Nucor 2015 Annual Report Download - page 29

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27
Tonnage data for the steel products segment is as follows:
(in thousands)
Year Ended December 31, 2015 2014 % Change
Joist sales 427 421 1%
Deck sales 401 396 1%
Cold finished sales 449 504 -11%
Fabricated concrete reinforcing steel sales 1,190 1,185 —
Net sales to external customers in the steel products segment decreased 2% from 2014 due to a 1% decrease in tons sold to outside
customers and a 1% decrease in the average sales price per ton from $1,383 in 2014 to $1,374 in 2015. Sales during 2015 followed
the typical seasonal pattern that was also experienced in 2014. Total sales and volumes were lowest in the first quarter as winter
weather conditions had their greatest impact on nonresidential construction markets. Conditions improved in the second and third
quarters, and then decreased in the fourth quarter as weather conditions transitioned back to winter. Volumes and average selling
prices for our cold finish operations decreased in 2015 as compared to 2014 due to decreased demand in agricultural and heavy
equipment markets. Nonresidential construction markets experienced a slight decrease in demand in 2015 as nonresidential building
construction starts decreased compared to 2014.
Sales for the raw materials segment decreased 41% from 2014 primarily due to decreased volumes in DJJ’s brokerage and processing
businesses and lower scrap and metallic commodity prices. Approximately 88% of outside sales in the raw materials segment in 2015
were from brokerage operations of DJJ and approximately 8% of the outside sales were from the scrap processing facilities (81% and
12%, respectively, in 2014).
GROSS MARGIN
In 2015, Nucor recorded gross margins of $1.58 billion (10%) compared to $1.91 billion (9%) in 2014. The year-over-year dollar
decrease was primarily the result of the 13% decrease in the average sales price per ton and 11% decrease in tons shipped to
outside customers. Gross margin during 2015 was also affected by the following factors:
• In the steel mills segment, the average scrap and scrap substitute cost per ton used decreased 29% from $381 in 2014 to $270
in 2015; however, overall metal margin decreased in 2015 due to lower sales volumes. Scrap prices were volatile and decreased
significantly during 2015, as the average cost of scrap and scrap substitute used in December 2015 decreased 41% when compared to
the average cost of scrap and scrap substitute used in January 2015. The overall metal margin in the fourth quarter of 2015 decreased
from the fourth quarter of 2014 and the third quarter of 2015 due to decreased metal margin per ton and decreased sales volumes.
Scrap prices are driven by the global supply and demand for scrap and
other iron-based raw materials used to make steel. As we begin 2016,
we expect to see scrap prices stabilize after the downward trend in
pricing continued in the fourth quarter of 2015.
• 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, 2015 decreased 42% as compared to December
31, 2014. As a result, Nucor recorded a LIFO credit of $466.8 million
in 2015 (a LIFO credit of $57.3 million in 2014). The decreases in cost
per ton were driven by market conditions at the end of 2015, which
experienced significantly weaker demand for steel and raw materials
than market conditions at the end of 2014.
• Total steel mill energy costs decreased approximately $3 per ton from
2014 to 2015 primarily due to lower natural gas and electricity unit
costs. Due to the efficiency of Nucor’s steel mills, energy costs were
approximately 6% of the sales dollar in 2015 and 2014.
year
80
160
240
320
400
14 4th Q 14154th Q 1513 4th Q 13
dollars
AVERAGE SCRAP AND SCRAP SUBSTITUTE
COST PER TON USED