Steel Dynamics, Inc. (NASDAQ: STLD) stock rose over 1.4% on 20th October, 2020 (as of 9:46 am GMT-4 ; Source: Google finance) after the company posted better than expected results for the third quarter of FY 20. During the period, the domestic steel demand recovery has been strong, with significant improvement in the automotive and construction continued to be resilient. Flat roll steel spot prices rebounded during the third quarter, as customer inventory levels were extremely low and demand steadily improved. The company anticipates to see continued price strength and customer demand throughout 2020 and into 2021. The company’s steel mills operated at 85 percent of their production capability during the third quarter 2020, with the flat roll group achieving a rate of 99 percent. This is compared to the domestic steel industry rate of 64 percent.
Third quarter 2020 operating income for the company’s steel operations was 17 percent lower than sequential second quarter results, mainly on back of metal spread compression caused by lower realized selling values in the company’s flat roll business, mostly related to lagged contract arrangements. The third quarter 2020 average external product selling price for the company’s steel operations fell $21 sequentially to $734 per ton. The average ferrous scrap cost per ton melted at the company’s steel mills declined $7 sequentially to $259 per ton.
Moreover, during the third quarter, the automotive sector, restarted, scrap flows dramatically improved in the third quarter. During this period, domestic steel production grew, resulting in a meaningful increase in the company’s metals recycling volumes and earnings. The company reported the third quarter operating income from the company’s metals recycling operations was $15 million, compared to an operating loss of $6 million in the sequential second quarter.
STLD in the third quarter of FY 20 has reported the adjusted earnings per share of 51 cents, beating the analysts’ estimates for the adjusted earnings per share of 47 cents, according to the Zacks Consensus Estimate. The company had reported the adjusted revenue growth of 35.9 percent to $2.33 billion in the third quarter of FY 20, beating the analysts’ estimates for revenue by 6.39%.
Additionally, the company generated strong cash flow from operations of $849 million during the first nine months of 2020, and invested $855 million in capital investments, of which the new Sinton Texas steel mill represented $640 million. During this period, the company also paid cash dividends of $157 million and repurchased $107 million of its common stock, while maintaining strong liquidity of $2.5 billion as of September 30, 2020.