Nucor Corporation (NYSE:NUE) Q2 2019 Earnings Conference Call - Final Transcript

Jul 18, 2019 • 02:00 pm ET

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Nucor Corporation (NYSE:NUE) Q2 2019 Earnings Conference Call - Final Transcript

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Presentation
Executive
John J. Ferriola

cautiously optimistic that pricing has bottomed on most of our products and that volumes should be more closely aligned with real end-use demand in the second half of the year.

We all know that the steel industry is cyclical, and we have built a business model around that reality with our low and highly variable cost structure and our diversified product portfolio. Our performance in the first half of the year benefited from meaningful year-over-year earnings gains in our plate, MBQ, rebar, joists and deck, metal buildings and pilings distribution businesses, once again highlighting the benefits of our diversified product mix. Our strategy to increase market share in automotive applications also continues to bear fruit. We are currently shipping into this market at an annual rate of about 1.6 million tons.

Further, we were recently named Supplier of the Year by General Motors. We are the first EAF-based steel producer to receive this recognition. It's a tremendous testament to our team and further evidence of our success moving up the value chain and gaining market share in many value added applications. As we have previously discussed, we have several investment projects coming online this year and I want to update you on this status.

In our sheet group, we continue to ramp up production of our new specialty cold mill at Nucor Steel Arkansas and we have been pleased with the performance. This project will allow us to produce higher valued products, especially in high-strength steels and it will differentiate Nucor Steel Arkansas from its competitors. We are currently in trials for evaluated applications and customer acceptance has been excellent to this point. We are targeting to have as much as 20% of the new mill's capacity, both with contract customers by the year end. We expect to continue adding contract volumes at the mill as 2020 progresses.

In Kentucky, Nucor Steel Gallatin has begun commissioning its new galvanizing line and test running coils to verify the functionality of the line. Production of pickled and oiled coils has started this month and will be followed by production of galvanized coils in August, with 500,000 tons of annual capacity. This 72-inch galvanizing line will be the widest hot-rolled galvanizing facility in North America. Gallatin is now positioned to supply the underserved Midwest heavy-gauge hot band galvanized market. The new line will enable us to grow our automotive applications to include frames, control arms, supports and brackets.

Our commercial teams are excited to have these new capabilities in our Sheet Metal Group to serve both new and existing customers. The last project in our Sheet Metal Group I would like to mention is our joint venture with JFE Steel in Mexico. We are on track for start-up of the galvanizing line later this year, and we look forward to serving automotive customers in Mexico.

In the Bar Mill Group, our Marion, Ohio bar mills new in-line rolling mill is starting up in the third quarter. Marion's new reheat furnace which we installed