Nucor Corporation

Please stand by, we're about to begin. Good day everyone and welcome to the NUCOR Corporation's second quarter of 2022 earnings call. As a reminder, today's call is being recorded. Later we will conduct a question and answer session and instructions will be given 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 those forward-looking statements may be found in NUCOR's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's and NUCOR website. The forward-looking statement 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 like to turn the call over to Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Good afternoon, and welcome to our second quarter earnings call. Before we get to our second quarter results, I want to highlight some changes we've made to our executive leadership team. As we announced in May, Mary Emily Slate retired on June 11th. Mary Emily is a dedicated and exceptional leader. We thank her for her more than 21 years with Nucor. Her impact on our teams across the enterprise contributed greatly to Nucor's success and profitable growth. The Nucor team wishes the very best for you, Mary Emily, and your family. And you will always be a tremendously valued member of the Nucor family. With Mary Emily's retirement, Dan Needham has assumed the role of EVP of commercial. John Hollitz was promoted to Executive Vice President of Bar, Engineered Bar, and Rebar Fabrication. John is a proven leader. Over his 23-year Nucor career, he has served in our joist and deck, building systems, and flat roll businesses. we welcome John to the executive team. As part of this reorganization, Chad Udemark has been appointed to the newly created role of Executive Vice President of New Markets and Innovation. In this new role, Chad will focus on our continued growth into new markets and integrating new businesses into the core operations of Nucor. Also joining me today on the call are members of the Nucor's executive team, including Dave Samosky, our chief operating officer, Steve Laxton, our chief financial officer, Al Baer, responsible for plate and structural products, Doug Jellison, responsible for raw materials and logistics, Greg Murphy, responsible for business services and our general counsel, and Rex Query, responsible for sheet and tubular products. Our mission to become the world's safest steel company is the greatest measure of our culture and our most important value. Halfway through the year, we are on pace to have our new safest year in history, which is coming off back to back to back record safety years. I want to thank each and every member of the Nucor family for your focus and dedication in ensuring every team member is safe. Turning to our financial performance, we achieved a record second quarter earnings per share of $9.67 and record first half earnings of $17.30. This record performance was driven by strength across our diversified portfolio of businesses. Strong financial results were recorded by a number of our businesses, including bar, plate, sheet, structural, joist, deck, buildings, tubular, and our raw material operations. Since entering the steel business, We have focused on growing long-term earnings power and shareholder value. This month, we are celebrating 50 years since Nucor was listed on the New York Stock Exchange. During that time, we have led the transformation of the domestic steel industry, and we are the envy of the world in terms of Nucor's environmental footprint, safety performance, and efficiency, as well as profitability. Nucor has grown revenues by more than 13% per year from $83 million when we were first listed on the exchange in 1972 to last year's record of $36.5 billion, even as the total size of the domestic industry has shrunk. We have also grown our workforce from 1,800 team members back in 1972 to more than 31,000 team members today, and in the process created a huge amount of shareholder value. $1,000 invested in Nucor when we were first listed would be worth over $1.6 million today. Our record first half results continue the history of delivering new highs in profitability and cash flow through successive economic and steel market cycles, demonstrating the sustainability and adaptability of Nucor's business model. We have world-class manufacturing talent, and we are making the right investments to continue our track record of outperformance. Several of our recently completed organic growth projects in our core steelmaking businesses are already contributing to our record first half profitability, and there is more to come as additional projects ramp up production or come online. For example, our new core steel gallatin modernization and expansion project is now fully operational, having completed the last of their project-related outage work on June 6th. Our Brandenburg, Kentucky plate mill is on schedule and on budget for a late 2022 production start with almost 400 team members on board. This is a game changing mill in the US plate market that will firmly establish us as the market leader in plate. And in May, the state of West Virginia approved the air quality permit for our new sheet mill in Mason County. Groundbreaking for the project will happen later this year. Also during the second quarter, We completed our purchase of CHI overhead doors and announced two acquisitions that will lead to the establishment of Nucor towers and structures, which will serve the utility, transportation, and telecommunication sectors. We are so excited to welcome our new team members into the Nucor family. As we execute on our mission statement to grow the core, expand beyond, and live our culture, These investments are excellent examples of what we look for and expand beyond businesses. They serve growing markets and leverage Nucor's core manufacturing capabilities and our safety and team focused incentive driven entrepreneurial culture. We look forward to rapidly scaling up their operations as we continue to broaden our portfolio of construction market solutions. As we evaluate growth initiatives, either in our core business or by expanding beyond, we focused on driving incremental value by leveraging our capabilities and existing positions of strength, as we have done for the last five and a half decades throughout our history. Earlier, I mentioned the 50th anniversary of our New York Stock Exchange listing. Our July 12, 1972 news release announcing the listing gave our firm's business description as, quote, the nation's largest producer of steel joists, end quote. It had mentioned that the company also produces carbon and alloy steel. At that time, we just operated one steel mill, which was Nucor Steel Darlington. Nucor's tremendous growth in profitability and market value over the past five decades has been fueled by our decision back then to expand upstream into steelmaking. The result is that today, we are the leading North American manufacturer of a diverse array of steels and steel products, providing essential solutions for construction, infrastructure, energy, transportation, automotive, capital goods, and consumer durable market applications. Today, Expand Beyond is a disciplined strategy for profitable growth and value creation, just as our expansion into steelmaking was 50 years ago. With it, we are targeting higher growth sectors of the economy and leveraging Nucor's core competency in efficient variable cost-based manufacturing, as well as our broad product portfolio and existing channels to market. Turning to policy issues, I want to mention that we support swift passage of legislation to address semiconductor manufacturing and beneficial updates to our trade laws through legislation known as Leveling the Playing Field Act 2.0. Congress must get this important bipartisan priority across the finish line. Since the COVID-19 pandemic first disrupted our lives more than two years ago, it has become clear that the U.S. needs strong, resilient domestic supply chains for all sorts of critical materials, such as semiconductors, made by great American companies. Reshoring semiconductor production here in America gives us a tremendous opportunity to unleash a manufacturing renaissance in the United States. Also, last week, the U.S. International Trade Commission unanimously extended anti-dumping and countervailing duty orders for an additional five years on imports of corrosion resistant steel from China, India, Italy, South Korea, and Taiwan. While this is a positive development, unfairly traded imports remain a concern for our industry. The ITC is conducting several more five-year sunset reviews this year off key trade orders on flat-rolled products. These orders are critical to market stability and industry performance and are an important part of our government's trade enforcement toolkit. Nucor is working hard to ensure that they all remain in place. Finally, today's headlines are full of concerns regarding inflation, interest rate hikes, and whether we'll experience a recession. While we are all aware of these factors, Nucor's sustainable and flexible business model gives me great confidence in our ability to continue to grow and create value for our shareholders. Our team is focused on enhancing our capabilities, not simply adding capacity, and on delivering a differentiated value proposition for our customers by reliably and safely providing a broad offering of the most environmentally responsible steels and steel products found anywhere in the world. Before I turn it over to Steve, I want to congratulate our 31,000 Nucor team members for a fantastic first half of the year. Thank you for your hard work and dedication and commitment to delivering exceptional customer service. Let's continue our progress towards delivering the safest, cleanest, and most profitable year in New Course history. Now, Steve Laxton will share additional details on our first half performance and our outlooks as we move forward into the second half of the year. Steve?

Thank you, Leon. As Leon mentioned, this year's second quarter was the best quarterly financial performance in our company's history. The quarter's earnings of $9.67 per diluted share exceeded our prior quarterly record of $7.97 per share by more than 20%. Operating profits were stronger than we anticipated for all three segments. I want to thank our 31,000 teammates for these fantastic results. Your dedication and efforts are what drive the efficiency of our manufacturing businesses, which enable us to reliably meet the strong demand we're seeing across our broad array of products. Comparing the second quarter of 2022 to the first quarter of 2021, all three segments generated higher earnings with pronounced outperformance in our steel product segment. That segment produced $1.1 billion in operating profits for the quarter. Our joist and deck business continued to be the largest contributor to the segment's performance. While joist and deck shipments were down from the first quarter, higher prices more than offset the declining volumes. Contributions from tubular products and metal buildings were aided by both higher volumes and higher pricing during the quarter. Overall, our steel product segment continues to benefit from strong non-residential construction demand. This segment's earnings power and strong free cash flow characteristics continue to make key contributions to our overall performance. In our steel mill segment, shipping volumes were up by 10%. Most of the increase was in sheet and plate as we were able to take advantage of what we considered to be strong demand leading to attractive pricing in those markets. Our metal margins decreased by about 5% from the first quarter's $941 per ton to a still robust $895 per ton. Offsetting some of the benefits of the stronger metal margins we have been realizing over the past several quarters are some cost pressures from higher electricity and natural gas pricing. Our energy cost per ton of steel produced was up approximately 50% year over year. However, for some context, energy costs still represent approximately 6% of our overall cost per ton. Some of the changes in the energy commodity pricing seen in the marketplace overall over the past year were mitigated by Nucor's physical and financial hedges that we had in place. Our raw material segment outperformed first quarter results on the back of increasing selling prices for DRI and scrap. DRI benefited from elevated metallics pricing that we used to determine transaction values between segments. Cash provided by operating activities during the quarter was $2.3 billion, enabling both continued investment to grow new course future earnings power and the return of approximately $900 million of our shareholders' valuable capital via dividends and share repurchases. Our direct returns to shareholders for the quarter was 37% of earnings. Year-to-date, it is 43%. Our capital allocation priorities remain unchanged. Our highest priority is deployment of capital in our businesses to create long-term value. We also remain committed to our regular quarterly dividend, something Nucor has paid and grown consistently over the last half century. And importantly, we remain committed to additional direct returns to shareholders in times of strong performance, with an overall payout ratio of at least 40% of net earnings. During the five years ending in 2021, we returned approximately 56% of Nucor's net earnings to shareholders. We remain confident that with the capital we retain and deploy, we are building a more resilient, more profitable, and more cash-generative Nucor. During the second quarter, Nucor funded $520 million in capital expenditures and $3.1 billion in acquisitions. Between this past December and this year end, we expect to have completed three major organic growth projects that will substantially enhance the competitive position of our steel mill segment. The first, Hickman's Gen 3 Galve Line, was completed this past December. The second, Gallatin's Modernization and Expansion, was completed in June. And the third, our new state-of-the-art plate mill in Brandenburg, Kentucky, is anticipated to start at the end of the year. We expect these investments to generate at least $370 million of combined annual EBITDA once fully ramped up at mid-cycle performance and considerably more in robust market conditions like the ones we're seeing now. Nucor has an additional $3.6 billion of approved and in-process organic growth investments that will be completed by 2025. The largest of these is our West Virginia sheet mill. Once these five projects are fully ramped up, we anticipate they will contribute a further $700 million in run-rate EBITDA in normal market conditions. As you're also aware, we closed on CHI overhead doors in June. And with the acquisition of Summit Utility Structures and Sovereign Steel Manufacturing, we've established new core towers and structures. We expect these businesses, along with other new capabilities, we've acquired such as insulated metal panels and warehouse solutions can contribute as much as $600 million of incremental EBITDA annually in future years. Turning to the balance sheet briefly, as of the end of June, Nucor had debt to capital of 29% and ample liquidity with $2.5 billion of cash, short-term holdings and restricted cash holdings and an undrawn $1.75 billion in revolving credit facility. In May, we felt it was prudent to enhance liquidity and raise $500 million of senior notes with a three-year maturity and a coupon of 3.95% and $500 million of senior notes with five-year maturity and a coupon of 4.3%. Turning to the outlook for the third quarter of 2022, while we recognize there is considerable economic uncertainty right now, demand appears stable and resilient across our key end-use markets. prices in the steel segment has softened due to import pressures coupled with overall commodity pricing declines globally. For the third quarter, we expect lower earnings from our steel mill segment relative to Q2, and we expect continued strength in steel products and raw materials with performance roughly in line with the second quarter. For the year, we expect earnings per share will establish a new annual record for Nucor. In thinking about the longer term, with balance sheet strength and product diversity that is unparalleled in our industry, coupled with our highly variable and adaptive business model, we remain confident that Nucor is well positioned to deliver on our commitments to our team, our customers, and our shareholders over time. Thank you for your interest in Nucor. Operator, we're now ready to take questions.

Thank you. If you would like to ask a question, simply press the star key followed by the digit one on your telephone keypad. Also, if you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, it's star one. If you would like to ask a question or make a comment, we'll pause for a moment. And we'll first hear from Kurt Woodworth of Credit Suisse. Please go ahead.

Yeah, hey, good afternoon, Leon and team, and congrats on the exceptional quarter. First question is just with respect to the plate and structural markets. You know, you noticed somewhat soft utilization rates for those verticals this year, yet pricing is holding up extremely well and, you know, basically close to record metal spread today. So just wondering if you could talk to kind of what you're seeing in those markets and maybe long products more broadly, and then, you know, how you think about plate volumes in the 2020 with respect to ramping Brandon Burke. Thank you.

Yeah, absolutely. Kurt, thank you. And we're incredibly proud of our team in achieving an incredible quarter, an incredible first half of the year at over $17 per diluted share. It's just a tremendous outcome and, again, something that we and the entire executive team could not be more proud of, the 30,000 men and women who make up the Nucorp family. Specifically to your question on structural and plate, I'll let Al Baer, our EVP of plate and structural, touch on it. I'll just say from a very high level before I turn it to Al that one of the unique opportunities that we have, particularly in structural, is the market share position that we have. We are the leading structural manufacturer in the United States, and it's something that we've talked about many times and shared with you and other analysts that You know, through the cycle, we have seen incredible performance in that sector with Nucor Yamato, Nucor Berkeley Beans reporting incredible returns and profitability out of those mills, even with some, at the time, depressed utilization rates in the, you know, high 60s, low 70s. Over the last couple of years, that's improved markedly and 21 peaked at upper... 90s. So that business segment for us continues to operate. And Al, I won't steal all your thunder, but we couldn't be more excited about the shift in what's moving in place and the soon coming online of our plate mill in Brandenburg. But why don't you just touch on that a little bit and share where we're at with Brandenburg as well.

Yeah, thanks, Kurt. Thanks, Leon. As Leon said, Kurt, I just echo of the same so our utilization may have ticked down just slightly and the structural side and I'd say that's just not chasing the cheap tons you know truck and rail car availability remains a bit challenged and probably slowed up a few tons but our market share position remains strong our utilization remains right what we'd expected and we remain really excited about the opportunities and structural as we talked about what I call the consumptive demand part of the market, the folks that are buying our steel and making something out of it, is still really strong. And we're excited about the rest of this year. We're excited, frankly, about 2023. With regard to plate, I would say we've made several changes on how we market that product, how we take it to market, how we price it, and how we load our order books. And we're really pleased with what that has brought to the market in terms of a rationality of pricing and much less volatility in the pricing. But supply and demand still governs the price of that, and we publish a price, but the market determines what it really is. And it's held quite strong. Our utilization in Q2 was improved from Q1. Our order book improved when we talk about projects. expect to mainly hit in 2023 but it's starting to strengthen even today again fabricators are a big part of that plate business they remain strong with strong backlogs so service centers is a big product segment they remain a bit cautious with their buys the sentiment around that part of the market is perhaps I would say more pessimistic than what the reality is but again the consumptive side really really strong and you asked about 2023 I would just say We would expect continued robust markets. Non-residential construction has been one of our most resilient markets across the enterprise, and we would expect that continues in 2023. I mentioned infrastructure starting to produce better strength. Energy, including renewables, has been a strong market. So when we talk about the buildup to the startup of Brandenburg by the end of this year and the offshore wind and some even specialty pipe work. It's very exciting. I mean, we stand as the only mill in North America, the only mill in the Western Hemisphere that can serve that market that's currently served by foreign steel, mostly blast furnace steel. This will be the cleanest Pretty excited about it. Our team has done a wonderful job there navigating the challenges that a project has faced over a couple of years, and we sit ready for a startup by the end of the year. We hope to strike an arc, as a matter of fact, on the hot side even yet in the next literally day or two.

Great. And maybe just as a quick follow-up, with respect to Gallatin, can you just give us an update on, you know, progress there and what your commercial expectations are for volumes into the fourth quarter? Thank you. That's a lot.

Yep. Thanks, Curt. I'll ask Rex Cleary, our EVP of Sheet and Tubular, to give an update on Gallatin.

Yeah, Curt, thank you for the question. Quick summary. Oh, I'm sorry. I'm going, sorry, Hurt, talking about West Virginia, which I'll hold that for a moment and share that here, perhaps a little later in the question or a follow-up. But for Gallatin, completed our second quarter outage. All equipment's been commissioned at this point. We're already expanded, have expanded our slab width beyond original capabilities, so we're beyond 68 inches now. The new equipment, we're capable of 73 and a half inches. And we'll be ramping up here third quarter. By fourth quarter, we expect to be at nameplate capacity. And as you may recall, original stated capacity for that mill, about 1.6 million tons. The expansion We'll add about 1.4, so we'll be right at the 3 million ton mark and capable of producing at nameplate capacity during the fourth quarter. Our ramp up also and what we produce will be determined also by what's going on in the marketplace. So I do want to state that and we'll gauge that by the demand in the marketplace.

So thanks for the question. Thank you.

And next we'll hear from Seth Rosenfeld of BNP Paribas.

Good afternoon. Thanks for your questions. I've got two points on raw material strategy, please. First, with regards to pig iron from the mill's perspective, obviously when we spoke to you a few months ago, you emphasized the strategy to de-risk pig iron supply for the full year. What does that mean for your cost of inventory today? Were you ultimately forced to lock in some high-priced deliveries that might still be arriving even though spot has declined sharply? And then secondly, from the raw materials side, I think your guidance includes higher DRI price realizations in Q3. Can you explain what would drive that given the weaker scrap and pig iron prices that we're seeing in the spot market Q over Q? Thank you.

Yes, thanks for the question. I'll ask Doug Jellison, our EVP of raw materials and logistics, really to provide some background in how that flow through impact of the DRI pricing into the mills works and explain that in a little more detail.

Doug? Thanks for the question, Seth. First thing, I want to acknowledge the great work that the mills and our raw materials group has done over the last six months. Tremendous flexibility and execution to react to the changes in the supply chain. No stops in production. We've cut our pig use by about 50%, which also has led to a reduction in greenhouse gas emissions. And it's really been a key part of supporting our record earnings. So a big shout out to the team and a thank you. You're asking about pig, and as I mentioned, Our reliance on pig is half of this year of what it was last year. There's no overhang or buildup of pig. There is the normal flow of pig prices as we purchase pig, deliveries, lead times, working through inventories. So we see a little bit, probably leveling of pig prices through the third quarter, declining into the fourth quarter. As far as the DRI, adjust our DRI transfer price monthly. We want the transfer price to reflect the market price into the steel mills, so that will reflect in those segment recordings. And as a result of that, we see a stable input cost to DRI with a still elevated pig price or transfer price into the third quarter and then dropping pretty significantly into the fourth quarter.

That's great. Thank you very much. Thanks, Seth.

Next, we'll hear from Carlos de Alba of Morgan Stanley.

Yeah, thank you very much. Good afternoon. Maybe just exploring a little bit more the outlook for the steel product business. The guidance seems to suggest that it should be relatively in line with the second quarter, but could you comment a little bit more what you see the main changes, what is the composition of these? basically stable operating results? Is it prices offsetting, sorry, volumes offsetting prices the other way around? How do you see margins? Any color would be helpful. And then if I may squeeze another one, is it possible to get an update on how you see CapEx for the remainder of the year, maybe your first look at 2023, and how do you see working capital evolving in the coming quarters? Thank you.

Okay, Carlos, let me start off with our steel products businesses, and it's a good question in terms of how that breaks out, because there are segments within the products group that will continue to have record-setting pace and performance. And as a group, though, in its entirety, the steel joist and deck buildings, different segments that are contained in our steel products group, had a record quarter in this past quarter. And in fact, their performance in the quarter was stronger financially than the entire year of 2021. So at $1.1 billion of net earnings for our products group, they are setting an incredibly high bar and really operating on all cylinders. Chad Udemark, who was over our EVP of our products group and Now moving into new markets, Chad, why don't you just kind of break through a little bit of that split and how that's looking, what's our forecasting into Q3 and 4, and then Steve, if you would, on the CapEx.

Thanks, Leon. Yeah, similar to what we had in the script, we expect Q3 earnings to be very similar Leon mentioned we have multiple businesses from choice and deck, rebar fab, steel piling, racking, tubing, insulated panel, grading. So that group continues to perform well. There are indicators that we have come off the highs in some of these businesses as far as backlogs. But I want to remind you how strong those highs were. But most all of our downstream businesses have current backlog levels that are 30 to 50% higher than the average backlog we had in that 2015 to 2019 period prior to the pandemic. So we still see that non-risk construction space that is the driver for these businesses, as Al mentioned earlier, to be very strong. What can you expect going forward, even out past third quarter? and into the future. What I would say is you should expect higher highs and higher lows, and here's why. Number one, we've been making some changes in our businesses through the years, and we've talked about some of those, from restructuring some of our business to bringing on a construction solutions team, even alignment within our groups to better, more effective commercial practices and expectations that drive higher EBITDA margins. And we're not done. Bottom line, in some of our businesses downstream, we needed to get better. We've made progress, and I'm proud of where the team is at and where we're headed. In addition to that, we're bringing on these new businesses and expanding on. So you should expect good results from businesses like our insulated metal panel business as we grow that and as we drive efficiencies through that. Steel racking, steel towers. our profitability as we fully utilize and integrate these products into our construction solutions portfolio. So I guess if you can't hear my excitement, I'll reiterate again, I'm excited about the future of our downstream businesses.

Hey, Chad, one thing I'll add, and just maybe a further point, Carlos, to share some of this. You know, we get some questions, or I've got some questions over the last weeks, months, you know, what Why are you so optimistic in the face of inflation and interest rates? If we just look, for example, at the warehousing space, you know, forecast by Dodge for 2023 is down about 19%. But as Chad mentioned, and I think it's an incredibly important part, our industry has shifted, and it's shifted substantially through reconciliation, through consolidation, and through trade. And as a result, you are seeing higher highs and higher lows. But equally, that drop in 19% for 2023 is 60% higher than what we saw our previous record year, which was 2018 prior to 2021. So it's 60% higher than what we did in 2018. So in terms of the volumes, yep, it's coming off 19%. But the overall market is still incredibly strong, and there's a lot of to be optimistic about in that space. Now, the other piece of that, when we look at Nucor Buildings Group, the Nucor Buildings Group does roughly about 10,000 buildings annually, just our Nucor Buildings Group. Every one of those buildings has somewhere between four and 12 to 15 doors on every building. Well, now with CHI, it is an incredible marriage as they continue to grow their commercial end to tie in with that dealer network with those businesses. And then you think about the rest of the warehousing space with companies like Amazon, the Gigafactories, the chip factories, and hopefully we'll see that pass here in Washington, D.C., and the CHIPS Act and that incentive package supported to build and onshore and reshore American manufacturing. But that is an incredible construction solution piece. So having CHI now in the portfolio continues to differentiate new quarters, a one-stop differentiated supplier that can take care of all of the needs. And that's how we're thinking about it as we move forward and the types of businesses Chad will be responsible for in the expand beyond category. So again, thank you, Chad. And Steve, you want to touch on sort of our CapEx for the balance of the year and how we're looking? Thank you.

Absolutely. Hey, Carlos, how are you doing? This is Steve. You asked about capital for the remainder of the year. And we have guided to a little more than $2 billion on the year, and so I'll give you that same outlook from what we said today. We've spent about $1 billion so far, so you can back into roughly $1 billion for the second half of the year. And you'd ask about working capital. Working capital is obviously going to vary where you believe steel pricing is going to go across our system, and I'll let you take a best guess at that. You probably know better than we do.

All right, excellent. Well, thank you very much, and good luck.

Thank you.

Next, we'll hear from Emily Chang of Goldman Sachs.

Good afternoon, Leon and Steve. My first question is just around the infrastructure package that should start to really accelerate in 2023, but how much early demand are you seeing from that materialized this year, and perhaps what are the categories that are taking some of the early wins there?

Yeah, thanks, Emily. And look, I would tell you that, you know, right now there's a lot of dialogue going on, but we're not seeing any real movement in terms of material orders. We really think that'll start in earnest in early 2023 and really begin to progress throughout the year 2023. So while our teams, our division businesses are ramping up and at the ready, I think we're still about six months out from really seeing that move through our company.

Great. That makes sense. And then my follow-up is just on the steel mill side. You know, we've certainly been seeing a little bit more of a buyer strike type of activity on the customer's end as it relates to sort of hot rolls. But how are market participants acting now? Is there any sort of renewed or early signs of renewed appetite to reengage here?

Yeah, look, I think so. And again, if we look at our most recent order books, you know, she's strong. We're seeing some, again, the word resiliency is the right word across the non-res construction businesses. And you know well now in Nucor, that's 50% of our overall mix is into the construction sector. So us providing, again, a complete solution really is a differentiated value proposition. But Yes, we are seeing, again, stable demand and growing in some cases, but it's, you know, it's certainly not without looking as well at some of the headwinds that are coming from an economy standpoint in the marketplace of interest rates and, you know, inflation and supply chains and some of those constraints. While those are real, the driving demand factors in our businesses, for the most part, remain very healthy. Again, automotive is a good example. If we could solve the chip shortage today, I think we're going to crest well over 17 million units sold. And while that's the forecast, so it's easy to say that, I truly believe that. I think the underlying demand, the consumable spending appetite in this country still remains fairly high. And so, again, there are some things I think that will begin to loosen up and break loose in the back half of this year and well into 23 that will help in addition to the infrastructure, like getting a bit more caught up on the chips and, as Al mentioned, the offshore wind and what we saw President Biden recently announce in executive orders yesterday that will continue to position Nucor well, will position Nucor's plate group, and particularly Brandenburg, in an incredible value-add opportunity for our customers.

Thanks, Leon. I appreciate the call.

Thanks, Emily.

As a reminder, if you would like to ask a question, simply press the star key followed by the digit 1 on your telephone keypad. We'll now hear from Tina Kenners of Wolf Research.

Tina Kenners of Wolf Research.

Tina Kenners of Wolf Research.

Tina Kenners of Wolf Research. Tina Kenners of Wolf Research. Tina Kenners of Wolf Research. Tina Kenners of Wolf Research. Tina Kenners of Wolf Research. Tina Kenners of Wolf Research. Tina Kenners of Wolf Research. So with regard to Gallatin, if I look at your sheet tons, you're running run rate less than a year ago levels. And I know you made the comment that you tailor it to production to tailor production to demand levels. But how much of Gallatin was in the second quarter and assuming demand allows, should we be seeing that 1.4, half of that flow through fully in the second half of the year? Just trying to square that with the volumes being lower year over year. And then the CHI acquisition question, I just wanted to follow up. I know you said that you were looking to shore up maybe more overhead garage stores to kind of get more critical mass like you did with the tubulars, structural tubing in the past. So just wondering if you have any updated comments there. Thanks a lot.

Yeah, let me start with the back half and then Rex, I'll turn it over to you. And look, I think good questions on the Gallatin front of what we've seen. Today would be very little through the cycle of the overall volume, but I'll let Rex test more on that. Regarding the CHI acquisition, look, in our minds, we acquired the very best company out there in that space, period, bar none. So our opportunity really isn't to move or look for other companies. large garage door companies. We are roughly operating at about 60% total utilization with CHI today. We have a lot of room to grow. And most of that 60% is concentrated sort of that mid-USA levels. The further out towards the coast you get, the market shares drop off a little bit. So you have an opportunity or we have an opportunity to really grow that business with what we have today. Now, there may be some things that we're looking at that I can't get into that would be very, very small that might be complimentary, but our eggs are in the CHI basket. Couldn't be more excited about Dave Banger and his leadership team, the entire CHI team, and welcoming them to the Nucor family and what they're doing in that business segment. We're proud of them already. We're proud of all the Nucor team members and the growth that they're going to bring in the coming years is something incredibly exciting for us. Rex, you want to touch on the Gallatin question?

Yeah, Ted, I'll speak first. Let's speak about the first half of the year. We had some outages with Gallatin as we were installing this equipment. So if you look as a group, if you took the first half of the year, we were running at a utilization above the 80% mark as a group. With the outages, we were a little bit under that at Gallatin, but we augmented that with other sheet mills in our group. So that was how we handled that, took care of customers through supply from other mills. So now that the outage is complete, equipment's installed, we'll ramp up and we're putting the equipment through its paces. So we're doing a full thickness slab now, the new slab, 130 millimeter. But as we start to put the mill through its paces, we'll go wider and wider. That'll happen during the third quarter. And, again, we'll have the capability we absolutely expect in the fourth quarter to run at really main plate capacity. So you would look right at that 3 million ton run rate annualized. But we'll gauge that to what the market's doing off of that.

You know, Tim, where we sit, maybe a little more color, it'd probably be in the several hundred thousand ton range based on what we see today that we would produce – between now and the end of the year and from the new expansion part of Gallatin.

Okay, super. Thanks very much, guys. Appreciate the callers.

Thank you.

Next, we'll hear from Michael Leshock of KeyBank Capital Markets.

Hey, good afternoon. I wanted to follow up on your M&A commentary. It sounds like the CHI side will be mostly organic growth from here, but do you see other opportunities to make downstream acquisitions, and how deep is your pipeline of potential targets right now?

Yeah, Mike, thank you for the question. You know, when I took over in January of 2020, our eight-word mission statement is alive and well, and that's grow our core, expand beyond, and live our culture. And so the live the culture piece is easy. It's delivering uncompromising results in every area of our business. And doing that while maintaining the safety, health, and well-being of our team. The core is just that, the West Virginia mill, the Lexington micro mill, the expansions in Hickman, and the new, you know, increases across in Kankakee and other core assets that we have. This expand beyond piece over the last two and a half years. driven really by Steve Blackson before he became CFO, and Alex Hoffman, is really about finding those companies that provide a differentiated value proposition and moving us sort of that one standard deviation outside of the normal and traditional steelmaking lane that have a direct steel adjacency, but like CHI, offer you some insulation from the traditional cyclicality of steelmaking. Hannibal Industries is in doing that. Cornerstone in the insulated metal panel building business is doing that. The other side of it and the other filter that we look for is how do we continue to provide sweeping solutions in construction, in energy, in automotive, so that when our commercial teams go and meet with the architects, engineers, owners, VCs, they can say, we've got the entire solution for you. You don't have to worry about doors or joist or deck or grading or anything else. We are a one-stop shop and can solve the entity and entirety of their steel needs. So the pipeline is rich. I think it'll get richer as we move forward. you know, for every downturn, Nucor's gotten stronger and continue to invest, that, you know, our cash flow position, the profits we're generating today, put Nucor in an ideal position to continue to be very deliberate and very strategic with long-term goals to enhance our shareholder value.

Got it. Thank you. Okay, Michael, thank you.

At this time, there are no further questions. I will turn the call back over to Leon for any additional or closing comments.

I'd just like to congratulate our entire team again for a record first half of the year. Thank you for delivering on our mission and making 2022 the safest, cleanest, and most profitable year in our history. Thank you to our customers and thank you for the trust that you placed in each and every one of our new core teams. for your business. We will continue to work hard to earn that business well into the future. And finally, thank you to our shareholders for the trusted capital that you place in our hands. We continue to want to be great stewards and great shepherds to return that valuable shareholder capital.

Thank you for your interest in our company. Have a great day.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.