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    STEEL DYNAMICS (STLD)

    Q4 2023 Earnings Summary

    Reported on Jan 24, 2024 (After Market Close)
    Pre-Earnings Price$116.54Last close (Jan 24, 2024)
    Post-Earnings Price$117.38Open (Jan 25, 2024)
    Price Change
    $0.84(+0.72%)

    What went well

    • Steel Dynamics expects strong performance from its Sinton mill in 2024, aiming for utilization rates of 80% for the year, with utilization already approaching 75% in January despite operational challenges, demonstrating significant improvements and confidence in meeting targets.
    • The company experienced increased order input rates in Q4, achieving the highest fabrication order input in the prior six quarters, indicating that volumes and pricing have stabilized and are expected to improve throughout 2024.
    • Steel Dynamics is confident in strong customer reception for its upcoming aluminum flat-rolled investments, anticipating successful ramp-up starting mid-2025 due to high customer interest and support.

    What went wrong

    • Steel fabrication shipments in Q4 were the lowest in 5 years, indicating potential weakness in this segment.
    • The aluminum segment is incurring start-up losses that will be reflected in higher SG&A expenses, potentially affecting profitability.
    • Challenges at the Sinton mill, including transporter problems and lower power input, may hinder the company's ability to achieve its 80% utilization target for the year.

    Q&A Summary

    1. Sinton's EBITDA Turnaround
      Q: Will Sinton be EBITDA positive in Q1?
      A: Yes, after two years of negative EBITDA, Sinton will be EBITDA positive in the first quarter and thereafter, contributing significantly to earnings.

    2. Aluminum Mill Startup
      Q: When will the new aluminum mill start operations?
      A: The aluminum mill is on schedule to start mid-2025, expected to contribute through-cycle earnings of $650–$700 million, with most of the incremental CapEx spent in 2024.

    3. Fabrication Demand Outlook
      Q: Has fabrication demand stabilized?
      A: Yes, fabrication volumes and pricing have stabilized, with the highest order input rate in Q4 over the past six quarters, indicating a trough and expected upward trend.

    4. CapEx Guidance
      Q: What is the CapEx outlook for 2024–2025?
      A: Total CapEx for 2024 remains at $2 billion, with most aluminum project spending in 2024; 2025 CapEx is expected to be a minimum of $500 million, focusing on ongoing projects.

    5. Conversion Costs Decline
      Q: Will steel conversion costs decline in Q1?
      A: Overall conversion costs are expected to come down due to ramping up Sinton's volumes, absent other factors.

    6. Share Repurchase Program
      Q: Will share repurchases continue in 2024?
      A: Yes, the company expects to generate cash in 2024 and plans to continue its share repurchase program alongside growth investments.

    7. Infrastructure and Onshoring Impact
      Q: How will infrastructure spending affect you?
      A: Infrastructure and onshoring investments are driving demand in manufacturing, education, healthcare, and data centers, benefiting steel joist, deck operations, and flat roll products.

    8. Aluminum Scrap Sourcing
      Q: Can you source enough aluminum scrap?
      A: Yes, with OmniSource's existing operations handling 500 million pounds of aluminum and strategic scrap collection facilities, sourcing is not expected to be an issue.

    9. Sinton's Utilization Rate
      Q: What is Sinton's expected utilization in 2024?
      A: Sinton aims to achieve 80% utilization for the year, with current rates approaching 75% despite power constraints.

    10. Backlog Pricing in Fabrication
      Q: Is fabrication backlog pricing steady?
      A: Yes, backlog prices are holding steady with no dramatic difference from the Q4 average selling price of $3,500 per ton.

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