Nucor Corporation (NYSE:NUE) Q1 2024 Earnings Call Transcript

Nucor Corporation (NYSE:NUE) Q1 2024 Earnings Call Transcript April 23, 2024

Nucor Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to Nucor’s First Quarter 2024 Earnings Call. [Operator Instructions] and today’s call is being recorded. [Operator Instructions] I would now like to introduce Jack Sullivan, General Manager of Nucor Investor relations. You may begin your call.

Jack Sullivan: Thank you, and good morning, everyone. Welcome to Nucor’s first quarter 2024 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 Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Brad Ford over Fabricated Construction Products; Noah Hanners, Raw Materials; John Hollatz, Bar and Rebar Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial; Rex Query, Sheet Products; and Chad Utermark, New Products and Innovation.

We have posted our first quarter earnings release and presentation to the Nucor Investor Relations website and we encourage you to access these materials as 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.

Leon Topalian: Thanks, Jack and welcome everyone. I’d like to begin by congratulating our 32,000 Nucor teammates for a safe and profitable start to 2024. In the first quarter, we generated EBITDA of approximately $1.5 billion and net earnings of $845 million or $3.46 per diluted share. For the quarter, we shipped a total of 6.2 million tons to outside customers, up 5% from the prior quarter and in line with our average quarterly shipments for 2023. Pricing also remained strong in the first quarter. Average steel mill pricing per ton was up nearly 10% compared to the prior quarter and slightly ahead of the average for all of 2023. For steel products, realized prices continue to moderate. However, prices have held consistently above pre-pandemic levels and will continue to generate robust returns.

In keeping with our commitments to shareholders and our balanced approach to capital allocation, Nucor returned over $1.1 billion to shareholders through dividend payments and share repurchases in the first quarter. We made good progress on key capital investment projects during the quarter. And as we have mentioned previously, our capital spending will increase this year as we get further along in the construction phase of our West Virginia Sheet Mill and our Lexington, North Carolina rebar micro mill. We’re also advancing work on 2 downstream production facilities that are part of our Nucor Towers and Structures growth platform. On the safety front, our team delivered the safest quarter in Nucor’s history with an injury and illness rate roughly 30% lower than that of Q1 last year.

I’m incredibly proud of the steady progress we have been making since 2017 to drive down the number of safety incidents we experience. Our goal to become the world’s safest steel company will require the steadfast determination, innovation and continuous improvement in how we operate. We have the most capable team assembled anywhere in the world who are all focused on delivering these results and taking great care of one another, our customers and shareholders. Building on our leadership position and sustainability continues to be a high priority and we kicked off 2024 with several exciting initiatives. In March, we signed an agreement with Mercedes Benz to supply Econiq-RE for vehicles produced at its Tuscaloosa, Alabama manufacturing plant.

The Econiq-RE is made with 100% renewable energy and has a greenhouse gas intensity less than half that of extractive blast furnace based steel production across scopes 1, 2 and 3. Our agreement with Mercedes Benz is another example of how we’re partnering with world class customers to reduce carbon emissions within their supply chain. We also announced a new initiative with Google and Microsoft to scale the adoption of clean energy technologies. Developers of such technologies often struggle to find creditworthy and large-scale energy customers to advance early stage projects. We aim to lower these obstacles by aggregating our energy needs with others like Google and Microsoft that will seek affordable, reliable and cleaner forms of energy.

Going forward, we’ll be working with energy providers, policymakers and other large energy consumers to advance this work. Nucor continues to receive recognition for our sustainability efforts. Earlier this year, Barron’s Magazine designated Nucor the only steel company ranked among its top 100 most sustainable companies. Congratulations to our entire Nucor team for this well-deserved recognition of your commitment to operating sustainably each and every day. Turning to our commercial strategy, we’re always looking for better ways to serve our customers, which has led us to introduce weekly pricing updates for our hot rolled coil sheet products. Nucor’s consumer spot price or CSP for short will provide customers with reliable real time pricing information for hot rolled coil.

The CSP will provide our customers with better information to make better decisions to meet their needs. Having real time pricing coupled with shorter lead times will help our customers reduce the risks inherent in price speculation. While the CSP pricing framework has only been in place for a few weeks, the customer feedback thus far has been positive. On the corporate strategy front, 2024 is off to a productive start. We recently announced the acquisition of Southwest Data Products, a reputable manufacturer and installer of data center infrastructure with an impressive blue chip customer base. With that, I’d like to welcome the 147 team members at Southwest Data Products to the Nucor family. In conjunction with this transaction, we’re launching a new business unit, Nucor Data Systems to better serve the data center market.

Southwest Data Products gives Nucor expanded capabilities in airflow containment structures, which help data centers run more efficiently by separating cold air from the heat generated by racks of server equipment. The team at Southwest has a strong reputation for engineering and manufacturing high quality products and installing them in a timely and professional way. They have also deep relationships with many of the largest data center, co-developers and hyperscalers, which Nucor can leverage to cross sell our other downstream products. The rise of artificial intelligence and the growing reliance on cloud computing are driving strong demand for the next generation data centers, and this market is expected to grow at double-digit annual rates through the end of this decade.

We continue to evaluate other acquisition opportunities in high growth sectors, and we have a robust pipeline of compelling prospects aligned with steel adjacent growth trends. Before turning it over to Steve, I’d like to take a moment to comment on recent updates to our nation’s trade enforcement policy. Earlier this month, I attended a World Steel Association meeting, where I currently serve as Chair. And during that meeting, we discussed the ongoing challenges posed by global production overcapacity. The U.S. Commerce Department recently published a final rule designed to strengthen its antidumping and countervailing duty regulations. These rule changes are a positive development for Nucor and the entire steel industry as they strengthen the enforcement of existing trade laws.

We appreciate the Commerce Department for making these necessary changes, but we still believe it’s crucial for Congress to pass the Level the Playing Field 2.0 legislation to give commerce additional tools that address trade distorting behaviors. With that, I’ll turn it over to Steve, who’ll share some more details on our Q1 financial results. Steve?

Steve Laxton: Thank you, Leon, and thank you all for joining our call this morning. The first quarter of 2024 saw Nucor advance its growth strategy, make meaningful commercial moves and continue to differentiate itself. We also had a solid start to the year on the earnings front with net earnings of $845 million or $3.46 a share. This was nearly 10% higher than our prior quarter earnings per share, but came in roughly 4% below the midpoint of our first quarter earnings guidance range. So I’d like to take a minute to share some color on that. First and most important, results from the 3 operating segments were generally in line with our forecast for the first quarter. However, certain administrative costs and intercompany eliminations exceeded our estimates.

Some of the larger drivers have higher than expected administrative costs related to employee benefits such as medical insurance coverage. Intercompany eliminations had a more pronounced impact. Higher than expected eliminations were a function of two things. One driver was the delivery of more materials from new core divisions to our own construction projects than expected. This is predominantly a timing difference between our pre guidance assumptions and what actually materialized. The second driver was more activity and profits than anticipated between our operating divisions. As most of you know, Nucor has a diverse and integrated set of this aspect provides strategic benefit, synergies and risk mitigation over long periods of time. However, that same beneficial attribute can result in short-term adjustments to earnings recognition, particularly during periods of higher rates of change in volume and realized pricing, both of which occurred in the first quarter.

Generally speaking, these intercompany eliminations are simply timing differences between segment level earnings recognition and the final sale to our customers. With respect to our operating segment results, our steel mills improved pretax earnings nearly 90% from the prior quarter, generating approximately $1.1 billion in pre-tax earnings for the first quarter. Improved results in our sheet business was the largest factor driving the quarter over quarter gains. That business saw approximately 11% increase in shipments percent higher realized pricing during the quarter. Moving to Steel Products, this segment delivered pre-tax earnings of approximately $512 million for the quarter. Total segment shipments were down approximately 4% from the prior quarter.

We believe an unusually wet start to the year may have adversely affected some regional construction activity during the period. While margins for downstream steel products have receded from the historically high levels of recent years, segment continues to generate attractive returns and strong cash flows. Highlighting a few individual product lines, the first quarter saw higher pricing and margin from our tubular products divisions. This was more than offset by moderating contributions from our joist and deck, metal buildings and rebar fabrication operations. Our joist and deck business continues to be the largest single contributor to our steel product segment earnings. This business tends to have backlogs and lead times of 4 to 6 months.

Consequently, we believe the earnings profile of our joist and deck business will likely stabilize as we approach the back half of the year given the relative stability we’ve seen in pricing over the last quarter. It’s worth noting that for the foreseeable future, this business is expected to maintain results that remain considerably higher than pre-pandemic averages. Our raw material segment produced pretax earnings of approximately $10 million for the quarter. Overall, volumes were higher, but lower metallics prices compressed margin for the segment. Let me now turn our attention to the balance sheet and capital allocation. We began the year with a strong cash position and generated $460 million in cash from operating activities in the first quarter.

These factors enabled Nucor to continue its balanced approach to capital allocation, enabling growth through investment, providing direct shareholder returns and maintaining a strong investment-grade rating. On the growth front, during the first quarter, we continued to advance our strategy deploying $670 million in capital spending with progress made on several greenfield and expansion projects described earlier. The first quarter also saw Nucor return over $1.1 billion back to its shareholders. This includes $134 million in dividends and $1 billion in share repurchases, which reduced our share count by 5.5 million shares. It has long been Nucor’s practice to put capital to use or return it. This discipline was on display again in the first quarter, where repurchasing activity was higher than normal due to our sizable cash balance at the start of the year.

Today, we continue to have a healthy cash and liquidity position, an enabler of our expected near-term CapEx plans and pipeline of acquisition opportunities. Nucor’s balance sheet remains robust, a financial practice that both maintains a strong investment grade rating and enables our long-term orientation and success. We ended the quarter with a total debt to capital ratio of approximately 24% and total leverage of roughly onetime trailing 12-month EBITDA. Looking ahead to the second quarter of 2024, we expect consolidated earnings to be lower than the first quarter with reduced earnings from our Steel Mill and Steel Products segment, partly offset by modest improvements in earnings from our raw materials segment. Lower earnings from our Steel Mills segment are the largest drivers of our reduced outlook for second quarter earnings.

For this segment, we expect slightly higher volumes to be more than offset by lower realized prices. We anticipate our sheet business will be the largest driver of change in results for the Steel Mill segment and for the overall company. Our steel product segment continues to moderate from historically high record levels of performance. For this segment in the second quarter, we expect higher volumes and lower realized pricing with the net effect being slightly lower earnings for the segment. For the raw material segment, stable volumes and improved margins should result in an overall higher profitability. Overall, across all businesses, backlogs remain healthy and in line with historic norms. However, the anticipated reduction in realized pricing for our steel mills and steel products segment in the second quarter are expected to lead to lower overall cash flows and earnings.

On a macro level, the U.S. economy appears to demonstrate near term resilience. Net strength relative to recent past expectations is an overall positive. In addition, select end markets such as advanced manufacturing, data centers and infrastructure continue to show strength from secular trends. Taken collectively, near-term demand appears stable. Looking further out, we remain cautiously optimistic on demand fundamentals given the positive trends of reshoring, repowering and rebuilding. With that, we’d like to hear from you and answer any questions. Operator, please open the line for Q&A.

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Q&A Session

Operator: [Operator Instructions] Your first question comes from Martin Englert from Seaport Research Partners.

Martin Englert: Within the Steel Mill segment, both bar and plate volumes were down double-digits versus last year. Also overall steel products volumes were down to a similar degree. Do you anticipate a similar trend of kind of double-digit declines are in these products are going to continue in 2Q? Or is the sequential volume improvement expected going to start to offset this where we’ll see something potentially lower?

Leon Topalian: Well, Martin, I certainly appreciate your question. As we look out, markets are moderating. I think one of the important things to keep in mind more broadly is when you think about the context of record years like ’21, ’22, ’23. We believe ’24 is going to be another strong year, maybe not as strong as 2024 however. When we see the specific people that play for our products either are flat or improving volumes Q-over-Q. So we expect Q2’s volumes to be a little substantial, but a little better, excuse me, stronger. But as we look at pricing, it is moderating. But again, context is a really important thing. So, for example, in the product group, while that’s coming off the historic highs, it is way, way above what we saw pre-pandemic levels.

So we believe we’ve seen a pretty stable market out there I think regarding that group. And so again, I don’t want to break out individual or break out individual pricing within those product groups. We’re expecting Q2 to be a little softer, but again, it’s relative. I still think there’s going to be many of our product groups that are going to generate very robust returns for us and our shareholders. And a couple of those that are, as Steve mentioned in his opening remarks, if we look at markets across the segments really heat, the heavy equipment adding transportation is really the only area that we see declining a little bit from an overall demand picture. Other than that, construction, automotive, energy, service centers, we see either flat, stable or slightly improving as we head into Q2.

Martin Englert: Within steel mills, the estimated conversion costs like it declined modestly versus the prior quarter. Would you expect similar sequential decline in 2Q on conversion cost per ton given higher volumes, maybe something similar to the year ago comparable period?

Dave Sumoski: Our costs are down slightly, mainly because of the utilization rates being up at sheet mills and also at Gallatin [indiscernible]. We don’t think that there’s a whole lot more decline. So we think that the costs have stabilized. You can expect them to be maybe a little bit down, but it’s a little bit what you saw in the first quarter.

Martin Englert: If I could one last quick one, raw materials expected to improve in 2Q on both DRI and the recycling operations. What do you believe is going to drive the improvement in recycling given recent pricing trends and why has that been challenged from a margin perspective in recent quarters?

Noah Hanners: Let’s talk about recycling first, and I want to go back and just hit on your point about DRI as well. Really the answer is margin compression and scrap pricing has been lower. We peaked in December, we’ve seen declining prices month over month since, and we expect those prices to stabilize and stabilize in the May and as mentioned in the [indiscernible]. So we expect the normalization of margin there. We also are bringing online, a new advanced metal recovery plant, our Bushnell facility in Florida, and we’ve incurred some additional start-up costs related to our commissioning of that facility. We’ll work through those costs early in Q2 and you’ll see our — that’ll contribute to more normalized margins in the cycle as well.

You mentioned DRI as well. I just want to make sure and provide some additional context there. We executed 2 extended outages in DRI, in Q3 going into Q4. So we’re back to running higher rates, higher volumes of DRI. Now that this plants are back performing consistently and that’s been advantageous to us through Q1 and will continue to be in Q2 as you see us running high rates of DRI in our melt pick. So we’re able to not participate in higher cost pig iron market and run higher rates of DRI. So our DRI plants are back to performing at that levels that we saw before the outages.

Martin Englert: You’re adding the advance in recycling separation technology to one facility right now. Can you frame up the cost impact as to what it was in 1Q for the start-up costs there and what you might anticipate in 2Q?

Noah Hanners: Yes. It was about $9 million additional in Q1. It will be minimal in Q2. We’re nearly fully commissioned. And it is a standalone facility at Bushnell that allows us to recover higher rates of copper and aluminum. So it’s not an add-on to one of our existing processes.

Martin Englert: How many more of those do you have planned over the course of the year, if any?

Noah Hanners: Nothing else this year. We’re going to continue to learn from this process. It’s really state of the art technology. We’re going to take this and learn from the additional recovery we’re realizing this process and then build out across the rest of our recycling platform to take this technology more broad.

Martin Englert: And the crux of that is that allows you some increased optionality what you would charge with prime or substitutes at that facility to switch to some degree to an upgraded shred product, right?

Noah Hanners: Yes, that’s a different process. This is really for nonferrous material. So if you think about upgrading obsolete scrap or shredded scrap, we’re doing that at one of our facilities now, Berkeley, we’re producing about 2,500 tons per ship and really that is an offset of a replacement for prime scrap or pig iron in our process. So we’ve got that fully at scale now and we’ll continue to expand that capability to our other mills as well.

Operator: Your next question comes from the line of Curt Woodworth from UBS.

Curt Woodworth: I was just hoping to drill down a little bit more into the downstream product categories. Last quarter you talked about joist and deck order entry was up pretty substantially to start the year. Yes, we’re still seeing pretty materially negative volume trends. So I’m just curious, did anything maybe change in the quarter? Did that kind of proceed as you expected? And then you commented that you do expect to see price stabilization in the back half of the year. But can you comment on maybe where margins stand today versus historical? I think historically joist and deck was around 10% to 15% operating margin. I know it’s much higher than that now. And then you also talked about joist and deck accounting for the majority of that division. Could you frame that out anymore so we can have a better understanding of the EBIT contribution?

Leon Topalian: I’ll kick us off and then I’ll turn it over to Brad and then Steve if there’s any comments you’d like to make on the specifics in terms of margins. Look, our downstream products prove in general is perform incredibly well over the last several years. And I’m not looking at the data in front of me, but we had a run of 10 or 11 quarters where that group generated $1 billion of net earnings or better. Their performance over the last several years has been nothing short of incredible. And so I’m incredibly proud of what the team has been able to do, how they’ve come together to provide solutions, not just individual products, but taking care of our customers with the breadth of Nucor’s strength, coming together and again leading the differentiated capability set in serving that market in a very different way.

Again, I use the word moderating. We’re seeing pricing moderate. But again, I’ll let Brad speak a little bit more to some of the details, what he’s seeing, what we’re envisioning as we move forward and then go from there. Brad?

Brad Ford: As you know, we produce many different downstream products and this breadth of product offering continues to be a significant differentiator for us. As we bring multiproduct solutions to our customers, specifically some areas of strength we’re seeing right now in non-res, advanced manufacturing, data centers, institutional projects in healthcare and education. As Steve noted, quarter one started out a bit slow for us on the product side, driven mainly by some extreme weather and associated job site delays. That said, in light of current interest rate environment, we remain very optimistic about the resiliency in non-res construction. On the joist and deck side specifically, again, started the year relatively slow, but we’ve seen quote and booking activity accelerate pretty rapidly over the last 45 days with March industry bookings far outpacing what we saw in January and February.

Couple that with backlogs that remain strong, we still sit about 25% above pre-pandemic levels and we expect improved volumes as we noted in Q2. On the pricing side, again, we’ve seen market price stabilize, remaining pretty consistent now for the last two quarters at levels far higher than historical norms, which we believe better reflect the value of the products and the solutions that we’re bringing to the market. As I think about the balance of this year and the megatrends we’ve been discussing, I’m we’re very optimistic. Product breadth and solutions focused approach means we’re well positioned to take advantage of these mega trends. Like Leon said, I’m extremely proud of how our downstream products teams are executing, working together to take care of customers and continuing to drive the step change in earnings that we’re generating.

Steve Laxton: Curt, I’ll just add on to what Brad and Leon have said. This is Steve. And Leon talked about the profitability being in a fundamentally different position. Our segment profits were over $0.5 billion from that segment this quarter. And if you go back pre-pandemic, we averaged call it, $450 million in EBITDA from that segment for a year. So we are fundamentally positioned different as a company today than we have been in the past. So when you reference this moderation, it has to be taken in a broader context of those along with demand trends that are Brad referenced that are pretty good. We’re not going to get into the profitability particular products within that segment. We’ve not done that. But what I will point you to give you a little bit of an orientation.

Again, Brad referenced that we have a very diverse set of downstream businesses, and 20% to 25% of our volume is from the joist and deck business and roughly 20% to 25% is going to be pipe and tube and about 20% to 25% is rebar fabrication. So I hope that gives you a good mix of the products that’s set in that segment.

Curt Woodworth: And then as a follow-up, can you kind of comment on how you see infrastructure spending evolving this year? I mean, it seems looking at kind of the bar and plate volumes, they’re still somewhat static demand trends going on there. And then can you give us an update on how the Brandenburg plate mill is doing and if you still expect the similar level of volumes you’re guiding to last quarter. And we’ll turn it over.

Leon Topalian: I’ll kick this off and John, if I miss anything on the bar side, if you want to comment on, please jump in and then I’ll maybe touch on Brandenburg’s ramp. Curt, I’ll just start with the 3 pieces of legislation and the great news that we’ve been talking about for way too long are passed right there. The money is there, it’s in the books. Obviously the furthest along in the three of those pieces of legislation are the CHIPS Act. And we got 83 new semiconductor products that have been announced worth an estimated roughly $350 billion worth of CapEx that will be built out in the coming years. To date, ’23 of those have broken ground and begun construction. So that’s real. Those orders are coming. We’re seeing that in flowing through into our different product groups.

If we look at IRA Next, that’s sort of the next, most advanced behind the CHIPS Act where again, when we look at renewables, particularly solar, for tubes, we’re seeing those orders again in our books, being produced, being shipped and moving. And then last and probably the most lagging in that is IIJA or infrastructure that again, funds are there federally, got to flow through the states and then execute on the individual projects and highways, bridges and the like. That’s still in the very, very early innings, and we’re expecting in the years to come, next 2, 3, 4, 5, we’ll see all 3 of those continue to ramp. We still estimate that the total between the 3 is somewhere between 5 million and 8 million tons annually over the next 4 or 5 years that again will have a positive impact.

The thing that, as you look to Nucor in our strategy or growth plate, where we’re going focusing, I mean, some of the megatrends are showing more than double-digit growth for the next 5 years like data centers, like towers and structures that we’re in, that we’re incredibly excited about that we also think is going to be an incredible tailwind. And most of our groups, not the least of which are playing, sheet beams and products will play a significant role. Do you think you’d like to add, John, on that?

John Hollatz: I would add, we’re certainly, as Leon noted, seeing a slowdown or not slowdown, but a delay in the infrastructure spending. But as we look at building out commissioning our mills in Lexington, North Carolina and Kingston, Arizona, you’re going to be well positioned to take advantage of these dollars as they start to flow through. So we’re optimistic about the long-term demand on long products and feel good about where we’re going there.

Al Behr: This is Al Behr. I’ll just comment quickly on your question about Brandenburg. The Brandenburg ramp up continues to go according to plan for this year that we talked about on the last fall, which is about 500,000 tons for the year. Our volume in Q1 was about 50,000 tons. Obviously, it’s going to be heavily weighted to the second half, but I’d expect to double that tonnage in Q2 and double that again in Q3 and Q4. So it continues to be a capability story. We shipped our first head plate for a tank railcar customer, so that’s something new for us. We weren’t able to take care of those customers before. It’s a new capability. So we continue to tick off these new firsts for Nucor on how we can take care of our customers due to the capability Brandenburg gives us and the volume will come with it, just like we thought.

Operator: And your next question comes from Tristan Gresser from BNP Paribas.

Tristan Gresser: Maybe to start with a quick follow-up on the downstream outlook. With what you said about joist and deck and prices normalizing and the volume direction. Is that fair to say that Q2 will mark the trough for the divisions? And when we look at the H2 outlook, given the visibility you have certain of your products, is it fair that we have more of a stable kind of environment from an earning perspective, but nothing yet to be more optimistic or positive in terms of earning momentum there.

Leon Topalian: Tristan, I want to make sure I understood the question. Is it really framing to how the moderation is going to flow through to quarter-to-quarter earnings?

Tristan Gresser: Yes, pretty much. And given if you have some visibility on certain products that are really big for the division like joist and deck and you’re saying prices have stabilized. It looks to me that you have all the elements to say that Q2 would potentially mark the trough for the division. And then given the visibility you have, I’m just trying to understand if we’re looking at more of a stable outlook in the second half of the year for the division, the steel product division? Or if given the positive commentary you mentioned on joist and deck, could we see even, I don’t know, an uptick in prices, an uptick in margins and be a bit more positive on the earning direction for H2?

Steve Laxton: I’ll field this, and Brad can clean up any misses that I’ve got. But yes, we particularly with joist and deck, given the lead times and backlogs that we’ve got there that are pretty healthy, we’ve seen very good price stability relative price stability over the last call quarter or so. That does lead you to have more confidence in what the back half of the year might look like. I’ve been around too long to say that we’re going to call it trough at this point. There’s too much variability in our business model overall. But certainly for joist and deck, that’s a very, very positive trend in terms of stabilization. And just sort of like Curt’s questions earlier around the diversity of the Downstream Products segment, there’s other parts of that part of our portfolio that don’t have that much linked to their backlogs and lead times.

So that’s why I’d be a little hesitant to say that second quarter, a trough, but I would characterize your question as affirming the relative positive position of joist and deck.

A – Brad Ford: Yes. Steve, the only thing I would add is from a volume perspective, non-res construction is somewhat seasonal. So Q1 tends to be a bit lower volumes on the product side. Q2 and Q3 are usually more robust and that’s what we’re seeing right now.

Tristan Gresser: And you discussed a little bit data center and your recent acquisition. Am I right to understand that when you talk about the complementarity of certain downstream product that those data center will use joist and deck in order products? And if you could maybe give us a sense, quantified sense of how big this could be as a driver right now and maybe in the future?

Leon Topalian: Yes, I’ll kick this off and then maybe ask Chad Utermark to borrow who’s overall for M&A and new businesses that we acquire Tristan, but we’re really excited about the opportunity that the long-term projections are. Boston Consulting Group is projecting about 12% to 14% year-over-year growth in data center construction over the next 4 or 5 years. Couple that with, again, just a little bit of a pivot here, couple that with the demand of power that many of these large hyperscalers need, you’re talking hundreds and hundreds and hundreds of megawatts. So the infrastructure build out required, the energy requirements are prompting a few things. One, we’re going to continue to grow in this space. Two, under Chad’s leadership as we make these acquisitions and I shared earlier in my opening comments, we now have a data center group that will provide holistic solutions to our hyperscalers and other major data center builders.

And so again, these are long-term, long established relationships that we have in the marketplace. And again, you’re going to see Newport continue to move forward. Many of the questions we often get on these earnings calls are what are you going to do with the money? What are you going to do with the cash you’re generating or sitting on? And again, we returned over 130% of that back to shareholders in Q1. But our focus without getting too far is going to be in the megatrends in this economy that we see are going to continue to generate incredibly strong and robust growth and returns for our shareholders, data centers being one of them, southwest makes the sort of pathways for cool air to come in and hot air to get out. In terms of that data center, the 147 team members that we look forward to welcoming into the Nucor family and or into the Nucor family.

But do you have any other details that you’d share on the market in general in Southwest?

Chad Utermark: Let me start by saying, we’ve been in this data center space for a while. Our new core buildings group along with our joist and deck and our beam, our products have supplied a lot of building structures for the space. They will continue to do that. They have great relationships with a lot of the hyperscalers the co-locators. We actually entered what I kind of call the racking or inside the data center, I think it may be the furniture in there, about a year ago through our racking division. And in 2023, we saw some tremendous growth there. And then we were able to acquire SWDP, 3 weeks ago as Leon mentioned. And these 147 team members, I mean, they’re right down in the middle of the data center explosion. This acquisition is going to give us new capabilities to serve this growing market.

And it’s kind of hard to put a dollar figure on how big the inside of the data center, this furniture space that we’re playing in is, but we estimate it to be probably north of $2 billion and growing, as Leon mentioned, double digits. So we really feel like it’s going to bolster new course opportunity to be a preferred supplier to many of the nation’s hyperscalers, the key co locators who are front and center on the data center build out. Kind of as a note, SWDP also installs their products, which we’re really excited to be a part of that and bring those assets into Nucor and possibly even install other products that we make, sprinkler piping and other things that we produce. So we’re excited about the space. We’re excited about the products we have.

We’re excited about the relationships we have with the key players. We already have those relationships, but the phones are already ringing. And we’re looking at really growing, significantly in this space.

Tristan Gresser: And maybe a final question on Econiq. Do you have any volume target? Or can you disclose a little bit on the volume, how much you’re selling or you target to sell in coming years? And if I look at the carbon intensity at which you’re selling, if you were to sell that product in Europe, you probably get a premium, a selling premium of EUR150, EUR200 per ton. So it can be pretty significant. The U.S. market is much different. But I was wondering if you could share as some other peers have done, the type of premiums you’re looking at for this tonnage.