Nucor 2011 Annual Report Download - page 25

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24
Tonnage data for the steel products segment is as follows:
(in thousands)
Year Ended December 31, 2011 2010 % Change
Joist production 288 276 4%
Deck sales 312 306 2%
Cold finished sales 494 462 7%
Fabricated concrete reinforcing steel sales 1,074 981 9%
Net sales to external customers in the steel products segment increased 21% over 2010 due to a 7% increase in tons sold to outside
customers and a 13% increase in the average sales price per ton from $1,194 to $1,355. While pricing of joists, deck, cold finished bar
products, and rebar fabricated products improved over the prior year, sales in the steel products segment remain depressed due to the
low levels of demand in the nonresidential construction market. Net sales to external customers decreased 10% in the fourth quarter of
2011 from the third quarter because of typical seasonality in the nonresidential construction market.
Though volumes have decreased each quarter in 2011, average sales prices of cold finished bar products were 7% higher in the fourth
quarter of 2011 compared to the first quarter. Sales of cold finished bar products contributed most significantly to the year-over-year
increases in volumes and prices due to improved demand in heavy equipment and transportation markets.
Sales for the raw materials segment increased 17% over 2010 primarily due to increased prices. Approximately 86% of outside sales in
the raw materials segment in 2011 were from brokerage operations of DJJ and approximately 13% of the outside sales were from the
scrap processing facilities (88% and 12%, respectively, in 2010).
The “All other” category includes Nucor’s steel trading businesses. The year-over-year increases in sales are due to increases in both
volume and price.
GROSS MARGIN
In 2011, Nucor recorded gross margins of $1.95 billion (10%) compared with $843.7 million (5%) in 2010. The year-over-year
dollar and percentage gross margin increases were primarily the result of the 21% increase in the average sales price per ton and
the 5% increase in tons shipped to outside customers. Additionally, gross margins were impacted by the following factors:
• In the steel mills segment, while the average scrap and scrap substitute cost per ton used increased 25% from $351 in 2010 to
$439 in 2011, metal margins for the full year 2011 also increased and were at their highest level since 2008. This metal margin
expansion was consistent with our historical experience of rising scrap prices leading, after a short lag, to higher metal margins.
While scrap costs and metal margins increased year over year, a decrease in scrap costs at the beginning of the fourth quarter
was accompanied by a decrease in metal margins. This declining trend in steel margins appears to have bottomed out overall,
as December was our most profitable month in the fourth quarter. The
trend is more positive at the bar mills and beam mills, where margins per
ton improved in the fourth quarter compared with the third quarter of 2011.
Margins at our plate and sheet mills continued to be impacted by higher
import levels that began in the second quarter of 2011 and new domestic
sheet mill supply. Selling prices have recently trended up for both our plate
and sheet steel mills while scrap prices have been flat to slightly down.
Scrap prices are driven by changes in global supply and demand. While
monthly scrap prices remained volatile in 2011, the quarterly average cost
was less volatile and remained at higher levels than in 2010. In 2012, we
expect quarterly scrap prices and the level of volatility to be more consistent
with that experienced in 2011.
• Nucor’s gross margins are significantly impacted by the application of
the LIFO method of accounting. LIFO charges or credits are largely based
on the relative changes in cost and quantities year over year, primarily
within raw material inventory in the steel mills segment. The average scrap
and scrap substitute cost per ton in ending inventory within our steel
mills segment at December 31, 2011 increased 12% as compared with
December 31, 2010, while quantities included in ending inventory also
increased. As a result of these factors, Nucor incurred a LIFO charge of
year
90
180
270
360
450
10 4th Q 10 11 4th Q 1109 4th Q 09
dollars
AVERAGE SCRAP AND SCRAP SUBSTITUTE
COST PER TON USED