Nucor 2013 Annual Report Download - page 32

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31
Net sales to external customers in the steel mills segment decreased 5% in 2012 from 2011 due to a decrease in the average sales
price per ton, partially offset by an increase in tons sold to outside customers.
Tonnage data for the steel products segment is as follows:
(in thousands)
Year Ended December 31, 2012 2011 % Change
Joist production 291 288 1%
Deck sales 308 312 -1%
Cold finished sales 492 494 —
Fabricated concrete reinforcing steel sales 1,180 1,074 10%
Net sales to external customers in the steel products segment increased 9% over 2011 due to a 4% increase in tons sold to
outside customers and a 4% increase in the average sales price per ton from $1,335 to $1,393. Pricing of joists, deck, metal
buildings and components and rebar fabricated products improved over the prior year as nonresidential construction activity
showed modest improvement; however, sales in the steel products segment were depressed as demand in the nonresidential
construction market remained well below historical averages. Pricing and volumes of cold finished bar products decreased slightly
from 2011. Sales of rebar fabricated products contributed most significantly to the year-over-year increases in volumes and prices
in the steel products segment due to the modest improvement in nonresidential construction activity.
Sales for the raw materials segment decreased 10% from 2011 primarily due to decreased pricing and decreased volumes in
DJJ’s brokerage operations. Approximately 85% of outside sales in the raw materials segment in 2012 were from brokerage
operations of DJJ and approximately 13% of the outside sales were from the scrap processing facilities (86% and 13%,
respectively, in 2011).
GROSS MARGIN
In 2012, Nucor recorded gross margins of $1.51 billion (8%) compared to $1.88 billion (9%) in 2011. The year-over-year
dollar and gross margin percentage decreases were primarily the result of the 3% decrease in the average sales price per ton.
Additionally, gross margins were impacted by the following factors:
• In the steel mills segment, the average scrap and scrap substitute cost per ton used decreased 7% from $439 in 2011
to $407 in 2012; however, metal margins also decreased from 2011.
The average scrap and scrap substitute cost per ton used decreased each quarter during 2012. However, the average sales
price per ton also decreased each quarter of 2012 for all of the products within our steel mills segment except for structural.
The decrease in sales prices and the resulting decrease in metal margins is primarily the result of new domestic suppliers
and very high import levels in 2012 that increased from 2011 levels.
• The average scrap and scrap substitute cost per ton in ending inventory within our steel mills segment at December 31, 2012
decreased 13% as compared to December 31, 2011, which was partially offset by increased quantities included in ending
inventory. As a result of these factors, Nucor recorded a LIFO credit of $155.9 million (a LIFO charge of $142.8 million in 2011).
• Nucor’s 2012 gross margins were negatively impacted by $48.8 million in inventory-related purchase accounting adjustments
associated with our acquisition of Skyline.
• Total energy costs decreased $2 per ton from 2011 to 2012 due primarily to lower natural gas unit costs. Due to the efficiency
of Nucor’s steel mills, energy costs remained less than 6% of the sales dollar in 2012 and 2011.
• Gross margins related to DJJ’s scrap processing operations were significantly lower in 2012 compared to 2011. The decrease
was due to conditions in the scrap processing industry, in which excess shredding capacity increased competition for raw
materials. As scrap selling prices decreased throughout 2012, DJJ experienced severe downward pressure on margins.
• Gross margins were impacted in the fourth quarter of 2011 by a non-cash gain of $29.0 million as a result of the correction of
an actuarial calculation related to the medical plan covering certain eligible early retirees.
• Gross margins in 2012 were positively affected by the improved performance of our steel products segment, which experienced
gross margin improvement between the third and fourth quarters of 2012.