Nucor (NUE) Q1 2013 earnings summary

Executive summary

• Q1 net sales fell 10% YoY to $4.55B; net earnings were $84.8M, or $0.26 per diluted share, versus $145.1M and $0.46 a year earlier.

• Q1 diluted EPS modestly exceeded guidance of $0.20-$0.25; steel mill weakness drove the YoY decline.

• Strategy focused on higher-value products, lower raw-material costs and building earnings power through the cycle; nearly $7B had been invested since the 2008 peak through year-end 2012.

Financial highlights

• Gross margin was $303.2M, or 7% of sales, versus $380.5M, or 8%, in Q1 2012; Q1 included an $18.0M LIFO charge.

• Operating cash flow was $128.8M versus $201.8M YoY; lower net earnings and greater working-capital use weighed on cash flow.

• Capital expenditures were $330.6M versus $161.5M in Q1 2012, primarily for Louisiana DRI construction and natural-gas drilling.

• Effective tax rate was 27.8% versus 27.4% YoY; Q1 2013 benefited from retroactively extended 2012 R&D credits.

Outlook and guidance

• Q2 earnings expected to improve on better fabricated construction products, raw materials and most steel mill groups, partly offset by weaker sheet steel.

• 2013 earnings trends expected to improve modestly across steel products except sheet; sheet volumes may be similar or slightly higher, with pricing challenged.

• 2013 capital expenditures expected to exceed $1.1B, including ~$300M for maintenance and $800M for growth projects; funds expected to cover existing-operation capex and working capital for at least 24 months.

• Louisiana DRI startup shifted to late Q3 after weather delays; the facility forecast profitability in Q4 and full capacity by year-end.

• Non-residential construction markets expected to improve slowly from historically low levels during 2013.