Nucor Corporation

Good day everyone and welcome to the new core corporation first quarter of 2020 earnings call. As a reminder, today's call is being recorded. Later we will conduct a question and answer session and instructions will come at that time. Certain statements made during this conference call will be forward looking statements that involve risks and uncertainties. The words we expect, believe, anticipate, and variations of such words and similar expressions are intended to identify those forward looking statements, which are based on management's current expectations and information that is currently available. Although NUCOR believes they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy. More information about the risks and uncertainties relating to these forward-looking statements may be found in the NUCOR's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's and NUCOR's website. The forward-looking statements made in this conference call speak only as of this date, and NUCOR does not assume any obligation to update them, either as a result of new information, future events, or otherwise. For opening remarks and introductions, I would now like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Good afternoon, and welcome to our first quarter earnings call.

I want to begin today by taking a moment to honor the heroes surrounding us during these unprecedented times. Thank you to the doctors, nurses, and healthcare workers drawing close when the natural tendency is to pull away. Thank you to the EMTs and first responders, like my own daughter, who are serving on the front lines, battling to save lives. Thank you to the U.S. postal workers, UPS and FedEx drivers, and to the truck drivers delivering our food and medicines. I'd like to also thank the Nucor team members who have continued to work in order to support our country's essential systems and processes. And finally, I want to offer our thoughts and prayers of sympathy for those who have lost loved ones or who currently has someone fighting this terrible disease. Joining me in honoring these heroes on our call today are the members of Nucor's executive team, including Jim Frias, our chief financial officer, Craig Feldman, responsible for raw materials, Lad Hall, responsible for flat roll products, Ray Napolitan, responsible for engineered bar products, as well as Nucor's digital initiative. Mary Emily Slate, responsible for plate, structural, and tubular products. Dave Simosky, responsible for merchant bar products. Chad Udemark, responsible for fabricated construction products. And Al Baer, our most recently named executive vice president. And to our teammates listening in, your health and safety is our most important responsibility. Thank you for those of you who continue to work from home and those of you who are working to safely produce the products our customers need to continue to support essential projects across our nation. We will get through this pandemic by living our culture every day, staying focused, and taking care of one another. Currently, over 40 states where we operate our facilities are subject to either shelter-in-place or stay-at-home orders. In every one of these jurisdictions, NUCOR has been deemed an essential manufacturing operation Some of the essential projects that Nucor continues to produce feel for include the expansion of the Mayo Clinic in Arizona, the Henry Ford Healthcare System in Detroit, and many other hospitals across the nation in New York, California, Oregon, and Minnesota. Our sheet mills recently received orders from hospital bed manufacturers. We prioritized those orders and got the material turned around in one and a half weeks. Thank you to our team for making that happen. military and defense applications, including two aircraft carriers being built for the United States Navy, and several nursing homes, assisted living communities, and critical infrastructure projects across the United States. Over these last several weeks, the spirit of Nucor's culture has been on full display. Our teammates are not only continuing to serve our customers, but they are living up to the deeply shared sense of responsibility to the communities in which we operate and we live. there have been numerous stories of our team members finding ways to help their communities during this crisis by exercising the entrepreneurial spirit that brought them to Nucor. For example, Nucor teams all over the country have been pooling resources and overnighting in 95 masks and other critical PPE to medical units in need. Our team members in Seattle and Nebraska are utilizing personal and company-owned 3D printers to produce as many as 100 NIH approved face shields per day. Our Volcraft New York team has created and donated specialty hardhats with face shields to the local hospitals. Our Nucor LMP team in Missouri has been delivering meals to local senior centers. And one of our engineers at Nucor Steel Berkeley is producing intubation boxes to protect doctors and nurses in the operating room. These are just a few of the many stories that make me incredibly proud. to work with the greatest team assembled anywhere in the world. In late February, we took several proactive steps to prepare for the COVID-19 pandemic, including establishing three task force teams to guide our response, a main COVID-19 task force to provide guidance to our general managers who run each of the divisions, a pay and benefits task force focused on the financial well-being of our team members and a commercial task force to work with our customers, making sure that we provide uninterrupted customer service and that our customers continue to recognize Nucor as a sustainable and reliable supplier of choice. Turning to our first quarter performance, 2020 got off to a good start with an operating rate of approximately 90% at our steel mills and very strong earnings from our steel products businesses. Excluding the charges we took related to our deferred investment, our earnings were just under the guidance range we indicated in our March 19th news release. Order activity and backlogs remained strong well into March, reflecting solid underlying demand in non-residential construction and other end-use markets. The coronavirus pandemic's impact to our overall business has been varied. Automotive and oil and gas end-use markets have been the most severely impacted, while demand for our non-res construction products continues to be quite strong. Our facilities serving these construction applications continue to operate at high utilization rates. We are well positioned to weather the economic downturn and emerge from it poised to grow again once it's behind us. Nucor is a low-cost producer in each of the diverse markets in which we compete, and our businesses generate healthy cash flows throughout the upside. and downs of the business cycle. Our strong balance sheet and good liquidity during these distressed business conditions continues to be a source of real competitive advantage. Finally, underlying demand going into this crisis was robust. As we see America reopen for business, we believe that demand is still there and it will return quickly in most end-use markets. However, as you might expect, we are taking steps to further enhance our liquidity position during this time of significant uncertainty. We will also continue to look for ways to enhance our competitive position through the strategic allocation of capital. UCOR is currently evaluating all of our capital projects across the enterprise to determine which projects will continue to move forward, which projects we will pause as we assess the depth and severity of the pandemic and oil crisis facing our globe, and finally those projects that we will readdress at another time. We're also aggressively managing all inventory positions, including scrap with finished goods. We believe that these initiatives will allow Nucor to generate more than an additional $1 billion in free cash flow in 2020. I also want to note that we believe it's vital for Congress and the administration to move forward immediately with a significant infrastructure spending bill with strong Made in America provisions that include melted and poured for the United States steel industry. Our domestic infrastructure needs have been neglected for too long. A large-scale infrastructure effort would not only generate the economic activity and jobs we need now, but would also be an investment in our nation's future competitiveness. In closing, let me just note that we have faced crises before at Nucor, and it is during these times when the strengths and sustainability of our company are most evident. As we move forward, Nucor will stay focused on the health and safety of our team, serving our customers, and supporting our communities while preserving and growing shareholder value.