Nucor (NUE) Provides Q4 Guidance; Sees Profitability But Well Below Wall Street Views

December 9, 2008 8:52 AM EST

Nucor Corporation (NYSE: NUE) expects to be profitable in Q4, but only marginally above the breakeven level, versus the consensus of $1.46. Full year 2008 might still be a record year based on the results of the first nine months; however, the Q4 results will reflect the impact of the unprecedented financial crisis on the economy and steel markets, in the U.S. and internationally.

The economic crisis has caused not only end use demand for steel to decline, but many customers have been reducing inventories due to liquidity concerns arising from the credit crunch. Nucor's total steel shipments for Q4 are expected to decline by approximately 40% from Q308 level. Nucor seesits steel mill average capacity utilization rate for the current quarter to be slightly above 50%. These dramatically lower production rates also have slowed the pace at which its steel mills have consumed higher cost scrap and pig iron inventories purchased prior to the collapse in the economy and scrap pricing. Accordingly, its Q4 forecast now includes a small LIFO inventory charge as opposed to the previously expected large LIFO credit.

Looking into Q109, Nucor's results are expected to benefit from more recent purchases of lower cost scrap and pig iron as well as order levels aligned more closely to end use demand. At present, actual end user demand appears to be down 25%-30%, and not down the 50%-60% that has been reflected in order entry. Nucor expects to see an increase in order entry based on the real end user demand as inventory levels will need to more closely track to real demand. The company is already seeing raw material prices increase here and globally and expect to see this impact steel pricing going forward. This expectation of course depends on real demand not falling further below these dramatically reduced levels.

Nucor Corporation and its subsidiaries engage in the manufacture and sale of steel and steel products in North America.

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