Nucor Corporation (NYSE:NUE) Q1 2023 Earnings Call Transcript

So you can see the health of these backlogs as we go through the year.We’re not seeing a lot of cancellations at this time as well. So we feel strong about our backlog. Dodge Construction forecast, the recent numbers are positive both in dollars and square footage when you look at the non-res space. And again, it’s obvious that the activity have come off the 2022 peaks, but they really remain above pre-pandemic levels. And what dataset I was looking at the 2023 Dodge projected non-res building starts when you look at square footage, it’s up 15% compared to that 2017, 2019 average, which was some good years.So we feel really good about what we’re seeing and then we always base these datasets compared to what we’re hearing from our customers.

And our customer feedback is still positive in the non-res space. Part of your question was about new markets or new channels, and we all know that warehouse obviously was extremely strong in 2021 and 2022, and it is come off those peaks and it’s level setting and find recalibrating and finding its place.But I would remind you that even with that level setting, it’s still forecasted the warehouse space to exceed the 2018 and 2019 demand levels for warehouses, which was historic prior to COVID. So one of those areas that Leon touched on that I want to just mention would be the excitement we have around the onshoring of manufacturing. It’s strong and it keeps pushing forward. Projects such as the semiconductor chip plants, data centers, EV facilities, both the assembly facilities as well as the battery plants.

They’re in our backlog and we’re quoting even more of them.Again, I’ll say it, the manufacturing sector is very strong, and let me share this dataset with the construction spending in this segment alone has nearly tripled since 2018 and 2019 levels. We’re talking about close to $100 billion of spin projected in this segment alone. So while warehouse has come off its level setting, we’re really excited about the manufacturing sector.Emily Chieng Fantastic. That’s very helpful.Operator Thank you, Emily. Ladies and gentlemen, our next question comes from Lawson Winder with BofA Securities. Please go ahead.Lawson Winder Hello gentlemen, good morning. Thank you for your presentation and congratulations on a great quarter. Wanted to ask about again, about the ramp up of Brandenburg, the cadence you see there in terms of the quarterly ramp.

Thank you.Leon Topalian Yes. Thanks, Lawson. I’ll let Al Behr kind of give you some details and then back row on our Brandenburg ramp up. Al?Al Behr Yes, Lawson, thanks for the question. The Brandenburg ramp up continues to go really well. We shared there in the slide deck a couple of milestones again, that the strategy has always been about capabilities and not capacity. And so we continue to develop and explore the capabilities of this terrific machine. And we’ve rolled plate that is over 6 inches thick, which is a new milestone for us. We’ve rolled finished plate out of ingots, which is a significant milestone. We’re producing our own slabs now out of the caster, and this is one of the most capable casters, the most capable in the Western hemisphere.And so the wrap up is just going the way we’d like to see it.

We still feel good about our commitment about 50 – excuse me, 500,000 tons by the end of the year. Obviously that’s heavily weighted into the back end of the year because we’re focused on capabilities. But we’re excited about what this project is going to offer our customers and ready to serve them.Lawson Winder Okay. That’s fantastic. And then if I could follow-up just up on the plate market and get your views and get an idea for what you’re seeing in terms of tightness in the market looking out to Q3 and into the end of the year.Al Behr Yes. Gosh, you start talking end of the year, you’re beyond my crystal ball, but I’ll share some thoughts of what we see now. And it is a fairly tight market. Demand is pretty good for plate.

Our backlogs are up 100% year-over-year, even more than that quarter-over-quarter. So we issued a price increase. We published our prices and plate. As you probably are aware, we published an increase last night of $40 a ton. Inventories are low. There’s not a lot of slack in the supply chain. So we see continued strength in the plate market. It remains one of our more resilient markets. And I would highlight within that things like railcar manufacturing, non-res, bridge work as a result of some of the legislative successes that Leon’s highlighted. So, overall we’re pretty positive.Lawson Winder Okay. Fantastic. Thank you very much.Al Behr Thanks, Lawson.Operator And my next question today comes from Carlos De Alba with Morgan Stanley.

Please go ahead.Carlos De Alba Yes. Thank you very much, gentlemen. So question is given the positive comments that you have on non-resi and all the term that you mentioned, how can we reconcile the year-on-year growth in your bars and structural the steel mill shipments, they declined 3% in the bars, as you know, and 60% structural. So I don’t know if you could provide some color to help us understand these numbers. And then maybe a follow-up on this – on Slide 8 of your presentation, the Dutch construction forecast is very clear that infrastructure continues to increase in the coming years. There is a little bit of plateau or flatness in non-resi and then it increases. But that is in terms of dollars, there is a line there in that chart that is non-residential building starts in 1 million of square feet.

And that is – that comes down from 2023 to 2024, and then it increases from 2024 to 2027, but it’s only a gradual moderating increase. What drives your shipments? Is it more the dollar amount or the square footage of the projects that are put in place?Leon Topalian Carlos, it’s a bunch of questions. I’ll kick it off and maybe ask John Hollatz or Chad or Steve to jump in. I want to step back though to the broader sort of global environment. As you think about rebar and bar and longs, I want to begin with the humanitarian crisis in Turkey and the travesty that has befallen that nation. Obviously with zero imports coming out of Turkey in the last couple of months, they’re consuming a lot of that. Our long product businesses, in general, have provided incredible returns through a very, very long cycle for Nucor that remaining incredibly robust.

And so as we think about, again, Q2 we’re positive. We look forward to again, a stronger quarter in the second quarter. As you mentioned, the structural side of things as well, maybe just very quickly touch on what you’re seeing in the project of the coming months in the structural side, John, why don’t you finish up on the long products?Al Behr Yes, some structural things. I would say the structural market is not as strong as the plate market. It remains resilient, and we see some activities in nonres construction, but it’s not as strong as what we’re seeing in some other products. But the strength is resurging in these areas of reshoring of manufacturing in the chips plants; those are areas where we’re particularly strong, both on the mill side and the downstream product side.

So, I may have missed your specific question about reconciling shipments. All I’m giving you some color that’s helpful. But John, anything else on the bar side that you can share?John Hollatz Yes. I would say I think part of your question, Carlos, is what drives the steel intensity or the overall demand for steel. It’s more going to be on square footage than dollars. Obviously, there’s some inflationary impact on the dollar side. What we’re seeing with these chip facilities as they are very steel intense because of the enormous foundations that go into facilities like this, which gives us a lot of optimism that demand is going to remain strong, not just through 2023, but for the life cycle of this government spending. So, we see a lot of resilience in the market moving forward.Carlos De Alba Great.

Thank you very much.Operator Thank you. And our next question today comes from Curt Woodworth with Credit Suisse. Please go ahead.Curt Woodworth Yes, thank you. Good afternoon, Leon and Steve.Leon Topalian Hey, Curt.Curt Woodworth Just want to get your thoughts on the sheet market, right? So if we look at the second half of last year, the economy is still reasonably strong. Nonres was doing well, auto admittedly weaker and the pricing average around $750 a ton more or less, and here we are today, the pricing is $1,200, and arguably, maybe there’s a little bit more supply from some of the new EAF mills in the market, the lead times are out, and I’m not sure that the real economy is that much stronger today than it would have been back half of last year.

So, I’m just curious how – what would you explain kind of the – how would you characterize the move in the market this year, if you could kind of parse out some of the key moving pieces?And then the second question just pertains to the steel products division. That business is, I think, is a little bit more complicated for investors to parse out. So could you kind of maybe for size at the joist and deck business versus your rebar fab business – and then within the context of IRA, semiconductors, infrastructure, where do you really play in some of those markets? Is some of that more joist and deck specific versus pure rebar fab or other areas, obviously, like towers for energy infrastructure? Thank you guys.Leon Topalian Okay. Curt, I’ll kick this off and again a bunch of different questions in there, and we’ll try to make sure we cover them all if we don’t just ask again.

But let me begin with the tail end of your question. As we think about the IRA, the Chips Act and infrastructure, in the macro, we see about – is upwards of about 8 million tons of annualized capacity for the next 10 years. So if you think about 8 million tons, that’s roughly 7% of the overall ADC [ph] of this country. It is not an inconsequential number. And so well, how does that flow through? And how does that break down in the steel intensity within those three.Well, number one, it marries up incredibly well to the most diversified steel industry leader in Nucor. It matches up really well with the lowest in body carbon footprint of any steelmaker in the world that our customers are demanding these days, but it’s coming in the form of plate, structural longs, rebar, sheet, joist and deck, fasteners, buildings, warehouse systems, racking, it really is the breadth of our portfolio that is on display today.So it’s touching every segment of Nucor’s businesses.

And again, with what Chad described, and again, we – we’ve worked really hard commercially in Dan Needham’s group with how we provide solutions and looking not to sell products, but how do we provide and partner with a customer to take care of their entire needs of that building envelope from the foundation all the way through to completion.As we’ve shifting a little bit to your question on sheet, and I’ll ask Rex to touch on this as well. But I would tell you in the macro, no, we do say Q1 showing more favorable demand in the back half of 2022. And so, there’s strength there. And again, ultimately drives that is our customers. It’s a supply and demand market. That’s why we’re seeing pricing go up and stick because the demand is up, the drivers are up.