Nucor 2Q17 Earnings Call Notes

John Ferriola – Chairman, Chief Executive Officer and President

Significant work remains to be done to achieve effective enforcement of US trade laws

” Through the first half of 2017, finished steel imports have increased an estimated 15% compared to the same period last year. The estimated finished steel import market share in the months of June 2017 was 29%, matching the record annual level set in 2015. The year-to-date market share for finished steel imports stands at approximately 27%. This is further evidence that traditional trade cases are very often too slow to keep up with the shifting tactics of nations that are abusing the rules of trade. Nucor continues to believe significant work remains to be done to achieve truly effective and timely enforcement of U.S. trade laws. It’s time for comprehensive and broad based remedies that address years of illegal foreign trade practices that have weakened our nation’s economic vitality and our national security.”

Confident in our ability to compete domestically, it’s imports that are concerning

“when I look at the different markets that we are participating in and the advantages that we have in some of those markets, automotive, construction, energy, just being a bunch of – just a couple of names to put out there. We are very confident in our ability to compete extremely well against domestic competitors on a level playing field. The challenge that we have and we will continue to fight, and I know that we will continue to have more success on is with imported products.”

Seeing more support for our trade cases in Washington

” Washington is beginning to understand our elected officials, the administration, beginning to have a better understanding of the consequences of imports not only on our economy but on our national security. And as a result, we are seeing more and more support for trade cases and for more holistic solutions. But particularly on the trade cases, we’re seeing much greater success than we’ve had in the past, quicker turnarounds. There’s been several things that have come to into effect in terms of enforcement that are now supporting the trade cases as they get successfully prosecuted. So yes, I’m confident that we’re getting the handle, getting our hands around imports.”

No doubt that auto has plateaued

“Well, auto weakening is taking place. There’s no doubt that it’s plateaued. I’m hearing numbers around 7.1 units versus 7.5 units, okay. There’s no doubt in my mind that there’s some weakening going to be occurring. It’s only to the effect.”

Construction market still only 65% of where it was

“if we use 2007 as kind of the peak market, I would say we’re somewhere around 65% of where we were back in 2007. So it’s getting better. It’s continuing to improve… we are still hoping for some news on our infrastructure build, which would prolong the cycle.”

Jim Frias

Intensifying pressure from illegally traded steel imports

“This performance was achieved despite intensifying pressure from illegally traded steel imports.”

Nucor 1Q17 Earnings Call Notes

John Ferriola – Chairman, CEO and President

We welcome an investigation into the impact of imported steel on national security

” I have to tell you, we welcome an investigation into the impact of imported steel upon our national security, particularly given that many of these steels are imported illegally, violating our trade laws. And so we’re happy to see this. I think it was a bold move by the President. He clearly set a time frame that’s aggressive and it’s a good thing for the industry.”

Inventory levels are very low

“without a doubt, the inventory levels, as you mentioned, are extremely low. Our sheet products are about 1.8 months on hand. I can’t — frankly, I can’t remember the last time they were that low. Plate inventories are somewhere around 2.3 months on hand, also well under the normal PIV rate. And in terms of the impact or what we’re hearing as to why that’s been happening, I guess, part of it has been that the service center industries have been waiting to make sure that what they’re seeing today in the balance between supply and demand and its impact on pricing is longer term. They want to make sure that this wasn’t one of those short pops.”

Steel use per rig has doubled

“Well, if you take a look at the U.S. rig count, it’s up quite a bit. It’s currently running at about 850 rigs. That’s up from a low in the middle of last year of about 400. So the number of rigs have doubled. And as importantly, the amount of steel consumed per rig has doubled since about 2013. So when you have a situation where you’re doubling the number of rigs and the amount of steel consumed has doubled, that’s a good situation for us. And again, as I mentioned, we’re — we tend to be heavy on hot band, particularly at our Gallatin facility. And Gallatin has always been a big feeder to the OCTG. So we stand ready to supply this increased demand.”

25% of steel is imported…construction is #1 consumer of steel

“Yes. In general, I would have to agree with what you were saying. I will say, though, one point that I need to correct. You talked about basically the steel being cut off from China and Korea and some other — Turkey, some other problem areas. I need to point out that, that is a battle that we’re still fighting. If you look at the import percentage today, we’re probably still having 20% to 25% of the market share supplied by imported products, many of which are dumped products. So we continue that battle. But in general, we take a look at things and we say, “Okay, what’s — where does the steel demand come from?” And at the end of the day, when you look at the United States, construction accounts for the vast majority of steel consumed in the United States followed by automotive, okay, followed by energy.”

Nucor FY 3Q17 Earnings Call Notes

Nucor’s (NUE) CEO John Ferriola On Q3 2016 Results

Pent up earnings power

“Consistent with our company’s long history of growing stronger during industry downturns, Nucor has a sizable pent-up earnings power that we are eager to realize for our shareholders. We are executing our long term growth strategy by leveraging Nucor’s five drivers to profitable growth. The five drivers are: One, strengthen our position as a low cost producer. Two, achieve market leadership positions in every product line in our portfolio. Three, move up the value chain by expanding our capabilities to produce higher quality, higher margined products. Four, expand and leverage our downstream channels to market to increase our steel mills base load volume for sustainable results. And five, achieve commercial excellence to complement our traditional operational strength.”

Moving in the right direction thanks to new government

“With the recent actions taken by the U.S. Government to both strengthen and better enforce our nation’s trade laws significant progress is being made. We are definitely headed in the right direction, but there’s a tremendous amount of work still to be done. And Nucor team will continue to diligently work to ensure a more comprehensive and long term solutions to the problems facing the steel industry and America’s manufacturing base.”

We just want a level playing field

“Well we’ve had personally a small amount of contact with the new administration, but obviously our trade associates have been very active working with them. As a general statement we feel very pleased particularly with the appointment of the Cabinet members who will be focused on trade. We believe them to be very knowledgeable about the steel industry and very knowledgeable about trade laws and policy. So, we feel good about what we see as the changes coming up in the administration relative to trade and particularly to steal as it pertains to trade. And again, all we are looking for as we have said many times in the past, all that we are looking for is a level playing field. We are not looking for any advantage; we are looking for level playing field. We feel good about the administration’s position on China and with currency manipulation, and we feel very good about the acquisition on China as a market economy status, and not being granted market economy status.”

Quality, service, on time delivery, financial stability are all selling points

“e. I can tell you that in terms of how we’re being received by the automotive companies, it’s very favorable to know. For several reasons, our quality is good, Our service is excellent. Our long time delivery is very, very good, and frankly, we’re a very financially stable company. And as you know, the parts that they specify on a platform might not have to be delivered for two to three years. They want to make sure that that company that they’re buying from and specifying their platforms of buy from is, in fact, around in two to three years in Nucor with our financial strength, we’re going to be around for a long, long, long time.”

Jim Frias

Capacity is 26m tons

“Reflecting the capacity impact of moving up the value chain, we estimate Nucor’s total steelmaking annual capacity to be approximately 26.7 million tons, a decline of about 7% from a prior estimate of just under 29 million tons. For 2016, our steel mills produced a total of 21.2 million tons.”

Steel is being dumped and it’s hurting the American worker

“It’s being dumped, there is no doubt about it and it’s hurting the American worker and we’re going to keep, we don’t give up, we’re going to be going back until we get the proper outcome and ensure level playing field to our teammates to compete upon.”

Nucor (NUE) Q2 2016 Earnings

Nucor (NUE) CEO John Ferriola said the company aims to be the low cost producer

“Anchoring our strategy are Nucor’s five drivers to profitable growth, they are: strengthen our position as a low cost producer; achieve market leadership positions in every product line in our portfolio; continue to move up the value chain by expanding our capabilities to produce higher quality, higher margined, more import resistant products; expand and leverage our downstream channels to the market to increase our steel mills’ base load volume, especially in weak markets; and achieve commercial excellence to complement our traditional operational strength.”

And they were able to take market share

“Nucor’s steel mill volume growth in 2016 highlights our success in gaining profitable market share. For the first six months of 2016, our steel mill production increased 13% over the year-ago period. That compared with the U.S. steel industries decrease of approximately 1% over the same period. This profitable growth did not just happen. It is the result of our highly flexible and low cost production capabilities, our unrivaled product breadth and diversity, our investments that have allowed us to move up the value chain, and our execution of our channel to market strategy.”

Pursuing court cases against those they feel that are violating trade laws

“Nucor continues to be proactive and aggressive in pursuing trade cases when and where it is appropriate. When farm producers and governments break mutually-agreed-upon laws governing trade, there must be meaningful consequences. Utilizing trade remedies is not protectionism. Trade enforcement is absolutely critical to drive the change towards a market-based system. A market-based system is one where our efficiency and innovation determine which producers win and which producers lose.”