NUCOR CORP Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q) | MarketScreener

2022-08-13 00:23:02 By : Ms. Amy Wang

The following discussion provides a greater quantitative and qualitative analysis of Nucor's performance in the second quarter and first six months of 2022 as compared to the second quarter and first six months of 2021.

Net sales to external customers by segment for the second quarter and first six months of 2022 and 2021 were as follows (in thousands):

In the steel mills segment, sales tons for the second quarter and first six months of 2022 and 2021 were as follows (in thousands):

Outside sales tonnage for the steel products segment for the second quarter and first six months of 2022 and 2021 was as follows (in thousands):

• The primary driver for the increase in gross margins in the second quarter

of 2022 as compared to the second quarter of 2021 was the increased gross

margins in the steel products segment. The largest increases in gross

margins in the steel products segment were at our joist, deck and building

systems businesses. Demand in nonresidential construction markets continues

to be strong. As we enter the third quarter of 2022, backlogs for the steel

• Gross margins in the steel mills segment increased in the second quarter of

2022 as compared to the second quarter of 2021 due to increased metal

margins. Metal margin is the difference between the selling price of steel

and the cost of scrap and scrap substitutes.

• Pre-operating and start-up costs of new facilities were approximately $60

million in the second quarter of 2022 and approximately $22 million in the

second quarter of 2021. Pre-operating and start-up costs in the second

quarter of 2022 and 2021 primarily included costs related to the sheet mill

expansion in Kentucky, the plate mill being built in Kentucky and the

galvanizing line at our sheet mill expansion in Arkansas. Nucor defines

pre-operating and start-up costs, all of which are expensed, as the losses

attributable to facilities or major projects that are either under

construction or in the early stages of operation. Once these facilities or

projects have attained a utilization rate that is consistent with our

similar operating facilities, they are no longer considered by Nucor to be

• Gross margins in the raw materials segment increased in the second quarter

of 2022 as compared to the second quarter of 2021, primarily due to

increased margins at our DRI facilities and DJJ's scrap processing

operations, which had strong profitability in the second quarter of 2022.

• The primary driver for the increase in gross margins in the first six months

of 2022 as compared to the first six months of 2021 was the increased metal

margins in the steel mills segment. The average scrap and scrap substitute

cost per gross ton used in the first six months of 2022 was $516, a 20%

increase compared to $431 in the first six months of 2021. The increase in

the average scrap and scrap substitute cost per gross ton used was more than

offset by the previously mentioned increases in average selling prices.

• Pre-operating and start-up costs of new facilities increased to

approximately $122 million in the first six months of 2022 from

approximately $41 million in the first six months of 2021. Pre-operating and

start-up costs in the first six months of 2022 and 2021 primarily included

costs related to the sheet mill expansion in Kentucky, the plate mill being

built in Kentucky and the galvanizing line at our sheet mill expansion in

• Gross margins in the steel products segment increased in the first six

months of 2022 as compared to the first six months of 2021. The primary

driver was the increased gross margins at our joist, deck and building

• Gross margins in the raw materials segment decreased in the first six

months of 2022 as compared to the first six months of 2021, primarily due to

decreased gross margins at our DRI facilities in the first quarter of 2022,

which improved in the second quarter of 2022.

Marketing, Administrative and Other Expenses

Equity in Earnings of Unconsolidated Affiliates

Net interest expense for the second quarter and first six months of 2022 and 2021 was as follows (in thousands):

Earnings Before Income Taxes and Noncontrolling Interests

the earnings of CSI, for which results were consolidated beginning on February 1, 2022, the date Nucor acquired its 51% controlling ownership position.

The effective tax rate for the second quarter of 2022 was 21.9% compared to 22.4% for the second quarter of 2021. The expected effective tax rate for the full year of 2022 is approximately 22.8%.

We estimate that in the next 12 months our gross unrecognized tax benefits, which totaled $124.0 million at July 2, 2022, exclusive of interest, could decrease by as much as $10.5 million as a result of the expiration of the statute of limitations and the closures of examinations, substantially all of which would impact the effective tax rate.

Net Earnings Attributable to Nucor Stockholders and Return on Equity

The current ratio was 2.6 at the end of the second quarter of 2022, which was in-line with the current ratio of 2.5 at year-end 2021.

In June 2022, Nucor's Board of Directors declared a quarterly cash dividend on Nucor's common stock of $0.50 per share payable on August 11, 2022 to stockholders of record on June 30, 2022. This dividend is Nucor's 197th consecutive quarterly cash dividend.

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