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    STLD
    Earnings call· Mar 2025(Q1 FY25)

    STEEL DYNAMICS Q1 FY25 earnings call STLD

    Apr 23, 2025 Source

    Executive summary

    Steel Dynamics Q1 FY25 — Record Steel Shipments and Aluminum Ramp-Up

    Steel Dynamics delivered a solid Q1 FY25, marked by record steel shipments and the successful initial commissioning of its Aluminum Dynamics facilities. The company is focused on optimizing these new growth platforms, which are expected to significantly boost future EBITDA, while maintaining a balanced capital allocation strategy prioritizing high-return growth and strong shareholder returns.

    Highlights

    5

    • Achieved record steel shipments of 3.5 million tons in Q1 FY25.

    • Sinton mill achieved positive EBITDA in Q1 FY25, operating at 86% utilization.

    • Aluminum Dynamics successfully cast first ingots in January (Columbus) and March (Mexico), on track for commercial shipments in June 2025.

    • Steel fabrication backlog extends into Q4 2025 with solid pricing, and March saw the strongest order entry in two years.

    • Received favorable preliminary countervailing and dumping rulings on coated steel imports, which has already slowed unfairly priced imports.

    Concerns

    3

    • Steel operations experienced metal spread contraction due to an average realized external steel price decline of $13 per ton and an average scrap price increase of $16 per ton in Q1 FY25.

    • SG&A was higher by approximately $37 million in Q1 FY25 due to non-capitalizable expenses related to the aluminum facilities.

    • Net interest expense is expected to increase from ~$12 million in Q1 FY25 to ~$30 million in Q2 FY25 and ~$40 million per quarter thereafter.

    Guidance & targets

    11
    CategoryTargetConfidence
    Aluminum Dynamics EBITDA
    positive EBITDA
    high materiality
    High
    Aluminum Dynamics Rolling Mill Utilization
    approximately 30%
    medium materiality
    High
    Aluminum Dynamics Rolling Mill Utilization Exit Rate
    50%
    medium materiality
    High
    Aluminum Dynamics Rolling Mill Utilization
    75%
    medium materiality
    High
    Aluminum Dynamics Rolling Mill Utilization Exit Rate
    85%
    medium materiality
    High
    Capital Investments
    $800 million to $1 billion
    high materiality
    High
    Sinton Earnings Contribution
    significant increase
    high materiality
    High
    Aluminum Dynamics Annual EBITDA
    $650 million to $700 million
    high materiality
    High
    Metals Recycling Platform Annual EBITDA (from Aluminum Dynamics)
    $40 million to $50 million
    medium materiality
    High
    Net Interest Expense
    closer to $30 million
    medium materiality
    High
    Net Interest Expense
    $40 million a quarter
    medium materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Steel Operations
    Operating income was sequentially higher as record shipments more than offset metal spread contraction.
    Record shipments: 3.5 million tonsAverage realized external steel price decline: $13 per tonAverage scrap price increase: $16 per tonHot band shipments: 1,093,000 tonsCold-rolled shipments: 116,000 tonsCoated shipments: 1,403,000 tonsSinton utilization: 86% (at times over 90%)Domestic steel industry utilization: 75%SDI steel mills utilization: 89%Coating lines utilization: 50%-55%
    		———$230 million operating income
    Metals Recycling Operations
    Operating income improved modestly as volumes in ferrous metal spreads increased. The team is growing access to recycled aluminum.
    Ferrous metal spreads: increased
    		———$26 million operating income
    Steel Fabrication Team
    Operating income was lower than sequential results as realized pricing declined and shipments seasonally decreased. Demand remained solid with good order activity.
    Realized pricing: declined 4%Shipments: seasonally decreasedBacklog: extends into Q4 2025
    		———$117 million operating income

    Operational metrics

    26
    Adjusted EBITDA
    $448 million
    Q1 FY25

    Adjusted EBITDA for the quarter.

    Net income
    $217 million
    Q1 FY25

    Net income for the quarter.

    Diluted EPS
    $1.44
    Q1 FY25

    Diluted earnings per share for the quarter.

    Revenue
    $4.4 billion13% higher than Q4 sequential results
    Q1 FY25

    Total revenue for the quarter, primarily driven by record steel shipments.

    Operating income
    $275 million16% higher than sequential results
    Q1 FY25

    Total operating income for the quarter, related to steel volumes.

    SG&A increase
    $37 million
    Q1 FY25

    Increase in SG&A due to non-capitalizable expenses for aluminum facilities.

    Net working capital growth
    $105 million
    Q1 FY25

    Growth in net working capital as steel prices increased later in the quarter.

    Liquidity
    $2.6 billion
    end of Q1 FY25

    Strong liquidity position at the end of the quarter.

    Capital expenditure
    $306 million
    Q1 FY25

    Capital expenditures during the quarter.

    Sustaining capital requirements
    $200 million to $250 million
    annually

    Annual sustaining or maintenance capital requirements.

    Return on invested capital
    23%vs S&P 500 at 12%
    last 5 years

    Average after-tax return on invested capital over the last 5 years.

    Unsecured notes issued
    $1 billion
    March 2025

    Issued in the investment-grade bond markets.

    Note pre-funded
    $400 million
    June 2025 maturity

    Proceeds from unsecured notes used to pre-fund a maturing note.

    Net interest expense
    $12 million
    Q1 FY25

    Net interest expense for the quarter.

    Dividend increase
    over 100%
    last 5 years

    Increase in cash dividend over the last 5 years.

    Shares repurchased
    over 40%
    since 2017

    Percentage of outstanding shares repurchased since 2017.

    Shares repurchased
    over 30%
    last 5 years

    Percentage of outstanding shares repurchased over the last 5 years.

    Additional coating capacity
    1.1 million tons
    annual

    Additional higher-margin product diversification from 4 new value-add flat-rolled steel coating lines.

    Aluminum flat-rolled capacity
    650,000 metric tons
    annual

    Total capacity of the state-of-the-art aluminum flat-rolled facility in Columbus, Mississippi.

    Aluminum on-site mill cast slab capacity
    600,000 metric tons
    annual

    Capacity at the Columbus, Mississippi facility, supported by satellite casting centers.

    Satellite recycled aluminum slab casting centers
    2
    current

    Number of satellite centers located in UBC scrap regions.

    Dumped coated steel imports
    3 million-4 million tons
    annual

    Volume of dumped coated steel from 10 Asian countries, subject to trade action.

    Fabricated structural steel imports
    2 million-3 million tons
    annual

    Volume of fabricated structural steel items imported, representing a significant portion of the market.

    Pig iron content in flat-rolled mills
    8% to 25%
    monthly

    The range of pig iron content used in flat-rolled mills, adjusted based on economic balance and productivity.

    Midwest premium
    $0.40doubled from $0.20
    current

    The Midwest premium for aluminum, which has doubled.

    UBC price discount to LME
    $0.05from $0.30 discount
    current

    The discount of Used Beverage Can (UBC) price to LME, which has narrowed significantly.

    Industry KPIs

    4
    MetricValueDetails
    Safety0-incident environment
    Unit cash cost$16per ton
    Growth project CAPEX first production$2.4 billionUSD
    Production sales volume by metal and by mine3.5 million tonstons

    Orderbook & backlog

    1
    Steel Fabrication Backlogextends into Q4 2025Q1 FY25

    Backlog pricing remains solid.

    Capital programs

    2
    Aluminum Dynamics facilitiesunderway
    Period spend: $300 million
    Spent to date: $2.4 billion

    Benefit: 650,000 metric tons aluminum flat-rolled capacity (300k can sheet, 230k auto, 130k industrial/construction); 600,000 metric tons on-site slab capacity

    Construction is nearing completion and commissioning is progressing extremely well. $2.4 billion invested through March 2025, with remaining $300 million forthcoming.

    4 new value-add flat-rolled steel coating linesunderway
    Spent to date: largely spent

    Benefit: 1.1 million tons of higher-margin product diversification

    Successfully ramping with expectation of full earnings benefit later this year. These lines add 1.1 million tons of higher-margin product diversification.

    Risks & headwinds

    5
    Metal Spread Contraction in Steel OperationsQ1 FY25

    Average realized external steel price decline of $13 per ton and average scrap price increase of $16 per ton in Q1 FY25.

    Mitigation: Record steel shipments helped offset the contraction; recent increases in flat-rolled steel pricing expected to positively impact Q2.

    Higher SG&A due to Aluminum FacilitiesQ1 FY25

    SG&A higher by approximately $37 million in Q1 FY25.

    Mitigation: This is a temporary impact during construction, as non-capitalizable expenses flow through SG&A. Aluminum Dynamics expected to achieve positive EBITDA in H2 2025.

    Increased Net Interest ExpenseQ2 FY25 and beyond

    Net interest expense expected to increase from ~$12 million in Q1 FY25 to ~$30 million in Q2 FY25 and ~$40 million per quarter thereafter.

    Mitigation: This is a result of interest expense capitalization for Aluminum Dynamics ending. The company has a strong capital foundation and free cash flow profile.

    North American Automotive Production Uncertainty2025

    2025 estimates recently revised lower.

    Mitigation: Uncertainty due to impact of recently discussed auto and auto part tariffs. STLD's specific automotive customer base has remained stable, and it is growing automotive market share.

    Customer Hesitancy and Increased ImportsQ1 FY25

    Increased imports kept incremental buying at bay in certain product areas, specifically for coated flat-rolled steel products.

    Mitigation: Favorable preliminary countervailing and dumping rulings on coated steel imports have already slowed unfairly priced imports. Announced 232 tariffs should also positively impact demand for US-produced steel.

    What to watch in Q2 FY25

    5

    Sinton Mill Profitability

    Q2 FY25 and H2 FY25
    CurrentEBITDA positive in Q1 FY25
    TargetSignificant increase in earnings contribution

    Why it matters

    Sinton is a major new asset, and its ramp-up and profitability acceleration are key to overall company earnings growth.

    We expect to see significant increase in Sinton's earnings contributions as they continue in the second quarter and again in the second half of the year.

    Q&A highlights

    6

    How exposed is STLD to tariffs on imported raw materials, specifically scrap and pig iron, and what is the overall impact of recent trade actions?

    Tariffs and trade actions are generally beneficial for STLD. Scrap imports from Canada/Mexico are unaffected. P1020 tariffs are absorbed by the Midwest premium. Pig iron tariffs might have some impact, but STLD can reduce pig iron content by using more prime/low-residual scrap. Aluminum slab from Mexico will have incremental impact this year due to ramp-up. Overall, STLD is well-positioned, and the USMCA renegotiation could be positive.

    “Relative to raw materials in particular, obviously, scrap is not included today, and all my comments are as of today, one doesn't know necessarily what may happen in the days, weeks and months ahead. But the scrap flowing across the border is not an impact to us.”

    asked by Katja Jancic · answered by Mark Millett

    2 min read7 chapters

    Detailed Narrative

    01

    Operational Performance & Safety Focus

    Steel Dynamics achieved a solid financial and operational performance in Q1 FY25, highlighted by record steel shipments of 3.5 million tons and adjusted EBITDA of $448 million. The company maintains a strong focus on safety, actively engaging in its 'take controller safe' program to drive toward a zero-incident environment, emphasizing team dedication and continuous improvement.

    02

    Aluminum Dynamics Progress and Commissioning

    The Aluminum Dynamics project is progressing on schedule, with the successful casting of the first aluminum ingot in January at Columbus, Mississippi, and in March at the Mexican satellite slab facility. Construction is nearing completion, with $2.4 billion invested through March 2025 and an additional $300 million forthcoming. Commercial quality coils are expected to ship in June 2025, with the rolling mill targeting 30% utilization in H2 2025 (50% exit rate) and 75% in FY26 (85% exit rate).

    03

    Sinton Mill Momentum and Profitability

    The Sinton flat-rolled mill gained considerable momentum in Q1 FY25, operating at approximately 86% utilization, often exceeding 90%. The mill achieved positive EBITDA for the quarter, with expectations for a steep acceleration of profitability for the remainder of the year. Product development is ongoing for API pipe grades and high-strength steels, further enhancing the mill's value-added offerings.

    04

    Steel Fabrication Strength and Backlog

    Steel fabrication operations delivered a solid performance, with March representing the strongest order entry month in two years, and momentum continuing into April. The order backlog extends into Q4 2025 with attractive pricing levels. The business anticipates considerable long-term uplift from federal programs, manufacturing growth, and onshoring initiatives, supporting demand for both flat and long product steel.

    05

    Metals Recycling and Innovation

    Metals recycling operations saw improved earnings in Q1 FY25 due to increased ferrous metal volumes and spreads. The team is actively growing its access to recycled aluminum and expanding scrap separation capabilities through innovative technologies. This strategy aims to mitigate supply risks, materially increase recycled content for aluminum flat-rolled products, and enhance earnings opportunities.

    06

    Strategic Growth and Capital Allocation

    Steel Dynamics emphasizes its resilient cash-generating business model and disciplined investment approach. The company's capital allocation strategy prioritizes high-return growth, complemented by a balanced approach to shareholder distributions (base dividend and variable share repurchase program), while maintaining investment-grade credit metrics. The company has achieved a 23% average after-tax return on invested capital over the last five years.

    07

    Aluminum Industry Disruption and Competitive Advantage

    Management views the aluminum industry as ripe for disruption, similar to the steel industry 30 years ago, characterized by older assets, high legacy costs, and a significant North American supply deficit. Steel Dynamics aims to leverage its core competencies, operational know-how, and OmniSource's recycling footprint to establish a cost-effective, high-return position, with state-of-the-art facilities and a performance-driven culture.

    AI-generated summary of the company’s earnings call. Not investment advice.