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    Steel Dynamics Inc (STLD)

    Board Change

    Business Description

    Steel Dynamics, Inc. (SDI) is one of the largest and most diversified domestic steel producers and metals recyclers in the United States, with operations organized into four main segments . The company primarily engages in steel production, metals recycling, and steel fabrication, with a focus on value-added products and supply-chain solutions . SDI's product offerings include electric arc furnace (EAF) steel mills, ferrous and nonferrous metal processing, steel joists and deck products, and a developing aluminum operations segment .

    1. Steel Operations - Operates electric arc furnace (EAF) steel mills and various processing and coating operations, contributing significantly to the company's revenue .
    2. Steel Fabrication Operations - Produces steel joists and deck products, emphasizing value-added solutions for construction and industrial applications .
    3. Metals Recycling Operations - Provides ferrous and nonferrous metal processing primarily through OmniSource, supporting sustainable material sourcing .
    4. Aluminum Operations - Developing a recycled aluminum flat rolled products mill and two slab centers, with operations expected to begin in 2025 .

    Q3 2024 Summary

    Initial Price$130.02July 1, 2024
    Final Price$129.23October 1, 2024
    Price Change$-0.79
    % Change-0.61%

    What went well

    • Steel Dynamics expects significant earnings impact in 2025 from their four new value-added flat-rolled steel coating lines, which had a $600 million investment and a payback period of 2 to 2.5 years . These lines are currently operating at 65% to 75% capacity and are expanding product mix and customer relationships .
    • Approximately 65% of the company's flat-rolled product mix is now value-added products, showing successful diversification and innovation that strengthens their ability to succeed regardless of external factors like trade cases .
    • Anticipated strong demand and potential price appreciation in steel fabrication in 2025, driven by interest rate changes and additional demand from public funding, positions Steel Dynamics for robust performance ahead .

    What went wrong

    • Dependence on favorable trade rulings: Steel Dynamics is relying on success in ongoing antidumping cases, especially concerning galvanized steel imports, to maintain competitive pricing. If these rulings do not go in their favor, it could negatively impact margins. ,
    • Pressure on value-added product margins: The spread between galvanized steel and cold-rolled coil has been depressed, reaching levels that are potentially not economical, putting pressure on value-added products like Galvalume. ,
    • Delayed earnings contribution from new investments: Despite a $600 million investment in four new value-add lines, they have not significantly contributed to earnings yet, with full impact expected in 2025.

    Q&A Summary

    1. 2025 Market Outlook
      Q: What if demand doesn't recover in 2025?
      A: We are very constructive on the 2025 market, expecting a lower interest rate environment to boost nonresidential construction. Our customer base is positive, and we will produce according to their needs. Even in a pessimistic scenario, our diversified product mix and pull-through volume strategies enable us to maintain strong cash generation.

    2. Dividend Expectations
      Q: Will dividends increase significantly in February?
      A: While the Board decides on dividends, we anticipate a positive move in the first quarter. With Sinton becoming a significant EBITDA contributor next year and our aluminum assets expected to be EBITDA positive in the second half of 2025, we foresee dividends reflecting this growth, possibly more in 2026.

    3. Sinton Profitability
      Q: When will Sinton be EBITDA positive?
      A: Despite not being EBITDA positive in Q3 due to maintenance costs , we expect Sinton to be profitable in Q4 and certainly next year. We're reducing unplanned downtime and improving equipment reliability, which gives us confidence in reaching optimal utilization.

    4. Trade Case Impact
      Q: How will the galvanized trade case affect you?
      A: Including ten countries, the trade case aims to address the surge of imports impacting fair trade. We anticipate success, especially against egregious offenders, which should allow us to adjust our product mix favorably. This process is necessary to ensure competitive markets in the U.S..

    5. Value-Add Lines Ramp-Up
      Q: What is the status of the new coating lines?
      A: Our four new lines are operating at 65% to 75% utilization. Their earnings impact hasn't been significant yet, but with a $600 million investment and typical 2 to 2.5 years payback, we'll see more benefits in 2025 as they ramp up.

    6. Biocarbon Project
      Q: When will biocarbon be used in production?
      A: Our biocarbon facility is on track for a Q1 2025 start. We'll begin integrating biocarbon into steel production in the first half of next year, aiding our decarbonization journey. While it's not for specific customers, it supports our use of lower-carbon raw materials.

    7. Steel Fabrication Outlook
      Q: What's the outlook for steel fabrication pricing and volumes?
      A: We expect normal seasonality in Q4 but anticipate much stronger volumes next year, which should support pricing. We're feeling good about the steady demand over the last 6 to 9 months and believe 2025 will be robust.

    8. Future Investments
      Q: Where will you invest next?
      A: We're focusing on value-add opportunities and products we don't currently make. While we don't see a need for another large greenfield steel site, we will expand our aluminum supply chain, as aluminum's volume growth is expected to be much stronger than steel.

    9. Long Products Strength
      Q: What's driving strength in long products?
      A: Our ability to optimize our product mix and the diversification across all businesses keeps long products resilient. We benefit from our metals recycling platform and are excited about opportunities from investment and reshoring.

    10. Contractual Business Mix
      Q: Will 80% contractual business change with Sinton's ramp-up?
      A: Contractual relationships remain important, keeping contract concentration around 70% to 80%. As we establish customer bases and supply chains in each region, this may slightly decrease but will stay significant.

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    Mark D. MillettCo-founder, Chairman, and Chief Executive OfficerJanuary 2012Mark D. Millett co-founded Steel Dynamics, Inc. in 1993. He has been the Chairman of the Board since May 2021 and has served as the Chief Executive Officer since January 2012. He has held various positions within the company and was instrumental in the design, construction, and start-up operation of all of the company's steel mills .
    Theresa E. WaglerExecutive Vice President, Chief Financial Officer, and Corporate SecretaryMay 2007Theresa E. Wagler has been with Steel Dynamics since 1998 and has served as Executive Vice President, Chief Financial Officer, and Corporate Secretary since May 2007. She oversees multiple functions including accounting, taxation, and strategic business development .
    Barry T. SchneiderPresident and Chief Operating OfficerMarch 2023Barry T. Schneider was appointed as President and Chief Operating Officer in March 2023. He has been with Steel Dynamics since 1994 and has held various operational and leadership roles, including Senior Vice President of the Flat Roll Steel Group .
    Miguel AlvarezSenior Vice President, Metals RecyclingMarch 2022Miguel Alvarez has been the Senior Vice President, Metals Recycling since March 2022. He is responsible for OmniSource's ferrous and nonferrous metals recycling operations. Before joining Steel Dynamics, he held leadership positions at BlueScope .
    James S. AndersonSenior Vice President, Steel FabricationMarch 2022James S. Anderson has been the Senior Vice President, Steel Fabrication since March 2022. He previously served as Vice President, Steel Fabrication and President of New Millennium Building Systems .
    Chris A. GrahamSenior Vice President, Flat Roll Steel GroupOctober 2023Christopher A. Graham was appointed as Senior Vice President, Flat Roll Steel Group in October 2023. He has held various positions within the company, including Senior Vice President, Long Products Steel Group .
    Richard A. PoinsatteSenior Vice President and TreasurerOctober 2023Richard A. Poinsatte was appointed as Senior Vice President in October 2023 and serves as Treasurer. He joined Steel Dynamics in 2000 and has been responsible for the company's treasury, risk, and legal applications since 2008 .
    Glenn A. PushisSenior Vice President, Special ProjectsFebruary 2019Glenn A. Pushis has been the Senior Vice President, Special Projects since February 2019. He is responsible for the design and construction of the company's new aluminum flat rolled products mill and has been with Steel Dynamics since 1994 .

    Questions to Ask Management

    1. Regarding the Sinton mill, you mentioned experiencing difficulties ramping back up after the outage and expect utilization to increase to around 75% for Q4 2024; can you elaborate on the specific challenges faced during ramp-up and how confident are you in achieving the projected utilization rate?

    2. You included Canada and Mexico in the galvanized trade case due to significant increases in imports; how do you justify this action given existing trade agreements, and are you concerned about potential impact on your relationships and operations in those markets?

    3. With capital investments projected to increase to $700 million to $800 million in 2025 from $500 million to $550 million in Q4 2024, can you explain how these investments will be allocated across projects and how they align with your capital allocation strategy focusing on high-return strategic growth?

    4. Given that 80% of your flat-rolled business is contractually based, do you anticipate any risks to this contractual mix with the further ramp-up of Sinton, and how might this affect your exposure to spot market volatility?

    5. On the biocarbon project expected to start in Q1 2025, since you mentioned you won't have enough product to satisfy all carbon needs at your steel mills, how do you plan to scale this project, and what impact do you expect it to have on your carbon reduction targets and potential product premiums?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateNovember 2023
    End Date/DurationNo expiration date
    Total additional amount$1.5 billion
    Remaining authorization amount$486.4 million (as of September 30, 2024)
    DetailsPurchases based on market price, investment opportunities, cash flows, and economic conditions. Can be modified, suspended, extended, or terminated at any time.

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2025
    • Guidance:
      1. Capital Investments: $500 million to $550 million for Q4 2024; $700 million to $800 million for FY 2025 .
      2. Aluminum Investments: EBITDA positive in the second half of 2025; 75% capacity operation in 2026 .
      3. Steel Fabrication: Strong order activity extending through Q1 2025 .
      4. Sinton Operations: 75% product utilization rate for Q4 2024 .
      5. Aluminum Facility Production: Slabs production in Q1 2025; commercial shipments by mid-2025 .
      6. Steel Demand and Pricing: Optimism as they end 2024 and enter 2025 .
      7. Sustainability Targets: 15% reduction in greenhouse gas intensity by 2030 .
      8. Financial Metrics: Strong cash generation capability .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: FY 2024 and beyond
    • Guidance:
      1. Capital Investments: $2 billion for FY 2024; $793 million funded by mid-year .
      2. Aluminum Project Costs: $2.7 billion total; $900 million in 2024, $250 million in 2025 .
      3. Aluminum Facility Operations: Start mid-2025; EBITDA positive in the second half of 2025 .
      4. Aluminum Product Mix: 45% can sheet, 30-35% automotive by 2027 .
      5. Sinton Operations: Improvements in production and profitability .
      6. Steel Demand and Pricing: Optimism for 2024 .
      7. Working Capital: Neutral or a funding source in the second half of 2024 .
      8. Cash Flow and Capital Allocation: No change expected for 2024 .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: N/A (No specific earnings guidance provided)
    • Guidance:
      1. Volume Expectations: Higher volumes expected in fabrication, steel, and mills recycling .
      2. Pricing and Backlog: Stabilized pricing; backlog extends through Q3 2024 .
      3. Capital Expenditures: $2 billion for FY 2024; $1.4 billion for aluminum investments .
      4. Aluminum Project: Operations start mid-2025; total cost $2.7 billion .
      5. Utilization Rates: Sinton division close to 70% capacity .
      6. Cash Flow and Liquidity: $3.1 billion liquidity .
      7. Share Repurchases: $1.1 billion available under the plan .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: FY 2024 and Q1 2024
    • Guidance:
      1. Steel Fabrication: Increased order input rate; expectations for Q2 2024 and beyond .
      2. Sinton Plant Utilization: 80% target for FY 2024; approaching 75% in January .
      3. Steel Demand and Pricing: Optimism for 2024 .
      4. Capital Investments: $2 billion for FY 2024; $1.4 billion for aluminum .
      5. Aluminum Facility: Expected EBITDA $650-$700 million; additional $40-$50 million from OmniSource .
      6. Coating Lines: All lines operational by Q2 2024 .
      7. Steel Operations Volume: Incremental volume expected in Q1 2024 .
      8. Fabrication Pricing: Steady backlog prices .

    Latest news

    Recent developments and announcements about STLD.

    Corporate Leadership

      Board Change

      ·
      Nov 7, 2024, 12:00 AM

      James Marcuccilli resigned from the Steel Dynamics, Inc. Board of Directors on November 4, 2024. He also stepped down from his roles on the Audit Committee and Corporate Governance and Nominating Committee. His resignation was not due to any disagreement with the company .