Nucor Steel Q2's performance is less than expected. Q3 performance is expected to continue to deteriorate.

On July 18, before the US stock market, Nucor Steel (NUE.US) announced the second quarter financial report for the 2019 fiscal year.

Data show that the company's second quarter net sales of 5.9 billion US dollars, lower than the market expectations of 6.018 billion US dollars, compared with 6.46 billion US dollars last year, down 8.6%.

In the second quarter, the average selling price per ton of steel fell by 2% year-on-year; total steel mill shipments fell by 10% year-on-year.

Net profit attributable to ordinary shareholders for the quarter was $386 million, which was lower than market expectations of $431 million, compared to $683 million for the same period last year. Under generally accepted accounting principles, the company's second quarter earnings per share (EPS) was $1.26, low. It was expected at $1.37, compared to $2.13 in the same period last year.

Main data

In the second quarter of 2019, the overall operating rate of the company's steel mills fell to 84%, compared with 95% in the same period last year.

The company's liquidity is still abundant. As of June 29, 2019, the company had cash and cash equivalents and short-term investments totaling $1.48 billion.

During the quarter, the company repurchased approximately 2.3 million shares of common stock at an average price of $55.41 per share. As of June 29, 2019, the company had approximately 30,301,700 shares outstanding and approximately $1.3 billion in share repurchase plans.

Q2 performance analysis

The company's steel mill revenue in the second quarter decreased compared with the first quarter, mainly due to the impact of service center destocking on the order rate. In addition, the increase in domestic supply and the decline in scrap prices have led the company's customers to take the initiative to take inventory management actions.

Compared with the first quarter, the profitability of the steel products sector improved in the second quarter, mainly because the typical seasonal factors and weather conditions improved the non-residential construction market.

In the second quarter, the operating results of the raw materials segment were basically the same as in the first quarter. The company's DRI plant in Trinidad is scheduled to be out of service from June 19th to July 13th.

Q3 Performance Guidelines

As the profit margin of the company's DRI business is further compressed, it is expected that the revenue of the raw materials sector will decline in the third quarter of 2019.

The company expects the profitability of the steel sector to continue to increase. The non-residential construction market is performing strongly. In addition, recent energy efficiency initiatives in steelmaking and metal construction are also improving the performance of these businesses.

The company expects that the performance of the steel mill sector in the third quarter will be lower than the second quarter, mainly due to the decline in flat steel and sheet steel prices.

After the earnings report was released, as of press time, Nucor Steel did not rise or fall before the market, and the price before the market was $54.7.