Q2 2023 Nucor Corp Earnings Call
Doug Jellison corporate strategy, Greg Murphy business services sustainability, and General Counsel, Dan Needham commercial strategy, Rex query sheet, and tubular products and Chad <unk>, new products and innovation.
We posted our second quarter earnings release, and Investor presentation to the new core Investor Relations website. We encourage you to access these materials as we will cover portions of them during the call.
Today's discussion will include the use of non-GAAP financial measures and forward looking information within the meaning of securities laws.
Actual results may be different than forward looking statements and involve risks outlined in our safe Harbor statement and disclosed in Nucor's SEC filings.
The appendix of today's presentation includes supplemental information and disclosures along with a reconciliation of non-GAAP financial measures, so with that let's turn the call over to Leon.
Thanks, Jack and welcome everyone.
I'd like to begin by thanking the 31000 members of the Nucor team for delivering another outstanding quarter.
Investments we've made in recent years to grow our core and expand into new markets are generating strong returns for our shareholders increased capabilities for our customers and the Nucor team is executing safely and efficiently in fact through the first half of 2023, we're on track to set another annual safety.
<unk> for the fifth straight year further proof of the World class performance by Nucor teammates, who live our culture every single day.
Looking at our financial performance in the second quarter nuclear generated approximately $2 2 billion of EBITDA and $1 5 billion of net earnings or $5 81.
Per diluted share on a year to date basis, we've generated $4 billion in EBITDA and $10 26 earnings per share representing our second best start to any fiscal year in Nucor's history.
Each of the three reporting segments saw higher earnings in Q2 compared to Q1 with the largest gains coming from the steel Mills segment, which saw higher realized pricing. The steel Mills order book remains healthy with strong demand from automotive energy heavy equipment bridge construction data centers and.
<unk>.
And within steel products Q2 marks the fifth consecutive quarter with segment earnings of approximately $1 billion or higher and we continue to see a healthy backlog at attractive margins through the remainder of the year.
Looking ahead, we believe steel market for the remainder of the year will remain healthy driven by strong manufacturing investment and infrastructure spending U S. GDP growth forecast for 2023 have been revised upward on multiple occasions in response to economic data that continues to demonstrate the resiliency.
The U S economy.
Turning to our growth strategy, we've completed slightly more than 50% of our $10 billion Capex plan to grow our core steelmaking operations. Several of these investments are already generating incremental earnings and growing our share in key markets.
Over the next several years will continue to execute on our Capex plan to better position Nucor with more value added steelmaking capabilities.
And our sheet Mill group, we've continued our ramp up at Nucor steel Gallatin in the second quarter. The Gallatin team has achieved full run rate production levels in June and saw increasing levels of profitability each month of the quarter I'd like to congratulate our entire gallatin team for their continued focus on safely bringing the facility.
The full run rate production as well as taking care of our customers. During this time.
At Nucor steel West, Virginia, we expect to begin construction in the coming weeks. We remain excited about this transformative project to serve the heartland of American steel consumption with a considerably lower carbon footprint.
In our plate Mill group that Brandenburg team in Kentucky continues to ramp up production at the most advanced AAF plate mill in the world.
As we've shared before our focus at Brandenburg in 2023 is on improving our capabilities rather than maximizing output we.
We spent the first half of the year dialing in the caster and downstream operations and were now producing finished products ranging in thicknesses from one to 12 inches.
In the second half of 'twenty, three we expect to produce approximately 300000 tonnes and turn profitable by year's end.
Our customers continue to express strong interest in <unk> capabilities and our team. There is working to ensure we can provide a full range of plate solutions.
Finally in the bar Mill group construction on our new rebar micro mill in Lexington, North Carolina broke ground in May and is slated for completion by early 2025. This highly efficient 430000 ton bar mill will serve the growing construction markets throughout the mid Atlantic and southeast regions.
Our steel products segment continues to generate strong earnings with nearly $2 billion of pretax earnings year to date, representing 45% of Nucor's earnings mix for the first half of 2023. This is a testament to our industry leading capabilities across a broad array of engineered steel construction.
Products and solutions.
Today Nucor can produce an estimated 90% of the steel intensity of a typical manufacturing facility or large warehouse with over 100 fabrication centers throughout North America. We are the leading supplier of the steel products. Most commonly used in nonresidential construction last year, we provided some.
<unk> to more than 5000 steel products customers with non representing more than 5% of consolidated revenue.
And we're leveraging our channels to market and broad capabilities to cross sell products, such as overhead doors racking and other solutions.
In recent years, our customers are attributing more value to the solutions, we provide helping to depart from the traditional cost plus paradigm there.
They recognize the incremental value, we provide through engineering detailing fabrication custom, finishing and our nationwide logistics capabilities.
As a result products, such as joist and deck pre engineered metal buildings and insulated metal panels command higher margins than in years past.
Our performance also reflects some fundamental changes we've made to improve efficiencies and metal buildings and rebar fabrication, which are now driving better results for our customers and our shareholders.
Turning to our expand beyond strategy. We're pleased with the initial success of our four new growth platforms, and we continue to develop a pipeline of potential growth opportunities during the second quarter Nucor tower since structures announced the location of our second new production facility in Crawfordsville, Indiana there.
Considerable growth potential in the utility infrastructure market with the need to expand and hardened transmission infrastructure.
Now accelerating the connection of distributed renewable energy to the grid.
As we evaluate and pursue new expand beyond platforms, we're focused on opportunities that leverage our core capability as an efficient industrial manufacturer and are aligned with steel intensive mega trends or themes.
Passage in the implementation of the infrastructure Bill IRA and chips and Science Act are helping to drive these mega trends and Nucor intends to capitalize on them further to grow and diversify our earnings potential.
The goal of our growth strategy is not simply about being the biggest steel company, it's about providing a differentiated capability set for our customers.
And creating long term economic value for our shareholders.
We aim to generate returns over the economic cycle comparable to the best manufacturing companies in the World. That's why we're seeking opportunities with attractive growth rates stronger free cash flow, great synergy potential and more stable earnings profiles.
Before turning it over to Steve I'd like to provide some updates on our sustainability strategy.
In May we announced an Mou with new scale to explore locating new scale small module reactor power plants near certain Nucor steel mills and in June we announced a partnership with Exxonmobil to capture transport and store <unk> emissions from our <unk> plant in Louisiana.
We believe this is the first carbon capture project of any DRA facility and will enable us to produce the lowest embodied carbon DIY in the world.
Even though our emissions intensity is already 60% lower than the global steelmaking average Nucor continues to aggressively pursue strategies that further differentiate itself as the leader in sustainability for our industry.
With that let me turn it over to Steve who will share additional details about our Q2 performance as well as our outlook for Q3, Steve.
Thank you Leon.
Nucor just completed another terrific quarter. The company had consolidated net earnings of nearly $1 5 billion, resulting in a return on equity of 30% over the past 12 months in fact, the second quarter of this year marks our ninth consecutive quarter, where both net earnings exceeded $1 billion and return on equity exceeded 25%.
These results highlight the advancement of our strategy and the growing earnings power of Nucor's diversified portfolio and industry leading capabilities.
It also demonstrates solid execution by the Nucor team and ongoing favorable conditions across important steel consuming end markets, such as construction automotive energy and industrial equipment.
At the segment level, our steel Mills' group delivered $1 4 billion of pre tax earnings in the second quarter, an increase of 68% over the first quarter. This was due to higher metal margins, especially at our sheet mills as gains on realized pricing on steel outpaced higher prices for both scrap and or base metallics.
Second quarter steel shipments were similar to that of the first quarter.
During the period, we realized slightly lower conversion costs, including lower energy rates.
Turning to our steel products segment, we saw another period of outstanding performance with segment pre tax earnings of just over $1 billion.
We continued to realize attractive pricing and margins, even as some sub sectors like warehouses continue to moderate from their historically high levels of 2022.
While nucor operates a diverse portfolio of downstream steel products. Some of the strongest contributions came from our joist and deck business and our pre engineered metal buildings group.
We also saw improved results in our rebar fabrication and tubular products businesses.
In addition, as Leon mentioned, we've seen very positive contributions from our newly acquired expand beyond platform businesses.
Our raw materials segment produced pretax earnings of $138 million for the quarter.
Relative to the first quarter of the year, we realized higher volumes and pricing in both our <unk> and recycling businesses.
During the second quarter. We also continued to generate strong free cash flow with cash from operations totaling $1 9 billion for the quarter and $3 1 billion year to date.
This strong cash flow, allowing nucor to continue its balanced approach to capital allocation in the second quarter, we deployed $525 million in capital expenditures as we continue to enhance and grow our core we also returned $580 million to shareholders, including approximately $130 million in dividends and four <unk>.
Third $50 million in share repurchases.
Year to date, we've returned roughly 44% of our net earnings to shareholders through dividends and share repurchases.
Nucor's balance sheet strength continues to be a fundamental underpinning of our current and future success.
Quarter end Nucor had approximately $5 4 billion in cash and short term investments.
And our revolving credit facility remains undrawn.
This strong liquidity position enables us to continue our balanced approach to capital allocation.
Leon referenced the progress, we're making on our $10 billion capital spending plan to leverage and grow our core but.
But we still have significant spending in our largest project ahead of us.
We expect capital spending related to our West Virginia sheet mill to accelerate in the near term as we began the construction phase of this project.
And as mentioned earlier, we continue to cultivate a viable pipeline of growth opportunities to expand into new adjacent businesses.
Maintaining a strong balance sheet and sufficient liquidity are centrally important to enabling in positioning nucor for continued future success.
Turning to our outlook for the third quarter. We currently expect consolidated earnings to be lower than the second quarter.
At the segment level for the third quarter, we expect earnings from steel mills to decrease compared to the second quarter on stable shipments, but lower margins as we've seen prices come down for sheet and to a lesser extent long products.
In our steel products segment, we expect performance will continue to moderate from the record setting earnings in recent quarters due to modestly lower pricing and stable volumes for.
For the raw materials segment, we expect lower earnings in the third quarter due to margin compression of our Dear I and scrap processing operations.
Overall nonresidential construction remains elevated with especially strong activity from infrastructure spending data centers and manufacturing. In addition positive trends continue in the automotive and energy sectors.
In short, we believe medium and long term fundamentals of our industry and key demand drivers remain very healthy this coupled with 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 you might have 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 you are your speakerphone, please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
Once again that with Star then one to ask a question at this time, we will pause momentarily to assemble our roster.
And our first.
Question comes from Alex hacking of Citi. Please go ahead.
Yes, good morning, and thanks for the time I guess, just my first question just drilling down on demand a little bit.
If we look at.
Shipments of long steel baas, and structural <unk>, it's down about 10% year over year.
I guess, you know, what's what's driving that.
Kind of year on year decline. Thanks.
Yes, Alex I appreciate the question.
As we look over.
The course of this year compared to last.
Coming off historic highs historic backlogs.
And volumes and so some of that is moderating we're seeing again continued robust demand in many of those sectors, particularly around non res construction auto advanced manufacturing and the likes so maybe provide a little more context on some of those long products in and what we're seeing in the marketplace today.
Good morning, Alex This is John Hall, if I'll speak specifically to.
Long products, so you've got to keep in mind when it comes to Nucor's long products portfolio, we have.
Most diverse offering of of any long product company out there, where you got rebar merchants SPT.
<unk> and Rod.
All mixed into those numbers.
Rebar demand has remained steady that's about even with where it was last year as we would expect where we've seen some decline is almost on the rod side and on the Q.
Are you seeing inventory builds up buildup. So over the course of last year that had been making their way down over the course of this year and we're feeling some impact that.
But again the bigger portion of that is the rebar side, which remains very consistent.
Alright, Thanks, Liana, John that's very helpful. And then I guess my second question I guess turning to the sheet side.
Shipments, they're modestly lower year on year.
Spite, adding 400000 tons from Gallatin your peers have generally been reporting shipments higher year on year.
Sitting on the outside it looks like May be Nucor is happy to can see a little bit of market share in the short term.
Is that a fair assessment or is there something else going on.
Well, Hey, I appreciate that and a couple of things to note and again context is important in a number of different aspects not the least of which.
The second quarter of last year was historic for Nucor in Raleigh, our industries and so at that time were peaking in setting records in about every category that you can imagine, including about 7 million tonnes of shipments in that quarter alone two and a half of which was in our sheet group.
And so what I would tell you as we look to Q2 of this year, we're not conceding market share and in fact, we're growing some of that and I would ask for next quarter, you to touch base on a little bit and.
I'll give you a little bit more flavor of that but.
Nucor is.
Yeah.
Focused on providing a capability set Alex for our customers again, not just volume at the same time, we're not going to <unk>.
<unk> market share, we're going to be deliberate in how we ramp up we thought very deliberately about how we bring gallatin on I'm proud of what they and their team have gone from a safety standpoint.
Reliability standpoint, and again really taking a complete brownfield revamp of that facility.
<unk>.
While delayed I'm really proud of the efforts the team has made and now profitable and running at full run rate level. So we're actually provide a little more clarity for Alex around that and are our market share gains.
Yes, Alex I appreciate the question as Leon mentioned second quarter last year.
Really was.
Extremely high in volume and so it matters, where you start out when you look at that from a relative tonnage standpoint. So you saw I would tell you basically have been stable and as far as market share.
We'll go back to that timeframe versus now in the in the last year, we picked up a couple of points of market share.
First quarter.
We're up about four points of market share.
So from our standpoint, we've grown it imports.
<unk> decreased slightly over that time, so from our standpoint as someone else growing they're getting it from somewhere else not from Nucor. The same time, we're expanding our capabilities so youre seeing us.
<unk> market share, but also.
Expand our capabilities into our customers for higher quality products.
Alright, Thanks, Liana rich I appreciate the.
The context and clarification.
Thanks, Alex.
The next question comes from Timna Tanners of Wolfe Research. Please go ahead.
Yeah, Hey, good morning.
One morning.
Hello, I wanted to ask a bit more about your backlog I know you talked about healthy backlogs you alluded to some of the weakness in warehouses, but also talked about healthy government program to support. So I was just wondering if you could provide any further color.
Warehouse starts upon over 50%.
Have you seen much weakness yet what are your customers, saying there and what are you seeing in terms of evidence of the government spending so far in your backlogs.
Yeah. Thanks Timna.
Kind of startup because there are so few different problems that.
I wanted to touch on and maybe ask Jon Horlicks to touch on.
Some of the flow through effects that we're already seeing in our order books, but I want to begin with the backdrop right. If we hit a point in time like june's numbers or a drop of 53%.
You look at the overall year averaged about down 25% and again the 2023 overall forecast at 27% down year over year, but you are coming off again historic highs.
However June .
I think what Youre asking is June .
A indicator that we've reached some different in a bigger decline that's going to stay with US I would tell you that is not indicative of what we're seeing in our quoting data our backlog data and as we talked to our customers' customers. The feedback and reports that we're getting is again pretty resilient through the rest of the year. So.
It is off 2022 piece, but again as we think about maybe a 2017% to 19 average it is still significantly higher than that period of time. So.
John maybe just provide a little context around what we're seeing in terms of the infrastructure ships, an IRA flowing through our mills. Thank you Leo and good morning, Timna on the infrastructure Bill.
CN still design and budgetary work being done on those projects. So we expect that that would flow our way probably more at the end of this year beginning of 2024 on the chip side. Those those projects are currently in motion. They are they are sitting in our backlog some of actually.
It's been delivered and we're seeing the benefits of that.
Specifically on the rebar and rebar fabrication side.
Asked about.
Backlogs.
Touch on rebar fabrication and I'm really proud of what our our team at Harris Rebar Fab has done over the last year, we are comfortably going to have a record year in that business and the margin on our backlog.
Right now is higher than it's been at any time in our history. Since we have owned this business. Our backlogs are down just slightly year over year.
That's by design, where we were coming off of a record backlog a year ago.
But we're positioning ourselves because of our geographic footprint across the entire country to take advantage of this wave of work that continues to come with the chip Zach an infrastructure Bill.
Okay. Thanks for that color very helpful and if I could sneak another one and I just wanted to kind of clarify.
A couple of comments.
It's about potential interest and further downstream M&A did.
Did I catch that right and if so can you elaborate on any of the criteria that you are looking for end market geography, any anything that you want to provide would be great.
Yes, Tim.
Got you on that.
Part of the expand beyond for US is it is a few filters that I'll share with you want is a is a marriage up where we bring value as an industrial manufacturer right that theres something too that we bring to bear we're not looking for a disparate businesses certainly not looking to become a conglomerate and again having.
<unk> things that don't marry up where we don't bring value to so that's one the second is <unk>.
Scalable with that we can maintain or grow into a market leadership position.
<unk> third.
And is looking for adjacencies that operate somewhat out of the traditional cyclicality.
The steel.
The steel mill World right. So how do we provide a more stable earnings profile through the long term and again. The best example of that is our CACI overhead door business that.
It's operated prior to us acquiring them at a 10% CAGR for 20 years and so there is stability in that earnings profile or is something that we look for.
A lot is we're continuing to look there are a lot of irons in the fire I won't get specific into the sectors, but other than to say as we look at the mega trends that are happening in our industry in the long term how do we continue to broaden that portfolio and again, increasing our value and capability set for customers and the returns for our shareholder.
<unk>.
Okay. Thanks, a lot.
Thanks Timna.
The next question comes from Lawson Winder of Bank of America Securities. Please go ahead.
Thank you operator, and good morning, everyone. Thank you for the update today and taking my call just wanted to start off with your commentary on steel products and for those to moderate in Q2 and ask whether you might be able to provide some.
More specific direction in terms of what moderation means like for example would that be down like 2%, 5%, 10% versus Q2.
Thanks, so much.
Yes, well listen I appreciate the question.
I don't know were prepared today to talk about that one.
And provide that exact one specific end market what I would tell you as we look to Q3, we expect volumes to remain pretty stable again, we think that business segment is pretty resilient and again, we do see some.
Slight contraction on the overall pricing.
It's going to flow through but again at this time.
I'm not going to provide a specific number.
Okay.
That's fine.
That's helpful that you provided and then I just also wanted to ask on.
Brandenburg.
Yes.
You continue to expect profitability in in Q4, how does how does Q3 look and then looking into 2024.
How would you describe the profitability outlook for Vandenberg.
Yes.
I'll ask Albert our EVP overplay products touch on it I would just point out and tell you.
The excitement of Brandenburg to us internally and then to our customer segment.
In the marketplace has been extraordinary and has the most diverse capable plate mill in the Western hemisphere. The team has done a phenomenal job again I shared earlier in my opening remarks about.
And their ramp up in their ability to data.
Produced one to 12 inches.
Again, we're excited about being in the heartland of the largest plate consuming region in the United States.
Al you want to just maybe provide a little bit.
Insight into Q3 and that ramp up and again.
Our expected profitability by Q4.
Yes. Thanks.
I don't know us in a position to comment beyond on the profitability. What we've given you about achieving it in Q4, but I can talk a little bit about volumes as we look at the second half and it's heavily weighted towards Q4. So the 300000 tons I would say, it's a 100 of that in Q3 at 200 of that in Q4, so that might help you.
Kind of pencil out what that looks like for the year, but as Leon said, we remain focused on the capabilities of that machine, which are extraordinary we've hit several milestones even within the quarter overall in a 12 inch finished played we've cast a 12 inch slab caster, we just continue to grow our capabilities in all the.
Casting and rolling and finishing.
Breadth of that that plant can do we're going to be strategic about rolling the tons out we're going to be careful and thoughtful about it but I've given you about the best estimate we have on how the second half outlook.
That's super helpful. Thanks, Thanks, Al and then.
When you think about.
Profitability in that sector as well in terms of pricing.
Would you accept expect.
Premium value added pricing to start coming through in sort of 2024, just given the range of product that you guys will be producing there and the focus on the.
Higher value added products.
Yes.
Hard to pricing ultimately the market is going to decide the pricing and supply and demand dynamics do that I would say Brandenburg as primarily a discrete plate mill in discrete play it does carry a premium over hot rolled coil plate. So that mix will be helpful. As you look at just backlog pricing and overall mixed pricing but.
It's probably as much granularity as I could give you is we just look into the next year.
Okay. That's all very helpful. Thanks, very much guys.
Thanks Lawson.
Our next question comes from Bill Peterson of Jpmorgan. Please go ahead.
Yes, hi, good morning, and thanks for taking the questions.
You discussed some.
Some fundamental changes that help improve efficiencies in our metal buildings and rebar fabrication.
I can recognize that customers are realizing value in the business, but can you elaborate more on I guess, what youre doing internally internal efficiencies that led to the fundamental change or is there any room for further improvement down the road.
Bill I appreciate the question here over the last couple of years.
Three four years, we've taken some very very.
Strong looks and evaluating our own internal portfolio, where do we where do we gain efficiencies how do we do align certain operations and we largely feel that the overall footprint today.
Geographically, where we're positioned as well as the product offering is it really good balance into the marketplace that an.
And customer segment that we're.
Attached to in the dealer network that we continue to help support and ultimately supply into so I would tell you on that internal footprint I think we feel very well positioned with a moves we've made to date and while there will be continued efficiency gains there'll be more.
Sure.
Smaller in nature, we don't see at this time further consolidation or closures.
In the future.
Okay I appreciate the color there maybe turning to Capex. It looks like you've spent a little more than a $1 billion in the first half of the year, how should we think about the cadence of capex in the back half of the year I guess, taking into account projects like the west Virginia side or any other projects.
Yeah, Hey, Bill this is Steve Thanks for the question on there.
And the back half is definitely going to be a much heavier spend on capex.
Got it earlier in the year to an estimate of around $3 billion on the year and of course, we spent only about $1 billion of that so far.
And.
The largest project that we have by far as West, Virginia, and we're about to enter a phase of construction there. So that's.
In particular that asset is going to ramp up.
Quickly in the second half.
Okay. Thanks for the color.
Thanks Bill.
The next question comes from Carlos de Alba of Morgan Stanley . Please go ahead.
Yes, good morning, everyone.
You mentioned that you saw a lower cost conversions in the steel segment in the second quarter I Wonder if you can provide any more color in terms of what do you expect for the third quarter, maybe the second half and what is driving those cost reductions.
And then yes, I have a second question.
If I if I may after.
Hey, Carlos.
Steve I'll take that question and then Jenny.
Generally what you've seen since the mid point roughly of last year overall moderation in cost in general and of course, that's been reflected in the CPI data and more broadly in the economy, we're not.
We're not any different than that but in particular energy is down around 20% year over year for example, but youre seeing some moderation in freight cost.
And.
And supplies and services in particular in some areas, we're seeing the biggest biggest declines year over year on cost.
And do you expect the level of declines in the second half to remain closer to the 20%. So that you mentioned for instance on energy.
Yes, I don't know that I would project further decline necessarily but.
But we're not seeing the increases that we saw last year.
Alright, Thanks, Steve and the other question I had is what we're seeing is that in terms of square footage warehousing.
Commercial warehousing construction is coming down a manufacturing plant is increasing but warehouses just far much bigger in terms of area that manufacturing plants at least where we stand right now.
Construction is also picking up.
How quickly I mean, how much exposure do you have to each one of these different segments between the nonresidential construction sector and how quickly for instance, if you had more exposure to the commercial warehousing how quickly can you adapt your.
Your product mix.
So you can sell more to those areas that are seeing expansions.
Yes Carlos.
Tim to answer that so starting with the back half of your question first.
The ability to pivot is instantaneous and so again, we're not making products for our own.
And if occasion, it's two to deliver solutions to our customers that again now nucor has a incredibly wide and diverse portfolio of fewer on the website or looking at that slide deck today, nucor produces and supplies into that typical warehouse structure about 90% of the steel intensity.
<unk> needs are already being met but you also have to keep in mind and I'm not going to detail out what individualized percentage of the overall portfolio, but the warehouse piece for US is only a small piece of the overall mix when you think about insulated metal panels racking.
The joist and deck that buildings.
No.
Towers in the entire portfolio of what Nucor brings to bear again.
That overall matrix for Newport and that revenue stream continues to look very robust and so while youre seeing and youre right about the reduction in overall square footage.
Nucor's earnings potential and you're seeing our volume is pretty stable.
I think theres going to be a little bit of pressure as we get into Q3, but.
Again volumetric Lee.
We have a very stable picture as we look out in the future. So again I think it's going to be a strong.
Year for Nucor, and our total portfolio of our.
Downstream products, but again I'm not going to break out the individual revenues for each of those components.
Fair enough. Thank you very much.
Thanks Carlos.
The next question comes from Cleve Rueckert of UBS. Please go ahead.
Great. Thanks for the question good morning, everybody and I think a lot of it's been covered already but I wanted to follow up on Tim and his question.
And just as Q.
Curious to understand what in your opinion needs to happen for you to generate returns comparable to the best manufacturing companies in the World. I mean is this really about vertical integration.
Or is there an opportunity to get there within your current business mix and it just kind of curious what direction you got.
Yes.
Sure.
Fair question and again as you think about that as a backdrop it really goes back to.
Our launch in my Italian <unk>, taking over as CEO , where we rolled out our mission statement to grow the core expand beyond and live our culture. So the expand beyond piece was really the lands in which we're looking on how do we continue to generate long term growth and long terms earnings power for our shareholders part of that analysis.
<unk> strategy has come back and embedded in the expand beyond that we're looking for businesses that generate more consistent through cycle earnings profiles than the traditional cyclicality of the steel business. So at the heart of what we do well or or a excellent industrial.
So part of that overall analysis and backdrop is well if you want to be comparative against the industrial manufacturers, we've got to bring our cyclicality of earnings.
Closer together, we've got to provide a more stable return performance and profile to our shareholders and so that's really where the entirety of our time is spent looking at expand beyond and what businesses, we want to onboard it fit the long term profile for Nucor that does just add that again stabilized is that through.
Cycle performance, and again generating higher highs and higher lows for our shareholders.
Yes.
I appreciate that I remember you had a slide kind of comparing the I think it was the HRC margin versus the rebar margins in your Investor day, So I guess I'm just curious about whether.
Where do you think you can achieve that margin stability in the steel industry are you to kind of.
They would expand beyond strategy.
Yes.
Fair enough and so I think theres two things to think about there one we have seen subset of shifts in the industry. We've seen consolidation, we've seen rationalization and we've seen a massive change in trade. If we go back five or six years ago and trade for example, and we have 50 cases at the industry had won against that.
Actors that were illegally dumping or subsidizing steels today, that's over 120, so while the overcapacity situation in the world will never ever be gone or advocacy has got to remain vigilant.
Secretary remind your Catherine tire USTR.
Understand that incredibly well and are very supportive of the industry as well as the manipulation that can occur when you look at the consolidation of rollout rationalization and our industry has created some outcomes that are much more advantageous that are stabilizing those earnings.
With that we're going to get a much more consistent outflow you saw back in November when we had our earnings day Ara projected through cycle EBITDA with the line of West Virginia, It's about $6 $7 billion. So thats the through cycle. So we expect peaks can be much higher and quite frankly, we don't.
The troughs that we saw pre pandemic.
To occur for us. Additionally, though the expand beyond shortage sort of shore that up it embedded in that.
Again go back to CACI, we bought it at <unk> today will be the performance at each generated it's calculating now more like a nine 2% or three exon that EBIT value. So they continue to perform because there are synergies inside of nucor that are going to grow that platform in that business segment and so together.
<unk> I think that creates a very compelling case for why we believe we're one of the best industrial manufacturers and certainly in the industry.
While we ought to be have a compelling story to trade at a higher multiple.
Got it. Thank you for all the all the detail I appreciate that.
And then just sort of.
One final one other follow up on the demand side, and we've talked about it a little bit already but you mentioned that the chips Act is helping drive some rebar demand.
On the infrastructure spending that's been very slow to develop but it sounds like it's starting to kind of shift from from planning to execution. Later this year, where do you expect that to drive volumes within your portfolio is that is that again about rebar I think in the past we've talked about.
Plate demand.
Is it both do you see a skew one way or the other is that you know as that spending gets unlocked.
Yes Fair question, I think youre going to see it across our portfolio as youre going to see in place youre going to see it in longs in.
Barb gains youre going to see enjoy some deck youre going to see it in and racking youre going to see it through the Nucor warehouse systems group and again that build out so I think theres going to be.
Fair distribution across nucor's portfolio, that's going to see.
An increase you know the other thing to keep in mind Nucor's overall volume about 50% of that flows through the construction end markets in some form or fashion and Thats targeting right in line with all three pieces of those legislative investments from our nation and passages so the.
Nucor sits in today across those spectrums are well suited to deliver those outcomes, but again youre going to see that mix distributed.
Fairly well across several of our product groups.
Got it that's clear thank you for the color appreciate it.
Thanks Clive.
Okay.
Okay.
The next question comes from Tristan Gresser.
N P. Paramorph Exane. Please go ahead.
Okay.
Yes, hi, Thank you for taking my questions I have two the first one is basically full up on the <unk>. It seems manufacturing investment is supporting rebar spread at the moment.
And if I understand your comments earlier, we're still waiting for infrared should really kick in.
And thats the most rebind <unk>.
I believe my question is in price yet to flow through.
Do you see any reason why rebar and metal spread should actually fall.
And also how would you address the important risk.
Obviously, clearly opened we've seen at <unk>.
Bar imports picking up.
In recent months you could could.
Could comment on that as well thank you.
Yeah, I'll kick us off Chris and maybe ask John to make a few comments.
Again.
Our belongings businesses in general have been our most stable earnings performers over many many years and so as we look to the back half of the area. There are some some downward pressure, but again the overall demand picture remains pretty robust so.
Like you I don't see this collapse in the second half of 2023, because again the underlying demand our backlogs and again, having the breadth of exposure that we have knowing the customers. The way. We do we again think 2023 will shape up to be another very strong year for for Nucor again our.
<unk> John .
John anything you want to add on that because I don't know that I fully understood. The second part of your question Tristan, but any any comments on the opening question, yes, Tristan ultimately the market's going to demand margins on any products that we would produce and we're going to monitor that closely to making sure that we're taking care of our customers.
You had mentioned imports on rebar year over year import volumes on rebar are down slightly.
<unk> seen a reduction from Turkey, I think everyone's well aware of what's what's happening over there.
You're seeing some increased volumes coming out of Algeria, Egypt, and Mexico, but over overall year over year, it's actually down by comparison.
Okay. So that's that's really helpful and there will be a pressure of late from some inputs.
Okay and my my second question is.
Pretty similar it's actually yeah on plate.
If you can discuss a little bit.
Luke.
I mean, it seems you havent seen also the impact from higher infrastructure spending, which I think can benefit you.
<unk> business, but can you also discuss a little bit what you're expecting in terms of.
The ramp up of offshore onshore wind in the U S.
Thank you.
Maybe in the back half of this year, but especially years moving forward in any type of pressure you also seen maybe on plate metal spread.
Recent months.
Sure.
Yes.
Yes, Justin this is al Behr.
Speak a little bit to plate demand when we just look at the general market.
There are several areas of strength that we see carrying through the rest of the year AG and heavy equipment remain early strong onshore wind has picked up with the passage of the IRI and brought some clarity to opportunities. There service Center excuse me service center buying has picked up versus a year ago.
So those are all tailwind to demand and we think the plate market. We will continue to be fairly strong through the rest of this year you asked about offshore wind, that's certainly a big opportunity for plate and we watch that closely.
The easiest way I can tell you is it takes about 250 tons of steel for every megawatt of offshore wind put in place. So you really have to come back to what you think is going to be built in any period of time offshore and there is a widespread in those estimates, but it takes about 250 tons per megawatt to execute that we don't see that.
This year or even much into next year.
I think it's a huge opportunity for plate that as the years beyond that start to play out there is a lot of tons. There if you do that math.
Closing up real quickly on the other.
Restructure parts and the spending you asked about we do see that in place and there is a lot of opportunity that creates in plate were starting to see that today with bridge work, especially much more to comment is just in its early early stages.
Many of those opportunities are starting to present in the market.
Alright, Thats really helpful. Thank you.
Thank you.
Yeah.
The next question comes from Martin Englert of Seaport Research Partners. Please go ahead.
Hello, Good morning, everyone.
Good morning Martin.
Yes.
Wanted to switch theres been a lot of conversation about government spend and incentives.
Private sector, and what's happening with manufacturing.
What conversations are you, having if any with customers that maybe in the process of re shoring manufacturing or considering it in the future regarding their steel and metals needs.
When you say several years ahead here.
Yes, maybe I'll kick it off and let Dan EMR EVP over commercial maybe.
Some broad context, but we're having a lot of those conversations and have actually for the last year.
Year year, and a half about.
What does that look like again with all the.
The negatives of Covid, one of the things that it did and I believe in this country has an it shop saw and showed our overdependence to foreign nations. Many many things not just steel, but pharma and PPE and medical devices and the like and so youre seeing that move come back.
And you mentioned, the semiconductors and I'll touch on that and turn it over to Dan.
When we were running short on semiconductors. It obviously has massive impacts through the automotive sector, but others as well in <unk> and other industries that are dependent on those so with Egyptian science at $55 billion piece of legislation passed that now put to date 34 projects.
On the books to be built in the United States totaling $374 billion of build out.
Very steel intensive type buildings and some of those individuals are massive $2023 $25 billion investments in single play and so as we talk to those customers in the gcs and the architects and engineers to partner with them.
The size and scale of that re shoring effort is.
Massive it is not inconsequential it is a significant.
Overall volume.
C, but Dan maybe just provided as well another backdrop as we think about our customer interactions with infrastructure in IRI sure I appreciate the question Martin.
If you think about the breadth of our capabilities today that we've talked about throughout this call.
Our ability to go into customers now today and give them opportunities or solutions around how we can help them with this re shoring is unbelievable and that's what we're doing everyday today taken advantage of that Avenue as conversations leveraging our groups are what we call solutions, particularly.
Instruction solutions, where we have.
Technical capabilities, we have and the breadth of our capabilities throughout Nucor to go in and provide solutions and lots of ways turnkey solutions to what they need going forward. So we're having many of those conversations today and that's our focus as we go forward.
Okay.
Looking past the build out of these.
So just taking a step or two forward I guess.
If a semiconductor plant is.
Bill.
Are you, saying, it's probably not moving the needle.
Our steel and metals demand.
Curious.
Maybe on the next.
What youre seeing as far as.
Steel and metals.
Ziv consuming industries like after the build out or if youre, having customers that are talking to you about.
We're shoring whatever type of a manufacturing facility, that's going to be consuming more steel.
What you are hearing there anecdotally.
Yes, Martin look I think anecdotally youre right single individual plant may not move the needle for Nucor at 30 million tons of year of capability and capacity. However, if you look at the aggregate if you look at the.
The next 10 years, which is really the cycle of these legislative builder are built up bond or you are talking about somewhere between six to 8 million tons of steel demand annually for 10 years, well that 7% to 8% overall overall ADC in this nation and so.
It's not going to spike the United States as an industry to move from 105 to 110 million tonnes of steel consumed 180, or 190, but it is a strong indication of a long term trend that's going to be here, but the other pieces of that and I think at the heart of your question.
One of those regions that nucor's positioning itself to offer well one of those for example, as towers and structures that is a massive growing industry, we've announced our <unk>.
Mall acquisition with summit industries, we're very excited about we just announced our two greenfield plants that are going to be built to continue to ramp that business up and growing it because every one of those transmission lines every one of those towers.
Towers and structures are individually designed by the utility themselves. So again with our breadth of exposure in engineering and pipeline.
Marry up really really well to <unk>.
To serve that industry in that market again for a long period of time, so while the individual plan youre right.
Not move the needle Youre also talking about a decade worth of work. So this is not short term in the legislative side, but the other investment piece that youre seeing at Nucor is to identify those mega trends that will be growth platforms again for many many years to come that are outside of those legislative windows as well automotive being another one.
Yeah.
Energy and renewables al touched on the plate, we are the only producer in the western hemisphere that can make the motto pilots for the offshore wind what position does that line Brandenburg up for the long term.
Build out of the renewable sector in this nation. So there are many of those industries that we're coupling and again building capability sits today, because thats, where we know the industry is moving.
Martin.
Add one thing to what Leon said anytime you see manufacturing growth. There is a multiplier effect on the economy and Theres, a rippling and cascading effect for years to come so all the jobs get created from those various investments create follow on.
<unk> investments.
Things like schools housing housing.
Non res construction growth that typically shows up a number of years later.
Yes.
Like I said, the cascading towards the effects.
That chips Act will promulgate, an awful lot of value for new foreign steel industry over time.
John .
Yeah.
That's a fair point and I appreciate you highlighting that.
One quick follow up on the towers and structures business.
If you look through the supply chain there are there any other adjacent.
Businesses that makes sense.
With that where there would be synergies in congenital Dale.
It's free.
Work that you previously detailed for the beyond strategy here.
Or is it more so.
They're still in the supply chain fits with that and some engineering capabilities right to the customer and theres, not something more vertical or horizontal that Mike <unk> with it.
Well now now we need to bring in the executive strategy session. We have so the answer to that.
Yes, so the all of the above as Nucor and Chad you to Mark leads are new markets and innovation team the towers and structures team the M&A team.
We're all sitting down identifying and doing exactly what you just shared.
Or are the trends where are the supporting structures.
Unintended to augment this business to continue to provide adjacencies, where we believe there is value to be added we're doing the same thing as you look at the slides.
<unk>.
The warehouse buildings and structures, where else can nucor marry up so and as Dan Needham pointed out we can walk in with a complete <unk>.
Packaged solution for our customer set we're doing the same thing in automotive in and Youll see in the coming.
The months that we will really use the same type of slide that does the cross section of the automobile where are we today what are we targeting and where will we be in the next three to five years, because our anticipation is that we're going to double our volumes into the automotive industry in West Virginia for example is targeting.
About roughly a third of their overall mix to be in automotive that from an individual plant standpoint would be the largest volume.
Per capita into that sector. So again, we've got we've got a lot of plans built into how we continue to grow this company and where we're going to position it for future growth.
Thank you I appreciate all the color there and have a good rest of the day.
Thank you and you do say Michel Martin.
Thank you.
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 and I want to thank the nucor team for delivering a great and safe first half of the year, let's continue to make sure we take care of our most important value the health safety and well being over the entire 31000 Nucor team member family.
To our customers as well and allowing us the privilege to serve you with each and every order and finally, thank you to our shareholders for the trust that you've placed in us to be great stewards of the valuable shareholder capital that you've entrusted us with thank you for your interest in Nucor and have a great day.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Yeah.