Steel products maker Nucor Corp. (NUE) on Wednesday said it expects profit in the second quarter to be below the qualitative guidance issued in April, citing a surge in imports that began late last year and extended into the second quarter as well as the economic and political unrest in Europe.
Earnings are now expected in the range of $0.35 to $0.40 per share. The guidance includes an expected impairment charge of $0.09 per share related to its Duferdofin Nucor S.r.l. joint venture in Italy.
Nucor said operating performance at Duferdofin Nucor continued well below budgeted levels through the first half of 2012. This trend, combined with the accelerated economic and political turmoil in Europe, caused the firm to conclude that Duferdofin Nucor had a triggering event requiring assessment for impairment in the second quarter.
Excluding the impact of the charge, this range is lower than last year's $0.94 per share. It is similar to the first-quarter earnings of $0.46 per share, Nucor noted.
On average, 17 analysts polled by Thomson Reuters expect earnings of $0.50 per share for the quarter. Analysts' estimates typically exclude special items.
Nucor had said in April that it expects to see only a modest improvement in earnings in the second quarter. "This performance, excluding the expected impairment charge, is somewhat below the qualitative guidance presented in our first quarter earnings release," the company said today.
Projected second-quarter results include an estimated LIFO credit of $14.5 million or $0.03 per share compared to charges of $0.03 per share in the first quarter of 2012 and $0.06 per share in the second quarter of 2011.
Nucor said its lower performance in the second quarter of 2012 is mainly due to a surge in imports, particularly rebar, plate and sheet steel, which began at the end of 2011 and has continued through the first half of 2012.
While the U.S. market continued to show some demand for steel, the surge in imports undercut seasonal pricing momentum normally seen early in the calendar year. Further, U.S. markets were hurt by the influence of new domestic supply, which ramped up production in 2011.
Also, lower scrap pricing hurt the operating performance of its scrap processing business, but the firm expects this to have a positive operating benefit on the performance of its steel mills as scrap costs will be less.
NUE, which closed at $36.11, is losing close to 2 percent in pre-market trading.
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