America's largest recycler and steel maker, Nucor Corporation, expects to post a loss of 55 cents to 65 cent per share for its first quarter ending April 4, 2009, far below the $1.41 per share it earned in the year-ago quarter, and the 34 cent profit it posted in the fourth quarter.
This is far below $0.34 per share the company earned in the fourth quarter of 2008 and the $1.41 per share in the year ago quarter.
Analysts had on average expected the company to post earnings of 47 cents per share.
"The unprecedented speed and magnitude of the global economy's decline to depressed levels not seen in our lifetime have presented severe challenges in 2009,'' Nucor chairman, chief executive and president Dan DiMicco said.
''The economy has fallen off a cliff - and there is no visibility as to the timing of the recovery. While the projected results for the first quarter are very disappointing, our team is responding to these challenges with the 'can do' attitude and determination of the Nucor culture,'' he added.
''Customer demand has continued to weaken, with resulting downward pressure on orders, production rates and steel pricing in all of our product lines,'' DiMicco explained.
Nucor's overall steel mill utilisation rate is expected to decline to approximately 43 per cent in the first quarter from the 2008 fourth quarter level of 48 per cent.
The dramatically lower production has further slowed the rate at which its sheet mills are consuming higher cost iron units, in particular pig iron inventories, which were purchased prior to the collapse in both the economy and scrap / pig iron pricing in last year's fourth quarter.
''If these current production rates continue, the overhang from the high-cost pig iron will impact our results through the second and third quarters of this year,'' he warned, adding that the impact from higher cost scrap should disappear during the second quarter.
''As always, we are focused on continual improvement in safety, quality, costs and taking care of our customers. With Nucor's unrivaled position of strength in the steel industry, our team is working to continue Nucor's long tradition of taking advantage of economic downturns to grow even stronger and reward our shareholders with attractive long-term returns," DiMicco added.
At the core of the problems weighing on the world's base metal companies is a dangerous overhang of surplus supplies. Whether it is steel or aluminum, the entire sector is struggling with a drop in demand that caught most of them completely off guard and left them with literally millions of tonnes of unwanted metal. It is easy to see what happened, analysts said.
The company had previously expected marginally better earnings than the fourth quarter, but customer orders continued to weaken, pressuring prices in all its product lines.
Nucor's statement came a day after aluminum giant Alcoa Inc said it would slash its quarterly dividend to 3 cents per share from 17 cents, saving more than $400 million a year.
Alcoa also seeks to raise capital through sale of 150 million shares of common stock, resulting in proceeds of about $850 million based on the $5.73 closing price of Alcoa stock on March 13. The company also plans to offer $250 million of convertible notes due 2014.
Nucor, with a market value of $20.3 billion as on December 31, 2008, employs about 20,000 people.
Nucor was on a buying spree last year. In February 2008, it bought SHV North America, which owns scrap broker and processor David J Joseph, for $1.4 billion. In March, it bought Galamba Metals Group, which operates 16 scrap-processing facilities in Kansas, Missouri and Arkansas, as well as Metal Recycling Services based in Monroe.
In February, Nucor declared a regular quarterly cash dividend of $0.35 per share on its common stock, payable on May 12, 2009. This is Nucor's one-hundred forty-fourth consecutive quarterly cash dividend.
Shares of Nucor fell 9.20 per cent, or $3.40, to $33.55, in NYSE on Tuesday. The shares now lost 27 per cent since the beginning of the year.