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Key for Investors: Analyzing Steel Dynamics 2Q15 Earnings

PART:
1 2 3 4 5 6 7
Part 5
Key for Investors: Analyzing Steel Dynamics 2Q15 Earnings PART 5 OF 7

Steel Dynamics’ Metal Recycling Operations Posted a Profit

Steel Dynamics’ metal recycling operations

Previously, we discussed the 2Q15 operating performance of Steel Dynamics’ (STLD) fabrication segment. In this part of the series, we’ll explore how Steel Dynamics’ metal recycling operations fared in 2Q15. As we discussed in Part 2 of the series, the segment helps the company meet its raw material requirements. The segment also generates third party revenue by selling recycled scrap. Nucor (NUE) also has metal recycling operations.

Currently, Nucor forms ~4.50% of the SPDR S&P Metals and Mining ETF (XME). AK Steel (AKS) and Worthington Industries (WOR) form 2.77% and 2.40%, respectively, of XME’s portfolio.

Steel Dynamics’ Metal Recycling Operations Posted a Profit

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Metal recycling operations posted a profit

Steel Dynamics’ metal recycling operations posted an operating loss in 1Q15. The segment was negatively hit in 1Q15 as scrap prices corrected steeply. Steel scrap prices have been stable over the last couple of months. This helped Steel Dynamics’ metal recycling operations post an operating profit of $12.3 million in 2Q15. This can be seen in the above chart.

Ferrous operation hit

Steel Dynamics’ ferrous operations continued to generate operating losses. The segment generated an operating loss of $43 million in 2Q15. Lower iron ore prices have continued to dent the earnings of steel companies that have iron ore mining assets.

Steel Dynamics has idled its iron ore mine in Minnesota for a minimum of two years. It incurred a charge of $29 million in 2Q15 due to idling operations in Minnesota. It also incurred a charge of around $9 million due to planned furnace maintenance at Iron Dynamics. Together, these two items lowered Steel Dynamics’ 2Q15 EPS (earnings per share) by almost $0.09.

In the next part of this series, we’ll explore Steel Dynamics’ key operating metrics in more detail.

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