Nucor Earnings Call INSIGHTS: Louisiana Air Permits, Price Per Ton
On Thursday, Nucor Corp. (NYSE:NUE) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.
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Louisiana Air Permits
Kuni Chen – CRT Capital Group LLC: I guess just first-off, there has been some controversy over the air permits down in Louisiana. Can you just give us an update there? What’s the risks of that, leads to some delays and what’s your pathway to get those resolved in the timeline?
Daniel R. DiMicco – Chairman and CEO: Rumors always abound particularly issues that concern how the environmental issues might be handled on a new project. The fact is we have zero concern, I repeat zero concern that the project will be delayed via permitting issues because our permits are in place, legal and supported by the state and actually discussed openly by Lisa Jackson as being signs of a successful functioning of the EPA. Having said that, there are always nuisance suits that developed which are being dealt with and will no way slowdown the project. Our biggest issue today on that project is the water level in the Mississippi River. The good news lately is that the river Corps of Engineers is forecasting a 9-inch rise because of rains in the Ohio Valley. So, keep your fingers crossed, if the rain continues where it’s needed both for the crops and for the Mississippi River. Anyone else like to make any comments on that? Ladd?
Ladd R. Hall – EVP: That’s pretty balanced.
John J. Ferriola – President and COO: It might be worth noting, I mean these permits have been thoroughly read both in the public arena as Dan mentioned, with the state agency and frankly in (indiscernible) all of which gives us the confidence that Dan alluded to and construction will continue and we will complete this project on time.
Kuni Chen – CRT Capital Group LLC: Just as a follow-up on the automotive side, I know it’s about 10% of your mix right now and as you know other steel folks have a much higher proportional mix there. Do you think we could see Nucor dedicating even more resources to growing you share in automotive? Can you talk about how your strategy there may play out particularly from sheet products perspective?
Daniel R. DiMicco – Chairman and CEO: Simple answer to that is yes, and I’ll ask John to elaborate on that.
John J. Ferriola – President and COO: We’ve reported in the past that about 10% of our sheet’s shipments have gone into the automotive. Frankly those were numbers that we gave last year and it has increased since that time. It’s higher today and it continues to grow. As we continue to develop more value-added products we’ll continue to grow in that market. A good example of the investments that we’re making to accomplish that is our project where we refer to as a wide light project at Berkeley. The 72-inch wide sheet will give us more applications in the automotive arena as well as the vacuum tank degasser at our Hickman facility, which will give us a better portfolio of what we call deep drawn steels, and extreme deep drawn steels, which are very, very commonly used in the automotive industry. Today, on the sheet side, we’re in the neighborhood of about 12% to 13% of our shipments going into automotive and I’ll also point out that that’s we talk about sheet. Our participation in automotive through the SBQ products has also grown tremendously as Memphis continues to come online with more and more qualifications going into automotive. I guess my last comment that I’ll make about our participation in automotive is this. We sell product today to virtually every domestic and new domestic automotive company in production and we are very proud of the fact that our team continues to grow in that very important market to us.
Price Per Ton
Michelle Applebaum – Steel Market Intelligence: Couple of questions. I noticed that you reported price per ton dropped by 1.4% in the second quarter versus the first quarter, but the markets dropped about 6%. Was there a product mix shift in the quarter and how did that work?
John J. Ferriola – President and COO: There was definitely some product mix shift during the quarter. Also frankly in the quarter, we were challenged with some imports that have continued to flood into the country, that was a challenge for us. The fact that the overall pricing decreased is probably a function more of the overall economic conditions in the country, it’s a challenge for us, and as it is for all of our – for the industry. So, product mix, general economic conditions, imports, all are factors in the decrease.
Michelle Applebaum – Steel Market Intelligence: I guess I wasn’t clear. I’m asking your prices went down very little relative to the much less in the market. Was that about like more value added or more higher costs, higher price?
John J. Ferriola – President and COO: It’s a tribute to the great job that our commercial team does, so I want to thank them all for that. It is definitely a function of the fact that we are moving higher into the value-added products, and our whole focus on a commercial asset, by moving into more value-added products and through our commercial excellence program, has been to make us more sticky to the customer. When it is more stick to the customer, it given you greater pricing power. Those are some of the reasons why we bet at the industry as a whole in the quarter.
Michelle Applebaum – Steel Market Intelligence: Iron ore when you – I must have asked when you first started the iron, I probably asked a bunch of times what are you going to do about iron and clearly waiting was validated. So now what are you going to do about iron in Louisiana?
Daniel R. DiMicco – Chairman and CEO: The current strategy is to continue to feed the DRI plant in Trinidad and the new one that will start up mid ’13 with supplies from our existing tunnel suppliers for DRI (parts) and as far as iron ore goes when there is something to talk about, if there is anyway anything to talk about we will talk about it. But thanks for the question.