Steel Dynamics, Inc. (NASDAQ/GS: STLD) has reported its financial results for the second quarter of 2024. The company achieved net sales of $4.6 billion and net income of $428 million. This represents a decline from the first quarter 2024 net income of $584 million and the second quarter 2023 net income of $812 million.
Second Quarter 2024 Performance
Operating income for the company's steel operations in Q2 was impacted by lower realized selling values compared to scrap costs. The average external product selling price decreased by $63 per ton sequentially to $1,138 per ton, while the average ferrous scrap cost per ton melted decreased by $29 sequentially to $388 per ton.
The team at the Sinton Texas Flat Roll Steel Mill has successfully implemented changes to fully access its melting capacity this week. As a result, the company anticipates that Sinton's production utilization rate will rise from 60 percent in the first half of the year to approximately 75 percent in the second half of 2024, with full capacity expected to be reached by 2025.
Operating income from metals recycling operations increased by 42% to $32 million in Q2, driven by higher demand and expanded metal spread. Steel fabrication operations reported strong operating income of $181 million, with an extended order backlog through Q4 2024 at strong pricing levels.
Onshoring of manufacturing and robust U.S. infrastructure programs support a positive demand environment.
Year-to-Date June 30, 2024 Comparison
For the first half of 2024, net income was $1.0 billion with net sales of $9.3 billion. This compares to the same period in 2023, which saw net income of $1.4 billion, with net sales of $10.0 billion.
The first half of 2024 saw a 6% decrease in net sales and a 31% decline in operating income to $1.3 billion, attributed to lower volume and pricing in steel fabrication operations.
Cash flow from operations was strong at $738 million, with capital investments of $793 million. The company paid $141 million in cash dividends and repurchased $607 million of its outstanding common stock, maintaining strong liquidity of $2.7 billion.
Comments from Leadership
"The teams delivered a solid performance, achieving second quarter 2024 operating income of $559 million and adjusted EBITDA of $686 million," said Mark D. Millett, Chairman and Chief Executive Officer. "Given our proven through-cycle cash generation, we also maintained strong liquidity of $2.7 billion, while also investing $419 million in our organic growth projects and distributing $382 million to our shareholders through cash dividends and share repurchases. Across the company, our teams performed well, while keeping each other safe.
Millett highlighted the stable underlying steel demand in Q2, though earnings declined due to lower realized selling values in steel operations. Metals recycling saw improved earnings, and steel fabrication earnings remained steady. Despite stable demand dynamics, the steel platform experienced customer order inconsistency as scrap prices fell and inventory levels remained low.
The U.S. saw a significant increase in steel imports, particularly in coated flat rolled steel products.
"As fundamental steel demand remains constructive, customer inventories remain incredibly low, and scrap prices have steadied, we believe steel pricing has reached a pivot point to the upside. In support, we have seen a positive trend in steel order activity in recent weeks, especially for our flat rolled steel coated products."
Outlook
Looking ahead, Millett expressed confidence in solid domestic steel consumption for the second half of 2024. Order entry has improved across many businesses, with expectations of firmer steel pricing. He anticipates steady demand from the automotive, non-residential construction, and industrial sectors, supported by onshoring of manufacturing and significant fixed asset investments from U.S. public funding programs.
The company continues to ramp up its four new value-added flat rolled steel coating lines, which began operating earlier this year. These lines are expected to enhance supply-chain capabilities and increase higher-margin steel product offerings, benefiting the company in the second half of 2024 and fully in 2025.
Additionally, Steel Dynamics is progressing on its aluminum flat rolled products mill construction, aiming to start operations by mid-2025. This project will diversify end markets and provide high-quality aluminum products with high recycled content for various sectors, including automotive, industrial, and construction.
About Steel Dynamics, Inc.
Steel Dynamics is one of the largest steel producers and metals recyclers in North America, with facilities across the U.S. and Mexico.
The company produces a wide range of steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams, rail, special-bar-quality steel, and steel joists and deck. It also produces liquid pig iron and processes and sells ferrous and nonferrous scrap.
