On the heels of a 6.9% fourth-quarter GDP growth report, market and economy watchers are debating where economic growth will settle in 2022 as some tailwinds fade and inflation and the COVID-19 pandemic endure. From the perch of Nucor Corp.’s executive suite, however, the outlook remains bright.
Speaking to analysts and investors after reporting Nucor’s fourth-quarter results–net income of nearly $2.3 billion on revenues of $10.4 billion versus $399 million and $5.3 billion, respectively, in late 2020—President and CEO Leon Topalian and his team detailed a growth outlook that includes higher margins in key segments, a limited impact from recent sheet metal price drops the Nucor team sees as temporary and sustained hunger from customers for product.
Speaking to the big drop in sheet metal spot prices since the beginning of fall, Topalian said the move was a combination of growing imports, industry players catching up to demand and “maybe even some overbuying.”
“Couple that with the supply chain constraints, labor constraints and the Omicron variant raging all created for a little bit of a perfect storm here in the fourth quarter heading into early part of 2022,” he said Jan. 27. “Again, the outlook and the demand picture across every end market that Nucor serves remains very robust.”
Topalian said Nucor is forecasting a 6% increase in overall shipments, helped by that broad demand from non-residential customers. That includes traditional sectors as well as growth markets such as warehousing, data storage and cold storage companies. And, he said, the company is counting on the automotive sector—which hasn’t contributed much to Nucor’s growth because the semiconductor shortage is capping output—to pitch in in a bigger way in ’22.
Chad Utermark, Nucor’s executive vice president of products, added that Nucor’s expansion in downstream steel products in recent years has given its leaders “very good visibility” into various construction products. His and Topalian’s comments about strong demand were echoed Jan. 28 by their peers at Caterpillar, who noted that their good Q4 results could’ve been even better but for ongoing supply chain restraints.
Nucor is investing on various fronts to help capitalize on that demand and plans to spend $2.3 billion on capital projects this year, with 75% of that number—up from $1.6 billion in 2021—going to growth projects such as a plate mill in Kentucky and a recently announced sheet mill in West Virginia.
Shares of Nucor (Ticker: NUE) were up 2% to about $99 in midday trading Jan. 28. They have fallen about 15% this month, leaving them in line with their levels of six months ago.