EmailSteel Dynamics (STLD $15.04 -0.31) guided its second quarter earnings
at $0.35 to $0.40, well below the $0.56 Capital IQ Consensus Estimate.
On a comparative basis, unrealized hedging gains at the company's metals
recycling operations were $9.5 million in the first quarter 2011, as compared to
an estimated second quarter unrealized hedging loss of ~$3 million, resulting in
a non-cash fluctuation in the company's quarter over quarter pretax earnings of
$12.5 million, an estimated impact of approx. $0.03 per diluted share.
During the quarter, the co has been experiencing reduced metal margins in its
metals recycling operations, as the cost of acquiring unprocessed scrap material
more than outpaced any price increases, resulting in an estimated 15% quarterly
reduction in ferrous margins and an estimated 25% reduction in nonferrous
margins (excluding the impact from unrealized hedging adjustments), driven by
the copper and stainless steel markets.
The impact of Mesabi Nugget on the co's results is estimated to be comparable to
that experienced in the first quarter 2011, due to the previously discussed
planned May maintenance outage. In addition, during the second quarter the
company experienced periods of weaker than expected market dynamics for both its
sheet and structural products. April incoming orders for flat-rolled steel were
about 25% less than the monthly average achieved in the first quarter; however,
orders since the beginning of May have returned to levels consistent with those
achieved earlier in the year and currently the company expects this trend to
continue.
Unexpectedly, incoming orders for structural steel weakened in the quarter, as
the residential and non-residential construction markets remain a challenge.
Despite these volume and pricing issues, the company's steel operations'
operating results are expected to be further improved from those experienced in
the first quarter 2011.
than one year.
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