SDI Guidance Expects Lower Profit in Q4

Written by Sandy Williams

Steel Dynamics expects reduced profitability from its steel operations in fourth quarter compared to third. Lower steel shipments, customer destocking and seasonal demand weakness are impacting the steel platform and, in particular, commodity grade hot roll products. Lower steel pricing will offset any benefits from lower ferrous scrap costs.

Fabricated steel joist and decking products continue to have strong demand indicating a positive trend for non-residential construction. Fabrication shipments are expected to be higher than third quarter shipments but average pricing will be lower due to market conditions and a shift in product mix. Profitability for fabricated is expected to decrease, despite improved volume, due to the lower average pricing.

The metals recycling segment is expected to show a loss based on lower shipments and metal spread compression. Steel mill demand is down for ferrous scrap, resulting in a $65 to $70 per ton drop in pricing between the end of September and end of November. SDI anticipates an impairment charge in Q4 for its metals recycling operations but the amount has yet to be determined.

Commenting on commodity markets, heavy equipment, agricultural and energy remain challenged, said SDI. Automotive continues to be strong and construction continues to improve

Despite lower earnings, SDI, expects to generate cash flow of more than $200 million in Q4, resulting in record high liquidity for 2015. SDI provided earnings guidance in the range of $0.03 to $0.07 per diluted share, compared to sequential third quarter 2015 earnings of $0.25 per diluted share and prior year fourth quarter adjusted earnings of $0.40 per diluted share.

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