By Angela Chen
Nucor Corp. warned Thursday that it would post
lower-than-expected earnings for the first quarter, pointing to
higher import numbers pressuring margins and low steel prices.
Shares recently fell 3.8% to $47.37.
The North Carolina-based steel company now expects per-share
earnings in the range of 10 cents to 15 cents a share, down from 35
cents in the year-earlier period. Previously, Nucor had said it
expected its first-quarter earnings to slightly exceed year-earlier
numbers. Analysts had expected earnings of 40 cents, according to
Thomson Reuters.
Lower selling prices and margins resulting from a high number of
imports, which increased 35% last year, have led to lower
performance at the steel mills. The main source is China, whose
steel mills have remained humming despite slack global demand.
"Global overcapacity built by state-owned enterprises is the
biggest risk factor to our business," the company said in a new
release. Though imports are expected to subside in the second
quarter, Nucor expects them to "remain at excessively high
levels."
Import levels in the second half of 2014 were 10% higher than in
the first half, and the trend has continued into this year.
In January, total imports accounted for 39% of total January
domestic shipments, a 37% increase from a year earlier. That month,
Nucor said that it planned to cut back on production to hold up
prices, which were at their lowest levels in five years.
The sheet market has experienced the biggest impact from low
steel prices, with pricing falling 19% from the beginning of the
year until mid-March.
Nucor expects that steel-mill margins should improve in the
second quarter as selling prices stabilize and the company realizes
the benefit of lower raw-material costs.
Finally, the collapse in oil prices has caused an inventory glut
in the pipe and tube sector. However, the automotive market is
improving and there is growing demand in the nonresidential
construction market, the company said.
Write to Angela Chen at angela.chen@dowjones.com
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