Jack Sullivan:

Thank you, and good morning, everyone. Welcome to Nucor's second quarter earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO; along with Steve Laxton, Executive Vice President and CFO. Other members of Nucor's executive team are also here to participate during the Q&A portion of today's call. We've posted our second quarter earnings release and investor presentation to the Nucor Investor Relations website, and we encourage you to access these materials as we'll cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements and involve risks outlined in our Safe Harbor statement and disclosed in Nucor's SEC filings. The appendix of today's presentation includes supplemental information and disclosures along with a reconciliation of non-GAAP financial measures. So with that, we'll begin the call over to Leon.

Steve Laxton:

Thank you, Leon. And thank you to everyone for joining us on the call this morning. Leon just highlighted how the Nucor team is continuing to advance the ball, on its long-term and value-creating strategy. And during the first half of 2024, the team also executed on delivering results, posting strong earnings of just under $1.5 billion and around $2 billion of cash from operations. During the second quarter, Nucor generated net earnings of $645 million or $2.68 per share, approximately 23% lower than earnings from the first quarter of the year. The majority of our overall change in earnings between the prior quarter is attributable to our Steel Mill segment. This segment generated pre-tax earnings of $645 million, a decline of roughly 40% from the prior quarter. Lower realized pricing, especially among our sheet mills, was the biggest single factor contributing to the segment reduced profitability. The Steel Products segment delivered pre-tax earnings of $441 million for the second quarter, roughly 14% lower than the first quarter. Although segment shipments increased in the second quarter, lower realized pricing, and decreased margins more than offset volume gains. Our Steel Products segment is composed of a diverse set of products and market solutions. And I'd like to highlight two of our groups that had more pronounced impact on the segment results during the quarter. First, our Tubular Products group saw earnings decline by more than 50% during the quarter, as those divisions work through higher price substrate in a declining price environment. Our Tubular Products group accounts for more than one out of every five tons sold from the Steel Products segment. Another group to highlight in this segment is our Joist and Deck operations. These divisions continue to perform well even as realized pricing for these products moderated from the record levels of prior years. Earnings from Joist and Deck declined roughly 5% from the prior quarter, but still accounted for more than half of the segment earnings for the second quarter. Our Raw Materials segment produced pre-tax earnings of approximately $39 million for the quarter. Overall, volumes and pricing were softer than the prior quarter, but lower operating expenses more than offset these headwinds. During the second quarter, the power of Nucor's business model allowed it to generate $1.5 billion in cash from operations. This strong cash generation is a key factor enabling Nucor to continue its balanced, consistent, and long-term approach to allocating capital and creating value. Our capital allocation framework includes maintaining a strong investment-grade balance sheet, providing direct shareholder returns, and enabling growth and value through investments. That balanced and disciplined approach to capital allocation was on display again in the second quarter. Nucor's balance sheet has long been a foundational source of advantage, and an enabler of our long-term strategy. At the end of the second quarter, our total leverage stood at less than 1.2 times trailing 12-month EBITDA, and our cash on hand was a healthy $5.4 billion. And as Leon mentioned earlier, we're pleased to see Moody's revise our senior unsecured credit outlook in May, from stable to positive. The second quarter saw Nucor return just over $630 million back to shareholders through dividends and share repurchases. These returns, when combined with the first quarter, yield direct shareholder returns of more than $1.7 billion year-to-date. While we target returning 40% or more of net earnings to shareholders, we've nearly tripled that rate on a year-to-date basis. And this demonstrates an important aspect of how Nucor thinks about managing shareholders' valuable capital. We either invest it to grow and create value, or we return it to shareholders. In addition to strong shareholder returns, during the quarter, we deployed more than $800 million of capital spending and more than $100 million in acquisitions. These investments and those to come, will help fuel the future earnings capacity of this company. Turning to our third quarter outlook. We expect consolidated earnings to be lower than the second quarter, primarily because of lower anticipated earnings from our Steel Mill segment. Earnings in the Steel Mill segment, are expected to decline meaningfully as realized pricing has recently continued to decline across most of our major product categories. We also expect sequential earnings to decline in our Steel Products and Raw Materials segments. Taken together, the magnitude of the sequential decline in consolidated EBITDA for the third quarter could resemble that of our second quarter. Taking a step back to reflect on the broader macro picture, while the U.S. economy appears to continue, to avert a more pronounced downturn, it's becoming more evident that activity has softened as the year has progressed. We've also seen an increase in imports year-over-year, and a higher for longer interest rate environment may have tempered or delayed some marginal demand. The confluence of these factors is driving margin pressure on several of our products in the near term. It's worth noting that there are several end markets that remain quite healthy, including construction activity related to semiconductors and other advanced manufacturing facilities, data centers, healthcare facilities, and energy and infrastructure projects. As the largest and most diversified steel producer in North America, Nucor is well-positioned to service each of these markets. With that, we'd like to hear from you and answer any questions you might have. Operator, please open the line for questions.

Bennett Moore:

Hi, Leon and Steve. This is Bennett on for Bill. Given it's been about 3.5 months since you first introduced your weekly CSP back in April, I was wondering if you could share any key takeaways you've received from customer feedback thus far? And furthermore, how has the strategy unfolded relative to your initial expectations?

Noah Hanners:

Yes, Bennett, this is Noah. I'd just add that as its core to our culture, we've done what we said we were going to do with CSP. We believe we've provided relevant timely pricing. And I think the market conditions over the last few months, have afforded us the opportunity just to prove our transparency in pricing. I'll say that the feedback we get from customers is our customers want to deploy their capital in a way that creates value for their customers, and not in managing working capital or buying opportunistically. So, we're going to continue to do what we've said we're going to do with CSP, remain relevant and timely with our pricing. And to your point about how do we measure success in the future, we'll gauge success, and we'll be able to see success when we see order entry better matching underlying demand. So I think it's a longer-term engagement, but we're committed and we're happy with our progress on CSP so far.

Dave Sumoski:

I'm sorry, shipments related to what Bennett?

Dave Sumoski:

Yes. Look, I think there's a lot of talk in the market that's softer and are we heading for a cliff? And I would tell you, we don't feel that way at all. Certainly, we've seen pricing move off historic highs of '21 two and even parts of three, but it's moderated. We think we found some stability and this market has stabilized in most of our product groups from a demand picture. The back half of the year, we expect it to be relatively flat. Again, if you look at the overall market for the year, the ADC is expected to drop about 1%. So again, from a demand picture, things are really not too bad. And again, many of our products remain incredibly resilient, so specifically on the Steel Products sector, again, it's a very large sector for Nucor. It's not just buildings and Joist and Deck and in our Vulcraft facilities. We've got the fabricated rebar, we've got Skyline Steel. We've got our overhead door businesses in both C.H.I. and in Rytec now, and our data systems are racking. And so, it's an incredibly diverse group that's consuming about 22% of our overall steel products into it. So it's an incredibly large business segment for us. But specifically in buildings and products, we're seeing some stable order entry rates incoming; over the last few quarters, we've seen that very much stabilize. And so, we think the back half of the year, while we're working through some higher-priced inventory will continue to tick up and again from a demand picture, remain pretty resilient.

Leon Topalian:

Thank you. Appreciate it, Bennett.

Martin Englert:

Hello, good morning, everyone. Can you provide an update on Nucor's raw material strategy, specifically upgraded low-copper shred products and low-emission iron-making to the extent that it's applicable, maybe this is longer-term, but if you could touch on electrolysis process for iron ore in your investment in electric?

Al Behr:

Sure, Leon. And thank you, Martin, for the question. You asked just about our raw material strategy. I'd summarize it this way and say that what we're aiming to do is create competitive advantage by supplying our mills with the most cost-effective stream of inputs, and to do that while minimizing the embodied carbon in our finished products. And so that's our guiding light, and under that, then we execute that by building flexibility and adaptability into our raw material stream. And we've talked about that for a number of years and have had the opportunity to demonstrate that, through changes in the market - excuse me, in the market that we see. So one of those that gives us flexibility is low-copper shred. And I know you asked about that, and I'll share a few thoughts just on how we're attacking that area and how we think of it. And the first thing I'd share with you, Martin, is that low-copper shred isn't new for us, that we've been making that product for about 12 years at two different locations. And so, we've mastered the discipline of how to make it. We've mastered the discipline of how to use it in the mix. But you have seen recently a renewed investment and some newer investments in low-copper shred as we see the demand for high-quality metallics going up. And we're responding to that, by making additional investments in low-copper shred, to add to the flexibility that's so key to our strategy. And so in terms of where we sit today, I'd share with you, we can process today about 1.4 million tons of low-copper shred. And we're bringing on another 750,000 tons as we speak. So that will give us, in the very near future, about 2.1 million tons of capacity. And then as we look out another couple of years, I'd expect us to add another 3.5 million to 4 million tons of additional capacity, landing us somewhere in the 5.5 million to 6 million ton range for low-copper shred. But Martin, I'll share with you, if you think about the 4 million tons of DRI that we also make and you add to that 6 million tons of low-copper shred. It puts us at about 10 million tons of metallics that we control, which is about two-thirds of our needs. And so that's a sweet spot for us, because it gives us incredible control, while at the same time allowing us the ability to be very flexible and very opportunistic in the market and how we serve the rest of our needs. I know you asked about electric too, and I just want to talk just for a minute about that. I think what I'd say is we remain really excited about that project. It's got a long ways to go, but it's a very interesting technology. We remain an investor and are considering additional investments in that space. And Noah and I work on that together and are following that closely, that's got really interesting advantages for us, particularly in the lower carbon range. I wouldn't consider that a cost benefit, but that's primarily a green and sustainability benefit and really exciting technology.

Steve Laxton:

Hi, Martin, this is Steve. Thanks for the question. The conversion costs really are a function of a few different things, a few different moving parts. And in the quarter, what you see is utilization rates were down a bit, that always affects our cost. But probably more pronounced, there is a flow of materials through our production processes that creates a little bit of timing differences. And that causes the conversion cost to look higher on a quarter-over-quarter comparison. I think the most important thing probably, for you to take note of is that input costs right now are moderating, consistent with what you see with CPI or other indicators.

Leon Topalian:

Thanks, Martin.

Tristan Gresser:

Hi, good morning, and thank you for taking my questions. The first one is on the policy front. When you look at the upcoming elections, what risks do you see? I mean, for instance, solar and wind have been source of growth and potential upside for your business. So how concerned are you of any potential new administration removing some of the funding for those areas?

Tristan Gresser:

All right. No, I understand and I appreciate the color. And as a quick follow-up to that, when it comes to trade, a little bit again, what do you believe should be the new administration number one priority when it comes to steel? I mean, you've been vocal about Vietnam being an issue. Is there a specific trade case against the country and Mexico, the new deal. To your understanding, does Brazil have an exemption? Yes, where do you see where - what would you be pushing for?

Tristan Gresser:

All right. That's very clear. And maybe the last one, if I can squeeze that in, on plate, you made a big pricing adjustment last month. So what are you seeing from a demand perspective? Do you think you've hit the bottom in terms of prices? You're starting to see a bit more stable demand environment, or is there further adjustment to come? And if you can touch on the little - the various end-user - end markets that would be appreciated?

Brad Ford:

Yes. Thanks, Leon. Thanks for the question, Tristan. I think it's important to start with some context. We're coming off with some pretty strong years for plate. Really, '21, '22, and '23 were pretty robust. So as we think about this market being a little bit softer, there's a couple of things to address. One, we are seeing some softness in the more interest-rate sensitive portions of the market, namely kind of vertical construction, some of the heavy equipment and agriculture side. And two, and most significantly, back to the import conversation, we were challenged in the first half of this year by meaningful - meaningfully higher levels of imports, which gained some market share and put pressure on pricing. This pressure on pricing has led our distribution customers to take a pretty cautious approach to purchasing, as they try to right-size their inventories. All that said, we do see some bright spots. And as we think about the second half of the year. Back to imports, we've seen certain countries use up almost two-thirds of their quota really through the first five months of this year. So, we expect a slightly lower import picture in the second half. Bridge and power transmission markets remain strong. And what we're hearing from our customers and developers is onshore wind is really going to pick up, kind of late in the second half. And then there's the impact from IIJA funding and project awards really as we think about those ticking up here in late '24 and early '25, which supports not just plate, but our structural businesses and a lot of our steel products.

Leon Topalian:

Thanks, Tristan.

Chris LaFemina:

Hi, thanks, operator. Hi, guys, it's Chris LaFemina from Jefferies. Leon, you mentioned automation in the Steel Products segment and you've alluded to it a bit in the past. But I was wondering if you could kind of elaborate on how automation could impact your margins. I mean, what sort of cost benefits might you see? Is this sort of the type of stuff that you just need to remain competitive or do you think that you can become an even lower-cost producer relative to the rest of the industry, by some of the automation initiatives that you're putting in place?

Chad Utermark:

Yes. Thanks, Leon. Yes, Chris, not only it is a cost opportunity, but it's a flexibility opportunity, especially in our businesses that face penalty and also a safety opportunity for our teammates. When you think about Expand Beyond, yes, we're going to continue to invest and look for businesses so that we can bring technology that, will allow us to be more efficient and take care of our customers. Some specific examples in our Nucor racking group, we've invested and we have robotic well cells that are operating at several of our facilities right now, and we are excited about what we're seeing there. We've mentioned this before, but our two new tower and structured Greenfield plants, they have highly automated material handling equipment, as well as robotic plasma and well cells. And we look forward into the spring and fall of next year, as we bring those plants online and see the automation take place. As a reminder, many of our downstream businesses in Nucor face these demand fluctuations through the cycle. And what we are seeing is that automation in key manufacturing areas can really help us navigate that demand fluctuation so that we can really take care of our customers. John?

Steve Laxton:

Hi, Chris, this is Steve. I'll just add on one other thing to address your question about advantage or not. Nucor has always been about creating production efficiencies, that's how we win. And so, if you think about the scale and reach of what we do, any technology advantage is leveraged across a bigger system for more, more gains. So the - I'll call that a scale efficiency if you want to. But Nucor is unparalleled in our industry and the ability to be best.

Operator:

Your next question comes from the line of Philip Gibbs from KeyBanc Capital Markets. Your line is now open.

Leon Topalian:

Good morning, Phil.

Steve Laxton:

Yes. Hi, Phil, this is Steve. It's really two projects, Brandenburg, which is slightly - a little bit bigger in the quarter impact in West Virginia. As we - as we're accelerating the spending at West Virginia, you're seeing more - a little bit more impact there.

Steve Laxton:

No, no, generally not. It's generally contractor work and site-specific work.

Steve Laxton:

It's a year later. So back half of end of '26, Phil, is when we'll ramp up Brandenburg into '27. I'm sorry, West Virginia, not Brandenburg. Yes, West Virginia.

Leon Topalian:

And then, Phil, the only - in terms of overall in the company, you won't notice it necessarily, but in some of the segment numbers, some of those maintenance costs at our DRI plants as we have outages do swing the - swing the cost impacts, a little bit in that segment.

Leon Topalian:

Yes, for steel now, there's - you shouldn't see any pronounced impact heading into the third quarter.

Steve Laxton:

Yes, Phil. The guidance we've given on the year is about $3.5 billion for CapEx spend, we'll keep an eye on that. We'll update as we have in the past years as we get closer to the end of the year if we see any meaningful adjustment to that. And then Leon mentioned it in his prepared remarks at the outset of the call that, for the next couple of years, you'll see an elevated level of capital spending as we move through some of these projects. It's about $6.5 billion of really the larger projects that you - that you'll see us move forward on in the next couple of years.

Leon Topalian:

Thanks, Phil.

Alex Hacking:

Yes, good morning. I wonder if you could maybe comment on how much incremental steel demand, if any, you're really seeing from the IIJA at this point, or is that still something that's on the horizon? Thanks.

Alex Hacking:

Okay. Thanks. And then just a follow-up on Brandenburg, if I could. Right now, it's operating around 20% utilization rate, and if the plate market was booming, is there anything stopping Brandenburg from a technical perspective to ramping to a 100% utilization rate over the next six to 12 months, or are you still in that start-up phase proving out the capabilities phase and if the mill is really not ready to run at that rate yet? Thanks.

Alex Hacking:

Thank you.

Operator:

Your next question comes from the line of Timna Tanners from Wolfe Research. Your line is now open.

Leon Topalian:

Yeah. Look, Timna that's a fair assumption and assessment. What I would tell you is we think about products, there - the reason we forecasted a decline in Q3 is a few reasons. One, they're still working through some of that higher-priced backlog that's going to - we know is going to flow through in the coming weeks and next couple of months. However, again, one of the bright spots as we think about where inflation is, unemployment is a little bit more elevated, seeing the Fed's appetite or at least intimation for some rate cuts, that certainly could have some considerable impact, particularly to the product segment that, you would see more likely in the back-half of the year, Q4 and into Q1. But again, there's - we know what our backlogs are. Those backlogs are strong, and again from a demand picture in the Vulcraft and joist and deck, we're out for the rest of the year in terms of that backlog strength, but we also know what that pricing is. And again, we're going to see some squeeze on that, as we get into Q3.

Timna Tanners:

Okay. Thanks. And then taking a step back on the big picture, there is an incredible amount of appetite for grain-oriented electrical steel, and also for further options on automotive exposed. And I know we've talked about this in the past, but I've been hearing Gallatin can make thicker grades, I know West Virginia is targeting auto. Can you just remind us, A, when could you make some of these other auto grades and compete more broadly in the auto sector? Is that still the design? And is grain-oriented even on your radar still? I just wanted an update there. Thanks.

Timna Tanners:

Okay, will do. Thanks, Leon and team.

Operator:

Your next question comes from the line of Martin Englert from Seaport Research Partner. Your line is now open.

Leon Topalian:

Yes, Martin, look I'm going to kick it off, and I'm really glad you asked that. Over the last three or four years and really since I took over as CEO, it's been something that we've talked about and not just talked, we've actually taken meaningful steps. So you saw a few years ago, our partnership with an investment in NuScale, the small module reactor and the advanced nuclear reactors that are getting built. Obviously, Bill Gates and TerraPower are doing their own SMRs and as well as two other manufacturers. So from a Nucor perspective, we have a large power consumption that we look at. We're in 40 different states. We've got 30 EAFs around the country that we need to build relationships with. But you got to understand as well, we've been doing this since 1968. We have incredible relationships with the utilities that we're in, because we're the largest power consumer in many of those states. But the macro picture to what you're asking, as you think about the green and digital economies, you think about the data center infrastructure build-out in the cloud computing that's got to be handled, that volume is insatiable. And so, we as a nation have really got to think about how are, we going to solve that energy need, because almost everywhere they're looking, these data centers now are growing from 100 megawatts to 600, 700, 800, 900 megawatts in demand. It's a huge, huge appetite. So you're going to see Nucor continue to look for opportunities to promote, invest in or otherwise position ourselves for the long-term. So that not only do we get surety of supply at the right cost and again, many of our contracts are long-term pricing. So they're not - we're not going to the market daily or monthly. We don't have - we will have firm power rates versus variable, but we have a consistent pricing model that, we're able to look out years and years into the future that will continue that. So again, it's a really important question for our nation, as we think about manufacturing as well, as the U.S. citizens and how they're going to be able to afford energy in the years to come. As we think about the current environment in decommissioning of our existing coal plants, about 70% of them will be idle by 2030. So, we've got to find and I think we have to reembrace as a nation, nuclear energy as the cleanest, most reliable form of energy that's out there. But Steve, anything you'd want to add on kind of current climate and pricing in utilities?

Martin Englert:

Do you - I understand there's a lot of facilities, but is there an average duration or goalposts, whether that's five years or 10 years under contract for the EAF?

Martin Englert:

You touched on this or alluded to this to some degree in your answer, but do you have concerns that higher electricity rates might stymy some of the reshoring activity. And potentially disadvantage some of the U.S. manufacturing base given U.S. has been more so an ideal market, at least from a cost of energy or electricity perspective historically versus some others globally?

Martin Englert:

Okay. I appreciate all the color and commentary. Thank you.

Operator:

I would now like to turn the call to Leon Topalian, Chair, President and CEO.

Operator:

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Jack Sullivan:

Thank you, and good morning, everyone. Welcome to Nucor's first quarter 2024 earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO, along with Steve Laxton, Executive Vice President and CFO. We also have other members of Nucor's executive team with us, including Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Brad Ford over Fabricated Construction Products; Noah Hanners, Raw Materials; John Hollatz, Bar and Rebar Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial; Rex Query, Sheet Products; and Chad Utermark, New Products and Innovation. We have posted our first quarter earnings release and presentation to the Nucor Investor Relations website and we encourage you to access these materials as we will cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements and involve risks outlined in our Safe Harbor statement and disclosed in Nucor's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let’s turn the call over to Leon.

Steve Laxton:

Thank you, Leon, and thank you all for joining our call this morning. The first quarter of 2024 saw Nucor advance its growth strategy, make meaningful commercial moves and continue to differentiate itself. We also had a solid start to the year on the earnings front with net earnings of $845 million or $3.46 a share. This was nearly 10% higher than our prior quarter earnings per share, but came in roughly 4% below the midpoint of our first quarter earnings guidance range. So I'd like to take a minute to share some color on that. First and most important, results from the 3 operating segments were generally in line with our forecast for the first quarter. However, certain administrative costs and intercompany eliminations exceeded our estimates. Some of the larger drivers have higher than expected administrative costs related to employee benefits such as medical insurance coverage. Intercompany eliminations had a more pronounced impact. Higher than expected eliminations were a function of two things. One driver was the delivery of more materials from new core divisions to our own construction projects than expected. This is predominantly a timing difference between our pre guidance assumptions and what actually materialized. The second driver was more activity and profits than anticipated between our operating divisions. As most of you know, Nucor has a diverse and integrated set of this aspect provides strategic benefit, synergies and risk mitigation over long periods of time. However, that same beneficial attribute can result in short-term adjustments to earnings recognition, particularly during periods of higher rates of change in volume and realized pricing, both of which occurred in the first quarter. Generally speaking, these intercompany eliminations are simply timing differences between segment level earnings recognition and the final sale to our customers. With respect to our operating segment results, our steel mills improved pretax earnings nearly 90% from the prior quarter, generating approximately $1.1 billion in pre-tax earnings for the first quarter. Improved results in our sheet business was the largest factor driving the quarter over quarter gains. That business saw approximately 11% increase in shipments percent higher realized pricing during the quarter. Moving to Steel Products, this segment delivered pre-tax earnings of approximately $512 million for the quarter. Total segment shipments were down approximately 4% from the prior quarter. We believe an unusually wet start to the year may have adversely affected some regional construction activity during the period. While margins for downstream steel products have receded from the historically high levels of recent years, segment continues to generate attractive returns and strong cash flows. Highlighting a few individual product lines, the first quarter saw higher pricing and margin from our tubular products divisions. This was more than offset by moderating contributions from our joist and deck, metal buildings and rebar fabrication operations. Our joist and deck business continues to be the largest single contributor to our steel product segment earnings. This business tends to have backlogs and lead times of 4 to 6 months. Consequently, we believe the earnings profile of our joist and deck business will likely stabilize as we approach the back half of the year given the relative stability we've seen in pricing over the last quarter. It's worth noting that for the foreseeable future, this business is expected to maintain results that remain considerably higher than pre-pandemic averages. Our raw material segment produced pretax earnings of approximately $10 million for the quarter. Overall, volumes were higher, but lower metallics prices compressed margin for the segment. Let me now turn our attention to the balance sheet and capital allocation. We began the year with a strong cash position and generated $460 million in cash from operating activities in the first quarter. These factors enabled Nucor to continue its balanced approach to capital allocation, enabling growth through investment, providing direct shareholder returns and maintaining a strong investment-grade rating. On the growth front, during the first quarter, we continued to advance our strategy deploying $670 million in capital spending with progress made on several greenfield and expansion projects described earlier. The first quarter also saw Nucor return over $1.1 billion back to its shareholders. This includes $134 million in dividends and $1 billion in share repurchases, which reduced our share count by 5.5 million shares. It has long been Nucor's practice to put capital to use or return it. This discipline was on display again in the first quarter, where repurchasing activity was higher than normal due to our sizable cash balance at the start of the year. Today, we continue to have a healthy cash and liquidity position, an enabler of our expected near-term CapEx plans and pipeline of acquisition opportunities. Nucor's balance sheet remains robust, a financial practice that both maintains a strong investment grade rating and enables our long-term orientation and success. We ended the quarter with a total debt to capital ratio of approximately 24% and total leverage of roughly onetime trailing 12-month EBITDA. Looking ahead to the second quarter of 2024, we expect consolidated earnings to be lower than the first quarter with reduced earnings from our Steel Mill and Steel Products segment, partly offset by modest improvements in earnings from our raw materials segment. Lower earnings from our Steel Mills segment are the largest drivers of our reduced outlook for second quarter earnings. For this segment, we expect slightly higher volumes to be more than offset by lower realized prices. We anticipate our sheet business will be the largest driver of change in results for the Steel Mill segment and for the overall company. Our steel product segment continues to moderate from historically high record levels of performance. For this segment in the second quarter, we expect higher volumes and lower realized pricing with the net effect being slightly lower earnings for the segment. For the raw material segment, stable volumes and improved margins should result in an overall higher profitability. Overall, across all businesses, backlogs remain healthy and in line with historic norms. However, the anticipated reduction in realized pricing for our steel mills and steel products segment in the second quarter are expected to lead to lower overall cash flows and earnings. On a macro level, the U.S. economy appears to demonstrate near term resilience. Net strength relative to recent past expectations is an overall positive. In addition, select end markets such as advanced manufacturing, data centers and infrastructure continue to show strength from secular trends. Taken collectively, near-term demand appears stable. Looking further out, we remain cautiously optimistic on demand fundamentals given the positive trends of reshoring, repowering and rebuilding. With that, we'd like to hear from you and answer any questions. Operator, please open the line for Q&A.

Martin Englert:

Within the Steel Mill segment, both bar and plate volumes were down double-digits versus last year. Also overall steel products volumes were down to a similar degree. Do you anticipate a similar trend of kind of double-digit declines are in these products are going to continue in 2Q? Or is the sequential volume improvement expected going to start to offset this where we'll see something potentially lower?

Martin Englert:

Within steel mills, the estimated conversion costs like it declined modestly versus the prior quarter. Would you expect similar sequential decline in 2Q on conversion cost per ton given higher volumes, maybe something similar to the year ago comparable period?

Martin Englert:

If I could one last quick one, raw materials expected to improve in 2Q on both DRI and the recycling operations. What do you believe is going to drive the improvement in recycling given recent pricing trends and why has that been challenged from a margin perspective in recent quarters?

Martin Englert:

You're adding the advance in recycling separation technology to one facility right now. Can you frame up the cost impact as to what it was in 1Q for the start-up costs there and what you might anticipate in 2Q?

Martin Englert:

How many more of those do you have planned over the course of the year, if any?

Martin Englert:

And the crux of that is that allows you some increased optionality what you would charge with prime or substitutes at that facility to switch to some degree to an upgraded shred product, right?

Operator:

Your next question comes from the line of Curt Woodworth from UBS.

Leon Topalian:

I'll kick us off and then I'll turn it over to Brad and then Steve if there's any comments you'd like to make on the specifics in terms of margins. Look, our downstream products prove in general is perform incredibly well over the last several years. And I'm not looking at the data in front of me, but we had a run of 10 or 11 quarters where that group generated $1 billion of net earnings or better. Their performance over the last several years has been nothing short of incredible. And so I'm incredibly proud of what the team has been able to do, how they've come together to provide solutions, not just individual products, but taking care of our customers with the breadth of Nucor's strength, coming together and again leading the differentiated capability set in serving that market in a very different way. Again, I use the word moderating. We're seeing pricing moderate. But again, I'll let Brad speak a little bit more to some of the details, what he's seeing, what we're envisioning as we move forward and then go from there. Brad?

Steve Laxton:

Curt, I'll just add on to what Brad and Leon have said. This is Steve. And Leon talked about the profitability being in a fundamentally different position. Our segment profits were over $0.5 billion from that segment this quarter. And if you go back pre-pandemic, we averaged call it, $450 million in EBITDA from that segment for a year. So we are fundamentally positioned different as a company today than we have been in the past. So when you reference this moderation, it has to be taken in a broader context of those along with demand trends that are Brad referenced that are pretty good. We're not going to get into the profitability particular products within that segment. We've not done that. But what I will point you to give you a little bit of an orientation. Again, Brad referenced that we have a very diverse set of downstream businesses, and 20% to 25% of our volume is from the joist and deck business and roughly 20% to 25% is going to be pipe and tube and about 20% to 25% is rebar fabrication. So I hope that gives you a good mix of the products that's set in that segment.

Leon Topalian:

I'll kick this off and John, if I miss anything on the bar side, if you want to comment on, please jump in and then I'll maybe touch on Brandenburg's ramp. Curt, I'll just start with the 3 pieces of legislation and the great news that we've been talking about for way too long are passed right there. The money is there, it's in the books. Obviously the furthest along in the three of those pieces of legislation are the CHIPS Act. And we got 83 new semiconductor products that have been announced worth an estimated roughly $350 billion worth of CapEx that will be built out in the coming years. To date, '23 of those have broken ground and begun construction. So that's real. Those orders are coming. We're seeing that in flowing through into our different product groups. If we look at IRA Next, that's sort of the next, most advanced behind the CHIPS Act where again, when we look at renewables, particularly solar, for tubes, we're seeing those orders again in our books, being produced, being shipped and moving. And then last and probably the most lagging in that is IIJA or infrastructure that again, funds are there federally, got to flow through the states and then execute on the individual projects and highways, bridges and the like. That's still in the very, very early innings, and we're expecting in the years to come, next 2, 3, 4, 5, we'll see all 3 of those continue to ramp. We still estimate that the total between the 3 is somewhere between 5 million and 8 million tons annually over the next 4 or 5 years that again will have a positive impact. The thing that, as you look to Nucor in our strategy or growth plate, where we're going focusing, I mean, some of the megatrends are showing more than double-digit growth for the next 5 years like data centers, like towers and structures that we're in, that we're incredibly excited about that we also think is going to be an incredible tailwind. And most of our groups, not the least of which are playing, sheet beams and products will play a significant role. Do you think you'd like to add, John, on that?

Al Behr:

This is Al Behr. I'll just comment quickly on your question about Brandenburg. The Brandenburg ramp up continues to go according to plan for this year that we talked about on the last fall, which is about 500,000 tons for the year. Our volume in Q1 was about 50,000 tons. Obviously, it's going to be heavily weighted to the second half, but I'd expect to double that tonnage in Q2 and double that again in Q3 and Q4. So it continues to be a capability story. We shipped our first head plate for a tank railcar customer, so that's something new for us. We weren't able to take care of those customers before. It's a new capability. So we continue to tick off these new firsts for Nucor on how we can take care of our customers due to the capability Brandenburg gives us and the volume will come with it, just like we thought.

Tristan Gresser:

Maybe to start with a quick follow-up on the downstream outlook. With what you said about joist and deck and prices normalizing and the volume direction. Is that fair to say that Q2 will mark the trough for the divisions? And when we look at the H2 outlook, given the visibility you have certain of your products, is it fair that we have more of a stable kind of environment from an earning perspective, but nothing yet to be more optimistic or positive in terms of earning momentum there.

Tristan Gresser:

Yes, pretty much. And given if you have some visibility on certain products that are really big for the division like joist and deck and you're saying prices have stabilized. It looks to me that you have all the elements to say that Q2 would potentially mark the trough for the division. And then given the visibility you have, I'm just trying to understand if we're looking at more of a stable outlook in the second half of the year for the division, the steel product division? Or if given the positive commentary you mentioned on joist and deck, could we see even, I don't know, an uptick in prices, an uptick in margins and be a bit more positive on the earning direction for H2?

A – Brad Ford:

Yes. Steve, the only thing I would add is from a volume perspective, non-res construction is somewhat seasonal. So Q1 tends to be a bit lower volumes on the product side. Q2 and Q3 are usually more robust and that's what we're seeing right now.

Leon Topalian:

Yes, I'll kick this off and then maybe ask Chad Utermark to borrow who's overall for M&A and new businesses that we acquire Tristan, but we're really excited about the opportunity that the long-term projections are. Boston Consulting Group is projecting about 12% to 14% year-over-year growth in data center construction over the next 4 or 5 years. Couple that with, again, just a little bit of a pivot here, couple that with the demand of power that many of these large hyperscalers need, you're talking hundreds and hundreds and hundreds of megawatts. So the infrastructure build out required, the energy requirements are prompting a few things. One, we're going to continue to grow in this space. Two, under Chad's leadership as we make these acquisitions and I shared earlier in my opening comments, we now have a data center group that will provide holistic solutions to our hyperscalers and other major data center builders. And so again, these are long-term, long established relationships that we have in the marketplace. And again, you're going to see Newport continue to move forward. Many of the questions we often get on these earnings calls are what are you going to do with the money? What are you going to do with the cash you're generating or sitting on? And again, we returned over 130% of that back to shareholders in Q1. But our focus without getting too far is going to be in the megatrends in this economy that we see are going to continue to generate incredibly strong and robust growth and returns for our shareholders, data centers being one of them, southwest makes the sort of pathways for cool air to come in and hot air to get out. In terms of that data center, the 147 team members that we look forward to welcoming into the Nucor family and or into the Nucor family. But do you have any other details that you'd share on the market in general in Southwest?

Tristan Gresser:

And maybe a final question on Econiq. Do you have any volume target? Or can you disclose a little bit on the volume, how much you're selling or you target to sell in coming years? And if I look at the carbon intensity at which you're selling, if you were to sell that product in Europe, you probably get a premium, a selling premium of EUR150, EUR200 per ton. So it can be pretty significant. The U.S. market is much different. But I was wondering if you could share as some other peers have done, the type of premiums you're looking at for this tonnage.

Dan Needham :

And Tristan, this is Dan. What I would add to that is, if you think about Econiq, we rolled that out a couple of years ago, it's about a net zero product for Scopes 1 and 2. The markets evolved quite a bit since then. And what I would tell you is that sustainability is absolutely a personal journey for a lot of these companies. And so we've evolved as the market has and we're offering what the customers need. So we're very flexible as we just announced the Mercedes that was an Econiq-RE product around Scope 2, because that's what the customer has desired. So we're very flexible as we approach that. Your last question was around premiums. I'm not going to get into specifics around what that is, but there absolutely are premiums that we're achieving and realizing here in U.S. And if you look at how that's shaping out in Europe, I'd say it's similar to what's happening in the United States.

Timna Tanners:

I was hoping for a little more color on the outlook because we're struggling a bit to get to the decline quarter-over-quarter. I think it has a bit to do with the fact that you pointed out, which is seasonally demand does improve usually in the second quarter for your key end markets. And so in light of that, maybe it would be helpful to discuss the corporate eliminations impact, if that's sticky into the second quarter, if some of those in process inventories to some of your projects are going to remain elevated or how we can think about that, if you can help us a bit with that guidance?

Steve Laxton:

The only thing I would add to what Leon said is, and you're very knowledgeable of our business and know how that how our products flow through the different businesses we have. And we do see volume pickups in both steel and in products. And so you should reasonably expect that the quarterly limbs might look different for the second quarter than they did the first quarter. Having said that, the pricing pressure on both mills and products are expected to give us a little bit lower results in the second quarter. So I think your question was a correct characterization of some of those pluses and minuses as we look at Q2.

Steve Laxton:

I think what you, the first quarter is really an excellent piece of evidence of how Nucor thinks about managing its balance sheet. And that's over number one, it's very long-term perspective that we take. And number two, it's a rigor and a discipline around we put our capital to use or if we can't find the right uses for it to create value, we give it back to shareholders. And that's something we've done for years, years, and that was on the same store in the first quarter. One of the reasons we had a fair amount of liquidity at the end of the year last year was because of potential M&A pipeline activity. And we felt comfortable releasing that capital, if you want to call it that in the first quarter, at a higher rate than we normally do. We're still set with an excellent balance sheet, great leverage position, good liquidity, an active M&A pipeline, a smooth commitment to growth. And so we're striking that balance. It looks maybe a little bit choppy because of the amount of dollars quarter-over-quarter from the fourth quarter, but we were blacked out parts of the fourth quarter from some of the share buybacks. So that's part of why you're seeing the change if you're thinking about quarter-over-quarter numbers.

Leon Topalian:

I was just going to say, look, to get a little more qualitative, if you asked in sort of roundabout way, Nucor is probably not going to sit on $5.5 billion $6 billion of cash on a normal basis. We're thinking hard about that. There are some other activities in the M&A pipeline we're looking at that can't get any further than that to tell you. But again, you've watched our company long enough to know our return metrics, how we think about rewarding our shareholders and share repurchases, and you can expect that mindset and focus will continue well into the future.

Bill Peterson:

I wanted to kind of come back to the plate market. What are your views on the market given elevated inventories, apparent consumption turning down for the last 12 months? And then I guess as we, I guess how do you think what are the key drivers that will unlock this market? And then especially, taking into account you are ramping Brandenburg, it sounds like you're planning to double over the next few quarters. Just want to get your thoughts on the market as we look ahead over the next several quarters.

Bill Peterson:

And then coming to the customer spot index that you employed. I guess, what were you looking to achieve and how do you address concerns if this could potentially compete with indices? You commented that you're doing it for customers, but is this is this something customers have been asking for? Can you share any sort of feedback you've received thus far from customers? And I mean, I guess, if we were to take it one step further, are there any expectations to expand this type of thing to other steel formats, our customers asking for other products?

Rex Query:

Bill, I'll only add a couple of comments. I mean, Leon covered it well. Really, as we develop the CSP, we looked at the cycles over the last several years, and it was very predictable. As pricing started to firm, we would see customers enter into speculative buying. They would pull ahead demand. Lead times would then extend. Pricing would generally go up beyond, really supply demand balances, inviting imports in, inventories would balloon, and then we had to work that off, and you could see orders stop and pricing fall dramatically. So as we looked at that, we said, how can we create stability, potentially avoid speculative buying and it's through, us offering a current look at what we see spot pricing to our customers in the marketplace and maintaining our lead times, so they can count on what's happening. And that's really what we looked at, and we've got positive feedback at this point from our customers as Leon stated.

Leon Topalian:

In closing, I just want to thank our Nucor teammates for a great start to 2024. Let's continue to stay focused on our most important value, the health, safety and well-being of each and every one of our 32,000 team members that make up the Nucor family. And thank you to our customers and shareholders for the trust that you've placed in us both in the order books, in the orders that you give us, as well as the valuable shareholder capital that you trust us with. We will work hard each and every day to earn your trust in your continued business. Thank you and have a great day.

Jack Sullivan:

Thank you and good morning, everyone. Welcome to Nucor’s fourth quarter and year end 2023 earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO, along with Steve Laxton, Executive Vice President and CFO. We also have other members of Nucor’s executive team with us, including Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Brad Ford over Fabricated Construction Products; Noah Hanners, Raw Materials; John Hollatz, Bar and Rebar Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial; Rex Query, Sheet and Talent Resources; and Chad Utermark, New Markets and Innovation. We have posted our fourth quarter earnings release and presentation to the Nucor Investor Relations website. We encourage you to access these materials as we will cover portions of them during the call. Today’s discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results maybe different than forward-looking statements and involve risks outlined in our Safe Harbor statement and disclosed in Nucor’s SEC filings. The appendix of today’s presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let’s turn the call over to Leon.

Steve Laxton:

Thank you, Leon and thanks to our shareholders for joining us this morning. Nucor ended 2023 on a strong note with fourth quarter consolidated net earnings of $785 million, including $127 million of pre-operating startup cost. We exceeded the midpoint of our guidance due primarily to better-than-expected performance from our Steel Mills segment in the month of December. In addition to solid earnings for the quarter, the power of Nucor’s business model allowed us to generate more than $1.5 billion of operating cash flow during the quarter, with working capital contributing about $250 million of that total. Turning to our operating segment results, our Steel Mills Group generated $588 million of pre-tax earnings in the fourth quarter, a decrease of 33% from the third quarter. Total steel mill shipments declined 4% from the prior quarter and realized pricing for the segment was lower across all major products. Our mill utilization rate was 74%, down from 77% in the prior quarter, but higher than the 70% in the fourth quarter of 2022. In the back half of the fourth quarter, we saw an uptick in customer confidence as the UAW strikes were resolved and the Federal Reserve signaled the end to interest rate hikes. Shipment volumes increased as the quarter progressed and we began to realize higher pricing for sheet steel consistent with pricing trends in the published indices. We are expecting further improvements in both shipments and realized pricing to favorably impact results in the first quarter of 2024. Our Steel Products segment delivered another strong quarter with pre-tax earnings of $656 million. This represented just over half the total segment earnings for the fourth quarter and is the sixth consecutive quarter with Steel Products contributed at least 40% of our total segment earnings. For the year, Steel Products generated segment earnings of $3.4 billion, its second best year behind 2022. Realized pricing and margins continued to moderate in the fourth quarter, but on an earnings per ton basis for the full year of 2023, only gave up about 6 percentage points. Our Raw Materials segment posted a pre-tax loss of about $14 million for the quarter. Compared to the prior quarter, pricing was relatively stable, but output was lower and per ton cost rose due to planned outages at our DRI facilities. Now turning to capital allocation, with $2.2 billion in capital spending and $2.1 billion in shareholder returns in 2023, Nucor once again demonstrated a measured and balanced approach to its capital deployment. With respect to our shareholder returns, it’s worth noting that next week we will pay our 203rd consecutive quarterly cash dividend in the amount of $0.54 per share. This represents a 6% increase over the prior dividend. As Leon highlighted, Nucor is taking meaningful steps to grow its earnings power and cash flow potential. Since 2018, we have been able to increase our dividend by 42% and reduced our shares outstanding by 23%. For the foreseeable future, we remain confident we will continue to be able to return at least 40% of our net earnings to shareholders by way of dividends and share repurchases. A cornerstone of our capital allocation framework is a commitment to a strong investment grade credit rating and liquidity that enables our strategy. Nucor’s balance sheet remains well positioned to enable continued execution of our balanced capital allocation philosophy, with a debt-to-capital ratio of 25% and a debt-to-EBITDA ratio of less than 1%. We have a long history of putting capital to use and returning capital to shareholders. Given that principle and our ambitious growth plans, we do expect to end 2024 with a lower cash balance than when we started the year. We finished 2023 with a strong cash position for several reasons. First, with more than $7 billion of cash from operations, we generated robust cash flows throughout the year. Second, we experienced some timing delays in our planned capital spending. And finally, we were preserving liquidity for possible acquisition opportunities, which ultimately did not materialize. Now that we have broken ground in West Virginia, the pace of our capital spending should accelerate. For 2024, we expect total capital expenditures of approximately $3.5 billion, with our 7 largest growth projects represented approximately two-thirds of this total. In addition, we are firmly committed to growing our portfolio of solutions and expand beyond footprint through value-creating acquisitions. To that end, we are actively fostering a pipeline of acquisition candidates. As always, we will be selective, opportunistic and disciplined in our approach. But unlike our organic growth strategy, the timing and size of potential acquisitions is far less predictable. Looking ahead to the first quarter of 2024, we expect consolidated earnings to be higher than the prior quarter, with improved performance from the steel mills and raw materials segments, partially offset by weaker earnings from the Steel Products segment. For the Steel Mills segment, we expect quarterly earnings to increase due to higher realized pricing and higher volumes, in particular, from our sheet mills. In the Steel Products segment, we expect lower realized pricing compared with the prior quarter. Across most of our steel products groups, current backlogs are consistent with historic norms, while margins have remained higher than historic averages. For the Raw Materials segment, we expect modest profitability on higher shipments and relatively stable pricing. Looking ahead, 2024 appears to have a more stable outlook than may have been expected just a few months ago, with a reasonable probability of seeing the much discussed soft landing. As Leon mentioned in his opening remarks, the U.S. economy appears relatively healthy with inflation and unemployment metrics continuing to trend favorably. Market expectations for gradual declines in interest rates could result in more demand for consumer durables, light vehicles and increased activity across a broad construction sector. As the most diversified producer of steel and steel products with the widest array of market solutions, these potential expectations bode well for Nucor. Looking beyond 2024, several steel-intensive megatrends are only in the early stages. While economic cycles will continue to impact the markets, we broadly see positive demand drivers that provide a constructive backdrop to Nucor’s midterm growth potential. With that, we’d be happy to take your questions. Operator, if you would, please open the line for Q&A.

Curt Woodworth:

Yes. Thank you. Good morning, Leon and team. And I am sorry to hear that you guys lost a team member in November, but overall congratulations on what’s been a pretty strong safety performance the past several years. My first question is more end market related though in your slide deck, you did have a generally constructive outlook to use your words with regards to commercial construction as well as infrastructure. But when we look at the volume performance of the Bar and Beam mills and even plates to some degree, it’s been pretty choppy to down for almost 2 years now. So I guess what gives you confidence that, that market can inflect? What signs are you seeing in terms of either increased bidding activity on the Highway Bridge side? Or how your order book is shaping up?

Dan Needham:

Curt, this is Dan. I’ll give a little perspective on what we see in the market, in particular, with funding programs as well. But if you think of the trends, right now, we are seeing activity in some of the reshoring in the advanced manufacturing, so you are seeing in the EV battery plants those types of things. From a standpoint of IRA, CHIPS and the Infrastructure Act, there is more activity going on on the energy side with the IRA and also with the CHIPS. We are active in shipping to multiple CHIPS plants that are under construction today. From an IRA standpoint, we have seen a lot of activity in solar, particularly 2023 was a record shipment year for us on Torque 2 to go into these solar projects. And we see in that growing into 2024. It is about 22 gigawatts built in ‘23. We say go in to 22 – about 36 gigawatts in ‘24. What I would say is some of the headwinds, we see the peak of those activities in the volume and demand coming in the next few years. And the reason for that, there is a couple of things that are headwinds now. One is we have talked about on past calls is the labor constraints. That’s real out there. A lot of these projects are competing for the same labor pool. So we do see that having an impact. And then the other thing that’s also impacting the pace of these projects is really around regulations. And what I mean by that is getting access to energy for some of these plants is important. That’s a slow process. The other thing is environmental permitting. So we’re seeing some headwinds with those, but not just delaying the projects. And lastly, around the infrastructure it can take upwards of 18 months to go from when these projects are announced is actually when they start getting shipped. So that’s why we still see some optimism and are very positive in the outlook and we’re well positioned to take advantage of all of these trends going forward.

Leon Topalian:

Yes, Curt, that’s a lot to unpack in there. What I would tell you on the macro, and I’ll let Brad Ford share a little bit more of the details, could be more proud of how our products groups and teams and divisions have performed over the last several years. The non-res sector of our economy has remained incredibly resilient. We had 10 straight quarters over $1 billion earned in that business on the downstream side of our portfolio. And while it was a little bit under that for Q4 of ‘23, its continuing performance is strong. We’re seeing order entry rates that are strong. As we move into Q1, we see that moving upwards. I’m not going to get detailed on the margins, but we see that improving. And so Brad, maybe provide a little bit more context to what we’re seeing as we enter 2024.

Curt Woodworth:

Great. Thank you very much.

Operator:

Our next question comes from Katja Jancic with BMO Capital Markets. Please go ahead.

Leon Topalian:

Yes. I’d actually been pleased to. So in November of 2022, we stood in New York and rolled out the most comprehensive detailed analysis that we’ve ever published before to show you as the analysts what we were going to do and the accountability by which we’re going to hold ourselves to that through-cycle EBITDA with the completion of our CapEx investments would yield about a $6.7 billion through-cycle EBITDA performance. I’d tell you at $7.4 million for the third best year in Nucor, we’re doing really well and that’s going to continue to improve because not all those projects have come to fruition yet. We’ve got galv lines being built, we’ve got our new micro mill being built in Lexington, North Carolina, we’ve got the investments in Kingman, Arizona that we’re making, where we’re expanding our resource pool and how we bring these products to market. So I would tell you we’re doing incredibly well. And again, we will look back at times and look – coming out of the cycle, did we hit the trough? And what I would tell you is I’m really proud of our earnings. I’m proud of the way the team has been able to accomplish those. And then again, the results that we’ve been able to see, as we shared with you on the opening remarks, to generate $30 billion over the last 4 years, $20 billion in net earnings and 10% or $10 billion given back to our shareholders has been an incredible well disciplined growth strategy and that’s going to continue. We’re going to be very disciplined in how we think about capital allocation moving forward. Steve, anything you’d like to add on as we continue to grow and looking at that run rate of 6.7%?

Katja Jancic:

And maybe just quickly on the Brandenburg plate mill. How much do you expect the mill will produce in ‘24? I think previously you were expecting about 500,000 tons?

Katja Jancic:

Thank you.

Operator:

The next question comes from Timna Tanners with Wolfe Research. Please go ahead.

Leon Topalian:

Yes, Timna, I’ll kick it off and then let Steve. So I’ll begin with the second part of your question, which, again, obviously, the proxies have Nucor took a hard look at some of the select assets within the U.S. Steel portfolio. But at the end of the day, we’re not going to overpay for any assets. We’re going to continue to be very discipline and how we thing about growth. Some of the cash generated was just stronger results and stronger shipments and some pricing and flow through that we didn’t fully anticipate. But I would tell you again from my perspective, we continue to remain an incredibly undervalued stock as we think about the growth metrics that have already shared won’t repeat again, but at 7.5x EBITDA, I think we are a great value in terms of the things that we’re doing in producing. In regards of who ends up owning U.S. fields assets, Nucor today’s market cap is larger than the next three largest combined steel companies in North America. We are the industry leader. And so again, as we look at our strategy and our growth we’re going to be incredibly disciplined in making sure that the investments we make in our core and expand beyond are delivering the results our shareholders expect. And then they expand beyond particularly that it’s providing some insulation to the traditional sickle county of steel that we’re looking for the steel adjacent downstream businesses that, again, operate a little countercyclical to what we’re seeing in steel and we’re seeing those, again, manifest themselves for CHI, the megatrends that we’re seeing in towers and structures and some of the other businesses that we’ve acquired over the last 3 or 4 years.

Timna Tanners:

Okay, that’s super helpful. Thank you for the color. I guess one quick one, if I could add. I know there was a question already about Brandenburg run rate, but I was just wondering, is there still more room to see Gallatin on an annualized basis ramp up? Or is it already pretty fully running out those to the expansion? Thanks again.

Timna Tanners:

Yes, the status of that, if you could, please?

Timna Tanners:

Okay. Thanks again. Appreciate it.

Operator:

The next question comes from Bill Peterson with JPMorgan. Please go ahead.

Al Behr:

Yes. Thanks Bill. This is Al Behr again, I will comment on the plates stuff. We did have an increase year-over-year in shipments by 11% and part of that is, of course, Brandenburg. But just speaking about the plate market overall, I would say we are reasonably optimistic. I mean there is areas of weakness that get some headlines and higher interest rates, are a compressive force when it comes to vertical construction where plate is used. But there is plenty of bright spots in other areas like power transmission and railcar manufacturing. Heavy equipment is still strong. It’s probably declining, but it’s still strong and a good pull-through for us. So – and then of course, you have got the bridge and highway tons that are mostly yet to come, and that will come for years in the future. So, our Skyline business that Brad mentioned pulls a lot of plate tons through almost all of their work is infrastructure related, not just bridge and highway, but many other types of projects. So, our view is not that the plate market is going to be wildly robust, but it’s going to remain pretty steady and has plenty of tailwinds to offset some of the other forces working against us.

Al Behr:

I would expect we hit a run rate of breakeven sometime in the middle of the year.

Leon Topalian:

Yes. Look, I will begin and Greg Murphy, our EVP in Business Services and Sustainability can jump in as well. But from a high level, look, it’s a great question. One of the beautiful things about Nucor and our positioning is this, one of the top five recyclers in the world and certainly the largest in the Western Hemisphere. Our EAF steelmaking technology means that we don’t have to take the billions and billions and billions of dollars of profit we are making in pivot in transition from the old style integrated facilities. You are seeing headlines around the world companies in Europe that are – have made the pledge to 100% switch to EAF steelmaking technologies because they have no choice. The question in my mind isn’t about and if. This nation is going to move to a greener, more sustainable platform as we rebuild, restore and continue to grow the digital economy. The real question in my mind is the pace in which we changed, do we have the infrastructure, do we have the grid hardening, do we have the resources across the United States to be able to effectively help the EV users power their cars at homes and everything else. But it’s a long-winded way to get to the answer of your question is if you think about the PPAs that were part of, you think about some of these investment projects, the Louisiana partnership in Exxon, they didn’t cost us anything because of the strength of our balance sheet, the strength of Nucor’s leadership position, it wasn’t a huge outlay of cash, if you think about some of the other investments that are smaller in size. So, they are not – there are tens of millions rather than hundreds of billions. It’s positioning ourselves and finding partners out there that are doing different things with carbon and biochar. We are looking at technologies in Europe that are producing pig iron at or near net zero embodied carbon. So, there is a number of things that we are examining that are not at this point, large scale from a CapEx standpoint. Greg, anything you would add to that?

Bill Peterson:

Thanks for the conference and answers and good luck with the execution.

Operator:

The next question comes from Martin Englert with Seaport Research Partners. Please go ahead.

Leon Topalian:

Good morning.

Dave Sumoski:

Yes. This is Dave Sumoski. Certainly, some of the growth projects, especially Gallatin has – that’s increased our cost based on some of the things that we have done up there and some of the – it was a little bit slower but starting than we had expected. So, we can expect the costs to come down a little bit, but not a lot. I think Gelatin is running at a really good rate now, where I will say we were probably here near full run rate, so we are going to be in a good spot this year.

Al Behr:

Sure, Martin. Hey. This is Al Behr again. I will start with plate, so year-over-year growth, but you see same quarter year-over-year, we took a step back. A lot of that is just we are not going to chase cheap tons. And in Q4, we had some of the imports come in, and those spreads just got to be where we are not going to load our books with tons that aren’t profitable and aren’t going to drive returns for us. So, I think that will change as we move forward, and I spoke to our outlook for 2024 in plate. In beams, you saw a really great quarter of beams. Part of that speaks to the resiliency of the market and Brad spoke to that, and we have spoke to that. It just remains a resilient market, and there is plenty of areas of strength where we can go and compete and win and you see that. But part of that is also the breadth of Nucor’s portfolio. And some of those tons, you see in the beam group are tons to our downstream customers, Skyline being one of them, that won some nice projects and you will see them ship those tons through the first half to say, convert and perform. So, there is just always – Nucor’s success is a multilayered story. There is always a cylinder firing. And the numbers that you see, I think just reflect that, especially on the beams side.

Leon Topalian:

Thank you, Martin.

Tristan Gresser:

Yes. Hi. Thank you for taking my questions. The first one is on capital allocation, and thank you for touching on the M&A situation. If I could just have a quick follow-up there, when you look at the pipeline of opportunities, is it fair to assume the most – well, all those opportunities are inside the U.S. and you are not looking at opportunities abroad. And in the past, when you look at the balance between organic and inorganic, I wonder if you could comment a little bit where in the priority list, greenfield projects, you par essentially. That’s my first question. Thank you.

Tristan Gresser:

Alright. That’s helpful. Moving on to maybe the rebar market, can you discuss a little bit the demand trends you have been seeing there over the past a couple of weeks? And we have seen the price hikes coming through, putting an end to some metal spread compression. Do you see any reason on the ground to expect further moderation, or you believe the market has now find kind of a new equilibrium there? Thank you.

Tristan Gresser:

Okay. That’s clear. Maybe last question then on plate, I know it has been discussed a bit, but in your outlook, the weakness you are seeing in heavy equipment or earthmoving machinery, how new is that? How severe is it? And in terms of outlook, I think you mentioned something, you said it would be steady. Should I understand it as weakness – those incoming part of – portion of weakness being offset by more supported construction infrastructure that’s coming on?

Tristan Gresser:

Yes, the kind of the red dot you put in the table and that includes heavy equipment, earth moving machinery. So, some weakness you are seeing there, just trying to figure out if that’s new and if it’s severe. And then when you look at the outlook for metal spreads for plate, they have been pretty steady in January. Is that something you expect to continue, or do you think that weakness you just flagged this could potentially imply some further moderation there?

Tristan Gresser:

Yes, that’s really helpful. Thank you for the color.

Operator:

The next question comes from Curt Woodworth with UBS. Please go ahead.

Steve Laxton:

Yes. Curt, this is Steve. The $3.5 billion projection is our expectation for 2024. And I think if you are trying to extrapolate what future years are going to be, some of those projects like West Virginia are going to push our capital spending into ‘25 higher than historic averages. But likely, if you are potentially not something, it’s probably below that $3.5 billion, if you are trying to look for a direction, but north of $3 billion, if I would guess. And in terms of when West Virginia is completed, it will be in 2026. So, that’s a project that will keep going for some time for us.

Curt Woodworth:

Thank you.

Leon Topalian:

In closing, I just want to say thank you to our Nucor team members for another great year in 2023 as we begin ‘24, let’s make sure we take care of our most important value the health, safety and well-being of our Nucor family. Thank you to our customers for the trust you place in us with each and every order and thank you to our shareholders for the valuable capital that you entrust us with each and every day. Have a great day.

Jack Sullivan:

Thank you, and good morning, everyone. Welcome to Nucor's third quarter 2023 earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO, along with Steve Laxton, Executive Vice President and CFO. We also have other members of Nucor's executive team with us, including Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Brad Ford, Over Fabricated Constructions Products; Noah Hanners raw materials John Hollatz, Bar Products and Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial Strategy; Rex Query, Sheet and Tubular Products; and Chad Utermark, New Markets and Innovation. We posted our third quarter earnings release and investor presentation to Nucor's IR website. We encourage you to access these materials, as we'll cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different and involve risks outlined in our Safe Harbor statement and disclosed in Nucor's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let's turn the call over to Leon.

Steve Laxton:

Thank you, Leon, and thank you all for joining our call this morning. With third quarter consolidated net earnings of more than $1.1 billion, we exceeded the midpoint of our guidance by about 10%. The main driver of this exceedance was better performance in September than we expected from many of our businesses, the most notably in our bar mills and several downstream steel products divisions. The strength of Nucor's business model and growing the earnings power were on display yet again. The third quarter was our 10th consecutive quarter were both net earnings exceeded $1 billion and return on equity exceeded 25% on a trailing 12-month basis. With respect to our operating segment results, our steel mills group generated $883 million of pre-tax earnings in the third quarter, a decrease of 37% from the second quarter. While volumes declined roughly 4% from the prior quarter, lower realized pricing accounted for most of the earnings decline. As an example, our realized sheet pricing for the third quarter fell by roughly $80 a ton compared to the prior quarter outpacing more modest declines in our cost of scrap and ore base metallics. Our utilization rate for the quarter was 77% down from 84% in the prior quarter. This lower utilization rate was a key factor affecting higher price per ton conversion cost at our steel mills. We continue to see excellent results from our steel product segment. Pre-tax earnings for steel products were approximately $807 million for the third quarter. As you know our steel products business produces the most diverse set of solutions in our industry and were benefiting from this broad range of capabilities. During the quarter, we saw stronger contributions from areas like rebar fabrication, pre-engineered metal buildings and insulated metal panels. These partially offset some declines in joist and deck and tubular products. While Joist and deck profitability continues to moderate from historically high levels, it remains well above pre-pandemic averages. Although there is a lingering lack of clarity with the overall economy, we're still seeing areas of growth within non-residential construction. Here again Nucor's diverse product range is allowing us to see gains with advanced manufacturing facilities and data centers on the buildings front and transportation and energy on the infrastructure front. Our raw material segment produced pre-tax earnings of $71 million for the quarter compared with the prior quarter we shipped lower volumes and saw lower realized pricing in both our DRI and recycling businesses. Nucor generated nearly $2.5 billion of cash from operations during third quarter, and $5.6 billion through the first 9 months of the year. This strong cash flow enabled our balanced approach to capital allocation. Our framework for capital remains the same. We expect to maintain a strong investment grade balance sheet, make meaningful direct returns to shareholders and create long-term value by redeploying capital and advancing our strategy. Nucor's balance sheet remains strong with a total debt to capital of just around 24% and more than $6.7 billion of cash on hand at the end of last quarter. This level of liquidity provides support as we move into a period of accelerated capital spending over the next year with large capital projects such as our West Virginia Sheet Mill, while also enabling potential M&A activity. Nucor has a long track record of returning capital to shareholders. Since 2020, Nucor's returned approximately $9.3 billion back to shareholders through dividends and share repurchases. Year-to-date, Nucor's returned nearly $1.8 billion or 47% of net earnings to shareholders. Turning to capital spending. As you may recall, initial progress on several of our growth projects was slower-than-anticipated. But in particular, our largest project in West Virginia was delayed. Because of the slower spending and timing delays, we're reducing our 2023 capital spending estimates from $3 billion to approximately $2.4 billion, with the difference between those figures being pushed into 2024. For our fourth quarter outlook, we expect consolidated earnings to be lower than the third quarter with declines across all three segments. At the steel mills, we expect earnings to decrease compared to the third quarter results on lower realized prices and slightly lower volumes. Given that most of our sheet business is sold on contracts, recent improvements in pricing are not expected to improve average realized selling price until later in the quarter. In our steel product segment, we expect slower volumes and lower realized pricing as well. For the raw material segment, we expect lower earnings in the fourth quarter due to margin compression and planned outages at our DRI operations. Looking ahead into 2024, we have attractively priced backlogs into the second quarter for some of our steel products, with continued strong order activity expected in manufacturing, data centers and energy. So while we remain constructive over the long-term due to expected secular demand drivers, near-term market conditions have softened. We attribute this to uncertainty arising from the United Auto Workers strike, higher interest rates, credit tightening, elevated geopolitical risk and concern about another potential U.S government shutdown. As of today, we expect the sequential declines in our fourth quarter earnings may exceed that of our third quarter decline. With that, we'd like to hear from you and answer any questions you may have. Operator, please open the lines for Q&A.

Tristan Gresser:

Yes. Hi, thank you for taking my questions. The first one is on capital allocation. Could you remind us what is the place of inorganic growth and the strategy? I think you touched on potential M&A. I think in the past you viewed M&A as more on the downstream side, but how do you view the upstream and how do you view the current federal market at the moment? That's my first question. Thank you.

Steve Laxton:

And Tristan, the other thing I might add to what Leon said was, you started the question with capital allocation. And just as a reminder, Nucor has been and Leon used the word balance. Balance is really the key summary there. We have a disciplined and consistent approach with returning capital back to shareholders, which we enforced for a number of years, reinvesting in our business. And your question was about how do we look at organic versus inorganic, and as Leon walked through some examples, you can see that we take advantage of opportunity where we can create value. So we don't expressly have an inorganic more M&A strategy. We have a strategy and M&A is a tool by which we use to implement that strategy.

Leon Topalian:

Yes. Tristan, the short answer is yes. If you think about all of that, and another 100 variables of upstream product differentiation other materials, Nucor is -- and our team and M&A team review that consistently. And we've looked and again, one of the great things about having a comprehensive strategy, it informs you as much about what you're not going to do is what you are. So the things that we've made and the investments that I've just highlighted are really reflective of the opportunities that we're going to continue to look for in the pipelines and those megatrends that are existing in archive. They're going to provide a differentiated value proposition for our customers. So the megatrends like towers and structures, the opportunities and sustainability and iconic steel that we're making with zero net carbon footprints, how are we thinking about the manufacturing build out of EVs, battery plants, data centers that, again Nucor is really well-positioned. And so, what I would tell you is, all the things you mentioned come into the filtering of how we're thinking about M&A. But ultimately, what Steve and I just mentioned, are the drivers of can we create EVA for every dollar invested that it's going to return well above our cost of capital to our shareholders, and also giving us a opportunity to, again, improve the overall volatility of our earnings profile through cycle performance is much more consistent over the long-term.

Leon Topalian:

Yes, Tristan, I'll start it off and maybe ask John Hollatz, our EVP over bar products to comment as well. But, look, we announced an exploration that we're going to look into the Pacific Northwest, as we think about what we've done in the bar group itself in the -- our footprint in rebar is significant. And so, in the micromill strategies and what we've seen in the bar group itself in the -- our footprint in rebar is significant. And so in the micro mill strategies and what we've seen in Sedalia and Frostproof and now what we're getting to see come online in '25 in Lexington, North Carolina, it gives us an awful lot of excitement and optimism, but so do all our other facilities that are running rebar. So the market is growing, we know that. We know it's going to grow similar to that 2 million ton range. And to your point, there's a lot of announced capacity, not sure all of that will see light of day. But again, we know the Pacific Northwest we have our Seattle operations play. It's been running a long time and consistently one of our great financial performer and return to the team there does an amazing job. And so we know the customers there, we know the growth that's going to be there. And again, we think it holds a great deal of promise as we evaluate this in the coming months. John?

Tristan Gresser:

All right, I appreciate the color. Thank you very much.

Carlos de Alba:

Yes, good morning everyone. So -- just on the steel products, the steel fabrication business, you did mention that profitability has moderated, although it remains quite strong above pre-COVID levels. Can you provide a little bit more color regarding your order book, your backlog? Where does it extend to? And any sort of magnitude of the potential deceleration -- continued deceleration, if that is what you're seeing in the fourth quarter and perhaps into the 2024 year in terms of pricing and volumes, anything will be quite important for us.

Brad True:

Yes. Thanks, Leon. As Leon mentioned, backlogs have come down some, but are still well above pre-pandemic levels. And we have strong pricing in our backlog. We'll see some seasonal slowdown as we normally do this time of year. But we'll still have great results and strong earnings in Q4. One thing I would mention in addition is our diverse product portfolio continues to differentiate Nucor. While we saw moderating pricing and volume mainly driven by warehouse demand in our joist and deck business. We saw near record and record earnings in our pre-engineered metal buildings businesses, our insulated metal panel business and rebar fab. All three had stronger earnings quarter-over-quarter. And again, we'll see some seasonal slowdown in construction, but we really believe there's been a structural shift in the earnings profile of our fab product businesses. The other thing we're seeing is a lot of cross-selling opportunities. We are bringing multiproduct solutions to our customers that bring value to them, bring value to Nucor in a way of we've never done in the past.

Leon Topalian:

Carlos, look, what I would touch on immediately out of the gate is what Brad just mentioned, which is our product breadth is a key differentiator. So again, we are not under Damian [ph] the entire commercial team at Nucor. We're approaching that market to look and say, how do we provide a solution set not just provide and sell a product. So our teams, our Construction Solutions group, our Energy Solutions groups are going out now and meeting with customers attaching them to maybe areas and products that weren't traditionally purchased either mill direct or that weren't coupled together that we now can bring to bear as an entire offering to provide a solution set. As we think about the manufacturing build out and warehouse build out, how do we now look to offer, again, the complete solution, not just in piece or part on and product of. And so I would tell you that is gaining a lot of traction and intention. The other piece is the sustainability. There's a lot of people that are trademarked and branded their products in the green space, but very few, if any, in the world at our scale. And so the scale of which we're running our iconic products and net zero products today is getting a lot of attention and not just through the OEMs in automotive. It's a much more diverse customer set today that we're seeing that are demanding those products anything in the industry.

Steve Laxton:

Add one other element to that. You'll recall you followed us for a long time, but Nucor took some actions several years ago to restructure a few different businesses in that downstream steel products group. And while that's not something we really love doing. The teams did a wonderful job to bring efficiencies within our own systems there to use it. But the predominant reason is exactly what Leon outlined.

Leon Topalian:

Thanks, Carlos.

Bill Peterson:

Yes. Hi. Thanks for taking the questions. A couple, I guess, market-related questions. So if we think about the steel market today, I'm trying to get a sense of how you're anticipating the market reactions to maybe a prolonged UAW strike versus maybe in the median end and especially in the context of we've seen some mill discipline in the past few months, some of the maintenance extended. Just to get a sense of how the reaction would be under those two scenarios?

Bill Peterson:

Yes. No, that addresses the question. I had a question on CapEx. You talked about the CapEx now projected at $2.4 billion versus prior $3 billion. I guess how should we start thinking about next year, I guess, with the additional $600 million? And I guess, even maybe out of a few years, what does the normalized level start to look like for the company given the projects you've outlined?

Bill Peterson:

Great. Thanks for that. If I could sneak one more, kind of, again, a bigger picture. We were aware that the U.S. may be looking to remove the EU tariff rate quotas and understanding that nothing was concluded at this time, and it remains fluid. I guess how would you see this impacting the U.S. steel market? And I guess, what are the potential outcomes should the quotas be increased? I'm asking in the context of Nucor's obviously been an important part of [technical difficulty] of the U.S. steel market.

Bill Peterson:

Yes, thanks for those insights.

Operator:

The next question is from Martin Englert of Seaport. Please go ahead.

Leon Topalian:

Good morning.

Steve Laxton:

Martin, thanks for the question. And I think you summed up actually pretty well. Utilization rates have a big impact on the cost that's a major driver, and you highlighted that. We also saw a cost increase really [ph] in supplies and services and consumables. So these are sort of product [technical difficulty]. I think what's important too, Martin, is to keep in mind, in general, when you look year-over-year, commercial costs are down and I think that's encouraging against the backdrop of what we would have had. We were having this conversation a year ago, we were all concerned about inflationary pressures in the cost system. Those appear to have moderated notwithstanding the quarter-over-quarter changes we had, which were predominantly due to our own production choices of the company. Is that helpful?

Steve Laxton:

By substrate, you mean raw materials?

Steve Laxton:

Yes. That's correct, Martin. That's a good point. The slab purchases at CSI, we record in consumables, not in the raw materials. So that does have an impact. And so that's part of the change that you're seeing that's not reflected in the raw material scrap numbers.

Steve Laxton:

Yes. I think, Martin, if you're modeling out for the fourth quarter, you might see more close to flat cost quarter-over-quarter rather than an uptick, continued uptick. That's just because of where you see some of the trends -- for example, if you look at things like sheet, it likely has bottomed out at this point. So that has an impact on the system and how costs flow through our system. So you may see -- you may not see the same rate of increase on a per ton basis going into the fourth quarter and so in the third quarter.

Steve Laxton:

Yes. Martin, I think from where we sit today with what Brad highlighted, some comments about downstream products, order book and backlog and where we sit. I think those -- the trend being closer to those historic averages rather than some of the volatility you saw over the last year or two is probably an accurate statement.

Leon Topalian:

Hey, Martin, it's Leon. I don't know if we are going to provide you any more color on pricing outlook. Again, I think what we've tried to indicate is again, we see some of that softness as we head into the last quarter of this year. But again, context, particularly in our steel products that has generated incredible returns, coupled with Brad's comments earlier, which was to say there has been a fundamental shift in that overall market where we've seen a -- again, a different reset in the pricing levels that we believe are more sustainable. So again, while we see some softness heading into the last quarter, again, the resiliency of that sector has been remarkable, sending all the way back to the pandemic. So again, we see that as one of our strongest performers as we move into 2024 and that to continue to be the case.

Leon Topalian:

Thanks, Martin.

Katja Jancic:

Hi. Thank you for taking my questions. Quickly on the Brandenburg Plate Mill, can you let us know what the production level was this quarter? And how we should think about the ramp-up at the mill in 4Q and also into next year?

Katja Jancic:

And for next year, is there any color you can provide about the ramp up, or how much it could produce?

Katja Jancic:

Perfect. Again just quickly on the tax rate. It seems like the tax rate this quarter was a little lower. How should we think about it in 4Q? Is there anything we should be thinking about there?

Katja Jancic:

Okay. Thank you very much.

Phil Gibbs:

Hey, good morning. Steve, I just wanted to qualify the comment you made about the fourth quarter decline being more than that of the third quarter decline on a sequential basis. Were you talking about absolute EBITDA dollars? Or were you talking about more of a percentage?

Phil Gibbs:

And then on Gallatin, did you provide -- I may have missed it, but did you provide any color on the state of that project?

Rex Query:

Yes, Phil, thanks for the question. Currently as we mentioned in our second quarter call, we are full run rate capable. With that said, during the third quarter, we continue to work on some of our automation issues, which have impacted our consistency. But really from a production standpoint, as we look at our entire group, we've gauged on what demand is in the marketplace. And that's really what we focused on. But again, just to reiterate, I mean, in Gallatin we are on full run rate capacity at this point.

Leon Topalian:

Yes, Phil, again, it was an announcement that we are going to work through, and John Hollatz and his teams are going to work through and look at the diligence and all the variables that go into bring that project to fruition. But the drivers of that, I think John touched on really well. That mill has been around since 1905 and as that city has grown up expanding that footprint becomes a significant challenge. So how do we do that? How do we continue to serve our customers? How do we continue to serve those markets and gaining new customers. And again, we see some opportunities out there that are compelling that we think the strategies that the team is engaged on are going to potentially effectuate a great long-term outcome. Again, Seattle has been an incredible producer for Nucor, for our customers, shareholders. And so again, against that backdrop of providing the most capabilities for our customers are really the drivers behind this exploration in our future.

Leon Topalian:

Yes, Phil, what I would tell you is that we've generated an awful lot of free cash flow. We've got a lot of cash. We've got the best credit rating in the industry. So all those things said, there's no desperation -- there hasn't been. There wasn't in '21 and '22 and the record years of Nucor. It was an incredibly disciplined approach to think about growth. But make no mistake, we are going to grow. We are going to invest. We're going to continue to maximize our shareholder returns. We are going to continue to be great stewards of the shareholder capital we are entrusted with. We are going to return our 40%. We are going to maintain an incredibly strong credit rating but we're going to invest further in the future. We're going to look at so I would tell you the appetite is continually strong with again, a very disciplined mindset that is cash isn't burning a hole in our pocket. We are not going to chase things. We are going to look for the things that create EVA for our shareholders, period, full stop. Again, under the umbrella of the cultural fit that matches Nucor's longstanding traditions of how we know we can maximize that return is through the team, through the incredible culture that Nucor is been a proud part of for 60 years, that is driving and guiding our decisions and how we think about those companies that we choose to engage and bring on in Nucor. Thanks, Phil.

Timna Tanners:

Yes. Hey, good morning, everyone. I wanted to follow-up on Phil's question and see if I could ask it a little differently. But on a call we were just on and most of us, we heard that there's a view of one of the other steel mills that there could be further consolidation in the flat rolled sector. So do you agree that there's further -- you've been making your investments to grow organically in a lot of ways. But do you think there's also ability to further consolidate without running into any issues in antitrust?

Timna Tanners:

Okay. So let me switch gears a little bit and kind of ask, on the flat rolled side, you've been ramping up Gallatin and Brandenburg for a while, but not -- it doesn't seem like you're running flat rolled anywhere near full out. If we look at the sheet volumes, they're down quarter-over-quarter despite Gallatin ramping up. So you're running your sheet at less than full utilization, but you're also starting a new sheet mill. Is that going to displace any capacity? Or are you thinking that will be incremental? Because I know on the rebar side, you've been pretty disciplined and not adding a lot of extra capacity, but is flat rolled a different market for a reason that I might be missing? It would be great to hear your thoughts on that. Thanks.

Rex Query:

Tim, this is Rex Query. As I look at our capabilities across our sheet mills, we are positioning ourselves to rationalize product based on -- I'm going to say the capability and the efficiency levels of our various plants. So if you look at our pickle galv line, at Gallatin, which we have continued to support through all of these changes at Gallatin and supply into the automotive market, heavy frame applications. You look at our expansions in the coated side, a new Gallatin announced for Berkley with tremendous automotive supply there from that plant. So we are going to expand capability there, our investments in [indiscernible] so we really look to make sure that we are expanding capabilities, value added we are growing in our capabilities with our customers, not just only in volume. We are going to focus on margin and bottom line profitability. Frankly, that's going to be our focus.

Leon Topalian:

Yes. Look, I think it's a fair question, and it's going to be both. This is the short answer. Part of the driver for that as we think about the sustainability model and where our customer segment is asking us to go and has been asking us to go, that's going to be an incredible need. And don't forget that that mill is going to sit in the largest sheet consuming range in the United States where Nucor is underserved. We don't have as much market share that we know we are going to be able to go in and provide for our customers. So there's no doubt that both pieces of that strategy are going to come into play in the coming years as we ramp that up. And so no, we are not building 3 million tons of capacity that we think we're going to run in 2.1. We have full expectations that we are going to build it to 3, and it's going to run at 3.

Steve Laxton:

What you just said, the incrementally in new capacity.

Operator:

This concludes our question-and-answer session. I would like to turn the conference back over to Leon Topalian for closing remarks.

Operator:

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Jack Sullivan:

Thank you, and good morning, everyone. Welcome to Nucor's second quarter 2023 earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO, along with Steve Laxton, Executive Vice President and CFO. We also have other members of Nucor's executive team with us, including Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Brad Ford, over fabricated products; Noah Hanners raw materials John Hollatz, Bar Products and Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial Strategy; Rex Query, Sheet and Tubular Products; and Chad Utermark, New Products and Innovation. We posted our second quarter earnings release and investor presentation to the Nucor Investor Relations website. We encourage you to access these materials, as we'll cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements and involve risks outlined in our Safe Harbor statement and disclosed in Nucor's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let's turn the call over to Leon.

Steve Laxton:

Thank you, Leon. Nucor just completed another terrific quarter, the company had consolidated net earnings of nearly $1.5 billion, resulting in return on equity of 30% over the past 12 months. In fact, the second quarter of this year marks our ninth consecutive quarter where both net earnings exceeded $1 billion and return on equity exceeded 25%. These results highlight the advancement of our strategy and the growing earnings power of Nucor's diversified portfolio, and industry-leading capabilities. It also demonstrates solid execution by the Nucor team and ongoing favorable conditions across important steel consuming end markets such as construction, automotive, energy and industrial equipment. At the segment level, our steel mills group delivered $1.4 billion of pre-tax earnings in the second quarter, an increase of 68% over the first quarter. This was due to higher metal margins, especially at our sheet mills, as gains on realized pricing on steel outpaced higher prices for both scrap and ore base metallics. Second quarter steel shipments were similar to that of the first quarter. During the period, we realized slightly lower conversion costs including lower energy rates. Turning to our Steel Products segment. We saw another period of outstanding performance with segment pretax earnings of just over $1 billion. We continue to realize attractive pricing and margins, even as some subsectors like warehouses continue to moderate from their historically high levels of 2022. While Nucor operates a diverse portfolio of downstream steel products, some of the strongest contributions came from our joist and deck business and our pre-engineered metal buildings group. We also saw improved results in our rebar fabrication and Tubular Products businesses. In addition, as Leon mentioned, we've seen very positive contributions from our newly acquired Expand Beyond platform businesses. Our raw materials segment produced pretax earnings of $138 million for the quarter. Relative to the first quarter of the year, we realized higher volumes and pricing in both our DRI and recycling businesses. During the second quarter, we also continued to generate strong free cash flow, with cash from operations totaling $1.9 billion for the quarter and $3.1 billion year-to-date. This strong cash flow allowed Nucor to continue its balanced approach to capital allocation. In the second quarter, we deployed $525 million in capital expenditures as we continue to enhance and grow our core. We also returned $580 million to shareholders, including approximately $130 million in dividends and $450 million in share repurchases. Year-to-date, we've returned roughly 44% of our net earnings to shareholders through dividends and share repurchases. Nucor's balance sheet strength continues to be a fundamental underpinning of our current and future success. At quarter end, Nucor had approximately $5.4 billion in cash and short-term investments, and our revolving credit facility remains undrawn. This strong liquidity position enables us to continue our balanced approach to capital allocation. Leon referenced the progress we're making on our $10 billion capital spending plan to leverage and grow our core, but we still have significant spending in our largest project ahead of us. We expect capital spending related to our West Virginia sheet mill to accelerate in the near term as we begin the construction phase of this project. And as mentioned earlier, we continue to cultivate a viable pipeline of growth opportunities to expand into new adjacent businesses. Maintaining the strong balance sheet and sufficient liquidity are centrally important to enabling and positioning Nucor for continued future success. Turning to our outlook for the third quarter, we currently expect consolidated earnings to be lower than the second quarter. At the segment level for the third quarter, we expect earnings from steel mills to decrease compared to the second quarter on stable shipments but lower margins as we've seen prices come down for sheet and, to a lesser extent, long products. In our Steel Products segment, we expect performance will continue to moderate from the record-setting earnings of recent quarters due to modestly lower pricing and stable volumes. For the raw materials segment, we expect lower earnings in the third quarter due to margin compression of our DRI and scrap processing operations. Overall, non-residential construction remains elevated with especially strong activity from infrastructure spending, data centers and manufacturing. In addition, positive trends continue in the automotive and energy sectors. In short, we believe medium and long-term fundamentals of our industry and key demand drivers remain very healthy. This coupled with our strategy to grow our core and expand beyond position Nucor for strength well into the future. With that, we'd like to hear from you and answer any questions you might have. Operator, please open the line for Q&A.

Alex Hacking:

I guess just my first question, just drilling down on demand a little bit. If we look at shipments of long steel, bars and structurals, it's down about 10% year-over-year. I guess what's driving that kind of year-on-year decline? Thanks.

John Hollatz:

Good morning, Alex. This is John Hollatz. I'll speak specifically to long products. So you've got to keep in mind that when it comes to Nucor's long products portfolio, we have the most diverse offering of any long product company out there. We've got rebar, merchants, SBQ and rod all mixed into those numbers. The rebar demand has remained steady. That's about even with where it was last year as we would expect. Where we've seen some declines on the rod side and on the SBQ, you've seen inventory buildups over the course of last year that have been making their way down over the course of this year, and we're feeling some impact of that. But again, the bigger portion of that is the rebar side, which remains very consistent.

Leon Topalian:

Well, yes, I appreciate that. And a couple of things to note. And again, context is important in a number of different aspects, not the least of which. The second quarter of last year was historic for Nucor and really our industries. And so at that time, we're peaking and setting records in about every category that you can imagine, including about 7 million tons of shipments in that quarter alone, 2.5 of which was in our sheet group. And so what I would tell you is we look at Q2 of this year, we're not conceding market share. And in fact, we're growing some of that. And I'm going to ask Rex Query to touch base and give you a little bit more flavor of that. Nucor is focused on providing a capability set out for our customers, again, not just volume. At the same time, we're not going to concede market share. We're going to be delivered and how we ramp up. We've thought very deliberately about how we bring Gallatin on. I'm proud of what they and their team have done from a safety standpoint, from a reliability standpoint. And again, really taking a complete brownfield revamp of that facility while delayed, I'm really proud of the efforts that the team has made and now profitable and running at full run rate level. So Rex, provide a little more clarity for Alex around that in our market share gains.

Alex Hacking:

Thanks Leon and Rex. I appreciate the context and clarification.

Timna Tanners:

I wanted to ask a bit more about your backlog. I know you talked about healthy backlogs. You alluded to some of the weakness in warehouses, but also talked about a healthy government program support. So just wondering if you could provide any further color, recent warehouse starts up on over 50%. Have you seen much weakness yet? What are your customers saying there and what are you seeing in terms of evidence of the government spending so far in your backlog?

John Hollatz:

Yes. Thank you, Leon. Good morning, Timna. On the infrastructure bill, we're really seeing still design and budgetary work being done on those projects. So we expect that would flow our way probably more at the end of this year, beginning of 2024. On the chip side, those projects are currently in motion. They are sitting in our backlog. Some have actually been delivered, and we're seeing the benefits of that specifically on the rebar and rebar fabrication side. You asked about backlogs, I'll touch on rebar fabrication. I'm really proud of what our team at Harris Rebar fab has done over the last year. We are comfortably going to have a record year in that business and the margin in our backlog right now is higher than it's been at any time in our history since we have owned this business. Our backlogs are down just slightly year-over-year. That's by design where we were coming off of a record backlog a year ago. But we're positioning ourselves because of our geographic footprint across the entire country to take advantage of this wave of work that continues to come with the CHIPS act and the infrastructure bill.

Leon Topalian:

Yes, Timna, I'll touch on that. And part of the expand beyond for us is a few filters that I'll share with you. One is a marriage up where we bring value as an industrial manufacturer, right, that there's something to that we bring to bear. We're not looking for disparate businesses, certainly not looking to become a conglomerate and again, having things that don't marry up or we don't bring value to. So that's one. The second is scalable with that we can maintain or grow into a market leadership position. Third is looking for adjacencies that operate somewhat out of the traditional cyclicality of the steel mill world, right? So how do we provide a more stable earnings profile through the long-term. And again, the best example of that is our CHI overhead door business that is operated prior to us acquiring them at a 10% CAGR for 20 years. And so their stability in that earnings profile is something that we look for a lot is we're continuing to look. There are a lot of irons in the fire. I won't get specific into the sectors, but other than to say as we look at the mega trends that are happening in our industry in the long-term, how do we continue to broaden that portfolio and again, increasing our value and capability set for customers and the returns for our shareholders.

Lawson Winder:

I just wanted to start off with your commentary on steel products and for those to moderate in Q2. And I ask whether you might be able to provide some more specific direction in terms of what moderation means? Like for example, would that be down like 2%, 5%, 10% versus Q2? Thanks so much.

Lawson Winder:

Okay. That's fine. I mean, that's helpful what you've provided. And then I just also wanted to ask on Brandenburg. You continue to expect profitability in Q4. How does Q3 look? And then looking into 2024, how would you describe the profitability outlook for Brandenburg then?

Al Behr:

Yes. Thanks. And I don't know, Lawson, if I'm in a position to comment beyond on the profitability, what we've given you about achieving it in Q4. But I can talk a little bit about volumes as we look at the second half. And it's heavily weighted towards Q4. So of the 300,000 tons, I'd say you'd see 100 that in Q3 and 200 of that in Q4. So that might help you to kind of pencil out what that looks like for the year. But as Leon said, we remain focused on the capabilities of that machine, which are extraordinary. We've hit several milestones even within the quarter over rolling a 12-inch finish plate. We've cast a 12-inch slab at that caster. We just continue to grow our capabilities in all the casting, rolling and finishing breadth that plant can do. We're going to be strategic about rolling the tons out. We're going to be careful and thoughtful about it, but I've given you about the best estimate we have on how the second half would look.

Al Behr:

Yes. Well, with regard to pricing, ultimately, the market is going to decide the pricing and supply and demand dynamics do that. I would say Brandenburg is primarily a discrete plate mill and discrete plate does carry a premium over hot-rolled coil plate so that mix will be helpful as you look at just backlog pricing and overall mix pricing, but that's probably as much granularity as I could give you as we just look into the next year.

Operator:

The next question comes from Bill Peterson of JPMorgan. Please go ahead.

Leon Topalian:

Bill, I appreciate the question. Over the last couple of years, really 3, 4 years, we've taken some very, very strong looks in evaluating our own internal portfolio, where do we gain efficiencies, how do we do align certain operations. And we largely feel that the overall footprint today geographically where we're positioned as well as the product offering is a really good balance into the marketplace that in customer segment that we're attached to and the dealer networks that we continue to have support and ultimately supply into. So I would tell you on that internal footprint, I think we feel very well positioned with the moves we've made to date. And while there will be continued efficiency gains, there'll be more smaller in nature. We don't see at this time further consolidation or closures in the future.

Steve Laxton:

Yes. Hey Bill, this is Steve. Thanks for the question on there. And the back half is definitely going to be a much heavier spend on CapEx. We guided earlier in the year to an estimate of around $3 billion on the year. And of course, we spent only about $1 billion of that so far and the largest project that we have by far is West Virginia, and we're about to enter a phase of construction there. So that's going -- in particular, that asset is going to ramp up rather quickly in the second half.

Carlos de Alba:

You mentioned that you saw a lower cost conversion in the steel segment in the second quarter. I wonder if you can provide a little bit more color in terms of what do you expect for the third quarter, maybe the second half and what is driving those cost reductions? And then, yes, I have a second question, if I may, after.

Carlos de Alba:

And do you expect the level of declines in the second half to remain close to the 20% so that you mentioned for instance on energy?

Carlos de Alba:

All right. Thanks Steve. And the other question I had is, so what we're seeing is that in terms of square footage, commercial warehousing construction is coming down, manufacturing plant is increasing, but warehouse is just far much bigger in terms of area than manufacturing plants, at least where we stand right now, infrastructure is also picking up. I mean, how much exposure do you have to each one of these different segments between the non-residential construction sector? And how quickly, for instance, if you had more exposure to the commercial warehousing, how quickly can you adapt your product mix? So that you can sell more to those areas that are seeing expansions?

Operator:

The next question comes from Cleve Rueckert of UBS. Please go ahead.

Leon Topalian:

Fair question. And again, as you think about that as a backdrop, it really goes back to our launch in my time on taking over as CEO, where we rolled out our mission statement to grow the core, expand beyond and live our culture. So the expand beyond piece was really the lens in which we're looking on, how do we continue to generate long-term growth and long-term earnings power for our shareholders. Part of that analysis and strategy has come back and embedded in the expand beyond that we are looking for businesses that generate more consistent through-cycle earnings profiles than the traditional cyclicality of the steel business. So at the heart of what we do well, we're an excellent industrial manufacturer. So part of that overall analysis and backdrop is, well, if you want to be comparative against the industrial manufacturers, we've got to bring our cyclicality of earnings closer together. We've got to provide a more stable return performance and profile to our shareholders. And so that's really where the entirety of our time and spend and looking at expand beyond and what businesses we want to onboard that fit the long-term profile for Nucor that does just that, again, stabilizes that through cycle performance and again, generating higher highs and higher lows for our shareholders.

Leon Topalian:

Yes. Look, fair enough. And so I think there's two things to think about there. One, we have seen substantive shifts in the industry. We've seen consolidation. We've seen rationalization, and we've seen a massive change in trade. If we go back 5 or 6 years ago in trade, for example and we have 50 cases that the industry had won against bad actors that were legally dumping or subsidizing steels. Today, that's over 120. So while the overcapacity situation in the world will never ever be gone or advocacy has got to remain vigilant, Secretary Raimondo or Katherine Tai - USTR understand that incredibly well and are very supportive of the industry as well as the manipulation that can occur. When you look at the consolidation or rationalization in our industry it has created some outcomes that are much more advantageous that are stabilizing those earnings. So I think with that, we're going to get a much more consistent outflow. You saw back in November when we had our earnings day, our projected through-cycle EBITDA with the online of West Virginia. It's about $6.7 billion so that's the through cycle. So we expect peaks to be much higher. And quite frankly, we don't expect the troughs that we saw pre-pandemic to occur for us. Additionally, though they expand beyond sort of shores that up. It embeds in that. And again, go back to CHI, we bought it at 13x today with the performance that it's generated, it's calculating now more like a 9.2x or 9.3x on that EBITDA value. So they continue to perform because there are synergies inside of Nucor that are going to grow that platform in that business segment. Again, so together, I think that creates a very compelling case for why we believe we're one of the best industrial manufacturers and certainly in the industry, while we ought to be -- have a compelling story to trade at a higher multiple.

Leon Topalian:

Yes, look, fair question. I think you're going to see it across our portfolio as you're going to see in plate, you're going to see it in longs and bar beams, you're going to see in joist and deck, you're going to see it in racking. You're going to see it through the Nucor warehouse systems group and again, that build-out. So I think there's going to be a fair distribution across Nucor's portfolio that's going to see an increase. The other thing to keep in mind Nucor's overall volume, about 50% of that flows through the construction end markets in some form or fashion, and that's targeting right in line with that all three pieces of those legislative investments from our nation and passages. So the position Nucor sits in today across those spectrums are well suited to deliver those outcomes. But again, you're going to see that mix distributed fairly well across several of our product groups.

Tristan Gresser:

The first one is basically a follow-up on the rebar. It seems manufacturing investment is supporting rebar spread at the moment. And if I understand your comments earlier, we're still waiting for Infra to really kick in and that's the most rebar-intensive part, I believe. So my question is, is infra to flow through? Do you see any reason why rebar metal spreads should actually fall into H2, and also, how do you address the input risk? The orbs are clearly open. We've seen rebar imports picking up in recent months. If you could comment on that as well.

John Hollatz:

Yes. Tristan, ultimately, the market is going to demand margins on any products that we would produce, and we're going to monitor that closely to making sure that we're taking care of our customers. You had mentioned imports on rebar. Year-over-year, import volumes on rebar are down slightly. We've seen a reduction from Turkey. I think everyone's well aware of what's happening over there. You're seeing some increased volumes coming out of Algeria, Egypt and Mexico. But overall, year-over-year, it's actually down by comparison.

Al Behr:

Yes. Tristan, this is Al Behr. I'll speak a little bit to plate demand. When we just look at the general market. There are several areas of strength that we see carrying through the rest of the year. Ag and heavy equipment remain fairly strong. Onshore wind has picked up with the passage of the IRA and brought some clarity to opportunities there, service center buying has picked up versus a year ago. So those are all tailwinds to demand. And we think the plate market will continue to be fairly strong through the rest of this year. You asked about offshore wind. That's certainly a big opportunity for plate, and we watch that closely. The easiest way I can tell you is it takes about 250 tons of steel for every megawatt of offshore wind put in place. So you really have to come back to what you think is going to be built in any period of time offshore, and there's a wide spread in those estimates, but it takes about 250 tons per megawatt to execute that. We don't see that coming this year or even much into next year. But I think it's a huge opportunity for plate that as the years beyond that start to play out, there's a lot of tons that feature that math. Closing up real quickly on the other infrastructure parts and the spending you asked about. We do see that in plate. There is a lot of opportunity that creates in plate. We're starting to see that today with Bridge work, especially much more to come and it's just in its early stages, but that money on those opportunities are starting to present in the market.

Martin Englert:

Wanted to switch. There's been a lot of conversation about government spend and incentives, but about private sector and what's happening with manufacturing. What conversations are you having, if any, with customers that may be in the process of reshoring manufacturing or considering it in the future regarding their steel and metals needs when you think out several years ahead here?

Dan Needham:

Sure. Appreciate the question, Martin. If you think about the breadth of our capabilities today that we've talked about throughout this call, our ability to go into customers now today and give them opportunities or solutions around how we can help them with this reshoring is unbelievable. And that's what we're doing every day today. Taking advantage of that, having those conversations, leveraging our groups, what we call solutions, particularly construction solutions where we have technical capabilities. We have the breadth of our capabilities throughout Nucor to go in and provide solutions in a lot of ways, turnkey solutions to what they need going forward. So we're having many of those conversations today, and that's our focus as we go forward.

Leon Topalian:

Yes. Martin, look, I think anecdotally, you're right, a single individual plant may not move the needle for Nucor a 30 million tons a year of capability and capacity. However, if you look at the aggregate, if you look at the next 10 years, which is really the cycle these legislative bills are built up on or you're talking about somewhere between 6 million and 8 million tons of steel demand annually for 10 years. Well, that's 7% or 8% of our overall ADC in this nation. And so it's not going to spike the United States as an industry to move from 105 million or 110 million tons of steel consumed to 180 or 190 but it's a strong indication of a long-term trend that's going to be here. But the other pieces of that, and I think at the heart of your question are -- and what are those regions that Nucor is positioning itself to offer? Well, one of those, for example, is towers and structures. That is a massive growing industry. We've announced our small acquisition with some in industries we're very excited about. We just announced our two greenfield plants that are going to be built to continue to ramp that business up and growing it because every one of those transmission lines, every one of those towers and structures are individually designed by the utility themselves. So again, with our breadth of exposure and engineering and pipeline, we marry up really, really well to serve that industry and that market again for a long period of time. So while the individual plan, you're right, may not move the needle. You're also talking about a decade worth of work. So this is not short-term in the legislative side, but the other investment piece that you're seeing at Nucor is to identify those megatrends that will be growth platforms, again, for many, many years to come that are outside of those legislative windows as well. Automotive being another one, energy and renewables out touched on the plate. We are the only producer in the Western Hemisphere that can make the monopiles for the offshore wind, what position [indiscernible] Brandenburg for the long term build-out of the renewable sector in this nation. So there are many of those industries that we're coupling and again, building capability sets today because that's where we know the industry is moving.

Martin Englert:

That's a fair point. I appreciate you highlighting that. One quick follow-up. On the Colors & Structures business, if you look through the supply chain there, are there any other adjacent businesses that made sense to pair up with that, or there be synergies and potential scale and fits the framework that you previously detailed for the beyond strategy here? Or is it more so there's steel in the supply chain that's kind of fits with that and some engineering capabilities and then it's right to the customer and there's not something more vertical or horizontal that might pair up with it?

Operator:

This concludes our question-and-answer session. I would like to turn the conference back over to Leon Topalian for any closing remarks.

Operator:

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

Jack Sullivan:

Thank you, operator, and good afternoon, everyone. Welcome to Nucor's first quarter 2023 earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO, along with Steve Laxton, Executive Vice President and CFO. We also have other members of Nucor's executive team with us, including Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Noah Hanners over raw materials; John Hollatz, Bar Products and Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial Strategy; Rex Query, Sheet and Tubular Products; and Chad Utermark, New markets and Innovation. This morning, we posted our earnings release and an updated slide deck to the Nucor Investor Relations website. We encourage you to access these materials, and we will cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements and involve risks outlined in our safe harbor statement and disclosed in Nucor's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let's turn the call over to Leon.

Steve Laxton:

Thank you, Leon. Our net earnings of $4.45 per diluted share for the first quarter is the product of another strong performance by our team. In fact, with total earnings of just over $1.1 billion, our first quarter marks the eighth consecutive quarter where Nucor has exceeded $1 billion in earnings, a measure unattained prior to 2021, despite our long and profitable history as a company. These results highlight the advancement of our strategy and the growing earnings power of Nucor’s diversified portfolio and industry-leading capabilities. During the first quarter, steel mill earnings of $838 million represented a 62% increase in the prior quarter, driven predominantly by higher shipments. We also saw efficiency gains from Q1’s higher utilization rate, allowing us to achieve lower conversion cost. Improving cost for energy, alloys and consumables were also a factor. Shifting to our Steel Products segment, we again saw excellent quarterly performance with segment earnings of $971 million. While this is a slight moderation from the prior period, it remains a historically strong result. During the quarter, we realized attractive pricing from margins across many of our product lines. This performance is further evidence of the strong non-residential construction market commented on by Leon. Our Raw Materials segment produced earnings of $58 million for the quarter. We realized higher pricing in our recycling businesses and shipped higher volumes out of both DJJ scrap operations and our DRI facilities. You may recall DRI volumes in Q4 were lower than normal and large part due to planned maintenance activities. Our corporate eliminations expenses increased for the quarter in line with the outlook we shared during our fourth quarter earnings call in January. As a reminder, this segment includes several key activities including our teammate incentive compensation programs for all segments, interest expenses, selling, general and administrative expenses, and the elimination of intercompany profits. Included in this is the elimination of profits or losses on intersegment sales when one segment supplies product to another segment, but the final sale to an external customer has not yet been recognized. With roughly 20% of Nucor steel shipments going to downstream businesses and the vast majority of Nucor’s raw material shipments going to our Nucor steel segment. Our intercompany eliminations can increase or decrease meaningfully, particularly during periods of rapid price change. In addition to producing strong earnings in the first quarter, Nucor’s efficient manufacturing business model was on display again, generating cash from operations of $1.2 billion. This allowed the company to continue its long established and balanced approach toward capital allocation, investing $532 million in CapEx, while maintaining its commitment to making meaningful direct returns to shareholders. During the quarter, we repurchased 2.7 million shares valued at approximately $426 million and made dividend payments of $131 million for a total of $557 million returned directly to shareholders or 49% of our net earnings. Over the last three fiscal years, we’ve returned $7.6 billion to shareholders representing approximately half of the net earnings for the period. It’s worth noting our dividend payment in Q1 was Nucor’s 200th consecutive quarterly dividend. That’s a half a century of paying and raising our dividend and a long track record of creating shareholder returns that very few companies in any industry can point to. Nucor’s balance sheet continues to be a fundamental underpinning for Nucor’s capital allocation framework and an enabler of our value creating strategy. At quarter end, Nucor had more than $4.7 billion in cash and short-term investments, and our $1.75 billion revolving credit facility remains undrawn. Given the potential economic uncertainty, we’ve been intentional about fostering a resilient and flexible liquidity position. This position of strength gives us confidence. We can continue our balanced approach of executing Nucor’s growth strategy while also providing meaningful direct returns to shareholders. As we look ahead to the second quarter, we expect earnings from our steel mill segment to increase compared to the first quarter results on modestly higher shipments and improved margins with better results from our sheet business being the biggest driver. In our steel product segment, we expect performance will moderate slightly from the historically high earnings level of recent quarters. As the impact of lower pricing offsets the benefit we expect to see from seasonally higher volumes. Our raw material segment is expected to continue to improve on higher shipment volumes. Overall, we expect the second quarter consolidated earnings to be higher than the first quarter, and we remain optimistic that 2023 will be another strong year of earnings for Nucor. As Leon mentioned, federal support for infrastructure projects, clean energy investments and advanced manufacturing facilities will begin to impact demand in 2023. In addition, non-residential construction remains elevated and positive trends in both the automotive and energy sector will impact demand. In short, we believe medium and long-term fundamentals of our industry and key demand drivers remain relatively positive. This coupled with our strategy to grow our core and expand beyond position Nucor for strength well into the future. With that, we’d like to hear from you and answer any questions you might have. Operator, please open the line for Q&A.

Emily Chieng:

Good afternoon, Leon, Steve and team. Thank you for taking my question. My first one is just around the state of the steel market outlooks as you see it. I guess could you help us provide some color around what level of confidence you have or what’s sort of the extent of your visibility around the outlook for steel demand in this current macro environment? And how that perhaps compares to other economic down cycles that we’ve seen in the past?

Emily Chieng:

Great, that’s really helpful, Leon. And a follow-up, if I may, around non-resi construction demand there, you’ve certainly positioned yourself quite well with the cash flow business, the warehouse racking piece there, but as you think about the mix shift in projects within this segment. Where are you seeing a lot of pent up demand for certain non-resi construction product types and what are the projects that you are seeing Nucor specifically benefit the most from?

Chad Utermark:

Yes, thank you, Leon, and hello, Emily. Thank you for the question. As Leon stated, we are very excited about the demand picture that we see in non-res. I would categorize it as healthy and resilient as we move into Q2 and Q3. Some datasets I’d like to give you would be when you look at our backlogs, most of our downstream construction product backlogs are still at historically strong levels. As an example, two of our largest businesses that serve the non-res business they’re combined backlogs are 56% higher than their average during the time period of 2017 and 2019. 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.

Operator:

Thank you, Emily. Ladies and gentlemen, our next question comes from Lawson Winder with BofA Securities. Please go ahead.

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?

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.

Lawson Winder:

Okay. Fantastic. Thank you very much.

Operator:

And my next question today comes from Carlos De Alba with Morgan Stanley. Please go ahead.

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?

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.

Operator:

Thank you. And our next question today comes from Curt Woodworth with Credit Suisse. Please go ahead.

Leon Topalian:

Hey, Curt.

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. 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.

Curt Woodworth:

Thanks, Rex. I think on joist and deck…

Curt Woodworth:

Great. Thank you very much guys.

Operator:

Thank you. And our next question today comes from Timna Tanners with Wolfe Research. Please go ahead.

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.

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.

Leon Topalian:

Thanks Timna.

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?

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?

Tristan Gresser:

All right. Appreciated. Thank you.

Operator:

And our final question today comes from Alex Hacking with Citi. Please go ahead.

Leon Topalian:

Yes. I’ll maybe kick it off and then Steve or Rex, I would tell you, no, I don’t think it’s restocking. If you look at the MSCI numbers are hovering around the two months on hand, which, again historically has been low. I don’t know and I don’t, we don’t anticipate these jumping to three or four anytime soon. I think that’s going to be a balanced approach for what Timna asked about interest rates and then again availability. So what I would tell you is, yes, you saw a large increase in our sheet group that is real demand. But does that – stack in that continue? Well, look, we think second quarter is going to be strong. But as we play out the rest of the year, we’ll have to sort of wait and see. But the increase within that – if you broke out that increase in shipments, some of that is the loss of imports. We’ve seen the imports drop off significantly Q-over-Q. And some of that is also establishing different partnerships with our commercial teams and how we’re going to market. We mentioned in my opening remarks, the relationships and partnerships we have with Train [ph] and General Motors and Johnson Controls. And there’s another 20 customers like that, that we’re partnering with different to provide them something unique and again, a very differentiated value proposition.

Alex Hacking:

Thank you.

Operator:

Ladies and gentlemen, this concludes the question-and-answer session. I’d like to turn it back over to the management team for any final remarks.

Operator:

Thank you, sir. Ladies and gentlemen, this concludes today’s conference call. We thank you all for attending today’s presentation. You may now disconnect your lines, and have a wonderful day.

Jack Sullivan:

Thank you, and good afternoon, everyone. Welcome to Nucor's fourth quarter and year-end 2022 earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO; along with Steve Laxton, Executive Vice President and CFO. We also have other members of Nucor's executive team with us who may provide comments during the Q&A portion of the call. They include Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural products; Noah Hanners, responsible for Raw Materials; John Hollatz, Bar products and Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial Strategy; Rex Query, Sheet and Tubular Products; and Chad Utermark, New Products and Innovation. This morning, we posted our earnings release and an updated slide deck to the Nucor Investor Relations website. We encourage you to access these materials as we will cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements and involve risks and uncertainties outlined in our Safe Harbor statement and disclosed in Nucor's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So, with that, let's turn the call over to Leon.

Steve Laxton:

Thank you, Leon. As Leon mentioned, our earnings of $28.79 per share established a new record for the company. These results highlight the earnings power of Nucor's diversified portfolio and industry-leading capabilities. 2022 was also a noteworthy year for cash flows at Nucor. For the year, cash from operations exceeded $10 billion for the first time in our history, and free cash flow topped $8 billion. Over the past five-years, Nucor has generated $16.6 billion in free cash flow. During that same time period, we returned $9.7 billion directly to shareholders through dividends and share repurchases and while at the same time, investing over $12.8 billion in our business through capital expenditures and acquisitions to further strengthen and grow our earnings base. These results demonstrate continued and consistent adherence to our balanced capital allocation framework. Nucor's efficient manufacturing business model is a powerful through-cycle cash flow generator. Turning to our financial results for the fourth quarter. Earnings for the Steel Mills segment were down nearly 60% from the prior quarter. Shipment volumes fell 13%, reflecting normal seasonal weaknesses and some purchasing hesitancy as prices were trending lower for much of the quarter. Overall, metal margins contracted as lower realized pricing outpaced lower cost for metallics. Conversion costs were slightly lower compared to the third quarter despite lower utilization rates, in part due to energy cost, which fell approximately 10% on a per ton basis. Alloys and consumable costs also trended slightly lower. Shifting to our Steel Products segment. We continue to see very strong performance with segment earnings of $1.1 billion in the fourth quarter. This is down about 10% from the third quarter's record results, but still represents the third best earnings quarter ever for this segment. Contributions from most product lines were down from their respective third quarter levels, reflecting normal seasonality. And C.H.I. overhead doors was a notable exception, as Leon touched on earlier, posting fourth quarter earnings 20% higher than the prior quarter. Turning to Raw Materials. This segment saw negative earnings for the quarter as DRI and scrap processing results were impacted by lower volumes and falling prices for much of the quarter. We also took both DRI facilities off-line for planned maintenance and elected to extend those outages for additional service until we saw signs of improving conditions later in the quarter. On the capital deployment front, Nucor's CapEx for the quarter totaled approximately $520 million, bringing total CapEx for the year just under $2 billion. We are forecasting CapEx in 2023 at $3 billion, including some catch-up spending originally slated for 2022, new growth initiatives and general maintenance. The earnings presentation we posted on our Investor Relations site this morning has additional details on our 2023 capital spending plan, including projected allocations among primary CapEx categories, and a preliminary look at the anticipated pace of spending on a few of our major growth projects over the next couple of years. I would like to take a minute and provide an update on the strong results we are already seeing from recently completed investments. While strong conditions in 2022, certainly aided performance, we believe these were prudent, timely and well executed investments that are yielding excellent returns and position the company for continued future success. The roughly $2.2 billion we invested in sheet and bar projects that have been up and running for the past few years, generated an estimated $620 million in EBITDA for 2022. In the businesses we acquired over the last two-years for around $4.5 billion, establishing four new downstream platforms generated EBITDA of nearly $500 million over the course of the year. We believe this puts us well on our way to reaching our annual run rate EBITDA goal of $700 million for our Expand Beyond businesses. Collectively, these strategic investments in those to come, provide significant earnings catalysts and position Nucor for sustained value creation long-term. Turning to our balance sheet. We finished the year in a very strong liquidity position with over $4.9 billion in cash and short-term investments, and our $1.7 billion revolving credit facility remains undrawn. We have been intentional about building liquidity toward the end of the year in light of uncertain economic conditions, coupled with near-term uses of cash, including our 2022 profit-sharing payouts that are earned by our teammates, our capital spending plans and maintaining our commitment to meaningful direct returns to shareholders. In addition to ample near-term liquidity, Nucor's balance sheet continues to be in a position of strength with total debt to capital of around 25% at the end of the year and debt to EBITDA well under one turn. Earlier this week, Fitch Ratings published its first credit rating on Nucor with long-term and short-term unsecured ratings of A- and F1, respectively. We were pleased to see Fitch recognize Nucor's credit strength. During the quarter, we repurchased 3.1 million shares valued at $403 million and made dividend payments of $130 million for a total of $533 million return directly to shareholders, which represents more than 42% of our quarterly net earnings. Over the last five-years, we have returned $9.7 billion to shareholders, representing approximately 52% of total net earnings for the period. As we look ahead to the first quarter of 2023, we expect earnings from our Steel Mills segment to increase compared to fourth quarter results on higher shipments, improved metal margins and expected higher realized prices. In our Steel Products segment, we expect lower earnings in the first quarter compared to the fourth quarter due to seasonally lower volumes and lower pricing in some products. However, it is worth noting that earnings are expected to remain higher than the first quarter of 2022. Our Raw Materials segment earnings are expected to improve on more stable pricing and higher shipment volumes. While operating income from these three segments is expected to be higher compared to the fourth quarter, we expect consolidated earnings for the first quarter to be lower due to higher intercompany eliminations and the absence of onetime state tax benefits that were realized in the fourth quarter. We remain relatively optimistic 2023 will be another strong year of earnings for Nucor despite entering a period of increased economic uncertainty. Overall, non-residential construction spending continues to be robust, federal support for infrastructure and energy projects will begin to show impacts on demand in 2023. Other positive drivers of demand include re-shoring of manufacturing, energy infrastructure demand, clean energy and storage projects, EV factories and semiconductor plants. In closing, we believe medium and long-term fundamentals of our industry and key demand drivers remain relatively positive. This coupled with our growth initiatives and investments that advance our strategy to grow our core and expand beyond position Nucor for strength well into the future. With that, we would like to hear from you and answer any questions. Operator, please open the line for Q&A.

Lawson Winder:

Good afternoon, Leon, Steve, the presentation. Also congratulations to Noah and Doug on the new roles. And also, I would just say nice work to whoever help create those slides, that looks great. So wanted to follow-up, Steve, on your last comments on market demand. Could you maybe provide a sense to the extent to which demand might be driven also by restocking versus some of these actual real demand drivers that you are highlighting? And then in terms of these real demand drivers, you highlighted nonres, electricity grid, which is moving the needle most for Nucor? Thank you.

DanNeedham:

Okay. Appreciate the question, Lawson. In particular, what we are seeing forecasts out there from construction indices or are predicting infrastructure starts to increase 16% in 2023 and additionally, 10% in 2024. But more specific to that, we are seeing activity today on the infrastructure bill. In January, the Biden Administration announced $2.1 billion in funding for four major bridge projects. The most notable being the bridge over the Ohio River connecting Ohio and Kentucky on I-75 and I-71. You also asked a little bit, and Leon touched on the advanced manufacturing, but the other thing around the advanced manufacturing, the activity is increasing tremendously in that space, not only in chips, but also on the EV space and batteries. But those plants are quite large and the requirements from a grade and size standpoint, there is only a few suppliers that are capable of serving that and Nucor is well positioned to do that. If you think about the breadth of our products, our capabilities in the construction side from structural buildings to racking systems to now insulated metal panels and garage doors. Our capabilities are unparalleled. One thing you also mentioned was the inflation Reduction Act around energy. We are seeing activity grow in that space as well. And additionally, our breadth of capabilities fit that space very well additionally. And if you think about our leading low greenhouse gas intensity offerings, the requirements in that space, we are well poised to help the U.S. energy market move towards decarbonization. So the last point I would like to make is, in all of these, they are not mutually exclusive. They are all interconnected. And we have customers in these spaces in automotive and energy that have requirements on the construction side. And a couple of years ago, we created our focus on our solutions teams. And we have teams around construction, automotive and energy that are best poised to recognize these opportunities early in the design conceptual phase of these projects and work with the owners, developers, engineers to provide a valued solution for all involved, including Nucor.

Leon Topalian:

Yes, absolutely. As we touched on in my opening comments on Brandenburg, we are incredibly proud of the team. The work that they have done, what they have been able to accomplish. And again, I have been at Nucor, a long time now in 26-years and from a construction standpoint, from a safety standpoint, from a budget standpoint, this project exemplifies the very best of what our team has done and produced. Al Behr will share a few more highlights of that because we have got some recent milestones that the team has reached here in just a moment. And turning to Gallatin, again, we are about six-months behind where we wanted to be on their ramp-up. However, over the last few months, that team has done a phenomenal job of bringing that new cash and equipment online. As I mentioned during the last call, this really wasn't just a brownfield. It was a complete mill modernization with software and automation tying that entire complex together. So it was a significant undertaking. And all that being said, the bottom line in Gallatin, in Q2, we expect them to be at full run rate capability. We will see how the market needs and demands go and meet that demand. But the other piece and point that I would share is we expect Gallatin to be profitable in the second quarter as well. So Al, maybe you want to touch on a few other things at Brandenburg.

Lawson Winder:

Excellent. Thanks very much.

Phil Gibbs:

How do you guys see the global pig iron trade unfolding this year given the 25% reduction in 2022? Do you see supply chains having re-oriented at this point? Is there a reduced dependency on it given some of the new projects that have been announced by the blast furnace folks or others? Just what is the reconstruction in that market right now?

Noah Hanners:

First of all, thanks for the question, Phil, and really for the opportunity to talk about our team and the performance through 2022 because I think it was really formative for how we think about employing raw materials going forward. So the short answer, I think, to your question about the balance of global pig iron supply is the Ukrainian -- the invasion of Ukraine was really impactful. It was roughly 50% of the supply that went off-line when Russia invaded. But more important to us, the strength of our raw material models and the flexibility we have. If you think about how we operate about one-third of our raw materials are self-sourced between the DRI plants and our recycling group assets. So you combine this with what is really unmatched coverage of the market through our DJJ brokerage team and the flexibility of our mills in terms of what they can melt to make our products for our customers, and we can be extremely agile. So we are able to, as Leon described, quickly change our melt mixes, maintain our focus on value and use while minimizing our cost and making the products our customers need. So again, if you look back to 2022, it is a testament to this flexibility. We prepared for the invasion to the best of our ability, we had indications that was coming. We were able to quickly pivot, adjust our melt mixes at the mills, minimize our pig iron and immediately cease purchasing from Russia. So I'm extremely proud of our team for the 2022 performance. They executed and I'm also confident in our flexibility and the strength that provides us going forward.

Steve Laxton:

Yes. Phil, this is Steve. Thanks for the question, and that is been an outstanding segment that has really driven fantastic results for the year. It is been one of the key catalysts. So while we do see some moderation from that group, it is still very strong. I'm not going to guide you leaning one way or the other necessarily from 2021 versus 2022 or something like that. But you are seeing some moderation there, but still outstanding performance from that group well above. You should expect well above historic norms for that group as we head into at least the first half of the year where we have some visibility.

Operator:

Our next question will come from Curt Woodworth with Credit Suisse. Please go ahead.

David Sumoski:

Curt, this is David Sumoski. Inflation has certainly been a factor for us in our convergence costs. It probably falls anywhere within $40 to $80, depending on the division. Couple of divisions would be higher than that, Gallatin being one of those, but those are outliers. So inflation has been a big factor. Two other big hitters we have to remember -- well, two other big hitters are as we bought C.H.I. and ramped it up this year, we run slabs through that facility and the cost of the slabs go right directly into our cost of goods sold. So we had some pretty expensive slabs on the ground. So that was a pretty big hit year-over-year for our cost of goods sold. And then across all of our divisions, we had significant inventory adjustments throughout the year. And the cost of those inventory adjustments goes right into our cost of goods sold as well. So those three factors were pretty big, were very big, and that is why you see that big increase.

Leon Topalian:

Yes, Curt, I will begin and let Steve sort of talk about the -- as we think about through cycle EBITDA. But I will touch on your second question first. As we continue to think about the growth of Nucor. We are coming off two historic years. And really, over the last several years, our strategy has not changed. Our mission and our vision is very clear that is to grow our company, period. And we are going to do it in two ways

Curt Woodworth:

Okay. Thanks very much.

Timna Tanners:

Good afternoon, everyone. I wanted to explore a little bit the outlook and then ask a question about volumes, and I think they are a bit tight. But just start with the outlook in the Steel Mills, in particular. You talked to improve profitability on higher volumes and improved margins, specifically in the sheet business. So, the higher volumes I get seasonally and off a pretty low base at 70% utilization. On the margin side, I mean, it looks like trending prices at 750 hot rolled and compared to Q4's average price of 960 looks like a tough comp. And costs have increased and there is deeper discounts on your quarterly context and monthly context. So I'm just trying to figure out if your guidance is more about the volume side or if I'm missing something on mix or costs?

Rex Query:

Yes, Timna thanks for the question. The only thing I would really add if you look at the volatility we had from what we saw in really the second half of 2022, but if you look at where CRU stood in third quarter and then the drop in the fourth quarter and now what we are seeing now, it is a really short window. And I think that is to Leon's point, we have a long-term strategy. And in the short-term, you may see us do things from quarter-to-quarter based on what the market is happening. We chose very specifically not to participate in some of the spot market as heavily as we saw some of the lower pricing. So you would see some lower volumes, but we are a margin-focused company, long-term, as a group, as a sheet group, our goal, our purpose is to generate a return for our shareholders on our investment. So that would be the only addition I would have.

Leon Topalian:

I think you are going to watch that unfold. And again, I'm not going to comment on what our competitor strategy or positioning is. However, obviously, one of our competitors has got a new mill and a lot of assets sitting on the books, and they are going to do whatever they are going to do and bringing that mill up. At the same time, we are going to focus on what Rex said, in providing a return to the margin that drives our business. And so we will meet the demand out there. We are not going to chase tons or pull forward demand that isn't real. But again, I think what we are seeing in the indicator is that the sheet group is seen over the last two-months are very favorable. And I think that will continue, and you will see the uptick subsequently in our utilization rates as we head into the back half of Q1 into Q2.

Operator:

Our next question will come from Carlos De Alba with Morgan Stanley. Please go ahead.

Leon Topalian:

Yes. Carlos, and thank you for that comment. And that is where I would like to start where you ended. Nucor is very much a growth company and you do see different treatment of start-up costs from us versus some of our peers. Some of them like to make adjusted earnings, we don't view that as an adjustment. That is just part of what we do. We are a growth company. You are going to see that going forward from us, continued start-up costs, pre-operating start-up costs. It was $73 million in the last quarter. We expect it to be down just a little bit in the first quarter. And some of the variability as you start to model out the year, will have to do with spending and the pace at West Virginia. So you will have to just kind of stay tuned on that. But for the next quarter, you will see that come down slightly from the fourth quarter. Did that address your question adequately?

Steve Laxton:

Yes, yes, very much so. The components that go into that segment, the corporate and Elims number, you have got several different things, administrative costs, you have got interest cost and in compensation-related costs, the largest of which is profit sharing, which as Leon said, we are thrilled that our team earned almost $1 billion in profit sharing this year which will get paid out in March. But the big swing from last quarter to this quarter was really the inventory valuations that occurred in our intercompany elims. That is why it swung to the positive credit that you see. So that is what we don't expect to have going forward. That is going to be the biggest change between Q4 and as we head into Q1. And there is really two components to that. If you start to look into your model in a little bit more detail. So, one part of that was the DRI losses we had, which, of course, wiped out any profits -- intercompany profits between DRI. And the other part is really around volumes. And that was more pronounced in our downstream steel product segment than it was anywhere else. We shipped a lot, Carlos, toward the end of the year, even more than we expected. So that is partly why you saw a little bit of increased free cash flow from working capital as well from that factor. And just to close the loop here between Dave Sumoski commented earlier, it is one of the drivers of why sometimes it is a little complicated to look at our costs when you are looking at a segment and you are trying to dial into steel mill cost. Part of those elim numbers are actually falling out of that segment number down into the total corporate elims number as well. So it does get a little fuzzy when you are trying to look at.

Operator:

Our next question will come from Tristan Gresser with BNP Pariba. Please go ahead.

Leon Topalian:

All right. I'm going to begin and then I will let Al talk more specifically, but I want to begin with telling you our prices in plate are not elevated. And I do look forward to them returning to normal levels closer to $2,000 a ton. And so being a little facetious with you, Tristan, but we don't think they are elevated at all. We think we are in a supply and demand environment. And in a commodity business, demand will always dictate pricing. And so that is the driver. And so, I would, again, tell you that they are not elevated. In terms of import risk, and you mentioned the trade case, actually all testified here not too long ago on that case, the ITC is found and upheld, the sunset review on those countries. And so, the protections that are in place today, not just on plate, but all of our products is so greatly enhanced from what we saw six, seven years ago. In 2015, for example, there was only about 50 or 55 trade cases that were won against countries found dumping or illegally subsidizing their steels. Today, that is closer to 150. And so regardless of administration, we have had great success in advocating for our industry and holding those countries accountable with countervailing duties or antidumping margins for bringing, again, not just plate, but sheet and rebar and other products into this country illegally. But Al, you want to touch on sort of that makes the strategy for Brandenburg, how we expect to ramp that up?

Caleb Strother:

Sure. Thanks, Al, and thanks, Tristan, for the question. Brandenburg brings a whole diversified product mix that we haven't had with our plate group prior. When you are looking at plates up to 14 feet wide, 14 inches thick and 1,500 inches long, this helps support a lot of the initiatives that are going on the market. Dan touched on the IRA and the infrastructure package. Brandenburg is well suited in the middle of the country to help supply those customers with solutions that our plate group hasn't been able to offer in the past. Also with our announcement of Elcyon, you look at further investment in greening of the energy grid that is happening in our country, Brandenburg is well suited to supply the monopile plate that will be required our U.S. fabricators and as well as globally around the world for other fabricators.

Leon Topalian:

The percent of the volume out of -- well, I would just tell you, energy, roughly around 10% of our overall mix is probably where we see it. That could ebb and flow a little bit depending on demand and timing, but that is roughly where we are at as a company.

John Hollatz:

Good afternoon, Tristan, this is John Hollatz. Thank you for the question. We feel our portfolio in long products is really going to benefit from what we see coming in 2023 related to the infrastructure bill, where the rebar market will grow by 1.5 million to 2 million tons per year. And we are planning on ramping up our mill in Kingman should ramp up about October of 2024, and Lexington in the middle of 2024. So, we feel like we are well positioned to take advantage of that market.

Tristan Gresser:

All right. Thank you very much.

Leon Topalian:

Thank you. In closing, I just want to thank our team for a historic year in delivering the safest and most profitable year of Nucor's history. Thank you to our customers who enable our success. We appreciate the trust you place in Nucor with every order, and we will continue to work hard to earn your business. And finally, thank you to our shareholders. We take seriously the stewardship of the valuable shareholder capital that you entrust us with. Thank you for your interest in Nucor. Have a great day.

Leon Topalian:

Good afternoon and thank you for joining us for our third quarter earnings call. Joining the call today are other members of Nucor’s executive team, including Dave Sumoski, Chief Operating Officer; Steve Laxton, Chief Financial Officer; Al Behr, responsible for Plate and Structural Products; John Hollatz, responsible for Bar, Engineered Bar and Rebar Fab; Greg Murphy, responsible for Business Services and our General Counsel; Dan Needham, responsible for our commercial strategy; Rex Query, responsible for Sheet and Tubular Products; and Chad Utermark, responsible for New Markets and Innovation. As our teammates continue to serve our customers and what we anticipate will be a record year for Nucor financially, we have not lost focus on our most important goal of becoming the world’s safest steel company. After two record-setting safety years in 2020 and 2021, we are on pace for the safest year in Nucor’s history in 2022. I want to acknowledge the progress demonstrated by all of our teammates as they continue to take care of our most important value. I’d also like to thank and give a shout out to our sheet and engineered bar teams for achieving world class safety performance so far this year and I want to encourage all of our team members to maintain their focus on safety so we can again achieve our most important goal that we have set for our company. Regarding our financial results in the third quarter, we posted earnings of $6.50 per share. And through the first 9 months of this year, we have earned $23.85 per diluted share, setting an all-time record for Nucor Corporation. Our earnings in the third quarter were down compared to the record high levels we achieved in the first two quarters of the year. And as we indicated in our guidance, earnings from our steel mill segments were lower in the third quarter due to metal margin contraction and reduced shipping volumes, particularly at our sheet and plate mills. Prices have decreased more rapidly than our raw material costs and we have also had planned outages at several of our mills. The ongoing war in Ukraine, dynamic changes in energy cost and shifting monetary policy have amplified economic uncertainty. Even with this uncertainty, we continue to see good demand here in the United States, particularly in our Steel Products segments, which had strong earnings again in the third quarter. Their performance was largely the result of continued robust demand from the non-res construction market. U.S. Census Bureau data reflects that the total domestic non-res construction spending hit a record in August at $79.4 billion. Steve Laxton is going to provide more details on the financial performance of our three business segments and the outlook for the final quarter of the year. Although increased economic uncertainty and lower pricing for many steel grades means it’s unlikely we will see more record highs for the rest of the year. We believe that the medium and long-term outlook for our business is quite positive. We continue to execute on our various capital investment projects so that we are well positioned to seize market opportunities as they evolve. Consistent reinvestment in our businesses has been the critical factor enabling value creation by our team over the years. The construction and startup of our Nucor Steel Brandenburg plate mill continues to progress incredibly well with respect to safety, budget and schedule. The Brandenburg team is delivering one of the safest construction projects in Nucor’s history. The Brandenburg team has already commissioned the electric arc furnace, the ladle metallurgical furnace and anticipates commissioning the vacuum tank degasser and caster in the next several weeks. Commissioning is also underway in the rolling mill area, positioning the team to produce its first plate products by year’s end. The startup this year will have our state-of-the-art mill ready to enter the market in 2023. We also announced that Brandenburg is publicly registered to pursue lead version 4 for building and design certification. In a continued trend of environmental leadership as a company, Nucor Steel Brandenburg is the first steel mill in the world to pursue certification under lead version 4, which is more stringent than previously rating systems. The new plate mill will play a key role in supplying sustainable steel to build our clean energy infrastructure. It will be one of very few mills worldwide and the only one in the Western Hemisphere capable of supplying the critical steel components required to build offshore wind farms. I’d like to congratulate our entire Nucor Brandenburg team. The ramp up at Nucor Steel Gallatin continues to progress, although we anticipated a full run-rate production by the end of this year, we now expect that this will occur in Q1 of 2023. The majority of our startup delays have centered around equipment sequencing and remembering that this upgrade was a complete modernization of the entire facility, including new automation software throughout the mill. This investment, combined with the galvanizing line we added in 2019, the addition of the recently purchased pickle line and the two-mill currently under construction, dramatically expands the breadth of market solutions our Gallatin mill can provide. Collectively, these efforts position Gallatin with a higher, more value-added product suite and will enable our team to generate higher profit margins as we move forward. We are proud of the work our team is doing to safely bring the Gallatin facility to its full production capability for our customers. The third quarter was also the first full quarter of operating CHI overhead doors since closing on the acquisition in June. We continue to work closely with the CHI team to integrate them into Nucor and we are already realizing supply chain efficiencies because of the acquisition. We are also working to capitalize on incremental sales opportunities now that CHI is part of Nucor. We are very excited about the growth potential of this new portion of our business and we are on track for a record 2022 and ahead of our acquisition model expectations. We also announced in the third quarter that we will be adding a melt shop at our Kingman, Arizona facility. The new $100 million melt shop will have the capacity to produce 600,000 tons annually and create approximately 140 new full-time jobs. Kingman is currently a rolling mill and we are leveraging that existing footprint and adding melt shop capacity there to efficiently meet the growing demand for rebar in the Western U.S. Lastly, at the end of the third quarter, we announced that the Nucor Board of Directors approved the construction of the galvanizing line at our Nucor Steel Berkeley sheet mill that is expected to begin operations in mid-2025 The Board also approved an additional galvanizing line to be constructed in the Western United States with details to be announced at a future date. The new Berkeley line will be our eighth wholly-owned galv line. These investments further advance our strategy of shifting our mix to higher margin value-added products and capitalizing on sustainability trends that are driving more growth opportunities for Nucor. Turning to Washington for a moment. During the third quarter, Congress passed the CHIPS Act and the Inflation Reduction Act, two pieces of legislation that will strengthen domestic manufacturing and create opportunities in the future for the American steel industry. The CHIPS Act promotes semiconductor manufacturing here at home, which is strengthening our supply chains and helping us unleash a manufacturing renaissance across the United States. The Inflation Reduction Act invests in the domestic manufacturing of clean technologies to reduce emissions. It also contains provisions that encourage the procurement of American-made steel products in clean energy infrastructure. Incentives to build our clean energy future with low emission steel produced by the U.S. industry give us a competitive advantage. And finally, as we have mentioned in previous calls, we expect to start seeing the impacts of new federal infrastructure spending in 2023 as states continue to move forward with their projects. With our expanded capabilities and sustainable steel products, we are well positioned to supply the broad array of solutions that are essential to these efforts. And we are confident that as we do so, our efficient and flexible business model and diversified product portfolio will enable us to deliver very attractive returns on our shareholders’ valuable capital. Before I turn it over to Steve, I want to thank our Nucor team for your incredible hard work and great performance through the first 9 months of this year. And as we navigate the volatility and certainty in the market, we must stay focused on working safely and operating reliably to take great care of our customers. Let’s finish this year having 2022 be the safest and most profitable year in Nucor’s history. Now, Steve Laxton will share with you additional details about our third quarter performance and our outlook through the end of the year. Steve?

Operator:

[Operator Instructions] Our first question is from Carlos De Alba with Morgan Stanley. Please go ahead.

Leon Topalian:

Yes. Carlos, I want to make sure I understand your question. Is it why the long products businesses are seeming to do a little bit more stable in the market than our flat products businesses?

Leon Topalian:

Yes, absolutely. I’ll make a couple of comments. Maybe ask Al Behr, who’s in charge of our Plan Structural Group to make a few comments. But overall, long over many decades now have been our most consistent performers in the marketplace. Historically, again, pre sort of ‘21, ‘22 levels, for example, we were in the structural businesses in the low 70% utilization rates and made very, very good returns based on that level. Again, market leadership position helped that, but also the breadth of products that Nucor runs and producers to take care of that customer base also helps. We did see some meaningful declines in plate. And again, Al, maybe just touch on that, and then we will come back to structural.

Carlos De Alba:

Yes. That was great, Al. And yes, if you could comment on what you’re seeing for 2022, that will be also great. Thank you.

Leon Topalian:

Thanks, Al.

Operator:

The next question is from Timna Tanners with Wolfe Research. Please go ahead.

Leon Topalian:

Good afternoon, Timna.

Leon Topalian:

Yes. Timna, I’ll start us off. And Rex, if there is anything I miss, please jump in. It’s too early to talk about our overall percentage of mix. We’re in the middle of our contract season. And historically, Nucor has been in that 70%, 75% range. Again, I’m not we see meaningfully different. But again, we’re not through that yet and can comment a little more clearly, as we enter the Q4 earnings call in January of next year. But one of the things that – and Al touched on it, it’s really a dichotomy of the markets that we sit today. We’re facing 40-year high inflation supply chain constraints. There were new crane that continues to provide some disruption, monetary policy that’s going to raise interest rates until we roughly double our current unemployment rate. So you’ve got all these negative sentiments in the marketplace. And at the same time, we’ve got some positive. We’ve got automotive, as you’re well aware, of forecasting an additional 1 million tons or 1 million units of new light vehicles coming into the United States in ‘23. Energy, as Al just mentioned, particularly in renewables. Infrastructure spending that’s going to begin to take off. And then the other side of that non-res construction that Nucor is heavily positioned to take care of in our customer base and advanced manufacturing like chips, battery plants cold storage. And so what I would share with you and give you a little more than ambiguous or generalized statements, as we look at the contracts, particularly with OEMs that have been placed so far this year for 2023 and beyond, the long-term play as we see it today in the contracts that have been established are forecasting up in volumes, about 15% for next year. So again, we see some encouraging signs is our order book and our customers’ customers are forecasting out beyond that. So again, some positive news, and again, against the backdrop that remains a little fuzzy as we walk into the new year.

Rex Query:

Timna, this is Rex Query, I’ll comment some of it may overlap what Leon just stated. The comment he made about the success we’re having with partnering with our OEMs, what that’s resulting, what we’re seeing at this point is a willingness to sign up for multiyear contracts, and we’re seeing improved margins. So when you talk about what the discounting is, we look at our business from a margin business. It’s not a fixation on volume. We want to make sure that we offer the value that we have customers willing to pay for. And so what we’re seeing is improved margins in particular with the OEMs and multiyear contract sign-up at this point. I would also comment that we’re seeing the recognition of our varied product mix. Our iconic brand of products with the zero-carbon offerings, our sustainability, all that’s being recognized in particular at this point in the contract season with our OEMs.

Leon Topalian:

Thanks, Timna. I’ll ask Dave Sumoski to maybe provide a couple of comments on raw material sector in our outage plans.

Timna Tanners:

Okay, I will leave it there. Thanks again.

Leon Topalian:

Thanks.

Tristan Gresser:

Yes. Hi. Thanks a lot for taking my questions. The first one, if I may, your commentary around demand and market conditions that are deteriorating into year-end. For which end market have you seen more weakness over recent weeks? And if you could give us maybe a brief update by end market, that would be greatly appreciated. Thank you.

Tristan Gresser:

Alright. Thank you. That’s really good color. My second question, if I may. I just wanted to know if you could provide us maybe an update on Econiq sales and the partnerships on low carbon steel and how this has evolved over recent months. And if you can share if you have any target for 2023 and if you have seen any appetite for those low carbon steel sales outside the U.S.? Thank you.

Tristan Gresser:

Any targets you can share at this stage or not yet?

Tristan Gresser:

Alright. Appreciate the color. Thank you.

Operator:

The next question is from Emily Chieng with Goldman Sachs. Please go ahead.

Leon Topalian:

Yes. Emily, look, I appreciate the question. And certainly, again, there is a lot to unpack, whether it’s in non-res or flats in the sheet business in terms of economic signals and then true demand. And so I have shared a couple of times on the call parts of that non-res story that we see strength. So, what I am going to do and maybe Chad Utermark is over our products group, just provide a little more detail and background and what you are seeing in terms of that customer-to-customer input and what we are seeing in terms of that strength in demand, Chad?

Emily Chieng:

Great. I appreciate the additional color. A follow-up I had was just around what may be sort of lumped into sort of conversion costs. I appreciate the comments earlier on energy, and apologies if I missed something on other components of those cost pressures that you are seeing there. But anything that you would be able to share around cost inflationary pressures and whether or not those are stickier are you seeing them come off?

Emily Chieng:

Got it. That’s really helpful. Thank you.

Operator:

[Operator Instructions] The next question is from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

Leon Topalian:

Good afternoon Phil.

Steve Laxton:

Yes. Phil, I think the other – in addition to talking about cost, the volumes were down for us. So, that’s an important part of maybe that you may have missed in your model assumptions heading into the quarter relative to what actually happened.

Steve Laxton:

No, we really did. And I apologize. I can’t see into your Excel spreadsheet from where I am sitting. But our pre-operating start-up costs were in line with the prior quarter, utilizations were down. That’s going to drive your costs somewhat, but the other costs are in line with what you are seeing overall in the marketplace. We are certainly happy to follow-up with you, Phil, and dig into that in more detail and try to help dial into maybe what’s being missed there.

Steve Laxton:

Yes. The two big drivers on that really have more to do with some of the start-ups, but also the C.H.I. acquisition that was done. Those two things, if you are picking up amortization in your D&A number, then you are grabbing that one.

Steve Laxton:

Yes. Phil, on the CapEx side, we do have about $4.5 billion of projects that we have announced that we will be working on between now and 2025. So, we will have an elevated level of CapEx here for at least for next year. And so we will be likely north of $2 billion. We will refine that further as we go into the end of the year here and finalize our budgets. On the working capital, as you said, we released just under $600 million in the quarter on working capital depending on where your model is assuming on volumes and prices, you could see a similar number or even slightly higher in the fourth quarter.

Leon Topalian:

Thank you, Phil.

Operator:

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.

Leon Topalian:

Good afternoon and welcome to our second quarter earnings call. Before we get to our second quarter results, I want to highlight some changes we’ve made to our executive leadership team. As we announced in May, MaryEmily Slate retired on June 11th. MaryEmily is a dedicated and exceptional leader, and we thank her for her more than 21 years with Nucor. Her impact on our teams across the enterprise contributed greatly to Nucor’s success and profitable growth. The Nucor team wishes the very best for you, MaryEmily and your family, and you will always be a tremendously valued member of the Nucor family. With MaryEmily’s retirement, Dan Needham has assumed the role of EVP of Commercial. John Hollatz was promoted to Executive Vice President of Bar, Engineered Bar and Rebar Fabrication. John is a proven leader. Over his 23-year Nucor career, he has served in our Joist and Deck, Building Systems and Flat-rolled businesses. We welcome John to the executive team. As part of this reorganization, Chad Utermark has been appointed to the newly created role of Executive Vice President of New Markets and Innovation. In this new role, Chad will focus on our continued growth into new markets and integrating new businesses into the core operations of Nucor. Also joining me today on the call are members of the Nucor’s executive team, including Dave Sumoski, our Chief Operating Officer; Steve Laxton, our Chief Financial Officer; Al Behr, responsible for Plate and Structural Products; Doug Jellison, responsible for Raw Materials and Logistics, Greg Murphy, responsible for Business Services and our General Counsel; and Rex Query, responsible for Sheet and Tubular Products. Our mission, to become the world’s safest steel company, is the greatest measure of our culture and our most important value. Halfway through the year, we are on pace to have our new safest year in history, which is coming off back to back to back record safety years. I want to thank each and every member of the Nucor family for your focus and dedication in ensuring every team member is safe. Turning to our financial performance. We achieved record second quarter earnings per share of $9.67 and record first half earnings of $17.30. This record performance was driven by strength across our diversified portfolio of businesses. Strong financial results were recorded by a number of our businesses, including bar, plate, sheet, structural, joist, deck, buildings, tubular and our raw material operations. Since entering the steel business, we have focused on growing long-term earnings power and shareholder value. This month, we are celebrating 50 years since Nucor was listed on the New York Stock Exchange. During that time, we have led the transformation of the domestic steel industry, and we are the envy of the world in terms of Nucor’s environmental footprint, safety performance and efficiency as well as profitability. Nucor has grown revenues by more than 13% per year from $83 million when we were first listed on the exchange in 1972 to last year’s record of $36.5 billion, even as the total size of the domestic industry has shrunk. We have also grown our workforce from 1,800 team members back in 1972 to more than 31,000 team members today and in the process created a huge amount of shareholder value. $1,000 invested in Nucor when we were first listed would be worth over $1.6 million today. Our record first half results continue the history of delivering new highs in profitability and cash flow through successive economic and steel market cycles, demonstrating the sustainability and adaptability of Nucor’s business model. We have world-class manufacturing talent, and we are making the right investments to continue our track record of outperformance. Several of our recently completed organic growth projects in our core steelmaking businesses are already contributing to our record first half profitability, and there is more to come as additional projects ramp up production or come on line. For example, our Nucor Steel Gallatin modernization and expansion project is now fully operational, having completed the last of their project-related outage work on June 6th. Our Brandenburg, Kentucky plate mill is on schedule and on budget for a late 2022 production start with almost 400 team members on board. This is a game-changing mill in the U.S. plate market that will firmly establish us as the market leader in plate. And in May, the State of West Virginia approved the air quality permit for our new sheet mill in Mason County. Groundbreaking for the project will happen later this year. Also during the second quarter, we completed our purchase of C.H.I. Overhead Doors and announced two acquisitions that will lead to the establishment of Nucor Towers and Structures, which will serve the utility, transportation and telecommunications sectors. We are so excited to welcome our new team members into the Nucor family. As we execute on our mission statement, to grow the core, expand beyond and live our culture, these investments are excellent examples of what we look for and expand beyond businesses. They serve growing markets and leverage Nucor’s core manufacturing capabilities and our safety and team-focused, incentive-driven, entrepreneurial culture. We look forward to rapidly scaling up their operations as we continue to broaden our portfolio of construction market solutions. As we evaluate growth initiatives, either in our core business or by expanding beyond, we focused on driving incremental value by leveraging our capabilities and existing positions of strength as we have done for the last 5.5 decades throughout our history. Earlier, I mentioned the 50th anniversary of our New York Stock Exchange listing. Our July 12, 1972, news release announcing the listing gave our firm’s business description as "The nation’s largest producer of steel joists." And it mentioned that the Company also produces carbon and alloy steel. At that time, we just operated one steel mill, which was Nucor Steel Darlington. Nucor’s tremendous growth in profitability and market value over the past five decades has been fueled by our decision back then to expand upstream into steelmaking. The result is that today, we are the leading North American manufacturer of a diverse array of steels and steel products providing essential solutions for construction, infrastructure, energy, transportation, automotive, capital goods and consumer-durable market applications. Today, Expand Beyond is a disciplined strategy for profitable growth and value creation, just as our expansion into steelmaking was 50 years ago. With it, we are targeting higher-growth sectors of the economy and leveraging Nucor’s core competency in efficient, variable cost-based manufacturing as well as our broad product portfolio and existing channels to market. Turning to policy issues. I want to mention that we support swift passage of legislation to address semiconductor manufacturing and beneficial updates to our trade laws through legislation known as Leveling the Playing Field Act 2.0. Congress must get this important bipartisan priority across the finish line. Since the COVID-19 pandemic first disrupted our lives more than two years ago, it has become clear that the U.S. needs strong, resilient domestic supply chains for all sorts of critical materials, such as semiconductors made by great American companies. Reshoring semiconductor production here in America gives us a tremendous opportunity to unleash a manufacturing renaissance in the United States. Also, last week, the U.S. International Trade Commission unanimously extended antidumping and countervailing duty orders for an additional five years on imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan. While this is a positive development, unfairly traded imports remain a concern for our industry. The ITC is conducting several more five-year sunset reviews this year off key trade orders on flat-rolled products. These orders are critical to market stability and industry performance and are an important part of our government’s trade enforcement toolkit. Nucor is working hard to ensure that they all remain in place. Finally, today’s headlines are full of concerns regarding inflation, interest rate hikes and whether we’ll experience a recession. While we are all aware of these factors, Nucor’s sustainable and flexible business model gives me great confidence in our ability to continue to grow and create value for our shareholders. Our team is focused on enhancing our capabilities, not simply adding capacity, and on delivering a differentiated value proposition for our customers by reliably and safely providing a broad offering of the most environmentally responsible steels and steel products found anywhere in the world. Before I turn it over to Steve, I want to congratulate our 31,000 Nucor team members for a fantastic first half of the year. Thank you for your hard work and dedication and commitment to delivering exceptional customer service. Let’s continue our progress towards delivering the safest, cleanest and most profitable year in Nucor’s history. Now, Steve Laxton will share additional details on our first half performance and our outlook as we move forward into the second half of the year. Steve?

Operator:

Thank you. [Operator Instructions] And we’ll first hear from Curt Woodworth of Credit Suisse. Please go ahead.

Leon Topalian:

Yes. Absolutely. Kurt, thank you. And we’re incredibly proud of our team and achieving an incredible quarter, an incredible first half of the year at over $17 per diluted share. It’s just a tremendous outcome, and again, something that we and the entire executive team could not be more proud of the 30,000 men and women who make up the Nucor family. Specifically to your question on structural and plate, I’ll let Al Behr, our EVP of Plate and Structural, touch on it. I’ll just say from a very high level before I turn it to Al that one of the unique opportunities that we have, particularly in structural, is the market share position that we have. We are the leading structural manufacturer in the United States. And it’s something that we’ve talked about many times and shared with you and other analysts that through the cycle, we have seen incredible performance in that sector with Nucor-Yamato, Nucor-Berkeley beams reporting incredible returns and profitability out of those mills even with some, at the time, depressed utilization rates in the high-60s, low-70s. Over the last couple of years, that’s improved markedly in ‘21, peaked at [Technical Difficulty] 90s. So, that business segment for us continues to operate. And Al, I won’t steal all your thunder, but we couldn’t be more excited about the shift and what’s moving in plate. In the -- soon coming on line of our plate mill in Brandenburg. But why don’t you just touch on that a little bit and share where we’re at with Brandenburg as well.

Curt Woodworth:

Great. And maybe just as a quick follow-up. With respect to Gallatin, can you just give us an update on progress there and what your commercial expectations are for volumes in the fourth quarter?

Rex Query:

Yes. Curt, thank you for the question. Quick summary, all our primary steelmaking equipment has been purchased. We’ve awarded our significant portions of civil and concrete work.

Rex Query:

Oh, I’m sorry. I’m going -- sorry, Curt, was talking about West Virginia, which I’ll hold that for a moment and share that here perhaps a little later to the question or a follow-up. But for Gallatin, completed our second quarter outage. All equipment is being commissioned at this point. We’re already expanded -- have expanded our slab with beyond original capabilities. So we’re beyond 68 inches now. That -- the new equipment, we’re capable of 73.5 inches. And we’ll be ramping up here third quarter. By fourth quarter, we expect to be at nameplate capacity. And as you may recall, original stated capacity for that mill, about 1.6 million tons. The expansion will add about 1.4 million. So, we’ll be right at the 3 million-ton mark and capable of producing at nameplate capacity during the fourth quarter. Our ramp-up also in what we produce will be determined also by what’s going on in the marketplace. So I do want to state that, and we’ll gauge that by the demand in the marketplace. So thanks for the question.

Seth Rosenfeld:

I’ve got two points on raw material strategy, please. First, with regards to pig iron from the mills’ perspective, obviously, when we spoke to you a few months ago, you emphasized the strategy to derisk pig iron supply for the full year. What does that mean for your cost of inventory today? Were you ultimately forced to lock in some high-priced deliveries that might be arriving even though spot has declined sharply? And then secondly, from the raw materials side, I think your guidance includes higher DRI price realizations in Q3. Can you explain what would drive that given the weaker scrap and pig iron prices that we’re seeing in the spot market Q-over-Q? Thank you.

Doug Jellison:

Sure, Leon. Thanks. Thanks for the questions, Seth. First thing, I want to acknowledge the great work that the mills in our raw materials group has done over the last six months, tremendous flexibility and execution to react to the changes in the supply chain. No stops in production. We’ve cut our pig use by about 50%, which also has led to a reduction in greenhouse gas emissions and has really been a key part of supporting our record earnings. So, a big shout-out to the team and a thank you. You’re asking about pig iron. I mentioned our reliance on pig is half of this year what it was last year. There’s no overhang or buildup of pigs. There is the normal flow of pig prices as we purchase pigs, deliveries, lead times, working through inventories. So, we see a little bit probably leveling of pig prices through the third quarter declining into the fourth quarter. As far as the DRI, we adjust our DRI transfer price monthly. We want the transfer price to reflect the market price into the steel mills, so that will reflect in those segment reporting. And as a result of that, we see a stable input cost to DRI with a still elevated pig price or transfer price into the third quarter and then dropping pretty significantly into the fourth quarter.

Carlos De Alba:

Maybe just exploring a little bit more the outlook for the steel product business. The guidance seems to suggest that it should be relatively in line with the second quarter. But, could you comment a little bit more where you see the main changes? What is the composition of these basically stable operating results? Is it prices offsetting -- sorry, the volumes offsetting prices, the other way around? How do you see margins? Any color would be helpful. And then, if I may squeeze another one. Is it possible to get an update on how you see CapEx for the remainder of the year, maybe first look at 2023? And how do you see working capital evolving in the coming quarters? Thank you.

Chad Utermark:

Thanks, Leon. Yes, similar to what we had in the script, we expect Q3 earnings to be very similar to the record-breaking results that we had in Q2. So just a big shout-out to all of our downstream product groups. As Leon mentioned, we have multiple businesses from joist and deck, rebar fab, steel piling, racking, tubing, insulated panel, grading. So, that group continues to perform well. There are indicators that we have come off the high in some of these businesses as far as backlogs. But I want to remind you how strong those highs were. And in some of our businesses, our backlogs are still at record levels. But most all of our downstream businesses have current backlog levels that are 30% to 50% higher than the average backlog we had in that 2015 to 2019 period to the pandemic. So, we still see that nonres construction space that is the driver for these businesses, as Al mentioned earlier, to be very strong. What can you expect going forward, even out past third quarter and into the future? What I would say is you should expect higher highs and higher lows. And here’s why. Number one, we’ve been making some changes in our businesses through the years, and we’ve talked about some of those, from restructuring some of our business to bringing on a construction solutions team, even alignment within our groups to better, more effective commercial practices and expectations that drive higher EBITDA margins. And we’re not done. Bottom line in some of our business is downstream, we needed to get better. We’ve made progress, and I’m proud of where the team is at and where we’re headed. In addition to that, we’re bringing on these new businesses in Expand Beyond. So, you should expect good results from businesses like our insulated metal panel business as we grow that and as we drive efficiencies through that. Steel racking, steel towers, and obviously, the overhead steel doors with the acquisition of C.H.I., all these should positively impact our profitability as we fully utilize and integrate these products into our Construction Solutions portfolio. So I guess you can’t hear my excitement, I’ll reiterate, yes, I’m excited about the future of our downstream businesses.

Steve Laxton:

Absolutely. Hey Carlos, how are you doing? This is Steve. You asked about capital for the remainder of the year. And we have guided to a little more than $2 billion on the year. And so, I’ll give you that same outlook from what we said today. We spent about $1 billion so far. So, you can back into roughly $1 billion for the second half of the year. And you’d asked about working capital. Working capital is obviously going to vary where you believe steel pricing is going to go across our system. And I’ll let you take a best guess at that. You probably know better than we do.

Emily Chieng:

My first question is just around the infrastructure package that should start to really accelerate in 2023. But, how much early demand are you seeing that -- from that materialize this year? And perhaps what are the categories that are taking some of the early wins there?

Emily Chieng:

Great. That makes sense. And then, my follow-up is just on the steel mill side. We’ve certainly been seeing a little bit more of a buyer strike type of activity from -- on the customers and as it relates to sort of hot-rolled. But how are market participants acting now? Is there any sort of renewed or early signs of renewed appetite to reengage here?

Operator:

[Operator Instructions] We’ll now hear from Timna Tanners of Wolfe Research.

Leon Topalian:

Yes. Let me start with the back half and then, Rex, I’ll turn it over to you. And we’ve got, I think, good questions on the Gallatin front. What we’ve seen today would be very little through the cycle of the overall volume, but I’ll let Rex touch more on that. Regarding the C.H.I. acquisition, look, in our minds, we acquired the very best company out there in that space, period, bar none. So, our opportunity really isn’t to move or look for other large garage door companies. We are roughly operating at about 60% total utilization in -- with C.H.I. today. We have a lot of room to grow. And most of that 60% is concentrated sort of that mid-USA levels. The further out towards the coast you get, the market share has dropped off a little bit. So, you have an opportunity -- or we have an opportunity to really grow that business with what we have today. Now, there may be some things that we’re looking at that I can’t get into that would be very, very small that might be complementary, but we -- our eggs are in the C.H.I. basket. Couldn’t be more excited about Dave Banger and his leadership team, the entire C.H.I. team and welcoming them to the Nucor family and what they’re doing in that business segment. We’re proud of them already. We’re proud to call them Nucor team members, and the growth that they’re going to bring in the coming years is something incredibly exciting for us. Rex, do you want to touch on the Gallatin question?

Leon Topalian:

Timna, where we see, maybe a little more color. It’d probably be in the several hundred thousand ton range, based on what we see today that we would produce between now and the end of the year and from the new expansion part of Gallatin.

Operator:

Next, we’ll hear from Michael Leshock of KeyBanc Capital Markets.

Leon Topalian:

Yes. Mike, thank you for the question. When I took over in January of 2020, our eight-word mission statement is alive and well, and that’s Grow Our Core, Expand Beyond and Live Our Culture. And so the Live the Culture piece is easy. It’s delivering uncompromising results in every area of our business and doing that while maintaining the safety, health and wellbeing of our team. The core is just at the West Virginia mill, the Lexington micro mill, the expansions in Hickman and the new increases across in Kankakee and other core assets that we have. This Expand Beyond piece over the last 2.5 years driven really by Steve Laxton before he became CFO and Alex Hoffman is really about finding those companies that provide a differentiated value proposition and moving us sort of that one standard deviation outside of the normal and traditional steelmaking lane that have direct steel adjacency, but like C.H.I. offer you some insulation from the traditional cyclicality of steelmaking. Hannibal Industries is in doing that. Cornerstone and the insulated metal panel building business is doing that. The other side of it and the other filter that we look for is how do we continue to provide sweeping solutions in construction, in energy, in automotive, so that when our commercial teams go and meet with the architects, engineers, owners, VCs, they can say we’ve got the entire solution for you. You don’t have to worry about doors or joist or deck or grading or anything else. We are a one-stop shop and can solve the entity and entirety of their steel needs. So the pipeline is rich. I think it will get richer as we move forward. And for every downturn, Nucor has gotten stronger and continue to invest that our cash flow position, the profits we’re generating today put Nucor in an ideal position to continue to be very deliberate and very strategic with long-term goals to enhance our shareholder value.

Leon Topalian:

I’d just like to congratulate our entire team again for a record first half of the year. Thank you for delivering on our mission and making 2022 the safest, cleanest and most profitable year in our history. Thank you to our customers, and thank you for the trust that you place in each and every one of our Nucor teams for your business. We will continue to work hard to earn that business well into the future. And finally, thank you to our shareholders for the trusted capital that you place in our hands. We continue to want to be great stewards and great shepherds to return that valuable shareholder capital. Thank you for your interest in our company. Have a great day.

Leon Topalian:

Good afternoon, and welcome to our first quarter earnings call. I'd like to begin the call by introducing our new Chief Financial Officer, Steve Laxton. During the first quarter, we announced the retirement of Jim Frias and the appointment of Steve to the role of CFO. Steve began his career in Nucor in 2003 and has spent the last 8 years as our Vice President of Business Development. We're excited for Steve's future as CFO and welcome him to the executive team. And you'll be hearing from Steve in a few minutes about our first quarter financial performance. I'd also like to take the opportunity to thank Jim Frias for his 30 years with Nucor. He has had a tremendous impact on me, our team and our company, and we wish Jim and his wife, Sharon, and family the very best in his upcoming retirement. Also joining us on the call today are members of the Nucor executive team, including Dave Sumoski, our Chief Operating Officer; Al Behr, responsible for plate and structural products; Doug Jellison, responsible for raw materials and logistics; Greg Murphy, responsible for business services and our General Counsel; Dan Needham, responsible for bar, engineered bar and rebar fabrication; Rex Query, responsible for sheet and tubular products; MaryEmily Slate, responsible for our enterprise, commercial strategy; and Chad Utermark, responsible for fabricated construction products. Last year, we achieved record safety performance, beating the safety record we set in 2020, and the Nucor team is off to another strong start in the first quarter of 2022. We continue to see excellent safety performance across our divisions as our teams work to meet strong demand from our customers. I'm proud of our team's commitment and progress toward achieving our goal of becoming the world's safest steel company. Team, together, let's set another record in 2022. Turning to our financial performance. We achieved record first quarter results with earnings per share of $7.67. The quarter was marked by pronounced volatility as Russia's invasion of Ukraine impacted commodity markets and the supply chains of nearly every industry. While the Ukraine-Russia conflict certainly is having an impact on our industry, the much larger concern is the humanitarian disaster that has unfolded in Ukraine. The images coming out of Ukraine are heartbreaking and our thoughts and prayers are with the Ukrainian people who continue to endure significant suffering due to the invasion. The onset of the pandemic in March of 2020 and the Russian invasion of Ukraine are 2 recent events that upended markets and showed the resilience and sustainability of our business model. Our flexible production process and diversified product portfolio have helped us to thrive in the volatile market conditions that followed. I'm extremely proud of how our Nucor team has navigated the pandemic and several unexpected supply chain disruptions over the past 2 years. We are on the cusp of completing $4.1 billion in strategic organic growth investments by the end of 2022. We have also completed $2.1 billion in strategic acquisitions and returned approximately $4.8 billion in capital to our investors through the last 5 quarters. Our balance sheet remains under levered, and we have a fresh series of new organic growth initiatives that are just getting underway. Nucor delivered breakout record performance in 2021. And now we're beginning 2022 with a new quarterly record, which we expect to surpass again in the second quarter. Our team's ability to navigate the current disruption to the seaborne pig iron markets highlight the benefit of Nucor's powerful and adaptive business model. Pig iron makes up roughly 10% of Nucor's overall metallic supply in a typical year. Russia and Ukraine have historically accounted for over half of that supply. However, at the outset of this war, we immediately ceased all purchases of pig iron and any other raw materials from Russian suppliers. We could do this without disrupting customer supply or quality because we have worked over the years to effectively manage the risks related to our raw material needs. While we have not been able to source material from Ukraine since the war began, we look forward to partnering with our Ukrainian suppliers when conditions in the region permit. We have several advantages that are enabling us to manage through this disruption, including good long-term relationships with numerous pig iron producers globally; reliable DRI production capabilities in Trinidad and Louisiana that are particularly helpful in this environment; the ability to increase our production of low copper spread and to continue to invest in additional technologies for high-quality metallics, especially those that can help us further reduce Nucor's carbon footprint; and our DJJ brokerage arm that has once again proven its value as it utilizes its broad network to ensure our steel mills have the scrap they need to meet our customers' requirements. Turning to current market conditions. We continue to see robust demand across the key end-use markets we serve. Some markets, like automotive, continue to be constrained due to supply chain issues. Last year, we realized outstanding results despite key markets such as automotive and energy being challenged and well below their averages and our initial expectations. The first quarter of 2022 was similar, with very strong overall demand despite continued supply constraints, production challenges in automotive and relatively tepid response for energy products despite strong pricing for hydrocarbons. And now let me provide a quick update on some specific growth initiatives. During the first quarter, we completed our acquisition of a majority stake in California Steel Industries. And as we've discussed on our last call, this $400 million investment expands our geographic reach in the sheet market to the West Coast, grows our portfolio of value-added sheet products and create supply chain efficiencies with Nucor's downstream businesses in the region, including Verco and Hannibal Industries. We welcome CSI teammates to our Nucor family. We also announced plans to modernize and expand the product capabilities of our sheet mill in Crawfordsville, Indiana by adding a construction-grade continuous galvanizing line and prepaint line. The construction-grade continuous galva line will have a capacity of 300,000 tons per year, while the prepaint line will have an annual capacity of 250,000 tons per year. Crawfordsville was our first sheet mill, pioneering EAF thin slab casting. These projects in Indiana will enhance Crawfordsville's ability to competitively serve the regional construction market. Earlier this month, we announced plans to build our third rebar micro mill in Lexington, North Carolina. We have had great success with our micro mills in Missouri and Florida, and saw a real opportunity to supply rebar to the fast-growing region between Washington and Atlanta. Population growth in this region, along with the new federal infrastructure spending, is increasing rebar demand. The site in Lexington is near abundant scrap supplies and transportation corridors, allowing us to efficiently deliver rebar to customers in the Mid-Atlantic and Southeast. We're really excited to be growing our presence and creating jobs in our home state of North Carolina. With regard to our modernization and expansion project at Gallatin, the team there has completed commissioning the EAF and LMF. The caster and second down coiler will be commissioned during the coming weeks. Following that, we'll have 7-day outage in early June to commission the roughing mill and hot mill crop shear. By June, all of Gallatin's new capabilities and capacities will be online. We currently anticipate shipping approximately 0.5 million tons of Gallatin's added capacity in 2022. By Q3, Gallatin should be able to produce at a 3 million ton per year rate. Our team continues to receive recognition from our customers for the high-quality products we provide. For the fourth year in a row, Nucor has received GM Supplier of the Year Award. We remain the only EES steelmaker to receive this award. In addition, Nucor received GM's Overdrive Award for supplying them with our iconic products. GM is our first customer to receive these products, and it is an example of how we work and listen to our customers to help them achieve their sustainability goals. These awards also demonstrate the benefits of investments we are making to serve our automotive and other customers with demanding applications for lower-CO2-intensity steel. To our Nucor team, you should be extremely proud of receiving this recognition for 4 years running. Econiq is just one example of our focus on sustainability. While our greenhouse gas emissions are just 1/4 of the global average for the steel industry, we continue to look for ways to further reduce our emissions. We have supported the development of solar and wind energy projects by signing 3 power purchase agreements for roughly 600 megawatts of renewable power generation capacity. And earlier this month, we announced an investment in NuScale, a leading developer of new nuclear power technology called the small modular reactor. This investment in NuScale complements these efforts to help the United States develop new sources of clean power. And effective electric grid requires both baseload and intermittent power sources, which is why we believe that both nuclear and renewable energy must be a part of the solution to achieve carbon reductions while maintaining grid reliability. On the trade front, unfairly traded imports remain a concern. The U.S. ITC is conducting 5-year sunset reviews this year of key trade orders on flat products, including cold-rolled steel and corrosion-resistant steel. These orders are important to market stability and industry performance, and Nucor will vigorously work to ensure that they remain in place. We view our advocacy for effective trade law enforcement as an essential component of Nucor's efforts to take care of our customers, teammates and shareholders. Nucor is investing more than $7.5 billion in our steelmaking operations over the 2019 to 2025 period. These investments are expanding the Nucor team by approximately 3,000 jobs and are driven by exciting opportunities to compete in a global steel marketplace where winners are determined by real cost and quality advantages that create sustainable value for consumers and not by government subsidies or other noneconomic factors. I'm incredibly proud of the Nucor team's exceptional focus on delivering world-class performance in every area of our business, particularly our record-breaking results in safety and profitability. We are grateful for the trust our customers place in the Nucor team with every order, and we strive to offer exceptional customer value by being leaders and delivering the cleanest and most sustainable steel solutions in the world. Our key forward-looking indicators for 2022 remain favorable, and we expect another strong year in both earnings and cash generation. Now Steve Laxton will provide more details about our first quarter performance. Steve?

Operator:

[Operator Instructions]. We'll take our first question from Emily Chieng with Goldman Sachs.

Leon Topalian:

Emily, thank you for the questions. If I forget the second or third ones, please remind me. But let me begin with kind of the backdrop of what we saw in Q1, and I'll begin with sheet. And Rex Query, our EVP of Sheet, might jump in here for a point or two. But as we saw it move from Q4 and really an end of a historic year in all of our product groups and company in 2021 into 2022, we obviously saw kind of -- about 3 factors culminating in the end of the year. One was imports coming back in, largely from Mexico and Canada. Two, the distributors really got full. And three, the mills all caught up sort of at the same time. And so as we enter 2022, with pricing going a little bit down and some weakening on the sheet side, we saw some softening there. The large piece of our sheet business is contract-based. And so we made some deliberate decisions at that time to focus on our maintenance, took some outages at different facilities to really ensure that we were able and ready to go when that pivot came. And obviously, that pivot came just a few weeks later. But also -- I'd share with you, Emily, that we also had a strategic decision to not put tons out there in the spot market when we didn't believe the volumes would support that. And so we didn't chase tons. And as a result, you saw some of our utilization has dropped some. But again, as we see the underlying demand in sheet and plate, it continues to be incredibly resilient. And as we -- Steve just shared with you earlier, we expect Q2 to be in an incredibly strong position. Further, as we talk about profitability for Q2, part of the reason why we see Q2 being a record is because our approach commercially and how we're moving through. So you're going to see those higher-priced tons, again, that pivot coming in February into early March, flow through into Q2 very, very quickly. Rex, anything you'd add to that on the sheet side? And then Al Behr, maybe a comment or two on plate.

Leon Topalian:

Thank you, Rex. Al?

Emily Chieng:

Great. That makes a lot of sense.

Emily Chieng:

Yes. No, that was very clear. I do have a follow-up, and it's just around the raw material mix. And I appreciate the comments that you provided earlier. My question is around the DRI component. I appreciate that you've got a couple of assets there in Trinidad and Louisiana. How should we think about the utilization rates of those two assets? And what's the opportunity to continue to increase production?

Douglas Jellison:

Yes. Thanks, Leon. The DRI -- both of our DRI facilities are running well, very, very high world-class reliability rates. We are seeing a little bit of dip as the production went down in the first part of the quarter, and now we're bringing those back up and would expect to run near full capacity in the balance of the year.

Douglas Jellison:

Yes, a number of things I'll touch on. So historically, we run about 10% pig iron in our mix, as Leon mentioned in the opening comments. We've adjusted that. Today, we're running about 6% of our mix is pig iron. We also, historically, in our sheet business, run about 25% prime scrap. So the DRI, you can see gives us a very different mix in our profile going into our sheet mills in there. As Leon mentioned, the team has done an outstanding job of really just turning things around literally overnight. And that doesn't happen overnight. That happens from years of investment in training and developing of the team and understanding the market and being able to read the signs and react quickly.

Carlos De Alba:

So maybe just a follow-up on the metallic mix. What -- how do you complement the rest? If you're right now running around 7% pig iron, 25% prime scrap, how do you see the component of shredded scrap there? And what else can you tell us on that front? And then more broadly, on the cost side, how are you dealing with the cost pressures on the labor side, on the energy front, on the natural gas? What can we expect there going forward?

Stephen Laxton:

Yes. Carlos, this is Steve. You're asking about cost and inflation pressure really. And when you think about Nucor, inside of our mills, the metallic is roughly 70% of the cost. And that is typically correlated highly with steel demand. So it's not going to move, in particular, sensitivity to see any kind of inflation indexes or things of that nature. And then when you think about other major cost components, at least, for Nucor, not for steelmaking in general, but because of the efficient, highly variable cost model that we have, it's a little bit different. In our case, energy is a very large portion of that remaining cost. And most of our energy comes from electricity. And most of that is under tariff rate programs and varies from state to state. So there's not a direct and immediate exposure necessarily there. On natural gas, Nucor is extremely well positioned on that. We typically -- we use a hedge program, and we have physical capabilities to produce gas. Those combined to, today, about 50% of our expected needs for 2022, and we're already hedged with about 40% of the expected use for 2023 and 2024. All those prices are well under the current strip prices. That's because of the active hedge program that we've had in place for a number of years. So we're relatively -- we're not immune to inflationary pressures. We certainly see that in freight and other areas, but we are pretty well positioned to manage through these changes.

Douglas Jellison:

Yes, Carlos, just one more comment on the shred. I don't have a specific number for that because all those numbers change really daily, weekly to give us the optimum cost in it. But what we have worked on, and we've worked on for a number of years, is low copper shred. We've always had a presence in producing low copper shred. But depending on the economics, there's times where it makes more sense than not. And right now, in this market, with the spread between the obsolete grades and the prime grades, it makes a lot more sense. And we're putting a lot more, not only short-term, but long-term development into the low copper shreds, which will again increase our flexibility.

Leon Topalian:

Look, a fair question. What I would tell you is, again, we've been in the business for a long time. We have a very, very long-term established relationships with our customers. We know them personally. We know their needs. And again, the investment strategy is to invest not for capacity but for capability. But specifically, to answer your question, Carlos, we're not, as Steve mentioned, immune to recognizing what's happening in the marketplace with inflation, with interest rates. Every one of us has -- and our team driving to the gas stations every day to see the impacts across the U.S., I would tell you, though, that the demand drivers in nonres, in construction, in the digital space, digital warehousing has been sensational. To say it's resilient would be an understatement. And so those jobs are being led daily. And so in many of those cases, our backlogs are at record backlogs, and we're closing the order book because we don't want to go out as far as some of our customers would ask us to. If there's one area that's, again, been slow to come back, obviously, the automotive piece of that is a General, but Nucor continues to gain market share because it's not a huge piece of Nucor's overall mix today. It's in that 5, 6 percentage point range, about 1.5 million, 1.6 million tons a year. We expect to double that in the coming years. But it is really on the energy side. And while you're seeing some signs of life and rig counts moving up somewhat, it's been a much slower recovery out of the pandemic. And that's probably the one area that continues to have some opportunity. But overall, and again, the end markets that we serve, the underlying demand remains incredibly robust.

Timna Tanners:

So the past couple of months have seen unprecedented volatility. I'm just trying to unpack the way it's impacted Nucor because it's hard for me to contemplate like prices for hot-rolled fell dramatically, then doubled and cost of scrap have gone up unprecedented amounts. And so I'm just trying to think about, if you have a lag in terms of the contract pricing, are you not seeing some of those lower prices for Q1 and to your Q2 numbers? Can you remind us about the mix of that? And can you talk to us a little bit how to think about the scraps sequentially into the second quarter?

Rex Query:

Timna, very clear on your premise for your question. What I would tell you, if we had seen a protracted and slower decrease, you can see that extend out further possibly on the recovery. But we get such a quick decrease and then rebound that you're going to see the majority of that move through very quickly, as Leon stated, in a matter of weeks versus months. The other thing I would tell you is that the vast majority of our contracts are geared towards monthly mechanisms versus something that's a longer time frame. So we have a small amount that would be quarterly. But again, with the quick decrease in the rebound, that's going to push through pretty quickly. The other that I would say is, Leon mentioned, as we saw the spot pricing decrease, we didn't go in place, take the orders for that. So now as we have that opportunity, the market strengthening, we do have the opportunity to place spot tons at higher pricing than we would have a matter of weeks ago. And so that's actually going to help bolster the price and kick it up even quicker. So that's the -- I understand the premise, but we see it being tempered by how we manage through this.

Douglas Jellison:

Timna, this is Doug. One other thing that is a little bit different is how we're leveraging our vertical integration, and we have a much tighter tie from commercial operations and raw materials. And the reaction time to prices moving against scrap is much, much quicker than we've seen in other swings. So building on what Rex has said and stuff, we expect that lag to be shorter with this one.

Timna Tanners:

Got you. And if I could, I have a follow-up, just to understand the answer to Emily's question. And I know you mentioned the commercial strategy, but prices were weak in the first quarter, but demand was strong, from everything I heard from you. If I misunderstood, correct me. But your volumes fell 20% year-over-year in sheet. They're only up like 0.4% despite strong construction and bar products. And like is it -- I'm trying to understand, if prices fall, is Nucor withholding tons? Or is it more about demand? And how do you ramp up Gallatin in an environment where, seasonally, demand slips in the second half? Just trying to square that, if you don't mind.

Operator:

We'll take our next question from Seth Rosenfeld with BNP Paribas.

Leon Topalian:

Yes. Great questions. I'm going to turn it to Rex Query and Al Behr to give you a more detailed update on Gallatin and Brandenburg.

Allen Behr:

Seth, this is Allen. On Brandenburg, our team there in Brandenburg continues to do an outstanding job of executing on that project. They've come through COVID, they've come through supply chain issues, and they remain on track for the start-up at the end of the year, and in late Q4 of 2022. In terms of meaningful production tons, I'd expect those in Q1 of '23. I don't have a number to share with you other than to say, that's largely market-dependent. So typically, in the first year of start-up, we aim for a run rate by the end of the year of 3/4 of capacity. But how that looks through the year is determined on where the market sits at that point and how we can respond to it.

Leon Topalian:

Yes. Certainly, Seth. I'll ask Chad Utermark to comment on that. Just as a backdrop, the performance of our products groups has been spectacular. And again, I couldn't be more proud of how they responded again in what they've done and how they've achieved. And we expect continued great things and improving things as they head throughout the year. But Chad, do you want to provide a little more detail on the products?