SDI, US Steel add to sector’s Q3 profit cautions

Two steelmakers Thursday provided earnings guidance letting investors know their profits in the third quarter will be reduced from those of the previous quarter. Pittsburgh-based United States Steel Corp. and Indiana-based Steel Dynamics Inc. (SDI) have joined fellow steel producer Nucor Corp., which made a similar announcement Wednesday.

SDI says it expects third-quarter 2022 earnings in the range of $4.93 to $4.97 per diluted share. That compares with earnings per diluted share of $6.44 in this year’s second quarter. SDI cites the impact of costs associated with the startup of the company’s Sinton, Texas, for part of the profit reduction.

“Third-quarter 2022 profitability from the company’s steel operations is expected to be historically strong, but significantly lower than second quarter 2022 results, due to lower earnings from the company’s flat-rolled steel operations, as lower average flat rolled steel pricing is expected to more than offset lower raw material costs and higher shipments,” SDI adds.

On the recycling front, SDI (which owns processing firm OmniSource) says, “As ferrous and nonferrous scrap prices have declined, third-quarter 2022 earnings from the company’s metals recycling operations are expected to be below sequential second-quarter results, based on lower realized pricing and volume.”

U.S. Steel says it expects third-quarter 2022 adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of approximately $825 million, which equates to net earnings per diluted share in the range of $1.90 to $1.95.

That compares with what the firm called “record second quarter adjusted EBITDA” of $1.62 billion in the prior quarter, meaning the $825 million figure would result in a 49 percent earnings decrease. The record second quarter EBITDA number resulted in a net earnings per diluted share figure of $3.42.

U.S. Steel says in its minimill segment, which includes Big River Steel in Arkansas, “adjusted EBITDA is expected to be significantly lower than the second quarter’s strong performance. Weaker demand and significantly reduced average selling prices from the segment’s exposure to spot selling prices are expected to negatively impact the segment’s EBITDA performance. In addition, high-cost raw materials procured at the onset of the war in Ukraine began to impact margins in the third quarter and are expected to impact results through year-end.”

The company also anticipates lower EBITDA in its flat-rolled segment, which includes most of its blast furnace-basic oxygen furnace assets. “Accelerating market headwinds in the third quarter negatively impacted demand across most end-markets, which is expected to result in lower shipment volumes,” the company says.

U.S. Steel President and CEO David B. Burritt says, “We expect to deliver a solid third quarter, even as the business continues to respond to the market headwinds that have accelerated over the quarter. We have quickly adjusted our integrated steelmaking operating footprint to better match our order book.”