April 28, 2009

Steel giant Nucor reports first-ever loss

PITTSBURGH

Nucor Corp., the largest U.S. steel maker by production, has reported its first loss ever as a severe recession sapped demand for the metal. It forecast an even bigger loss for the second quarter.

Like other steel companies, Nucor has been hit particularly hard by a shrinking economy, which has undermined demand for the metal in major markets such as construction and autos. Steel prices, which soared to record highs last summer, collapsed after demand virtually vanished late last year.

Nucor’s first-quarter loss, which was expected, totaled US$189.6 million. That reversed a profit of US$409.8 million, or $1.41 per share, a year earlier.

Revenue fell 47 per cent to US$2.65 billion. Shipments dropped 43 per cent and average prices slipped 7 per cent.

“As we have progressed from September 2008 to March 2009, we have seen business and market conditions worsen each succeeding month,” Nucor said in a statement.

Results included a charge of about US$60 million to write down steel inventories to market levels.

The U.S. recession and global fiscal crisis has dragged down steel consumption for autos, machinery, household goods and public works projects. A slump in consumer demand has decimated car sales while the bursting of the housing bubble has slammed construction, an industry that Nucor supplies with bars and beams for hospitals, schools, and airports.

The downdraft of the economy has pulled on steel companies, leaving Wall Street experts pessimistic about its prospects.

Mirroring the broader economy, Nucor expects an even bigger loss in the second quarter. Although it didn’t provide specific guidance, the company said it will update its outlook before announcing results for the current quarter.

Nucor, which makes steel from scrap metal and uses electric rather than traditional blast furnaces, said the rate at which it makes the metal fell rapidly during the quarter. Its mills operated at just 45 per cent of capacity, down from 92 per cent a year earlier and 48 per cent in the fourth quarter.

That meant energy costs rose about US$11 per ton because its furnaces continued using large amounts of power but produced less steel.

Still, its costs generally are lower than those of integrated steel companies, such as United States Steel Corp., which make steel from raw materials such as iron ore. That’s because Nucor’s electric furnaces can be turned on and off more quickly to adjust for fluctuating demand.

Nucor has grown through acquisitions in recent years, including Nucor’s 2008 purchase of The David J. Joseph Co., the largest U.S. scrap-metal company.

Associated Press

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