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

Our sheet business alone, Q over Q was up about 20%. Backlogs are up about 25% Q over Q. So there is real strength there. There’s – and there’s some optimism there and how we see that moving forward. So Rex maybe provide a little bit more of a picture within the sheet group and what you’re seeing through the back half of or the rest of 2023.Rex Query Yes, Curt. Thanks for the question. Actually, I’ll step back for a moment. From a big picture standpoint, looking at 2022 as you recall, with Russia’s invasion Ukraine and some uncertainty going on, you have things going on in the marketplace where customers began, I’d say placing orders in accumulating some inventory due to that uncertainty. So with uncertainty in the pipeline supply chain from that standpoint.

So you saw the back half of 2022 where some of that was being worked through. So we saw some softness occurring as people working through inventory.So then you didn’t see the – I’m going to say the demand pulled through on the production side. They were working through some inventory. So we saw that softness. But – and I would say overall uncertainty from an economy standpoint. But now as we’ve entered 2023, I would tell you, we see a much more stable market. We see more confidence in the marketplace and underlying demand, and we’ve seen that on the sheet side. So you’ve now seen stabilizing in some pricing at a higher level. And we see that demand stabilizing our backlogs at this point are on par with where we were in the – at the end of first quarter in 2022.

So we see that strength and as we move forward Q2 and even in the Q3, we see that continuing and more confidence in the underlying demand. Hopefully that’s helpful.Curt Woodworth Thanks, Rex. I think on joist and deck…Steve Laxton Yes. Hey, Curt. This is Steve. Just real quickly on your second question there about joist and deck and rebar fab. To give you a sense for size, joist and deck is typically about 25% of our products group’s volume. It’s a little bit higher than that in the first quarter. It’s around 27%. And rebar fab is in that same ballpark, usually a little bit under 25% of the volume we do on products. It’s in the low 20s right now. But those are typical for those businesses about what they represent for the products group.Curt Woodworth Great.

Thank you very much guys.Leon Topalian Thanks, Curt.Operator Thank you. And our next question today comes from Timna Tanners with Wolfe Research. Please go ahead.Timna Tanners Yes. Hey, good afternoon, team. Why don’t to probe a little bit more the Gallatin ramp up, and I know in the past couple years you’ve talked about pulling back production if market conditions warranted. But it’s also been some talk of you’ve got this asset and you want to run it. So I’m just kind of wondering about the cadence of, first off, when does it run full out? And then would you expect it to continue to run at a pretty full clip once it started up? Thanks.Rex Query Yes, Timna. This is Rex. Appreciate the question. I’ll go ahead and just pick that up.

First I’ll just comment at Gallatin at this point. We’re now over 190 days without a recordable at that team in it. Going through this ramp up process, it’s just really been impressive to watch the focus there. And at this point, I would tell you for all intents and purposes, our commissioning is basically complete. We’ve had the opportunity. I would tell you, we have the luxury as a company, the breadth of capabilities we have at other plants to support the work that’s been done at Gallatin. We utilized that fully in supplying our customers from other plants or substrate into Gallatin where we utilized the pickle galv [ph] line, which has continued to run in a tremendous fashion.So we utilized that as a group and we approached it as a group.

So we didn’t have to get tons through Gallatin for ton’s sake. And I think Al mentioned this about Brandenburg on a focus on capabilities. At this point, we’ve commissioned full capabilities at Gallatin. And so you’ll begin to see us now focusing on quality and ramp up of the tonnage subject to market conditions as we get into second quarter. I would tell you we expect to be at full run rate capability by the end of second quarter, and then we’ll gauge that based on the market, but it’s been a great ramp up. We’ve done it as a team, as a group excited, the new capabilities thicker slab that we have will be higher quality capabilities and we’ll be able to get into markets that we have not previously been into, and of course, the wider width we have there at Gallatin.Timna Tanners Okay, interesting.

Thanks. My second question is obviously you have a huge position with service centers and they’re an important counterparty for you. And our channel checks are suggesting that there are some challenges there as you can imagine with higher interest rates and also access to capital in light of banking market conditions. So just wondering if you have any observations about any impact on service center buying habits right now? Thanks.Leon Topalian Yes. Look in inventories, Timna, as you know and you’re looking at the MSCI data, like we remain pretty flat, and so as you see particularly in cheap pricing coming through and the stability of that, it’s a good indicator noting that we’re not pulling orders forward from Q2 early because of those moves.

So I would tell you while they remain at pretty flat and low numbers, look they’re going to be cautious as well. Interest rates are having a big effect on them, but many of our end market customers as well are watching and evaluating projects and expansions based on what we’re going to see from the Fed here next month and throughout the rest of the year. So it is touching obviously a big swath of our customers and like you we’re watching all of those indicators and trying to analyze, how does that shape out. But we’ve been partners with our major service center customers for a long time. We’re taking care of their needs and continue to do so well under the future.Timna Tanners Okay, great. Thanks very much.Leon Topalian Thanks Timna.Operator And our next question today comes from Tristan Gresser with BMP.

Please go ahead.Tristan Gresser Yes. Hi. Thank you for taking my questions. The first one in your comment you said that you’re already seeing an impact on infrastructure manufacturing. I thought it would be more of a theme for the next quarter and maybe later in the year. So can you discuss a little bit timing? Have you seen things accelerate a bit? One of you competitor mentioned a very strong month of March on the non-res side. So yes, just some questions around the timing there and if you’re seeing maybe those orders coming in faster than expected?Leon Topalian Yes. I’m not sure. They’re faster, Tristan. What I would tell you is it’s nice to see them actually materialized and so through February, March are Plate businesses, our Rebar businesses.

Again the long product businesses are seeing, the order activities increase, the quoting increase and actual orders and production increase so that’s taking shape as we speak. But we expect that to ramp up in the back half of 2023 even further. And again, somewhere in that 5 million to 8 million tons annually of production increase throughout the next eight to 10 years as we build out all these major projects. So guys, I didn’t miss anything there, anything you’d add?Tristan Gresser Thank you. And maybe follow-up on that and thank you for the presentation, that’s really helpful. The three poles of demand, you flagged the infrastructure, the clean energy and the manufacturing. Would you be able to break down for each of those three poles of demand, the split between let’s say long, flat and plate?

Is that something you could do?Leon Topalian Yes, we can do that. I’m not sure we’ll do it on the call, but Tristan, it’s something we can have our IR team follow-up with you and then give you some more details. But again one of the things to keep in mind is we think about those three projects; the breadth of Nucor’s capabilities set positions us incredibly well. It’s going to touch every major product group that we have. And we’re really excited about the expand beyond capabilities. When you think about the overhead door businesses, the racking business is combined with the joist and deck and the building systems group going to market together as one. We are providing a solution set no one in the industry has today. So we’ll get you some, some more information here Jack can follow up with you in the coming days, but maybe provide a little bit more of that breakdown.Tristan Gresser All right.

Appreciated. Thank you. Leon Topalian Thanks, Tristan. Operator And our final question today comes from Alex Hacking with Citi. Please go ahead. Alex Hacking Hi, thanks. I just have a couple of quick follow-ups. Firstly, on joist and deck, the weakness there, is that just purely the slowdown we’ve seen in the warehousing build-out. And then secondly, on sheet, just to clarify there, I think, some of your comments, obviously, your sheet shipments are extremely strong. I think we’ve seen that across the industry. You mentioned that comparing it to 4Q. 4Q saw a lot of destocking. Is your view that the current level of sheet shipments is reflective of underlying demand? Or is there a restocking element that we closing those shipments? Thank you very much.Leon Topalian Yes.