STEEL DYNAMICS INC Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Safety: Achieved all-time low quarterly recordable and lost time injury rates, with 80% of over 100 locations having no recordable injuries.
• Sinton, Texas: Despite vendor oxygen supply issues in Q2, Sinton increased sequential earnings, achieved pretax breakeven, and expects steep profitability acceleration in remainder of 2025.
• Metals Recycling: Achieved record quarterly shipments of ferrous and nonferrous metals.
• Biocarbon: In commissioning phase, with product shipments expected in third quarter.
• Aluminum: Shipped first commercial quality aluminum flat-rolled coils in June; estimated EBITDA positive by end of 2025.
• Awards: Awarded Volkswagen Global Group Award for Sustainability for low-carbon steel program.
• Financials: Generated cash flow from operations of $302 million in Q2 2025; ended Q2 with $1.9 billion liquidity; repaid $400 million senior notes; repurchased $200 million in common stock; increased dividend 9% to $0.50 per share.

Segment Performance

• Steel Operations: Generated operating income of $382 million in Q2, over 65% higher sequentially. Average realized steel pricing increased $136 to $1,134 per ton, but flat-rolled shipments declined. Revenue contribution from steel operations was significant.
• Metal Recycling: Operating income was $21 million, $4 million lower than Q1 due to lower ferrous pricing despite record shipments. Contributed around [specific percentage, not explicitly stated but a portion of total revenue].
• Steel Fabrication: Operating income was $93 million, lower than Q1 due to modest pricing decline and higher steel substrate costs. Contributed a portion of total revenue.
• Aluminum Operations: First commercial quality aluminum flat-rolled coils shipped in June 2025. Operating losses totaled $69 million in H1 2025. Estimated losses of $40 million in Q3 2025, improving to $15-$20 million in Q4, with expectation of monthly EBITDA positive by end of 2025.

Guidance

• Steel Dynamics: Expect steep acceleration of profitability in remainder of 2025 and 2026. Steel Fabrication expects increased profitability in Q3. Capital investments in H2 2025 to be in range of $400 million, mostly related to aluminum and biocarbon growth.
• Aluminum: Estimated losses of $40 million in Q3 2025, $15-$20 million in Q4 2025; expect monthly EBITDA positive by end of 2025.
• Sinton: Expect meaningful positive shift in financial performance in second half of 2025, with projected through-cycle EBITDA contribution.

Risks

• Oxygen Supply: Vendor oxygen supply issues impacted Sinton's production in Q2 2025.
• Aluminum Industry: Challenges in start-up, commissioning, and potential market dynamics affecting aluminum operations.
• Trade and Tariffs: Impact of tariffs on pig iron, aluminum imports, and potential demand destruction; uncertainty related to trade policies and interest rates affecting steel demand.
• Supply Chain: Dependence on vendor oxygen supply and potential issues with raw material sourcing for aluminum and steel operations.

Question and Answer

Q: Just on the Al business, congrats on producing and shipping the first coil. Maybe get a little bit more color on what drove the slightly lower utilization rate in 2025 and 2026 and also the delta in the EBITDA profitability...

A: Mark D. Millett said no material change in view; Theresa Wagler added they still are confident in EBITDA positive in second half.

Q: Maybe on Sinton, can you disclose how much of EBITDA the mill generated in 2Q?

A: Theresa Wagler stated they're not specifically giving financial metrics for Sinton, but it was significantly better than Q1 with expected step function increase in second half.

Q: Maybe just a follow-up on the aluminum venture, if you can discuss the market environment in which you'll be ramping up your new aluminum facility...

A: Mark D. Millett said environment has become more positive with supply deficit and high tariffs; Theresa Wagler added modeled spreads are conservative with upside opportunity.

Q: Can you explain the benefit of biocarbon and the potential ability to replace other materials?

A: Theresa Wagler said biocarbon allows replacement of carbon inputs in steelmaking, reducing carbon footprint by up to 35%, and has potential for other benefits like producing hydrogen and supporting low-carbon pig iron production.

Q: You mentioned that you expect fab to see an inflection point. Is that being driven by price or volume or both?

A: Theresa Wagler said primary driver is volume with price stability supportive.