer to one versus the other.
Within that hour Howard Berk enjoys prices holding up relative to the second half because I know that they were historically.
Thank you Sean.
Yes.
Hey, Phil This is Steve Thanks for the question and that's been an outstanding segment.
Really driven fantastic results for the year, it's been one of the key catalysts. So.
While we do see some moderation from that group is still very strong I'm not going to guide yet leaning one way or the other.
Necessarily from 'twenty, one versus 'twenty, two or something like that but you are seeing some moderation there but.
Still outstanding performance from that group well above you should expect well above historic norms for for that group as we head into the at least the first half of the year, where we have some visibility.
Yeah.
Thanks, John .
Thanks, Phil.
Our next question will come from Curt Woodworth with credit Suisse. Please go ahead.
Yes, Hey, good afternoon, and I hope you're well.
Thanks, Kurt Yes of yours.
So.
I just wanted to drill down into the margin structure.
And the mill segment, if I look at <unk>.
2021, you reported metal spread was about 720.
If I look at the back half of 'twenty two it was about the same at 710.
But your EBITDA per ton at least based on my math went from 410 to only 185, so that seems to imply a pretty big step up in conversion costs.
And I know that there could be some galton startup and other issues, but does that is that math roughly correct and can you just talk to.
How you see conversion costs trending into the start of this year.
Thank you Kurt this is David Muskie.
Inflation has certainly been a factor for us on their own are conversions cost it probably falls anywhere within $40 to $80, depending on the division a couple of divisions would.
It would be higher than that gallatin being one of those but those are those are outliers. So inflation has been a big factor two other big hitters.
Well two other big hitters are.
We bought CSI and ramped it up this year, we run slabs through that through that facility and the cost of slabs co write directly into our cost of goods sold.
We had some pretty expensive slabs on the ground. So that was a pretty big hit year over year for our cost of goods sold.
And then across all of our divisions, we had significant inventory adjustments throughout the year.
And those inventory the cost of those inventory adjustments go it goes right into our cost of goods sold as well so.
Those three factors were pretty big.
Big.
That's why you see that big increase.
Yeah.
Okay.
Okay. That's helpful and then.
Second question is if I look at slide seven on the expand beyond Youre talking.
<unk> targeted a dollar cost those assets of roughly $700 million and it seems like you're making good progress on CH CH.
To get to the 400 number but can you kind of help frame like roughly like where we are.
And that progression and then when you look at I guess those business segments can you talk about.
Growth potential within those or how should we think about maybe how much capital you would look to allocate M&A wise into expanding beyond the core.
If you have any preliminary views. Thank you guys.
Yes, Kurt I'll begin and let Steve talk about the.
As we think about through cycle EBITDA.
I'll touch on your second question first as we continue to think about the growth of new quarter, we're coming off two historic years and really over the last several years. Our strategy has not changed our mission and our vision is very clear that is to grow our company period, and we're going to do it in two ways in the core.
And expanding beyond you've seen our investments in the core and we're certainly not done those will be probably more in line with what you've seen in terms of positioning strategies moving into more galvanized more prepay more higher value added products as opposed to what we're doing in west Virginia.
In terms of a greenfield facility, but on the expand beyond piece.
Steve Alex Hoffmann, who heads up our business development team and our executive team is focused on growing and looking at that expand beyond area for those adjacent companies that have sort of a steel centricity at some piece.
Efficient manufacturers, because thats really where we see the value set in coupling and Thats one of the reasons why.
We were so excited about CACI again couldn't be more proud of Dave and the entire CACI team for how they have performed through this year and again.
Their EBITDA and where we sit today is so far beyond.
The models that we built out so that focus for us is going to continue we're going to continue to look to grow nucor to position nucor well into the future and regenerating.
Significant revenues as well as our bottom line net earnings through the expand beyond businesses that we continue to acquire.
Yes, Kurt I'll, just add a couple of comments there to what Leon said.
<unk> of where we are.
With these particular platforms theres not a significant amount of capital other than what we've announced on the towers business to achieve the $700 million target that we outlined.
For earnings for these businesses. So we are.
We are well along that path very proud of the teams that are in these four platforms. The work they've done so so far to integrate into new floor as Leon question his opening remarks.
<unk> been very solid.
They just undermined.
What what Nucor's business model really is that are we're a strong diversified industrial manufacturing model and we're able to leverage that model in businesses and across a broad spectrum.
Our portfolio to drive value so.
If youre looking for how much money might be a new.
Expanding beyond platforms as Leon said, we are a growth company and so we're not done yet but these platforms that are established or are well on their way to that $700 million figure.
Great. Thanks, very much best of luck.
Okay.
Our next question will come from.
With Wolfe Research. Please go ahead.
Yeah, Hey, good afternoon, everyone.
I wanted to explore a little bit that outlook and then ask a question about volumes and I think they're a bit tight but to start with the outlook and the steel mills in particular can you talk to improve profitability on higher volumes and improved margins specifically in the sheet business.
Volumes, I get seasonally and off a pretty low base at 70% utilization on the margin side I mean, it looks like trending prices at 750 hot rolled and compare it to Q4, it's average price of 960 looks like a tough comp.
<unk> costs.
Based in those deeper discounts on your quarterly context, and monthly context, I'm just trying to figure out if your guidance is more about the volume side or if I'm missing something on mix or costs.
Yes, I mean, I'm not going to get into the contract to contract comparison, but again.
All contracts are not created equal they are not on a calendar year, they're not all one year contracts and they are different escalators built in.
<unk>, so again, we feel.
Really good about our strategy and that strategy really comes back to.
The pre announcement as we were getting ready to announce west Virginia to build the most diversified capability said not capacity and so if you look at the sheet group in particularly has done this year they've matched demand they have matched the market and what was required.
Flows through and you can look very quickly to see our EBITDA per ton and what we've been able to return back to our shareholders and our performance and I'm very proud of.
If you think about our.
Our positioning as we move forward, we're going to we're going to match that in my.
The answer to the Gallatin question that mill will have the capability to run at full steam Q2, but we'll be very mindful about how we bring those tons into the marketplace. So we're going to be very thoughtful about how we do that.
Rich anything you would like to touch on in terms of.
Yes that customer segment as we move into 'twenty three yes.
Yes timna.
Thanks for the question.
The only thing I would really add.
If you look at the volatility we had from what we saw in.
Really the second half of 'twenty, two but if you look at where Cru's stood.
And third quarter, and then the drop in the fourth quarter and now what we're seeing now.
It's a really short window and I think thats to Leon's point, we have a long term strategy and in the short term you may see us do things.
<unk>.
From a quarter to quarter based on what the market's up happening we chose very specifically not to participate in some of the spot market as heavily as we saw some of the lower pricing.
So you would see some lower volumes, but we are a margin focused company long term.
As a group as a sheet group.
Our goal our purpose is to generate a return for our shareholders on our investment so that'd be the only addition, I would have.
Okay. I was just trying to understand the margin guidance on the sheet side in particular, if that was it pricing or cost driven but.
I don't want to press you on contact side I understand that sensitive.
I'll switch to the second one if you have anything else on the cost side that would be great, but on that and then utilization.
<unk> at 70% in the fourth quarter and.
One of your peers earlier today touting above 85% utilization should we think about that ramping up given all the positive commentary on demand that you are you're explaining slide 17, and the ramp up of <unk>.
And of course, Galton Brandenburg I mean is it reasonable to expect that there should be a commensurate increase with the new capacity coming on or tomorrow normal utilization levels.
Yes, I think youre going to watch that unfold and again I'm not going to comment on what our competitor strategy are positioning us. However.
Obviously, one of our competitors has got a new mill and a lot of assets sitting on the books and they're going to do whatever they're going to do in.
Bringing that mill up at.
At the same time, we're going to focus on what rich said in providing a return to the margin that.
That drives our business and so we will meet the demand out there, we're not going to chase to onshore.
Pull forward demand that isn't real but again I think what we're seeing in the indicators that the <unk> group machine over the last two months are very favorable and I think that will continue and you'll see the uptick subsequently in our utilization rates.
As we head into the back half of Q1 into Q2.
Okay. Thank you Brian .
Thanks, Tim.
Our next question will come from Carlos de Alba with Morgan Stanley . Please go ahead.
Yes, Thank you very much and good afternoon, Steve.
I have a couple of questions one is on.
Start up cost on the other piece on comprehend eliminations.
Segment or.
Your line is.
In.
Reports first on the startup cost.
You complete some of the projects I know as you ramp up the play meal.
How do you see it.
Start up cost.
Coming out in 2023, given given the big increase that we saw $250 million in 2022 versus $1 30 last year.
Clarity there would be great understanding that you are always a growing company, but but any any color would be useful.
Yeah, Hey, Carlos.
Thank you for that comment and that's what I'd like to start where you ended nucor is very much a growth company and you do see different treatment of startup cost from us versus some of our peers some of them like to make adjusted earnings we don't view that as an adjustment. It's just part of what we do we're a growth company youre going to see that going forward from us.
Continued startup costs pre operating startup cost it was $73 million in the last quarter.
We expect it to be down just a little bit in the first quarter.
Some of the variability as you start to model out the year, we will have to do with spending and the pace at West Virginia. So you'll have to just kind of stay tuned on that but for the next quarter Youll see that come down slightly from the fourth quarter.
Did that did that address your question adequately.
Definitely and then the other question is on corporate and elimination.
The reports.
It was 77%.
One 1 billion in the quarter.
If I just back for the tax credit and tax.
The change in the valuation.
Allowance.
Think I calculate.
And I'm assuming that this is all on just the same figure pretax and after tax I calculate that line would have been around $71 million negative $71 4 million negative which would be a substantial.
<unk> versus the $441 million reported in the third quarter.
617 million negative in the fourth quarter of 2021. So I'm wondering if you can comment a little bit about that.
Delta, which is definitely.
He helped.
For the quarter.
I assume from your guidance that is not going to be such as positive tailwind in the first quarter of 2023.
Yes, very very much.
The components that go into that segment.
The corporate <unk> number.
<unk> got several different things administrative cost you've got interest costs and.
And compensation related costs, the largest of which is profit sharing which as Leon said, we are thrilled that our team earned almost $1 billion in profit sharing this year.
And which would get paid out in March.
But the big swing from last quarter to this quarter was really the inventory valuations that occurred in our intercompany loans and Thats why it swung to the to the positive credit that you see.
So that's what we don't expect to have going forward, that's going to be the biggest change between Q4 and as we head into Q1.
And there's really two components to that if you start to.
Look into your model a little bit more detail from a one on one part of that was the DRA losses, we had which of course wiped out any profits intercompany profits between <unk> and the other part is really around volumes and that was more pronounced in our downstream steel products segment and it was anywhere else.
We shipped a lot Carlos toward the end of the year.
Even more than we expected.
Partly why you saw a little bit of.
We increased free cash flow from working capital as well from that factor.
And as Ed.
Just to close the loop here between.
Dave Some ASCII commented earlier, it's one of the drivers of why.
Sometimes it's a little complicated to look at our cost when Youre looking at our segment and Youre trying to dial into steel mill cost part of those <unk> numbers are actually falling out of that segment number and down into the <unk>.
Total corporate <unk> number as well so it does get a little fuzzy when you're when you're trying to triangulate.
Alright, well, thank you very much.
Yes.
Our next question will come from Tristan <unk> with BNP Paribas. Please go ahead.
Yes, hi, Thank you for taking my questions.
The first one on plate. Please can you explain a little bit the strategy and its its kind of a question in three parts. The first one on the volume side, if I look at plate volumes. So for the year. They are around $1 5 million tonne, usually around 2 million tonnes. So.
What's the target really with the new facility for 2023 and also if you can talk a little bit of that mix.
Target product mix and market mix and for the new facility.
Second kind of part of the question is more on prices. When you look at plate prices drift lower they are still really strong.
Do you believe that the demand environment, you're seeing is Kenneth warranting dose elevated prices and now we're back to kind of a more normal.
Kind of a price cost relationship or do you believe some normalization should still take place there and.
And finally, we if those elevated prices domestically, how do you view the import risk.
There has been a new trade case.
How do you feel about that do you think the U S market is definitely well protected there. So thank you.
Alright, I'm going to I'm going to begin and then I'll talk more specifically, but I want to begin with telling you.
Our prices in plate or not elevated and I do look forward to returning to normal levels closer to $2000 a ton and so being a little facetious with you trust in but we don't think they are elevated at all we think there or the supply and demand environment and.
In a commodity business demand will always dictate pricing and so.
Yes that is the driver and so.
Again tell you that.
Theyre not elevated.
In terms of import risk and you mentioned the trade case.
Actually I'll testified here not too long ago on that case.
The ITC has found and upheld the extra.
Sunset review on those countries and show the protections that are in place today, not just on plate, but all of our products is so greatly enhanced from what we saw six seven years ago. In 2015. For example, it was only about 50 or 55 trade cases that were won.
Against countries found dumping or illegally subsidizing their steel to data that is closer to 150 and so.
Regardless of administration, we've had great success in advocating for our industry and <unk>.
Holding those countries accountable with the countervailing duties are anti dumping margins for bringing again, not just plate, but sheet in rebar and other products into this country illegally, but how do you want to touch on.
That makes the strategy for Brandenburg and expect to ramp that up.
Yes, it's a great question Tristan there's a lot to unpack there I'll talk through a few of it and then I may ask Caleb Strother, who is our director of commercial for our plate and structural group to talk with a few more specifics but.
To Echo what Leon said, no certainly not we think plate prices are ours.
At a range, where the market is bearing that when they think they are fair and we don't see them as elevated at all.
What we did with our order book or the way, we bifurcated our order book through this year, we separated coil and cut to length plate from discrete plate that was one thing we did to make sure that the highly differentiated product like discrete plate that can only be made of the plate mill collects the premium that is oriented versus some of the other products that can be.
<unk>.
More influenced by hot band pricing and so that's been largely successful if you follow the pricing of both of those and I know you can see that we were able to decouple those too. So as we sit now our order book our mix on plate is about two thirds discrete plate and about one third coil or cut to length plate.
And as Brandenburg comes up Brandenburg is going to be mainly a discrete plate mill, it's got a steckel mill it can run coil.
Coiled plate that'll be highly specialized played very value added.
<unk> run a lot of coiled played out auto Brandenburg, it's discreet place. So it is going to move our mix to about 75% discrete we see that obviously is a good thing.
You asked about times I'll give you a rough accounting of the times during a ramp up year, and then ask <unk> to chime in on some of the markets, but we're expecting somewhere in the 10% to 20000 ton range of shipments in Q1, so thats be primarily a ramp up quarter.
Quarter, probably on the range of 100000 tons and then somewhere in the 200000 tonne range in the second or excuse me in the third and fourth quarter. So somewhere in the $5 to 600000 tons. I think we would expect out of Brandenburg. This year, obviously the market will dictate.
Of that but we would expect to be at run rates capable of capacity by the end of the year. So Caleb maybe if you want to talk just a little bit about some of the market strategies and some of the areas, we hope to penetrate with our broader capabilities sure. Thanks, Alan Thanks, Kristen for the question Brandenburg brings a whole diversified product mix that we havent had with our <unk>.
Prior when Youre looking at place up to 14 feet wide 14 interest stake in 500 inches long. This helps support a lot of initiatives that are going on the market Dan touched on the IRA and the infrastructure package Brandenburg as well suited in the middle of the country to help supply those customers with solutions that our playgroup hasnt been able to offer in the past also with our announced.
But of LCR you'd look at further investment and greening of the energy grid thats happening in our country Brandenburg as well suited to supply the autopilot play that would be required for our U S fabricators and as well as globally around the world for other fabricators.
Okay.
Alright.
That's very helpful and just a quick follow up in terms of the.
Wind and renewable how much of the percentage of demand with volumes could that be.
The percent of the volume out of well I would just tell you energy roughly around 10% of our overall mix is probably where we see it that could ebb and flow a little bit depending on demand and in timing, but that's roughly where we're at as a company.
Alright.
That's really helpful and if I may just another one also kind of big picture.
<unk> from play to rebar can you discuss a little bit what are you seeing on the market more kind of near term, but also.
More medium term as you ramped up your new micro mill in also.
What's kind of the timeline is summer 2020 for the right timing to think about this facility and the impact on <unk>.
Infrastructure Bill is it something you are looking at two to kind of move meaningfully into Q3 Q4 is that the right way to think about it. Thank you.
Good afternoon, Tristan this is John <unk>. Thank you for the question.
Our our portfolio and long products is really going to benefit from what we see coming in 2023 related to the infrastructure Bill.
The rebar market will grow.
One five to 2 million tons per year.
We're planning on ramping up our.
Our mill in Kingman should ramp up about October of 2024, and Lexington in the middle of 'twenty four so we feel like we're well positioned to take advantage of that market.
The other thing I would add John an interesting just in closing that.
The positioning of Washington, and the overall micro mill strategy.
Located in the growing regions in the Atlantic Coast, and that where Lexington North Carolina.
There's going to be.
Very key in the growth of that.
That sector in that market with proximity to the lowest priced scrap and again the customers that we will be supplying that strategy John .
John pointed out in.
It's been incredibly important for Nucor that will continue to help shape and again provide the returns that we've seen in rebar and quite frankly of our long products. The other pieces.
You asked about the infrastructure Act.
That.
We will take meaningful shape, probably second third fourth quarter, certainly in the back half of the year, but.
As Anthony mentioned earlier make no mistake the order activity the coach see the interest in the bar group our products vault craft for Arco decking, it's already begun so we're already seeing the pre bids and activity already starting so again thats not.
Just wishing and hoping we're seeing that activity, we're seeing some of the approvals in the branch and highway programs actually get funding now and that will that will have a meaningful and substantive impact we estimate in most of the outside groups estimate for every $100 billion in infrastructure or it can be.
5 million tons of steel that will flow through and again, the product breadth and offering that nucor has today puts us in an incredibly advantageous position to serve that growing market.
Alright, Thank you very much.
Okay.
And this concludes our question and answer session I would like to turn the conference back over to Mr. Leon Topalian for any closing remarks.
Thank you in closing I, just want to thank our team for historic ear and delivering the safest and most profitable year of Nucor's history.
Thank you to 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. We take seriously the stewardship of the valuable shareholder capital at you Entrust US with thank you for your interest in Nucor and have a great day.
The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.