10-K: Nucor Reports Lower 2024 Earnings Amid Softening Steel Market Demand, Invests in Long-Term Growth

Nucor's 2024 earnings decreased due to softened steel market demand and increased costs, but the company continues to invest in strategic growth initiatives and return capital to stockholders.

Summary

• Nucor Corporation reported a decrease in consolidated net earnings for 2024, totaling $2.03 billion ($8.46 per diluted share), compared to $4.53 billion ($18.00 per diluted share) in 2023.
• Earnings decreased across all three operating segments: steel mills, steel products, and raw materials.
• The steel products segment experienced the most significant decrease in earnings due to lower average selling prices and reduced volumes, particularly in the joist and deck businesses.
• The steel mills segment saw a decrease in earnings due to lower average selling prices and metal margins, despite comparable volumes.
• The raw materials segment's earnings decreased due to reduced profitability in DJJ's scrap processing operations and an $83 million impairment charge on a long-term note receivable.
• Net sales decreased by 11% to $30.73 billion, with average sales price per ton decreasing by 10% and total tons shipped to outside customers decreasing by 2%.
• The company invested approximately $11.84 billion over the last three years to expand its product portfolio, improve its cost structure, and increase its exposure to markets with attractive growth prospects.
• Nucor expects earnings in the steel mills and steel products segments to be similar in the first quarter of 2025 compared to the fourth quarter of 2024, while earnings in the raw materials segment are expected to decrease.
• Capital deployment is expected to decrease in 2025 with planned capital expenditures of approximately $3.0 billion, continued evaluation of acquisitions, and share repurchases expected to moderate.

Sentiment

Score: 5

Explanation: The document presents a mixed sentiment. While earnings are down and challenges exist, Nucor is actively investing in strategic growth and maintaining a strong financial position. The outlook is cautiously optimistic.

Positives

• Nucor is North America's most diversified steel producer.
• The company has numerous strategic capital projects underway to further diversify product offerings and expand into new markets.
• Nucor's raw material supply chain provides flexibility in optimizing raw material costs.
• The company has a highly variable, low-cost structure and strong financial position.
• Nucor has increased its base cash dividend every year since it began paying dividends in 1973.
• Nucor has net-zero, science-based greenhouse gas (GHG) targets for 2050 and established a new interim emissions reduction target for 2030.
• Nucor has the strongest credit ratings in the North American steel sector.

Negatives

• Global steel production overcapacity continues to be an ongoing risk.
• The price of ferrous scrap, Nucor's principal raw material, is volatile.
• The company faces competition from other steel producers, imports, and alternative materials.
• Pre-operating and start-up costs of new facilities increased to approximately $594 million in 2024 as compared to approximately $400 million in 2023.
• An $83 million impairment charge of a long-term note receivable that management determined was no longer collectible.

Risks

• Overcapacity in the global steel industry could increase steel imports into the United States.
• Recessions and prolonged periods of slow economic growth may negatively affect the business.
• Competition from other steel producers, imports, or alternative materials may negatively affect the business.
• Changes in the availability and cost of electricity and natural gas may negatively affect the business.
• Volatility in steel prices and the cost and availability of raw materials, particularly scrap steel, may negatively affect the business.
• The regulation of greenhouse gas emissions may negatively affect the business.
• Information technology and cybersecurity threats could have an adverse effect on the business and results of operations.
• The accounting treatment of equity method investments, goodwill and other long-lived assets could result in future asset impairments, which would reduce earnings.
• Tax increases and changes in tax laws and regulations or exposure to additional tax liabilities may negatively affect the business, results of operations, financial conditions and cash flows.

Future Outlook

Nucor expects earnings in the steel mills and steel products segments to be similar in the first quarter of 2025 as compared to the fourth quarter of 2024. Earnings in the raw materials segment are expected to decrease in the first quarter of 2025 relative to the fourth quarter of 2024. We expect higher corporate, administrative and tax impacts in the first quarter of 2025 than realized in the fourth quarter of 2024 which may result in lower net earnings overall. Capital deployment is expected to decrease in 2025 with planned capital expenditures of approximately $3.0 billion, continued evaluation of acquisitions, and share repurchases expected to moderate.

Management Comments

• We believe that these investments will help us deliver higher returns on invested capital and long-term growth.
• Further, we believe shifting our product mix to a greater proportion of value-added products will make our overall business less volatile.
• As we have in the past, we intend to allocate capital to investments that advance our strategy to grow the core and expand beyond, with the goal of keeping Nucor in a position of strength well into the future.

Industry Context

The report highlights the ongoing challenges of global steel overcapacity and unfairly traded imports, emphasizing the importance of trade remedies. It also notes the increasing customer demand for steel produced with lower GHG emissions, positioning Nucor's EAF-based steelmaking method as a competitive advantage.

Comparison to Industry Standards

• The OECD has estimated that global steel production overcapacity could grow to 710 million tons in 2025.
• China produced more than one billion tons of steel in 2024, accounting for approximately 53% of all steel produced globally.
• Finished steel imports supplied approximately 23% of U.S. demand in 2024, an increase of 3.7% from 2023.
• Nucor's circular production process has one third the GHG emissions intensity of the average traditional extractive steelmaking process using a blast furnace.

Legal Proceedings

• During 2022, Nucor Steel Louisiana, our DRI facility located in St. James Parish, Louisiana, received allegations of violations of the Clean Air Act from the United States Environmental Protection Agency.
• A combined settlement is currently being negotiated with the United States Department of Justice, United States Environmental Protection Agency and the Louisiana Department of Environmental Quality.

Related Party Transactions

• Mr. Query is married to the sister of Mr. Topalians wife.

Stakeholder Impact

• Shareholders: Lower earnings may impact stock value and dividend growth, but continued capital returns provide some offset.
• Employees: Profit sharing and incentive compensation are reduced due to lower earnings.
• Customers: Investments in new facilities and product offerings aim to improve service and product availability.
• Suppliers: Nucor's raw material strategy focuses on securing reliable access to low-cost inputs.
• Creditors: Nucor maintains a strong balance sheet and credit ratings, ensuring continued access to capital markets.

Next Steps

• Continue to monitor global steel market conditions and adjust production levels accordingly.
• Continue to implement raw material strategy to optimize costs.
• Continue to invest in strategic capital projects to expand product offerings and improve cost structure.
• Continue to return capital to stockholders through dividends and share repurchases.
• Continue to monitor operating results within all reporting units throughout 2025 in an effort to determine if events and circumstances require further interim impairment testing.

Key Dates