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spk13: Good afternoon, and welcome to Nucor's first quarter earnings call. All lines have been placed on mute to prevent any background noise, and today's call is being recorded. After the speaker's prepared remarks, I will provide instructions for callers wishing to ask questions. I would now like to introduce Jack Sullivan, General Manager of Nucor Investor Relations. You may begin your call.
spk06: Thank you, Operator, and good afternoon, everyone. Welcome to Nucor's first quarter 2023 earnings review and business update. Leading our call today is Leon Topalian, chair, president, and CEO, along with Steve Laxton, executive vice president and CFO. We also have other members of Nucor's executive team with us, including Dave Samusky, chief operating officer, Al Baer, responsible for plate and structural products, Noah Hanners, over raw materials, John Hollitz, bar products and fabrication, Doug Jellison, corporate strategy, Greg Murphy, business services, sustainability, and general counsel, Dan Needham, commercial strategy, Rex Query, sheet and tubular products, and Chad Udemark, new markets and innovation. This morning we posted our earnings release and an updated slide deck to the NUCOR Investor Relations website. We encourage you to access these materials, and we will cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different than forward-looking statements and involve risks outlined in our Safe Harbor Statement and disclosed in NUCOR's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So, with that, let's turn the call over to Leon.
spk16: Thanks, Jack, and welcome, everyone. I'd like to begin by thanking our 31,000 team members for delivering another strong quarter for our shareholders. While continuing to deliver on our most important value, the health, safety, and well-being of the entire Nucor family, We're coming off our fourth consecutive year setting new safety records and the team is off to a strong start again in 2023 ahead of last year's record performance through the first quarter. Turning to our financial results in the first quarter, Nucor generated EBITDA of approximately 1.9 billion in net earnings of 1.1 billion or $4.45 per diluted share. This strong performance was due in large part to the ongoing profitability of our steel product segments along with increased volumes and margins at our steel mills segment compared to Q4. In our steel product segment, net earnings were down 10% from Q4 levels but remained 42% ahead of prior year quarter and significantly above historical averages. Shipments out of our steel mills rose 18%, taking utilization to approximately 80% during Q1, compared to 70% in the prior quarter. And finally, the performance of our raw material segment improved in the first quarter due to higher volumes. Nucor has created significant long-term value over many years and cycles by executing on its strategy, and today we continue to position the company for further value creation. We are advancing several large capital projects to drive continued earnings growth, market share gains, and margin expansion in our core steelmaking businesses. In our sheet mill group, Nucor Steel Gallatin continues to ramp up production. We've invested in the Gallatin mill to completely modernize its operations and more than double its capacity. and we're pleased with the progress the team has made to date. During the second quarter, we expect Gallatin will continue ramping up to its full run rate of 2.8 million tons and return to profitability. We remain confident Gallatin will be a strong contributor to Nucor's bottom line in the second half of 2023 and for many years to come. Shifting to West Virginia, progress continues with our new sheet mill. The team has received all pre-construction state permits and is awaiting final federal permits, which we anticipate being finalized in the next few months. We expect to complete construction approximately two years after the receipt of all permits. And as previously announced, Nucor's Board of Directors approved an updated budget for the West Virginia project, which is now estimated at a net cost of $3.1 billion. Once completed, the new mill will have an annual capacity of 3 million tons per year and advanced capabilities that will enhance our ability to provide customers with high quality, low embodied carbon steel products, particularly for the demanding automotive and construction applications. Turning to our plate operations, the team at Nucor Brandenburg has had a productive quarter focused on continued commissioning of the mill and beginning shipments to customers. Throughout Q1, the team has made significant headway, dialing in the rolling mill and caster as we bring online a mill with the broadest offering of plate products in the Western Hemisphere. Every month, we continue increasing casting rates and the range of production capabilities. Over the balance of 2023, we expect the Brandenburg Mill will produce up to 500,000 tons of steel and turn profitable by year's end. This game-changing plate mill gives us a unique capability and will play a pivotal role in building out our nation's infrastructure across multiple growth sectors. Moving to our Expand Beyond strategy, we're pleased with the success of our new platforms, especially the diversification and accelerated growth they bring to Nucor's earning profile. As we've shared before, we look for efficient manufacturers of steel-related products when evaluating candidates to expand beyond our traditional steelmaking operations. The most attractive opportunities are those where we can create incremental value through operating synergies, supply chain efficiencies, and revenue enhancements. We also see companies whose values match Nucor's, especially when it comes to taking care of their team. As part of our expand beyond strategy, Nucor established four new platforms helping to grow the size and diversity of our steel product segment. In the past three quarters in which we've owned these platforms, they have generated combined EBITDA of roughly $350 million or annualized EBITDA of approximately $465 million. This puts them on track to reach the $700 million through cycle annual EBITDA goal we described at our investor day in November. In the first quarter, steel products represented approximately 52% of our segment earnings mix. We plan to keep growing the earnings potential of our steel product segment over time through both organic growth and acquisitions. In fact, just last month, we announced the location of our first of two new production facilities for Nucor towers and structures, which will help meet the growing demands of our nation's transmission infrastructure. As we execute our Expand Beyond strategy, we are maintaining a selective and disciplined approach, seeking those that enhance our service offerings for customers and generate superior returns for our investors. Our competitive advantage lies not only in the breadth and quality of the products we produce, but in how we make them. As more customers look to reduce emissions across their supply chains, the low embodied carbon in Nucor Steel is a real differentiator for us. Over the past few years, we've developed numerous supplier partnerships with the likes of General Motors and Trane. And this week, we're adding to that with a supplier partnership with Johnson Controls. Nucor will recycle nearly all of the scrap from Johnson Control facilities and repurpose it. as low embodied carbon steel to be sold back to Johnson Controls for future use. This closed loop recycling partnership helps both companies pursue our decarbonization goals. In May, we will publish our updated sustainability report, which speaks to the commitment our teammates have in living our culture and protecting our environment. I encourage you to take the time to review it as it describes what makes Nucor so special. Things like our industry-leading safety record and the pride of our teammates have in working for Nucor. How being the largest recycler of any product in the Western Hemisphere allows us to make steel with a fraction of the carbon footprint compared to the global average. and the various ways we support and invest in our communities. This is what makes Nucor a world-class manufacturer, as recognized by Fortune magazine, where we were ranked number one among steel companies for the second consecutive year as one of the world's most admired companies. Before turning it over to Steve, let me wrap up by sharing some perspectives on the U.S. economy. Despite the economic uncertainty, we see a constructive long-term outlook for Nucor and the broader U.S. steel industry. And when economic conditions do change, our highly variable cost structure and flexible operating model allows Nucor to toggle our production and efficiently match demand. Nucor has a track record of operating profitably through downturns and emerging from them even stronger. The long-term investments we make in our conservative capital structures are designed to withstand all economic cycles and this time is no different. But for now, the fundamentals driving non-residential construction and infrastructure projects appear to be quite healthy. Three pieces of legislation, the Infrastructure Investment Act, the Inflation Reduction Act, and the CHIPS Act, provide a combined $975 billion of funding or tax incentives, which will have a multiplier effect on the actual amount of capital deployed. Taken together, we believe that these three programs have the potential to generate up to 8 million tons of incremental steel demand per year over the balance of this decade. According to the American Iron and Steel Institute, an estimated 5 million tons of steel is needed for every $100 billion in infrastructure spending. On top of that, we expect IRA will drive significant investment in clean energy, adding approximately 2 to 3 million tons of annual steel demand for wind, solar, and transmission projects. There also have been more than 30 announced semiconductor plants or expansions in response to the CHIPS Act. These are massive steel-intensive factories that take billions of dollars and years to build, and Nucor's unrivaled domestic production capabilities and low carbon footprint position us favorably to provide the steel for these projects. As I've said in the past, the green and digital economies are being built with steel, and the steel that they get built with matters. The future looks bright for Nucor, and we're excited to continue building on our company's long track record of driving profitable growth and delivering outstanding returns to our shareholders. With that, let me turn it over to Steve Laxton, who will share additional details about our Q1 performance and outlook for Q2. Steve?
spk15: Thank you, Leon. Our net earnings at $4.45 per diluted share for the first quarter is the product of another strong performance by our team. In fact, with total earnings of just over $1.1 billion, our first quarter marks the eighth consecutive quarter where Nucor has exceeded $1 billion in earnings, a measure unattained prior to 2021 despite our long and profitable history as a company. These results highlight the advancement of our strategy and the growing earnings power of Nucor's diversified portfolio and industry-leading capabilities. During the first quarter, steel mill earnings of $838 million represented a 62% increase in the prior quarter, driven predominantly by higher shipments. We also saw efficiency gains from Q1's higher utilization rate, allowing us to achieve lower conversion costs. Improving costs for energy, alloys, and consumables were also a factor. Shifting to our steel product segment, we again saw excellent quarterly performance with segment earnings of $971 million. While this is a slight moderation from the prior period, it remains a historically strong result. During the quarter, we realized attractive pricing from margins across many of our product lines. This performance is further evidence of the strong non-residential construction market commented on by Leon. Our raw materials segment produced earnings of $58 million for the quarter, We realized higher pricing in our recycling businesses and shipped higher volumes out of both DJJ scrap operations and our DRI facilities. You may recall DRI volumes in Q4 were lower than normal in large part due to planned maintenance activities. Our corporate and eliminations expenses increased for the quarter in line with the outlook we shared during our fourth quarter earnings call in January. As a reminder, this segment includes several key activities, including our teammate incentive compensation programs for all segments, interest expenses, selling general and administrative expenses, and the elimination of intercompany profits. Included in this is the elimination of profits or losses on intersegment sales when one segment supplies product to another segment, but the final sale to an external customer has not yet been recognized. With roughly 20% of Nucor's steel shipments going to downstream businesses and the vast majority of Nucor's raw material shipments going to our Nucor steel segment, our intercompany eliminations can increase or decrease meaningfully, particularly during periods of rapid price change. In addition to producing strong earnings in the first quarter, Nucor's efficient manufacturing business model was on display again, generating cash from operations of $1.2 billion. This allowed the company to continue its long-established and balanced approach toward capital allocation, investing $532 million in CapEx while maintaining its commitment to making meaningful direct returns to shareholders. During the quarter, we repurchased 2.7 million shares valued at approximately $426 million and made dividend payments of $131 million for a total of $557 million returned directly to shareholders, or 49% of our net earnings. Over the last three fiscal years, we've returned $7.6 billion to shareholders, representing approximately half of the net earnings for the period. It's worth noting our dividend payment in Q1 was Nucor's 200th consecutive quarterly dividend. That's a half a century of paying and raising our dividend and a long track record of creating shareholder returns that very few companies in any industry can point to. Nucor's balance sheet continues to be a fundamental underpinning for Nucor's capital allocation framework and an enabler of our value-creating strategy. At quarter end, Nucor had more than $4.7 billion in cash and short-term investments, and our $1.75 billion revolving credit facility remains undrawn. Given the potential economic uncertainty, we've been intentional about fostering a resilient and flexible liquidity position. This position of strength gives us confidence we can continue our balanced approach of executing new course growth strategy while also providing meaningful direct returns to shareholders. As we look ahead to the second quarter, we expect earnings from our steel mill segment to increase compared to the first quarter results on modestly higher shipments and improved margins, with better results from our sheet business being the biggest driver. In our steel product segment, we expect performance will moderate slightly from the historically high earnings level of recent quarters, as the impact of lower pricing offsets the benefit we expect to see from seasonally higher volumes. Our raw material segment is expected to continue to improve on higher shipment volumes. Overall, we expect the second quarter consolidated earnings to be higher than the first quarter, and we remain optimistic that 2023 will be another strong year of earnings for Nucor. As Leon mentioned, federal support for infrastructure projects, clean energy investments, and advanced manufacturing facilities will begin to impact demand in 2023. In addition, non-residential construction remains elevated, and positive trends in both the automotive and energy sector will impact demand. In short, we believe medium and long-term fundamentals of our industry and key demand drivers remain relatively positive. This coupled with our strategy to grow our core and expand beyond position new core for strength well into the future. With that, we'd like to hear from you and answer any questions you might have. Operator, please open the line for Q&A.
spk13: Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch-tone phone. If you're using a speakerphone, we ask that you please pick up your hands up before pressing the keys. To withdraw your question, Today's first question comes from Emily Chang with Goldman Sachs. Please go ahead.
spk00: Good afternoon, Leon, Steve, and team. Thank you for taking my question. My first one is just around the state of the steel market outlooks as you see it. I guess could you help us provide some color around what level of confidence you have or what sort of the extent of your visibility around the outlook for steel demand in this current macro environment? and how that perhaps compares to other economic down cycles that we've seen in the past.
spk16: Yeah, Emily, thanks for the question. I'll kick it off. You know, for the last three years, we have been focused on executing on our mission, which is to grow the core, expand beyond, and live our culture, ultimately generating higher highs and higher lows and providing a capability set to our customers that provides them a differentiated experience value proposition. And so while there's an awful lot of talk about looming recessions and headwinds we're facing and whatnot, I just tell you that the objective measures, as we look into Q2, we think Q2 is going to be a stronger quarter. If we look at our backlogs, our steel segment backlogs, Emily, have increased 30% from the lows in the fourth quarter of last year. The demand picture, as we think about automotive approaching 15 million units in 2023, remains really bright. And then, you know, some of the other things that I mentioned in the opening script, like the IRA and CHIPS Act and the infrastructure bill are already having meaningful impacts in our business segments today. But if we just take and unpack this for a second, the CHIPS Act, a $55 billion act signed into law, that $55 billion investment has spurred 34 projects that are on the books today. Those 34 projects represent $374 billion of semiconductor factories that are going to be built in the United States. And as our customers continue to shift to higher demands in what they're looking for and lower in body carbon, it sets up incredibly well for Nucor as the most diversified product offering everywhere to help them build those facilities. And the full cycle of that is, as they build those facilities, they're going to provide the chips to our end use Tier 1 automotive customers, our HVAC customers, and our heavy equipment customers that are all waiting for those and ready to grow at that demand. So, again, we look forward to, and I think the brightest days for Nucor are still in front of us. And, yeah, that's really where I would point to. And, again, non-risk construction continues to be incredibly resilient, and we think strong going forward.
spk00: Great. That's really helpful, Leon. And a follow-up, if I may, around non-resi construction demand there. You know, you've certainly positioned yourself quite well with the garage door business, the warehouse racking piece there. But as you think about the mix shift in projects within this segment, where are you seeing a lot of pent-up demand for certain non-resi construction product types? And what are the projects that you're seeing Nucor specifically benefit the most from?
spk16: Yeah, look, I appreciate that question. And, you know, we are excited. We're incredibly excited about the expand beyond piece of our businesses, the warehouse systems, the racking, the CHI overhead doors, and what those teams have been able to already generate in their earnings power. And we're just getting warmed up. I'm going to ask Chad Udemark, who's over that product group, as well as the new markets and innovation teams, to give you some more flavor. But I would just remind you all that, hey, that's a segment. in the construction and non-res that represents over half of Nucor's overall mix. It's a market we know incredibly well, a customer base that we've had for going on six decades now, and one that we continue to partner with to provide a differentiated value proposition. Our investment strategies were two-thirds of the way through a $14 billion capital campaign that's going to double Nucor's earnings powers from pre-pandemic levels. So, Chad, why don't you provide Emily just a little more detail on what we're seeing in the Nasrin sector and some of the optimism we have.
spk07: Yeah, thank you, Leon. And hello, Emily. Thank you for the question. As Leon stated, we are very excited about the demand picture that we see in non-res. I would categorize it as healthy and resilient as we move into Q2 and Q3. Some data sets I'd like to give you would be when you look at our backlogs, most of our downstream construction product backlogs are still at historically strong levels. As an example, two of our largest businesses that serve the non-res business, their combined backlogs are 56% higher than their average during the time period of 2017 and 2019. So you can see the health of these backlogs as we go through the year. We're not seeing a lot of cancellations at this time as well, so we feel strong about our backlog. Dodge construction forecast, the recent numbers are positive, both in dollars and square footage when you look at the non-red space. And, again, it's obvious that the activity have come off the 2022 peaks, but they really remain above pre-pandemic levels. And one data set I was looking at, the 2023 Dodge projected non-res building starts, when you look at square footage, is up 15% compared to that 2017-2019 average, which was some good years. So we feel really good about what we're seeing. And then we always base these data sets compared to what we're hearing from our customers. And our customer feedback is still positive in the non-res space. Part of your question was about new markets or new channels. And we all know that warehouse obviously was extremely strong in 21 and 22, and it has come off those peaks in its level setting and recalibrating and finding its place. But I would remind you that even with that level setting, it's still forecasted the warehouse space to exceed the 2018 and 2019 demand levels for warehouses, which was historic prior to COVID. So one of those areas that Leon touched on that I want to just mention would be the excitement we have around the onshoring of manufacturing. It's strong, and it keeps pushing forward. Projects such as the semiconductor chip plants, data centers, EV facilities, both the assembly facilities as well as the battery plants, they're in our backlog, and we're quoting even more of them. Again, I'll say it. The manufacturing sector is very strong, Let me share this data set with you. Construction spending in this segment alone has nearly tripled since 2018 and 2019 levels. We're talking about close to $100 billion of spend projected in this segment alone. So while warehouse has come off its level setting, we're really excited about the manufacturing sector.
spk00: Fantastic. That's very helpful. Thank you.
spk12: Thank you. And ladies and gentlemen, our next question comes from Lawson Winder with BOA Securities.
spk13: Please go ahead.
spk11: Hello, gentlemen. Good morning. Thank you for your presentation, and congratulations on a great quarter. I wanted to ask about, again, about the ramp-up of Brandenburg, the cadence you see there in terms of the quarterly ramp. Thank you.
spk16: Yeah, thanks, Lawson. I'll let Albert kind of give you some details in the back row on our Brandenburg ramp-up. Al?
spk03: Yeah, Lawson, thanks for the question. You know, the Brandenburg ramp-up continues to go really well. We shared there in the slide deck a couple of milestones. Again, the strategy has always been about capabilities and not capacity, and so we continue to develop and explore the capabilities of this terrific machine, and we've rolled plate that is over six inches thick, which is a new milestone for us. We've rolled finished plate out of ingots, which is a significant milestone. We're producing our own slabs now out of the caster, and this is one of the most capable casters, the most capable in the Western Hemisphere. And so the wrap-up is just going the way we'd like to see it. We still feel good about our commitment, about 500,000 tons by the end of the year. Obviously, that's heavily weighted to the back end of the year because we're focused on capabilities, but we're excited about what this project is going to offer our customers and ready to serve them.
spk11: Okay, that's fantastic. And then if I could follow up just up on the plate market and get your views and get an idea for what you're seeing in terms of tightness in the market looking out. to Q3 and into the end of the year?
spk03: Yeah. Gosh, you start talking end of the year, you're beyond my crystal ball. But I'll share some thoughts of what we see now. And it is a fairly tight market. Demand is pretty good for plate. Our backlogs are up 100% year over year, even more than that quarter over quarter. So we issued a price increase. We published our prices in plate. As you probably are aware, we published an increase last night of $40 a tonne. Inventories are low. There's not a lot of slack in the supply chain. So we see continued strength in the plate market. It remains one of our more resilient markets. And I would highlight within that, you know, things like rail car manufacturing, non-res, bridge work as a result of some of the legislative successes that Leon's highlighted. So overall, we're pretty positive.
spk11: Okay, fantastic. Thank you very much, Dave. Thanks, Lawson.
spk13: And our next question today comes from Carlos D'Alvo with Morgan Stanley. Please go ahead.
spk01: Yeah, thank you very much, gentlemen. So the question is, given the positive comment that you have on non-RESI and all the terms that you mentioned, how can we reconcile the year-on-year growth in your bars and structural steel mill shipments? They declined 3% in the bars, as you know, and 16% in structural. So I don't know if you could provide some color to help us understand these numbers. And then maybe a follow-up on this, on slide eight of your presentation, the Dutch construction forecast, it's very clear that infrastructure continues to increase in the coming years. There's a little bit of plateau or flatness in non-RESI, and then it increases. But that is in terms of dollars. There is a line there in that chart that is non-residential building starts in millions of square feet, and that comes down from 2023 to 2024, and then it increases from 2024 to 2027, but it's only a gradual, moderate increase. What drives your shipments? Is it more the dollar amount or the square footage of the projects put in place?
spk16: All right, Carlos, it's a bunch of questions that I'll take it off and maybe ask John Hollis or Chad or Steve to jump in. You know, I want to step back, though, to the broader sort of global environment. As you think about rebar and bar and longs, I want to begin with the humanitarian crisis in Turkey and the travesty that has befallen that nation. Obviously, with zero imports coming out of Turkey in the last couple of months, they're consuming a lot of that. Our long product businesses in general have provided incredible returns through a very, very long cycle for Nucor that remain incredibly robust. And so as we think about, again, Q2, we're positive. We look forward to, again, a stronger quarter in the second quarter. You know, as you mentioned, the structural side of things as well. I'll maybe just very quickly touch on what you're seeing in the coming months in the structural side. Don, why don't you finish up on the long products?
spk03: Yeah, some structural things. I would say the structural market is not as strong as the plate market. It remains resilient, and we see some activities in non-res construction, but it's not as strong as what we're seeing in some other products. But the strength is resurging in these areas of reshoring of manufacturing and the chips plants. Those are areas where we're particularly strong, both on the mill side and the downstream product side. I may have missed your specific question about reconciling shipments. I hope I'm giving you some color that's helpful. But John, anything else on the bar side that you can share?
spk05: Yeah, I would say I think part of your question, Carlos, is what drives the steel intensity or the overall demand for steel. It's more going to be on square footage than dollars. Obviously, there's some inflationary impact on the dollar side. What we're seeing with these chip facilities as they are very steel intense because of the enormous foundations that go into facilities like this, which gives us a lot of optimism that demand is going to remain strong, not just through 2023, but for the life cycle of this government spending. So, we see a lot of resilience in the market moving forward.
spk12: Great. Thank you very much. Thank you.
spk13: And our next question today comes from Kurt Woodward with Credit Suisse. Please go ahead.
spk02: Yeah, thank you. Good afternoon, Leon and Steve. Hey, Kurt. I just want to get your thoughts on the sheet market, right? So, you know, if we look at the second half of last year, the economy was still reasonably strong. Non-res was doing well. Auto admittedly, you know, weaker, right? And the pricing average around $750, a ton more or less. And, you know, here we are today, the pricing is $1,200. You know, and arguably maybe there's a little bit more supply from some of the new EAF mills in the market, but feed times are out. And I'm not sure that the real economy is that much stronger today than it would have been back half of last year. So, you know, I'm just curious, you know, how, you know, what would you explain kind of the, how would you characterize the move in the market this year if you could kind of parse out some of the key moving pieces? And then the second question just pertains to the steel products division. You know, that business is, I think, is a little bit more complicated for investors to parse out. So, you know, could you kind of maybe for a size set the Joyce and Deck business versus the pure rebar fab business? And then, you know, within the context of IRA, semiconductors, infrastructure, You know, where do you really play in some of those markets? Is some of that more Joyce and Dec specific versus pure rebar fab or other areas, obviously, like towers, you know, for energy infrastructure? Thank you, guys.
spk16: Okay. Kurt, I'll kick us off. And, again, a bunch of different questions in there, and we'll try to make sure we cover them all. If we don't, just ask again. But let me begin with the tail end of your question. As we think about the IRA, the CHIPS Act, and infrastructure, In the macro, we see about, you know, it's upwards of about 8 million tons of annualized capacity for the next 10 years. So if you think about 8 million tons, that's roughly 7% of the overall ADC of this country. It is not an inconsequential number. And so, well, how does that flow through and how does that break down in the steel intensity within those three? Well, number one, it marries up incredibly well with the most diversified steel industry industry leader in Nucor. It matches up really well with the lowest embodied carbon footprint of any steelmaker in the world that our customers are demanding these days. But it's coming in the form of plate, structural, longs, rebar, sheet, joist and deck, fasteners, buildings, warehouse systems, racking. It really is the breadth of our portfolio that is on display today. So it's It's touching every segment of Nucor's businesses. And, again, with what Chad described, and, again, we've worked really hard commercially in Dan Edems' group with how we provide solutions and looking not to sell products, but how do we provide and partner with a customer to take care of their entire needs of that building envelope from the foundation all the way through to completion. You know, as we've, Shifting a little bit to your question on Sheet, I'll ask Rex to touch on this as well. But I would tell you in the macro, no, we do see Q1 showing more favorable demand than the back half of 2022. And so there's strength there. And what, again, ultimately drives that is our customers. It's a supply and demand market. That's why we're seeing pricing go up and stick because – The demand is up. The drivers are up. Our sheet business alone, queue over queue, is up about 20%. Backlogs are up about 25% queue over queue. So there is real strength there. And there's some optimism there in how we see that moving forward. So Rex, maybe provide a little bit more of a picture within the sheet group and what you're seeing through the back half or the rest of 2023.
spk08: Yeah, Kurt, thanks for the question. Actually, I'll step back for a moment from a big-picture standpoint. Looking at 22, as you recall, with Russia's invasion of Ukraine and some uncertainty going on, you had things going on in the marketplace where customers began placing orders in accumulating some inventory due to that uncertainty. So with uncertainty in the pipeline supply chain from that standpoint. So you saw the back half of 22 where some of that was being worked through. So we saw some softness occurring as people were working through inventory. So then you didn't see the, I'm going to say, the demand pull through on the production side. They were working through some inventory. So we saw that softness. And I would say overall uncertainty from an economy standpoint. But now as we've entered 2023, I would tell you we see a much more stable market. We see more confidence in the marketplace and underlying demand. And we've seen that on the sheet side. So you've now seen stabilizing and some pricing at a higher level. And we see that demand stabilizing. Our backlogs at this point are on par with where we were in the at the end of the first quarter in 22. So we see that strength. And as we move forward, Q2 and even into Q3, we see that continuing and more confidence in the underlying demand. Hopefully that's helpful.
spk16: Thanks, Rex. I think I'm in Joyce and Dec.
spk14: Yeah. Hey, Kurt. This is Steve. Just real quickly on your second question there about Joyce and Dec and RebarFab. To give you a sense for size, Joyce and Dick is typically about 25% of our product group's volume. It's a little bit higher than that in the first quarter. It's around 27%. And RebarFab is in that same ballpark, usually a little bit under 25% of the volume we do on products. It's in the low 20s right now, but those are typical for those businesses about what they represent for the products group.
spk02: Great. Thank you very much, guys. Thanks, Kurt.
spk13: Thank you. And our next question today comes from Tim Nataners with Wolf Research. Please go ahead.
spk09: Yeah, hey, good afternoon, Tim. I wanted to probe a little bit more the Gallatin ramp-up, and I know in the past couple years you've talked about pulling back production if market conditions warranted, but there's also been some talk of, you know, you've got this asset and you want to run it. So I'm just kind of wondering about the cadence of, first off, when does it run full out, and then would you expect it to continue to run at a pretty full clip once it started up?
spk08: Thanks. Tim, this is Rex. Appreciate the question. I'll go ahead and just pick that up. First off, I'll just comment, at Gallatin at this point, we're now over 190 days without a recordable at that team, and going through this ramp-up process has just really been impressive to watch the focus there. And at this point, I would tell you for all intents and purposes, our commissioning is basically complete. We've had the opportunity. I would tell you we have the luxury as a company, the breadth of capabilities we have at other plants to support the work that's been done at Gallatin. in a tremendous fashion. So we utilized that as a group, and we approached it as a group, so we didn't have to get tons through Gallatin for tons' sake. And I think Al mentioned this about Brandenburg on a focus on capabilities. At this point, we've commissioned full capabilities at Gallatin, and so you'll begin to see us now – focusing on quality and ramp up of the tonnage subject to market conditions as we get into second quarter i would tell you we expect to be at full run rate capability by the end of second quarter and then we'll gauge that based on the market but it's been a great ramp up we've done it as a team as a group excited uh the the new capabilities thicker slab that we have will be higher quality capabilities. We'll be able to get into markets that we have not previously been into and, of course, the wider width we have there at Gallatin.
spk09: Okay, interesting. Thanks. My second question is, obviously, you have a huge position with service centers and they're an important, you know, counterparty for you. And our channel checks are suggesting that there is some challenges there, as you can imagine, with higher interest rates and also access to capital in light of banking market conditions. So just wondering if you have any observations about any impact on service center buying habits right now. Thanks.
spk16: Yeah, look, inventories, Timna, as you know, and you're looking at the MSCI data like we are, remain pretty flat. And so, as you see, particularly in cheap pricing coming through and the stability of that, it's a good indicator, noting that we're not pulling orders forward from Q2 to early because of those moves. So I would tell you, while they remain at pretty flat and low numbers, look, they're going to be cautious as well. Interest rates are having a big effect on them, but many of our in-market customers as well are watching and evaluating projects and expansions based on what we're going to see from the Fed here this next month and throughout the rest of the year. So it is touching, obviously, a big swath of our customers. And like you, we're watching all of those indicators and trying to analyze, you know, how does that shape out. But we've been partners with our major service center customers for a long time. We're taking care of their needs and continue to do so well into the future.
spk09: Okay, great. Thanks very much.
spk13: Thanks, Timna. And our next question today comes from Tristan Gresser with BNP. Please go ahead.
spk10: Yes, hi. Thank you for taking my questions. The first one, in your comments, you said that you're already seeing an impact on infrastructure manufacturing. I thought it would be more of a theme for the next quarter and maybe later in the year. Can you discuss a little bit timing? Have you seen things accelerate a bit? One of your competitors mentioned a very strong month of March on the non-resi side. So yeah, just some questions around the timing there and if you're seeing maybe those orders coming in faster than expected.
spk16: Yeah, I'm not sure they're faster, Tristan. What I would tell you is it's nice to see them actually materialize. And so through February, March, Our plate businesses, our rebar businesses, you know, again, the long product businesses are seeing the order activities increase, the quoting increase, and actual orders and production increase. So that's taking shape as we speak, but we expect that to ramp up in the back half of 23 even further. And, again, somewhere in that 5 to 8 million tons annually of production increase throughout the next, you know, eight to ten years as we build out all these major, major projects. So, guys, did I miss anything there, anything you'd add? Okay.
spk10: Thank you. And maybe a follow-up on that, and thank you for the presentation. It's really helpful. The three poles of demand you flagged, the infrastructure, the clean energy, and the manufacturing, Would you be able to break down for each of those three poles of demand the split between, let's say, long, flat, and plate? Is that something you could do?
spk16: Yeah, we can do that. I'm not sure we'll do it on the call, but, you know, Tristan, it's something we can have our IR team follow up with you and engage some more details. But, again, one of the things to keep in mind as we think about those three projects, the breadth of new cores, capability set positions us incredibly well. It's going to touch every major product group that we have, and we're really excited about the Expand Beyond capabilities. When you think about the overhead door businesses, the racking businesses combined with the Joyston deck and the building systems group going to market together as one, we are providing a solution set no one in the industry has today. So we'll give you some more information here. Jack can follow up with you in the coming days, but, you know, maybe provide a little bit more of that breakdown.
spk10: All right. Appreciate it. Thank you. Thanks, Kristen.
spk13: And our final question today comes from Alex Hacking with Citi. Please go ahead.
spk04: Hi, thanks. I just have a couple of quick follow-ups. Firstly, on Joyston Deck, the weakness there, is that just, purely you know the slowdown we've seen in the warehousing build out and then secondly on sheet you know just to clarify there i think some of your comments obviously sheet your sheet treatments are extremely strong you know i think we've seen that you know across the industry you know you mentioned that for you know comparing it to 4q 4q saw a lot of d stocking you know is your view that the current level of sheet shipments is reflective of underlying demand, or is there a restocking element that we use in those shipments? Thank you very much.
spk16: Yeah, I'll maybe kick us off, and then Steve or Rex. I would tell you, no, I don't think it's a restocking. If you look at the MSCI numbers or hovering around the two months on hand, which, again, historically has been low. I don't know, and we don't anticipate those jumping to three or four anytime soon. I think that's going to be a balanced approach for, you know, what Tim asked about interest rates and, again, availability. So what I would tell you is, yeah, you saw a large increase in our sheet group. That is real demand. But does that stick and that continue? Well, look, we think Second quarter is going to be strong. But as we play out the rest of the year, we'll have to sort of wait and see. But the increase within that, if you broke out that increase in shipments, you know, some of that is the loss of imports. We've seen imports drop off significantly queue over queue. And some of that is also establishing different partnerships with our commercial teams and how we're going to market. You know, we mentioned in my opening remarks, the relationships and partnerships we have with Trane and General Motors and Johnson Controls, and there's another 20 customers like that that we're partnering with different to provide them something unique and, again, a very differentiated value proposition.
spk07: Yeah, I'll just jump in on the non-res part of your question, Alex. You know, as we mentioned, manufacturing is robust, and I would say get ready. Infrastructure is going to be coming to support where we're going. But you asked about the drop-off, and it really is, I believe, led by warehousing, has dropped off significantly from these peaks. I would just remind everyone how high that peak went and where we're at today compared to historical. And I would say warehousing was the big market.
spk12: Thank you. Thanks, Alex.
spk13: Ladies and gentlemen, this concludes the question and answer session. I'd like to turn it back over to the management team for any final remarks.
spk16: Well, thank you. And in closing, I want to thank our Nucor team for their incredibly strong start to 2023 and your continued focus. on our most important value, the health, safety, and well-being of our team. I want to thank our shareholders for your investment and your trust. We take that stewardship incredibly seriously, and we appreciate the opportunity to serve you and our customer base. Thank you all for your interest in Nucor, and have a great day.
spk13: Thank you, sir. Ladies and gentlemen, this concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.
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