Steel Dynamics, Inc. earnings

Management highlights

• Strong first quarter financial and operational performance with record quarterly steel shipments of 3.6 million tons. • Adjusted EBITDA of $700 million. • Significant progress in aluminum operations. • World class safety culture with 94% of 135 SDI locations operating without a lost time injury in Q1. • Steel operations had operating income of $557 million in Q1, up 73% sequentially. • Metals recycling operating income was $47 million, 155% higher than sequential earnings. • Steel fabrication operating income was $90 million, aligned with Q4. • Aluminum operations had operating loss of $65 million in Q1 due to startup issues but now operating smoothly. • Capital investments: $138 million in Q1, with total expected to be $600 million in 2026. • Increased cash dividend by 6% and repurchased $115 million of common stock. • Steel fabrication order backlog solid, with December - March being strong. • Metals recycling operations perform well with North American geographic footprint providing competitive advantage. • Steel mills operated at 89% utilization in Q1, higher than domestic industry average of 77%.

Guidance

• Expect to exit 2026 at a monthly rate of 90% capacity for aluminum operations. • Projected future through-cycle EBITDA contribution from Synton, four value add-lines, and aluminum dynamics is $1.4 billion a year. • Believes in strong cash generation and disciplined capital allocation strategy. • Sees opportunities in diversified value-added steel products with favorable market environment.

Segment performance

Steel operations: Record quarterly steel shipments of 3.6 million tons. Steel operations generated operating income of $557 million in Q1, a 73% sequential increase, with average selling prices per ton up $86. Metals recycling: First quarter operating income was $47 million, 155% higher than sequential earnings, due to higher pricing for ferrous and non-ferrous scrap. Shipments were modestly lower in Q1 due to inclement weather. Steel fabrication: First quarter operating income was $90 million, aligned with fourth quarter results. Aluminum operations: Earnings were lower than expected with an operating loss of $65 million in Q1 due to normal startup issues in January, but now operating smoothly with increasing volumes. Revenue contribution: Steel operations likely contribute a significant portion, metals recycling, steel fabrication, and aluminum each have their respective contributions.

Risks & headwinds

• Challenges in integrating or starting up new assets, such as issues faced in aluminum operations in January. • Uncertainties related to the aluminum industry, including market disruptions and supply chain challenges. • Risks associated with general business and economic conditions that could impact steel, metals recycling, fabrication, and aluminum businesses. • Potential prime ferrous scrap challenges and need to mitigate them through enhanced processes and technology.

Analyst Q&A

• Q: On aluminum, impact of recent tariff policy and upside to through-cycle EBITDA numbers.

  A: Margins are strong, more than confident with $650 - $700 million EBITDA per year, and spreads are lower than current, with more to come on through cycle.

• Q: On aluminum business, issues in past quarter and inventory write-off.

  A: Principally a quality issue in January - February, resolved, not an equipment issue, expecting to ramp volumes with second quarter expected to be around 60 - 70,000 tons.

• Q: On mix and capital allocation.

  A: First quarter flat rolled shipments: hot band 1,017,000 tons, cold rolled 151,000 tons, coated 1,530,000 tons. Four new value added lines operating at full capacity. Focus on growing business and positive dividend profile.

• Q: On unit conversion costs.

  A: No huge increases, some structural increases in things like paint, energy not a major concern, product mix has impact.

• Q: On pricing, market sustainability, supply and demand.

  A: Customers more confident, supply chain important, market strong demand-driven, 232 protections helpful, long products market robust.

• Q: On pig iron import and mitigation.

  A: Only use pig iron at flat rolled mills, Butler mill has technology for liquid iron, use scrap and pig iron supplement, teams work closely to mitigate.

• Q: On long products uptick and 26 contracts.

  A: Incentive-based system drives efficiency, sales team works to represent mills, optimization in operations, railroad rail and SPQ mill also doing well.

• Q: On material expansion in long products and aluminum.

  A: Have broad pipeline of strategic opportunities, see great opportunity in aluminum with supply deficit, assess opportunities as fit.

• Q: On steel substitution and aluminum price environment.

  A: Not seeing substantial substitution, automotive investments massive, recent automotive producer announcement supports aluminum demand.

• Q: On March aluminum plant performance and BlueScope situation.

  A: Aluminum plant was break even combined February and March due to January pause, but doing well now. BlueScope: Best and final offer rejected, no constructive engagement since.

• Q: On growth options, downstream vs upstream.

  A: Strategic philosophy is to explore all opportunities, focus on downstream, innovative ways to add value, continue to explore opportunities in aluminum and others.