Steel Dynamics Reports Fourth Quarter and Annual 2023 Results

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Jan 23, 2024, 16:30 ET

FORT WAYNE, Ind., Jan. 23, 2024 /PRNewswire/ --

Annual 2023 Performance Highlights:

Record steel shipments of 12.8 million tons
Net sales of $18.8 billion, operating income of $3.2 billion, and net income of $2.5 billion
Adjusted EBITDA of $3.7 billion and strong cash flow from operations of $3.5 billion
Strong liquidity of $3.5 billion as of December 31, 2023
Share repurchases of $1.5 billion of the company's common stock, representing 8 percent of its outstanding shares
Strong after-tax return-on-invested-capital of 32 percent for the three-year period ended December 31, 2023

Steel Dynamics, Inc. (NASDAQ/GS: STLD) today announced fourth quarter and annual 2023 financial results. The company reported fourth quarter 2023 net sales of $4.2 billion and net income of $424 million, or $2.61 per diluted share. Comparatively, the company's sequential third quarter 2023 net income was $577 million, or $3.47 per diluted share, and prior year fourth quarter net income was $635 million, or $3.61 per diluted share.

"The teams executed well and delivered a solid operational and financial performance across our operating platforms during 2023, resulting in our second highest annual net sales of $18.8 billion, as well as, annual operating income of $3.2 billion, and adjusted EBITDA of $3.7 billion," said Mark D. Millett, Chairman and Chief Executive Officer. "The strength of our cash generation was once again demonstrated with annual cash flow from operations of $3.5 billion. We maintained strong liquidity of $3.5 billion, while at the same time meaningfully growing our business through significant organic growth investments, coupled with strong shareholder distributions through a positive dividend growth profile and meaningful share repurchases. We have a firm foundation for our continued long-term growth and ongoing value creation strategy.

"Underlying domestic steel demand was firm throughout 2023 supported by the construction, automotive, industrial, and energy sectors," continued Millett. "Customer steel inventories also remained below historical averages, in combination resulting in generally steady order patterns. Our steel operations achieved record 2023 annual shipments of 12.8 million tons and historically strong operating income of $1.9 billion. Our steel fabrication business achieved its second highest annual earnings with operating income of $1.6 billion. Despite a challenging pricing environment throughout much of the year, our metals recycling teams meaningfully increased volume and achieved operating income of $108 million. The strength of our diversified, value-added circular manufacturing model was certainly evidenced in 2023."

Fourth Quarter 2023 Comments

Fourth quarter 2023 operating income for the company's steel operations was $365 million, representing a 24 percent sequential decline, based on seasonally lower long product steel shipments and flat rolled steel metal spread compression, as average realized flat rolled steel selling values declined more than scrap costs. The fourth quarter 2023 average external product selling price for the company's steel operations decreased $101 per ton sequentially to $1,090 per ton. The average ferrous scrap cost per ton melted at the company's steel mills decreased $12 per ton sequentially to $393 per ton.

Fourth quarter 2023 operating income from the company's metals recycling operations decreased to $6 million, due to seasonally lower shipments and lower nonferrous scrap realized selling values.

The company's steel fabrication operations achieved historically strong operating income of $250 million in the fourth quarter 2023, but below sequential third quarter results, based on lower shipments and metal spread compression, as realized selling values declined more than steel substrate costs. Monthly order activity improved in the fourth quarter 2023, resulting in a well-priced order backlog that extends through the first half of 2024. The company believes that the continued onshoring of manufacturing, coupled with the robust U.S. infrastructure and Inflation Reduction Act programs which will drive industrial construction activity, provide an environment for strong steel joist and deck demand, as well as flat rolled and long product steel demand.

Annual 2023 Comparison

Annual 2023 net income was $2.5 billion, or $14.64 per diluted share, with net sales of $18.8 billion, as compared to net income of $3.9 billion, or $20.92 per diluted share, with net sales of $22.3 billion for the same period in 2022.

Annual 2023, net sales decreased 16 percent to $18.8 billion and operating income declined 38 percent to $3.2 billion, when compared to the same period of 2022. Lower earnings were driven by metal spread contraction within the company's steel and steel fabrication operations, as lower realized product pricing outpaced lower primary raw material costs. Annual 2023 operating income from the company's steel operations declined $1.2 billion and steel fabrication operations declined $831 million, when compared to prior year's earnings. The average 2023 external selling price for the company's steel operations decreased $247 per ton to $1,152 per ton compared to the same period of 2022, and the average ferrous scrap cost per ton melted at the company's steel mills decreased $61 per ton to $414 per ton.

Based on the company's differentiated circular business model and highly, variable cost structure, the company generated strong cash flow from operations of $3.5 billion during 2023. The company also invested $1.7 billion in capital investments, paid cash dividends of $271 million, and repurchased $1.5 billion of its outstanding common stock, representing 8 percent of its outstanding shares, while maintaining strong liquidity of over $3.5 billion as of December 31, 2023.

Outlook

"We believe the market dynamics are in place to support increased demand across our operating platforms in 2024," said Millett. "Steel pricing has firmed, and customer order entry activity continues to be solid across our steel operations, as demand continues to be steady and customer inventories remain at historically low levels. In addition, we believe demand for lower-carbon emission, U.S. produced steel products will also support future domestic steel pricing. The continued onshoring of manufacturing businesses, combined with the expectation of significant fixed asset investment to be derived from public funding related to the U.S. Infrastructure, Inflation Reduction Act, and Department of Energy programs, will competitively position the domestic steel industry. We believe this will benefit all of our operating platforms, especially our steel and steel fabrication businesses.

"Steel Dynamics continues to be in a position of strength as we enter 2024. We are ramping up operations at our new state-of-the-art electric arc furnace flat rolled steel mill located in Texas, and just recently completed construction of four additional value-added flat rolled steel coating lines comprised of two paint lines and two galvanizing lines with Galvalume® coating capability. These lines will increase our value-added flat rolled steel annual capacity by 1.1 million tons. We plan to commission these lines during the first quarter of 2024.

"This demand environment, in combination with our ongoing expansion initiatives, provide firm drivers for our continued growth. The team continues to make great progress on our aluminum flat rolled products mill and related investments. We still plan to begin commissioning of the aluminum flat rolled mill mid-2025. We remain incredibly excited about this meaningful growth opportunity, which is aligned with our existing businesses and operational expertise," said Millett. "We have intentionally grown with our customers' needs, providing efficient sustainable supply-chain solutions for the highest quality products. Thus far, this has primarily been achieved within the steel industry – however, a significant number of our flat rolled steel customers are also consumers and processors of aluminum flat rolled products. We are pleased to further diversify our end markets with plans to supply aluminum flat rolled products with high recycled content to the countercyclical sustainable beverage can and packaging industry, in addition to the automotive, industrial, and construction sectors. We believe our unique performance-based operating culture, coupled with our considerable experience in successfully constructing and operating cost-effective, highly profitable flat rolled steel mills, positions us exceptionally well to execute this strategic opportunity and to deliver strong long-term value creation.

"Our planned biocarbon production facility is also progressing well, and the team plans to begin operating the plant before the end of 2024," said Millett. "This project is a key to our further decarbonization strategy for our already low-carbon emissions steel offerings. In combination, with our renewable product purchase agreement with NextEra, these two initiatives will help us achieve our stated Scope 1 and Scope 2 emissions reduction goals.

"Our commitment is to the health and safety of our teams, families, and communities, while meeting the current and future needs of our customers. Our culture and business model continue to positively differentiate our performance compared to others. We continue to strengthen our financial position through strong cash flow generation and the execution of our long-term strategy," concluded Millett.

Conference Call and Webcast

Steel Dynamics, Inc. will hold a conference call to discuss fourth quarter and annual 2023 operating and financial results on Wednesday, January 24, 2024, at 11:00 a.m. Eastern Standard Time. You may access the call and find dial-in information on the Investors section of the company's website at www.steeldynamics.com. A replay of the call will be available on our website until 11:59 p.m. Eastern Standard Time on January 30, 2024.

About Steel Dynamics, Inc.

Steel Dynamics is one of the largest domestic steel producers and metals recyclers in North America, based on estimated annual steelmaking and metals recycling capability, with facilities located throughout the United States, and in Mexico. Steel Dynamics produces steel products, including hot roll, cold roll, and coated sheet steel, structural steel beams and shapes, rail, engineered special-bar-quality steel, cold finished steel, merchant bar products, specialty steel sections, and steel joists and deck. In addition, the company produces liquid pig iron and processes and sells ferrous and nonferrous scrap.

Note Regarding Financial Metrics

The company believes that after-tax return-on-invested capital (After-tax ROIC) provides an indication of the effectiveness of the company's invested capital and is calculated as follows:

After-tax ROIC =	Net Income Attributable to Steel Dynamics, Inc.
	(Quarterly Average Current Maturities of Long-term Debt + Long-term Debt + Total Equity)

Note Regarding Non-GAAP Financial Measures

The company reports its financial results in accordance with U.S. generally accepted accounting principles (GAAP). Management believes that the non-GAAP financial measures EBITDA and Adjusted EBITDA provide additional meaningful information regarding the company's performance and financial strength. Non-GAAP financial measures should be viewed in addition to and not as an alternative for the company's reported results prepared in accordance with GAAP. In addition, not all companies use identical calculations for EBITDA or Adjusted EBITDA; therefore, EBITDA and Adjusted EBITDA included in this release may not be comparable to similarly titled measures of other companies.

Forward-Looking Statements

This report contains some predictive statements about future events, including statements related to conditions in domestic or global economies, conditions in steel, aluminum, and recycled metals market places, Steel Dynamics' revenues, costs of purchased materials, future profitability and earnings, and the operation of new, existing or planned facilities. These statements, which we generally precede or accompany by such typical conditional words as "anticipate", "intend", "believe", "estimate", "plan", "seek", "project", or "expect", or by the words "may", "will", or "should", are intended to be made as "forward-looking", subject to many risks and uncertainties, within the safe harbor protections of the Private Securities Litigation Reform Act of 1995. These statements speak only as of this date and are based upon information and assumptions, which we consider reasonable as of this date, concerning our businesses and the environments in which they operate. Such predictive statements are not guarantees of future performance, and we undertake no duty to update or revise any such statements. Some factors that could cause such forward-looking statements to turn out differently than anticipated include: (1) domestic and global economic factors; (2) global steelmaking overcapacity and imports of steel, together with increased scrap prices; (3) pandemics, epidemics, widespread illness or other health issues, such as COVID-19 or its variants; (4) the cyclical nature of the steel industry and the industries we serve; (5) volatility and major fluctuations in prices and availability of scrap metal, scrap substitutes and supplies, and our potential inability to pass higher costs on to our customers; (6) cost and availability of electricity, natural gas, oil, or other energy resources are subject to volatile market conditions; (7) increased environmental, greenhouse gas emissions and sustainability considerations or regulations; (8) compliance with and changes in environmental and remediation requirements; (9) significant price and other forms of competition from other steel and aluminum producers, scrap processors and alternative materials; (10) availability of an adequate source of supply of scrap for our metals recycling operations; (11) cybersecurity threats and risks to the security of our sensitive data and information technology; (12) the implementation of our growth strategy; (13) litigation and legal compliance; (14) unexpected equipment downtime or shutdowns; (15) governmental agencies may refuse to grant or renew some of our licenses and permits; (16) our senior unsecured credit facility contains, and any future financing agreements may contain, restrictive covenants that may limit our flexibility; and (17) the impacts of impairment charges.

More specifically, we refer you to our more detailed explanation of these and other factors and risks that may cause such predictive statements to turn out differently, as set forth in our most recent Annual Report on Form 10-K under the headings Special Note Regarding Forward-Looking Statements and Risk Factors, in our Quarterly Reports on Form 10-Q, or in other reports which we file with the Securities and Exchange Commission. These reports are available publicly on the Securities and Exchange Commission website, www.sec.gov, and on our website, www.steeldynamics.com under "Investors – SEC Filings."

Steel Dynamics, Inc. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands, except per share data)

	Three Months Ended				Year Ended				Three Months
	December 31,				December 31,				Ended
	2023		2022		2023		2022		Sept. 30, 2023

Net sales	$	4,233,423	$	4,826,287	$	18,795,316	$	22,260,774	$	4,587,057
Costs of goods sold		3,502,539		3,838,740		14,749,433		16,142,943		3,635,038
Gross profit		730,884		987,547		4,045,883		6,117,831		952,019

Selling, general and administrative expenses		157,207		142,602		588,621		545,621		145,896
Profit sharing		47,055		79,218		272,033		452,551		64,413
Amortization of intangible assets		8,086		6,679		34,048		27,837		8,160
Operating income		518,536		759,048		3,151,181		5,091,822		733,550

Interest expense, net of capitalized interest		14,795		23,855		76,484		91,538		18,415
Other (income) expense, net		(38,498)		(23,257)		(144,246)		(20,785)		(39,464)
Income before income taxes		542,239		758,450		3,218,943		5,021,069		754,599

Income tax expense		115,199		119,439		751,611		1,141,577		174,817
Net income		427,040		639,011		2,467,332		3,879,492		579,782
Net income attributable to noncontrolling interests		(2,770)		(4,147)		(16,450)		(16,818)		(2,587)
Net income attributable to Steel Dynamics, Inc.	$	424,270	$	634,864	$	2,450,882	$	3,862,674	$	577,195


Basic earnings per share attributable to
Steel Dynamics, Inc. stockholders	$	2.63	$	3.63	$	14.72	$	21.06	$	3.49

Weighted average common shares outstanding		161,434		174,706		166,552		183,393		165,170

Diluted earnings per share attributable to
Steel Dynamics, Inc. stockholders, including the
effect of assumed conversions when dilutive	$	2.61	$	3.61	$	14.64	$	20.92	$	3.47

Weighted average common shares
and share equivalents outstanding		162,276		175,892		167,431		184,622		166,105


Dividends declared per share	$	0.425	$	0.34	$	1.70	$	1.36	$	0.425

Steel Dynamics, Inc. CONSOLIDATED BALANCE SHEETS (in thousands)

	December 31,		December 31,
Assets	2023		2022
	(unaudited)
Current assets
Cash and equivalents	$	1,400,887	$	1,628,417
Short-term investments		721,210		628,215
Accounts receivable, net		1,608,307		2,056,051
Inventories		2,894,632		3,129,964
Other current assets		162,790		195,371
Total current assets		6,787,826		7,638,018

Property, plant and equipment, net		6,734,218		5,373,665

Intangible assets, net		257,759		267,507

Goodwill		477,471		502,067

Other assets		651,146		378,727
Total assets	$	14,908,420	$	14,159,984
Liabilities and Equity
Current liabilities
Accounts payable	$	1,088,330	$	1,017,238
Income taxes payable		5,524		6,520
Accrued expenses		778,455		951,204
Current maturities of long-term debt		459,987		57,334
Total current liabilities		2,332,296		2,032,296

Long-term debt		2,611,069		3,013,241

Deferred income taxes		944,768		889,103

Other liabilities		180,760		129,539
Total liabilities		6,068,893		6,064,179

Commitments and contingencies

Redeemable noncontrolling interests		171,212		181,503

Equity
Common stock		651		650
Treasury stock, at cost		(5,897,606)		(4,459,513)
Additional paid-in capital		1,217,610		1,212,566
Retained earnings		13,545,590		11,375,765
Accumulated other comprehensive income		421		889
Total Steel Dynamics, Inc. equity		8,866,666		8,130,357
Noncontrolling interests		(198,351)		(216,055)
Total equity		8,668,315		7,914,302
Total liabilities and equity	$	14,908,420	$	14,159,984

Steel Dynamics, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)

	Three Months Ended				Year Ended
	December 31,				December 31,
	2023		2022		2023		2022

Operating activities:
Net income	$	427,040	$	639,011	$	2,467,332	$	3,879,492

Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization		111,722		102,241		437,804		384,202
Equity-based compensation		21,944		19,559		61,744		59,240
Deferred income taxes		(16,348)		33,200		55,665		37,186
Other adjustments		912		97		(19,716)		(1,795)
Changes in certain assets and liabilities:
Accounts receivable		273,743		306,990		446,765		(110,560)
Inventories		43,952		258,871		232,282		413,262
Other assets		(13,273)		2,390		(23,777)		(6,884)
Accounts payable		24,085		(136,279)		(30,148)		(289,042)
Income taxes receivable/payable		(39,900)		(115,199)		56,756		31,623
Accrued expenses		30,763		32,547		(164,779)		63,679
Net cash provided by operating activities		864,640		1,143,428		3,519,928		4,460,403

Investing activities:
Purchases of property, plant and equipment		(514,945)		(344,201)		(1,657,905)		(908,902)
Purchases of short-term investments		(452,777)		(292,886)		(1,145,493)		(927,584)
Proceeds from maturities of short-term investments		233,074		248,156		1,054,742		297,950
Business combinations, net of cash acquired		-		(86,452)		-		(134,090)
Investments in unconsolidated affiliates		-		-		-		(222,480)
Other investing activities		(140)		6,497		(221,593)		15,837
Net cash used in investing activities		(734,788)		(468,886)		(1,970,249)		(1,879,269)

Financing activities:
Issuance of current and long-term debt		299,059		414,324		1,365,664		1,465,257
Repayment of current and long-term debt		(324,620)		(380,424)		(1,367,553)		(1,507,475)
Dividends paid		(69,483)		(60,032)		(271,317)		(237,163)
Purchase of treasury stock		(386,682)		(413,015)		(1,452,203)		(1,800,905)
Other financing activities		(12,650)		(27,473)		(51,725)		(116,298)
Net cash used in financing activities		(494,376)		(466,620)		(1,777,134)		(2,196,584)

Increase (decrease) in cash, cash equivalents, and restricted cash		(364,524)		207,922		(227,455)		384,550
Cash, cash equivalents, and restricted cash at beginning of period		1,770,988		1,425,997		1,633,919		1,249,369
Cash, cash equivalents, and restricted cash at end of period	$	1,406,464	$	1,633,919	$	1,406,464	$	1,633,919


Supplemental disclosure information:
Cash paid for interest	$	41,940	$	41,498	$	103,165	$	100,994
Cash paid for income taxes, net	$	169,731	$	196,494	$	642,667	$	1,063,844

Steel Dynamics, Inc. SUPPLEMENTAL INFORMATION (UNAUDITED) (dollars in thousands)

	Fourth Quarter				Year to Date
		2023		2022		2023		2022		1Q 2023		2Q 2023		3Q 2023
*External Net Sales*
Steel	$	2,915,325	$	2,937,955	$	12,640,551	$	14,563,349	$	3,088,490	$	3,449,555	$	3,187,181
Steel Fabrication		520,573		1,089,979		2,798,934		4,245,986		868,768		779,409		630,184
Metals Recycling		488,070		463,314		2,184,657		2,164,740		583,468		592,373		520,746
Other		309,455		335,039		1,171,174		1,286,699		352,480		260,293		248,946
Consolidated Net Sales	$	4,233,423	$	4,826,287	$	18,795,316	$	22,260,774	$	4,893,206	$	5,081,630	$	4,587,057
*Operating Income (Loss)*
Steel	$	364,829	$	177,720	$	1,895,983	$	3,107,696	$	346,478	$	702,340		482,336
Steel Fabrication		249,930		681,904		1,593,425		2,424,819		551,313		462,121		330,061
Metals Recycling		6,429		13,471		108,156		129,164		42,930		40,292		18,505
Aluminum		(10,769)		(1,403)		(23,774)		(2,355)		(2,422)		(3,411)		(7,172)
		610,419		871,692		3,573,790		5,659,324		938,299		1,201,342		823,730

Non-cash amortization of intangible assets		(8,086)		(6,679)		(34,048)		(27,837)		(6,878)		(10,924)		(8,160)
Profit sharing expense		(47,055)		(79,218)		(272,033)		(452,551)		(69,575)		(90,990)		(64,413)
Non-segment operations		(36,742)		(26,747)		(116,528)		(87,114)		(26,486)		(35,693)		(17,607)
Consolidated Operating Income	$	518,536	$	759,048	$	3,151,181	$	5,091,822	$	835,360	$	1,063,735	$	733,550
*Adjusted EBITDA*
Net income	$	427,040	$	639,011	$	2,467,332	$	3,879,492	$	644,333	$	816,177	$	579,782
Income taxes		115,199		119,439		751,611		1,141,577		203,456		258,139		174,817
Net interest expense (income)		(16,830)		5,032		(35,404)		62,148		(3,470)		(4,754)		(10,350)
Depreciation		102,082		93,960		397,437		349,971		99,210		98,438		97,707
Amortization of intangible assets		8,086		6,679		34,048		27,837		6,878		10,924		8,160
EBITDA		635,577		864,121		3,615,024		5,461,025		950,407		1,178,924		850,116
Non-cash adjustments
Unrealized (gains) losses on derivatives
and currency remeasurement		461		8,361		(12,109)		713		(8,142)		(18,433)		14,005
Equity-based compensation		22,694		29,425		60,060		69,219		13,877		11,500		11,989
Adjusted EBITDA	$	658,732	$	901,907	$	3,662,975	$	5,530,957	$	956,142	$	1,171,991	$	876,110

*Other Operating Information*
Steel
Average external sales price (Per ton)	$	1,090	$	1,124	$	1,152	$	1,399	$	1,076	$	1,251	$	1,191
Average ferrous cost (Per ton melted)	$	393	$	414	$	414	$	475	$	413	$	444	$	405

Flat Roll shipments
Butler, Columbus, and Sinton		1,841,701		1,762,716		7,459,023		6,772,162		1,929,792		1,903,949		1,783,581
Steel Processing divisions *		423,690		404,309		1,731,911		1,673,967		435,602		420,480		452,139
Long Product shipments
Structural and Rail Division		407,175		408,109		1,851,349		1,865,405		495,551		478,985		469,638
Engineered Bar Products Division		186,390		206,035		836,179		894,374		231,723		216,163		201,903
Roanoke Bar Division		117,244		126,346		564,776		589,449		157,024		148,313		142,195
Steel of West Virginia		87,537		87,701		378,515		363,832		95,456		97,276		98,246
Total Shipments (Tons)		3,063,737		2,995,216		12,821,753		12,159,189		3,345,148		3,265,166		3,147,702

External Shipments (Tons)		2,674,396		2,615,057		10,976,707		10,411,490		2,869,321		2,756,922		2,676,068

Steel Mill Production (Tons)		2,755,778		2,681,597		11,376,309		10,720,704		2,939,032		2,898,629		2,782,870
Metals Recycling
Nonferrous shipments (000's of pounds)		262,734		268,471		1,108,211		1,053,852		285,837		279,763		279,877
Ferrous shipments (Gross tons)		1,363,165		1,357,706		5,779,114		5,301,774		1,452,821		1,520,164		1,442,964
External ferrous shipments (Gross tons)		506,128		527,699		2,199,156		1,826,112		567,403		577,979		547,646
Steel Fabrication
Average sales price (Per ton)	$	3,501	$	5,222	$	4,236	$	4,976	$	5,021	$	4,384	$	3,916
Shipments (Tons)		150,002		208,956		662,539		855,641		173,021		177,819		161,697

Effective the fourth quarter 2023, we added a new reporting segment, Aluminum Operations. All periods presented have been recast to reflect these changes.
* Includes Heartland, The Techs and United Steel Supply operations