Metals Weakness Persists (STLD)

Steel Dynamics, Inc. (Nasdaq: STLD) gave updated guidance reading for its first quarter tonight.  It is hard to get excited about the metals sector and Steel Dynamics in particular.

The company now expects a loss of -$0.40 to -$0.45 EPS rather than its previous earnings forecast of $0.05 to $0.10 EPS.  The company says that this is due to continued weakness in market conditions.

The company did note that an estimated $70 million, almost $0.25 off of EPS, is related to non-cash inventory adjustments required to reflect current market conditions of the Flat Roll Division.  This is driven by weaker-than-expected shipping volumes and continued weakness in the metals recycling segment.

It has also maintained that demand for steel products remained soft through February, causing lower production rates which were as low as 30% at some plants.  The company’s steel operations are expected to report a pre-tax profit for the first quarter, but metals recycling is not.

Steel Dynamics is not offering any hope ahead.  It calls its 2009 outlook “Clouded” and it can’t project volumes or financial metrics.  It seems that its prior forecast for 2009 earnings to be comparable or close to 2008 will be more challenging.  Our own take is that this may be an understatement of the year.

It claims that an improved cost structure and efficient operational strength will generate stronger margins and a “much improved earnings outlook” as its liquidity position continues to improve.  Good luck on that, at least for the time being.

Steel Dynamics stock was down 4% at $8.55 today, and it fell by another near-10% to $7.70 in the after-hours session.  Its 52-week trading range is $5.18 to $40.92.

JON C. OGG