Leon Topalian: Again, Nucor is excited about our work that we’ve done regarding the entire sustainability front. Again, while other nations are looking to revamp their entire portfolio and spend tens of billions of dollars to try and someday 20, 30, 40 years down the road look like Nucor. We’re not standing still. We’re able to take the billions and billions that we’re making today and continue to grow in places like data centers and racking and the investments in towers and structures and automotive and construction and providing solutions and capability for our customers for decades to come. When it comes to sustainability, it really becomes a very nuanced answer to your question. For example, the Mercedes Benz relationship we just announced was very important to them that we worked hard at our scope to emissions, right, that the renewable energy incoming into Nucor is how we produce these deals was critically important.
But make no mistake, Nucor was the first out of the gate at scale to provide a 100% net zero carbon free steel, and we can do that at scale. A year ago, I think I used to figure that Nucor’s capability in that realm was somewhere around the ability to ship at least a million tons. We can do more than that, but really what we’re trying to do is identify the solutions for our customers that need different things. So there are some customers, for example, that don’t want us to use regs or offsets to be able to get to that net zero target. Well, our starting point already at 0.4 is hundreds of percentage points below the traditional or extractive, steelmaking process in our integrated competitors. So our starting point becomes incredibly low. And then when you look to regional differences, there are different regions across the U.S. and Newport operating in that are able to lower that even further than certain steel mills like Sedalia that are operating at 0.09 or in that range.
And so you have a unique opportunity again with the breadth of Nucor across the geographic footprint to really meet the needs today and long-term. Lastly, I’d just make the final comment and Dan anything you want to add or Greg is, it took Nucor, we were very deliberate before we came out with our net zero target. We didn’t just jump out there in 2021 and there was a lot of pressure to do so. We did it when we believed there was a pathway in our control. We’re not looking for government subsidies or handouts or technologies that would make the OpEx of steelmaking, quite frankly, unsellable. We’re looking for the things that we can directly control and produce a true net zero product. And again, we’re excited about that. We’re well on the way to that.
You’ll see continued improvement in our overall performance. But again, leaders lead and we’re going to be upfront, we’re going to stay there, we’re going to continue to make the investments for the long-term to position ourselves well for those customers that need and require Econiq steel.
Dan Needham : And Tristan, this is Dan. What I would add to that is, if you think about Econiq, we rolled that out a couple of years ago, it’s about a net zero product for Scopes 1 and 2. The markets evolved quite a bit since then. And what I would tell you is that sustainability is absolutely a personal journey for a lot of these companies. And so we’ve evolved as the market has and we’re offering what the customers need. So we’re very flexible as we just announced the Mercedes that was an Econiq-RE product around Scope 2, because that’s what the customer has desired. So we’re very flexible as we approach that. Your last question was around premiums. I’m not going to get into specifics around what that is, but there absolutely are premiums that we’re achieving and realizing here in U.S. And if you look at how that’s shaping out in Europe, I’d say it’s similar to what’s happening in the United States.
Operator: And your next question comes from Timna Tanners from Wolfe Research.
Timna Tanners: I was hoping for a little more color on the outlook because we’re struggling a bit to get to the decline quarter-over-quarter. I think it has a bit to do with the fact that you pointed out, which is seasonally demand does improve usually in the second quarter for your key end markets. And so in light of that, maybe it would be helpful to discuss the corporate eliminations impact, if that’s sticky into the second quarter, if some of those in process inventories to some of your projects are going to remain elevated or how we can think about that, if you can help us a bit with that guidance?
Leon Topalian: So now I’ll kick us off and maybe ask Steve to jump in, if I go too far into the accounting whole of corporate elims. But look, it is a good point, because one of the incredible strengths of Nucor is our diversity. Our ability to provide a wide variety and a capability set for our customers is unmatched in North America. Well, when you, for the quarter had $8 billion in revenue for the quarter. About $1.5 billion of that is internal. So it’s shipping to hundreds of locations across Nucor. So the magnitude of our strength of having about 20% of our overall shipments go internal means that, man, you tracking down the ebbs and flows of every potential property limb across hundreds of locations in 40 states, and it’s an inexact science.
And again, our team works really hard to try to do that. But to your point, it’s not a miss in terms of why you just missed it and it doesn’t come back. It will flow back through into new core in the week’s months and maybe the next couple of quarters. So did you see that boost as they start out their products to their final end customers? So look, I get your point in sort of I think the way you’re asking it is, would that not balance out what we’re seeing in getting a little more stable in our Q-over-Q performance. And again, against that backdrop, I would tell you, we still see the market softening a little bit into Q2. But again, you’re optimistic back half of the year sort of stabilizes. And again, I think Steve answered it well. I don’t want to call Q2 the trough and the low point at this point.
However, we do see strengthening and we do think the back half of the year and really the overall year for Nucor is going to be pretty strong. Steve, anything you’d add?
Steve Laxton: The only thing I would add to what Leon said is, and you’re very knowledgeable of our business and know how that how our products flow through the different businesses we have. And we do see volume pickups in both steel and in products. And so you should reasonably expect that the quarterly limbs might look different for the second quarter than they did the first quarter. Having said that, the pricing pressure on both mills and products are expected to give us a little bit lower results in the second quarter. So I think your question was a correct characterization of some of those pluses and minuses as we look at Q2.
Timna Tanners: I just said and if there’s any way to break out any more corporate eliminations guidance or color going forward, it’s just bit tricky as you mentioned? I know it’s tricky for you, it’s tricky for us. So my second question is on the buyback cadence because obviously first quarter was a pretty big amount. And as you pointed out, you have a huge amount on your balance sheet with which you could dig into. But how do we think about that cadence going forward? How do you make those decisions? Or what could that look like given that you have the spare capacity, but you hadn’t chosen to deploy it as aggressively until this quarter?
Steve Laxton: I think what you, the first quarter is really an excellent piece of evidence of how Nucor thinks about managing its balance sheet. And that’s over number one, it’s very long-term perspective that we take. And number two, it’s a rigor and a discipline around we put our capital to use or if we can’t find the right uses for it to create value, we give it back to shareholders. And that’s something we’ve done for years, years, and that was on the same store in the first quarter. One of the reasons we had a fair amount of liquidity at the end of the year last year was because of potential M&A pipeline activity. And we felt comfortable releasing that capital, if you want to call it that in the first quarter, at a higher rate than we normally do.
We’re still set with an excellent balance sheet, great leverage position, good liquidity, an active M&A pipeline, a smooth commitment to growth. And so we’re striking that balance. It looks maybe a little bit choppy because of the amount of dollars quarter-over-quarter from the fourth quarter, but we were blacked out parts of the fourth quarter from some of the share buybacks. So that’s part of why you’re seeing the change if you’re thinking about quarter-over-quarter numbers.
Timna Tanners: [Indiscernible] M&A?
Leon Topalian: I was just going to say, look, to get a little more qualitative, if you asked in sort of roundabout way, Nucor is probably not going to sit on $5.5 billion $6 billion of cash on a normal basis. We’re thinking hard about that. There are some other activities in the M&A pipeline we’re looking at that can’t get any further than that to tell you. But again, you’ve watched our company long enough to know our return metrics, how we think about rewarding our shareholders and share repurchases, and you can expect that mindset and focus will continue well into the future.
Operator: And your next question comes from Bill Peterson from JPMorgan.
Bill Peterson: I wanted to kind of come back to the plate market. What are your views on the market given elevated inventories, apparent consumption turning down for the last 12 months? And then I guess as we, I guess how do you think what are the key drivers that will unlock this market? And then especially, taking into account you are ramping Brandenburg, it sounds like you’re planning to double over the next few quarters. Just want to get your thoughts on the market as we look ahead over the next several quarters.
Al Behr: As we look at the plate market, the consumptive part of the market remains pretty steady. When you look at power transmission as an area of strength, bridge work is an area of strength. That’s bridge work that’s not necessarily related to the infrastructure build yet. I think that’s coming, that will be coming, and John shared some comments around rebar to that effect. Military work remains strong and will probably tick up some. That’s low volume work, but it’s very high margin work. It’s highly specialized plate, a lot of its hard work plate. But there’s still some weaker segments. Vertical construction or high rise construction remains very, very weak. Large is kind of an opportunistic market segment and there’s just not a lot of activity there right now.
You look at heat, and Leon had some comments around heat, that’s starting to soften. It’s coming down from highs, but it’s really softened in the last 12 months. So, I mean, when we boil that down to the year, it looks probably similar to last year. It’s just fairly steady on the consumptive side, and then what comes in and out is the service centers that they buy according to what they feel is best for their business. And we didn’t see a lot of restocking in Q1 this year. That’s probably the biggest driver of our volumes being down. We saw a lot of that last year and that drove volumes higher. But we look through the rest of the year and we think it remains fairly steady, but maybe some sliding continuing to the second half just because election cycles on the non res construction side tend to create some stall and you just don’t get as many decisions until the election happens and then regardless of the results, now what was not known is known and people move forward.
It’s probably a bigger story on the margin side for plate anyway that we continue to see squeeze on the margin side as we fight imports, imports are a problem. They’re higher. They’re trending higher, and we continue to have some so called trading partners that continue to abuse countries. I’m talking about our agreements and our trade laws, and, we’ll continue to fight that commercially, and part of that is just having a competing marketplace and creates margins, please. But we’ll also compete with that in any other way we go, which is regulatory and making our trade officials and elected officials aware of it. And, we’ve got to hold those countries to account to abide by the agreements that we make. So hopefully that provides some color for you on the on the play side.
That’s all along the backdrop of Brandenburg ramping and we went through that. But that’s the way we look at the play market and what our outlook is.
Bill Peterson: And then coming to the customer spot index that you employed. I guess, what were you looking to achieve and how do you address concerns if this could potentially compete with indices? You commented that you’re doing it for customers, but is this is this something customers have been asking for? Can you share any sort of feedback you’ve received thus far from customers? And I mean, I guess, if we were to take it one step further, are there any expectations to expand this type of thing to other steel formats, our customers asking for other products?
Leon Topalian: I’ll kick it off and Rex Query heads up our sheet group. If there’s additional comments, you’d like to make, please jump in. But we’re excited and you asked one great question, but within that an important question and that was, were our customers asking for this? I would tell you unequivocally, yes, they have been asking for this. And so I’m not going to name other indices, we’re obviously aware of them all. Our goal is simply to provide a more consistent, reliable, predictable, and relevant price on our top band spots, tons, period. Provide a consistent and shorter lead-time window for them and provide real time pricing on a weekly basis that was relevant. And so our commitment to them is to maintain a relevant price page each and every week.
And so again, the part of that and the driver for that, yes, our customers were asking and also the whipsaw that we see in ups and down markets to try and shrink that volatility to create more stabilization in the marketplace, again, giving them better information to make better value decisions for their business and get out of the price speculation that we see all too often in the hot band market. So those really were the drivers. As we look at, again, it’s only been a few weeks, how this evolves and moves forward, we’ll wait and see. We’ll allow our customers to see opportunity to decide that rather than us to starting that. They’ll either once that provides to see back to us, that yes, we love it, we like it, we want to use this, we think it’s the right industry.
And, again, our job and our goal is to make that incredibly easy and transparent. Rex, anything you can add to that?
Rex Query: Bill, I’ll only add a couple of comments. I mean, Leon covered it well. Really, as we develop the CSP, we looked at the cycles over the last several years, and it was very predictable. As pricing started to firm, we would see customers enter into speculative buying. They would pull ahead demand. Lead times would then extend. Pricing would generally go up beyond, really supply demand balances, inviting imports in, inventories would balloon, and then we had to work that off, and you could see orders stop and pricing fall dramatically. So as we looked at that, we said, how can we create stability, potentially avoid speculative buying and it’s through, us offering a current look at what we see spot pricing to our customers in the marketplace and maintaining our lead times, so they can count on what’s happening. And that’s really what we looked at, and we’ve got positive feedback at this point from our customers as Leon stated.
Operator: And that concludes our question-and-answer session. I would now like to hand over the call to Leon Topalian for closing remarks.
Leon Topalian: In closing, I just want to thank our Nucor teammates for a great start to 2024. Let’s continue to stay focused on our most important value, the health, safety and well-being of each and every one of our 32,000 team members that make up the Nucor family. And thank you to our customers and shareholders for the trust that you’ve placed in us both in the order books, in the orders that you give us, as well as the valuable shareholder capital that you trust us with. We will work hard each and every day to earn your trust in your continued business. Thank you and have a great day.
Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect.
