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Nucor Posts Third Straight Profit on Steel Price Gain

July 22 (Bloomberg) -- Nucor Corp., the largest U.S. steelmaker, reported its third consecutive quarterly profit as higher metal prices and increased demand boosted sales.

Net income was $91 million, or 29 cents a share, in the second quarter, compared with a loss of $133.3 million, or 43 cents, a year earlier, Charlotte, North Carolina-based Nucor said today in a statement. The results beat the 25-cent average estimate of 12 analysts surveyed by Bloomberg. Sales surged 69 percent to $4.2 billion.

Nucor, led by Chief Executive Officer Dan DiMicco, ran its mills at 71 percent of capacity, compared with 46 percent a year earlier. Steel shipments rose 53 percent from a year earlier and prices increased 25 percent.

“The quality of earnings was very good,” Michelle Applebaum, who runs a Chicago-based equity research company, said today in a telephone interview. “It was a strong volume quarter, particularly in the flat-rolled side, and they had good pricing.” She rates the shares “buy.”

Nucor rose 56 cents, or 1.4 percent, to $39.67 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have dropped 15 percent this year.

Nucor cautioned that profit gains may not continue.

“There is a general slowdown taking place across all product lines as the overall economy has entered into a new period of uncertainty,” Nucor said in the statement. “This is the case both in the U.S. and globally.”

Third Quarter

The company’s outlook reflects slowing demand in China and steel prices that have declined since June, Applebaum said. Earnings probably will fall short of analysts’ average third-quarter estimate, which calls for profit to rise from the second quarter to 43 cents a share, she said.

“At best, it could be a flat quarter,” Applebaum said.

Average second-quarter prices for hot-rolled steel coil, a benchmark product used in cars and buildings, were 71 percent higher than a year earlier, according to data compiled by Metal Bulletin. The price has slipped 12 percent since the beginning of June.

The company’s inventory accounting method reduced second-quarter profit by $67 million, more than the $47 million Nucor estimated June 15.

Previous Losses

Nucor posted consecutive losses through the first three quarters of 2009 before returning to profit in the final three months of the year.

Nucor is the largest steelmaker based in the U.S. ranked by market capitalization.

Earlier this week, Steel Dynamics Inc., the third-biggest U.S. steelmaker by market value, reported second-quarter profit that trailed analysts’ estimates. Falling prices for scrap metal hurt the recycling unit and steel shipments fell from the first quarter, Steel Dynamics said.

U.S. Steel Corp., the second-biggest U.S.-based steelmaker, and West Chester, Ohio-based AK Steel Holding Corp. are scheduled to report quarterly results on July 27.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

To contact the editor responsible for this story: Simon Casey at scasey@bloomberg.net.

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