Steel Dynamics cuts net debt by $61 million, reports 2.6x leverage

By Lisa Kerner

Charlotte, N.C., Oct. 29 – Steel Dynamics, Inc. ended its third quarter on Sept. 30 with record liquidity of $1.7 billion, even after deleveraging its balance sheet and increasing its cash dividend by 20% in the first quarter, said executive vice president and chief financial officer Theresa Wagler.

“Total debt declined slightly to $2.6 billion, and net debt of $2.2 billion decreased $61 million due to our free cash flow performance,” Wagler said during the company’s earnings conference call on Tuesday.

During the first nine months of 2015, the company generated $622 million of free cash flow.

Cash flow from operations for the quarter was “significant” at $164 million, according to the CFO.

Wagler said the company has no near-term debt maturities, its remaining maturities are well laddered and its net leverage is 2.6 times.

Steel Dynamics had cash and equivalents of about $474 million at quarter’s end.

Capital expenditures totaled $30 million in the quarter and are expected to total about $120 million for the full year, Wagler said.

The company had net income for the quarter of $61 million, or $0.25 per diluted share, on net sales of $2 billion. This compares with $91 million, or $0.38 per diluted share, on net sales of $2.3 billion for the prior-year period.

A challenging 2015

President and chief executive officer Mark Millett said, “2015 continues to be an interesting challenge.”

He cited ongoing pressure from steel imports, which negatively impact steel pricing and domestic steel production. As a result, industry utilization is “not fully reflecting the actual strength in U.S. steel consumption.”

While the automotive market remains strong and construction continues to improve, customer steel inventories remain at elevated levels and scrap prices continue to decline.

“As scrap prices stabilize at these lower levels and steel inventories moderate to more normalized quantities into 2016, we believe domestic steel production should improve,” Millett said.

Steel Dynamics’ fabrication operations achieved record profitability for the second consecutive quarter.

Fort Wayne, Ind.-based Steel Dynamics is a domestic steel producer and metals recycler.

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