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Steel Dynamics Sees Q2 EPS Below View; Stock Down

Steel Dynamics Inc. (STLD) said it expects second quarter earnings to be in the range of $0.60 to $0.64 per share, compared to prior year second quarter earnings of $0.58 per share and sequential first quarter 2017 earnings of $0.82 per share. Analysts polled by Thomson Reuters expect the company to report earnings of $0.84 per share for the second-quarter. Analysts' estimates typically exclude special items.

STLD closed Thursday's regular trading at $32.85, down $1.78 or 5.14%. In the after-hours, the stock further dropped $0.08 or 0.24 percent.

During the second quarter 2017, the company further modernized one of its galvanizing lines located at its Butler Flat Roll Division, while also expanding the line's annual value-added production capability by an additional 180,000 tons for an investment of approximately $15 million. The upgrade required the line to be down for three weeks in May, which resulted in higher costs and lower value-added shipments, reducing potential pretax earnings by an estimated $15 million during the second quarter 2017.

Additionally, the company experienced some quality issues related to the start-up of its new Galvalume and paint line at the Columbus Flat Roll Division, resulting in higher costs and lower value-added shipments, reducing potential second quarter 2017 pretax earnings by an estimated $15 million. The issues have been clearly identified and are being resolved.

Accordingly, second quarter 2017 profitability from the company's steel operations is expected to decrease in comparison to sequential first quarter 2017 results, based on both lower overall shipments and higher average scrap costs. Second quarter 2017 average steel product pricing is expected to increase; however, higher scrap costs are expected to offset the sales price improvement.

Second quarter 2017 profitably for the company's metals recycling platform is expected to remain steady compared to the sequential first quarter based on higher average sales price which is being offset by lower shipments, related in part to the sale of certain southeastern locations during the first quarter 2017.

Second quarter 2017 earnings from the company's fabrication business are expected to remain steady based on increased shipments, which are anticipated to offset metal spread compression related to higher average steel input costs.

The company declared a quarterly cash dividend of $0.1550 per common share. The dividend is payable to shareholders of record at the close of business on June 30, 2017, and is payable on or about July 7, 2017.

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