Nucor Corporation Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Thanks and Safety: Thanked 33,000 Nucor teammates for a solid quarter in financial results and safety performance, setting an all-time safety record for the first half of the year.
• Financials: Nucor generated EBITDA of approximately $1.3 billion and earned $2.60 per diluted share in the second quarter. Returned $329 million to shareholders through dividends and buybacks in the quarter, with total capital return to shareholders for the first half of the year at $758 million. Capital expenditures for the quarter totaled $954 million, on track to deploy approximately $3 billion in CapEx for the year.
• Operational Accomplishments: Brandenburg plate mill had production and shipments trending higher for a sixth consecutive quarter, with June shipments setting a record and achieving positive EBITDA. Sheet Group shipped nearly 3.1 million tons in the second quarter, setting a new shipment record for the second consecutive quarter. Beam team delivered shipping over 630,000 tons, generating the highest quarterly earnings for the business since 2022.
• Growth Projects: Rebar micro mill in Lexington, North Carolina rolled its first heat and is ramping up production. Kingman, Arizona's new melt shop has started production and will ramp up in Q3. Nucor Towers and Structures' pole production and galvanizing operations in Alabama set to begin by September. Indiana greenfield project set to commence full operations by spring 2026. Crawfordsville coating complex to complete by end of 2025, Berkeley galvanizing line by mid-2026, and West Virginia sheet mill nearly 60% complete.
• Trade Policy: Supported strengthened Section 232 program and applauded Commerce Department's actions on steel derivative products. Anticipated affirmative final determinations in trade investigations on core imports and rebar imports, critical for a level playing field in the steel industry.

Segment Performance

• Steel Mills Segment: Generated $843 million of pretax earnings, more than triple that of the prior quarter. Higher average selling prices, particularly in sheet and plate operations, were key drivers. Total volume was in line with prior quarter with increases in sheet, plate, and beam shipments offset by lower bar shipments. Backlog at end of second quarter was up nearly 30% over the same time last year.
• Steel Products Segment: Generated pretax earnings of $392 million in the second quarter, a 28% increase over the prior quarter's adjusted basis. Pretax earnings for each main product group in this segment were in line with or above Q1 levels. On an LTM basis, the Steel Products segment accounted for 45% of Nucor's total pretax segment earnings with EBITDA margins of approximately 16%.
• Raw Materials Segment: Realized pretax earnings of approximately $57 million for the quarter, an increase of approximately 95% over the first quarter. Results were in line with expectations with stable volumes and pricing and lower operating expenses.

Guidance

• Third Quarter Outlook: Expect Nucor's consolidated earnings to be nominally lower than in the second quarter. In the steel mills segment, modest margin compression expected compared to the second quarter. Earnings in steel products and raw materials segments expected to be similar to the second quarter. For Steel products, slightly lower profitability in Tubular and Joist and Deck, offset by improved performance in other business lines.
• Second Half Expectation: Anticipate domestic steel demand in the second half of 2025 to be higher than in the second half of 2024, with Nucor confident in capturing a healthy share of that demand.

Risks

• Trade Risks: Dumped and subsidized imports continue to persist, requiring vigorous enforcement of trade laws. Nucor and other domestic producers have been injured by elevated levels of unfairly traded corrosion-resistant imports.
• Tariff Impact: Evolving country-specific tariff negotiations and their impact on raw material cost, monitoring the effect of potential tariff changes on the bottom line.
• Energy and Cost Trends: Monitoring energy and electricity cost trends and their impact on operations.

Question and Answer

• Q: On Steel Products, you mentioned the margin compression. Can you break that down for us? A: Leon J. Topalian mentioned it's due to lag effect of orders taken in late Q4 or early Q1 being realized at lower pricing levels, but demand drivers remain robust. John J. Hollatz added that downstream businesses have diverse backlogs with varying lead times and teams have redefined earnings profile.
• Q: On Lexington and Kingman and those ramp-ups. Could you speak to the preoperating start-up costs and the period-by-period outlook for those assets? A: Leon J. Topalian thanked teams at Lexington and Kingman, and Steve D. Laxton mentioned pre-op start-up costs came down quarter-over-quarter with Brandenburg team contributing to breakeven. Brad Ford spoke to Brandenburg's utilization and capability in contributing to EBITDA positively.
• Q: Maybe going back to the 3Q outlook, specifically to the mill segment. So you expect volumes and pricing to be relatively stable, but also are calling for margin compression. Can you talk a bit more about what's driving that margin compression expectation? A: Leon J. Topalian said it's due to tariff impact and lag effect. Al Behr added on raw material flexibility, mitigating the impact of potential Brazil tariffs on DRI pellets and pig iron through global sourcing and supply mix adjustments.
• Q: Sticking with the big beautiful bill question, Steve, are there any direct tax benefits to you all in the back half of the year for 2026? A: Stephen D. Laxton said relatively limited, but R&D spending can be accelerated into expensing for positive net present value benefits.
• Q: Just wanted to check, the CapEx guidance is unchanged at $3 billion, and therefore, we should expect a pretty significant decline in 2H. And then just as a follow-up. If I look at Slide 5, all the projects nearing completion. Beyond that, you've got the sheet mill, you bought the Utah towers, the Pacific Northwest rebar mill. Is there anything else that I'm missing that's kind of coming beyond what's on Slide 5. A: Leon J. Topalian added galvanizing lines at Crawfordsville, Indiana and Nucor Berkeley, third towers plant in Utah, and CSI galv line in late '27 start-up as additional projects.