Nucor Corp (NUE) 2013 Q4 法說會逐字稿

Good day and welcome to the Nucor Corporation fourth quarter and year-end 2013 earnings call. As a reminder, today's call is being recorded. Later, we will conduct a question-and-answer session and instructions will come at that time.

Certain statements made during this conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate, and variations of such words and similar expressions are intended to identify those forward-looking statements which are based on Management's current expectations and information that is currently available. Although Nucor believes they are based on reasonable assumptions there can be no assurance that future events will not affect their accuracy.

More information about the risks and uncertainties relating to these forward-looking statements may be found in Nucor's latest 10-K and subsequently filed 10-Qs which are available on the SEC's and Nucor's website. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them either as a result of new information, future events or otherwise.

For opening remarks and introductions I'd like to turn the call over to Mr. John Ferriola; Chairman, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Good afternoon. This is John Ferriola; Nucor's Chairman, Chief Executive Officer and President.

Thank you for joining us for our conference call. As always, we appreciate your interest in Nucor.

With me for today's call are Nucor's Executive Vice Presidents; Jim Frias, our Chief Financial Officer; Jim Darsey, responsible for our bar mill, coal finish and fastener businesses; Keith Grass, responsible for our scrap business and energy investments; Ladd Hall, responsible for our sheet mills and direct reduce iron facilities; Ray Napolitan, responsible for our fabricated construction products businesses; and Joe Stratman, responsible for our beam mills, plate mills, sheet piling and business development work. First and most importantly, we want to thank everyone on our Nucor, Harris Steel, David J. Joseph, Duferdofin, NuMit, Steel Technologies and Skyline Steel teams for your excellent work taking care of all of our customers.

Each and every day, the more than 22,000 men and women of the Nucor team are building a stronger Nucor by working safely, working smart and working together. And as has been the case since our Company's founding nearly five decades ago Nucor's employees, the right people, are our Company's greatest asset and our greatest competitive advantage.

Throughout Nucor, our teammates have been working hard to grow long-term earnings power. We have invested significant capital in recent years that we expect to convert into higher [highs] in profits over the next upside. Two key drivers to the anticipated profit growth will be reducing our raw materials costs and expanding our product mix to include more value-added, higher-margin offerings. In the fourth quarter, if we reach we reached a number of significant milestones implementing these organic growth initiatives. I will discuss these achievements after our CFO, Jim Frias, reviews our fourth-quarter results and financial position. Jim?

Thanks, John and good afternoon. Fourth quarter 2013 earnings of $0.53 per diluted share included favorable out-of-period tax adjustments totaling $0.07 per diluted share. The lower than expected LIFO charge also benefited earnings by about $0.03 per share.

Excluding these items, our results exceeded our guidance range of between $0.35 to $0.40 per share by approximately $0.03 per diluted share. This performance largely resulted from better than expected December profitability at our sheet and plate mills. Nucor continues to benefit from its position as North America's most diversified manufacturer of steel and steel products.

Our comment about our tax rates can be confusing due to the impact of profits from non controlling interests. After adjusting our profits belonging to our business partners and the out-of-period tax adjustment, the effective tax rate was 31% for the fourth quarter and 33% for the full year of 2013.

Balance sheet strength remains an important attribute of Nucor's business model. Nucor is the only steel producer in North America to enjoy the extremely important competitive advantage of an investment-grade credit rating. Our financial strength allows us to invest aggressively during the downturn to grow our long-term earnings power.

At the end of 2013, Nucor's total debt to capital ratio was 36%. Cash, short-term investments and restricted cash totaled $1.5 billion. Further due to Nucor's strong liquidity, our $1.5 billion unsecured revolving credit facility is undrawn and it does not mature until August 2018. We have no commercial paper outstanding and our next significant debt maturity is not until 2017.

Nucor's cash flow generation remained very healthy in 2013's challenging steel market conditions. Cash provided by operating activities last year was approximately $1.1 billion. Our balance sheet, liquidity and cash flow have allowed us to grow stronger during the current downturn.

We have invested aggressively for profitable growth. 2013 capital expenditures exceeded $1.2 billion. That was more than double last year's depreciation expense of $536 million. Since the last cyclical peak reached in 2008, Nucor has invested $8 billion in our businesses; $4.4 billion of capital spending and $3.6 billion of acquisitions. This broad range of strategic investments enhances Nucor's key competitive strengths. Those include a low-cost production situation and the diversified product mix and market leadership.

We have posted a slide package our website that summarizes some of our major growth initiatives implemented during the current downturn. In his remarks John Ferriola will provide updates on some of our more current projects. With these investments the Nucor team is preparing for the inevitable steel industry cyclical upturn.

Our unrelenting focus remains on realizing attractive returns on Nucor's invested capital which now exceeds $9 billion at the end of 2013. We expect to build upon Nucor's long tradition of being an effective steward of shareholder's valuable capital. Return on invested capital for Nucor averaged 15.5% over the ten-year period ended in 2013. That ten-year period includes the most recent five years of the current down cycle as well as the five-year up cycle that ended in 2008.

It is interesting to note that Nucor's return on invested capital averaged 25.5% during that last up cycle in the steel business. We expect significantly lower capital expenditures for 2014, as the majority of our growth projects will be completed in the first half of this year.

Also we recently announced the joint decision with our natural gas working interest investment partner Encana to temporarily suspend drilling new wells until there's a sustainable improvement in natural gas pricing. Cessation of drilling will reduce Nucor's 2014 capital spending by about $400 million. As a result we estimate our 2014 capital spending will be approximately $600 million. The suspension should significantly improve our free cash flow position this year. It also highlights the strong relationship we enjoy with Encana and how flexibly this investment is functioning to provide Nucor a capital efficient hedge against high natural gas prices.

For the first quarter 2014 Nucor's earnings are expected to be similar to the fourth-quarter level excluding the tax adjustment. Our steel mills will benefit from having no major planned outages and we expect improved performance at our Louisiana DRI facility. However, these positive factors are likely to be largely offset by this year's unusually harsh winter weather exacerbating the typical seasonal first-quarter slowdown in our construction related businesses on both the fabrication side and the steel mill side.

Overall, the outlook continues to be tempered by excess global steel capacity and the threat of steel illegally dumped and the United States. Nucor will again follow our practice of providing quantitative guidance in the final month of the quarter. Our team is committed to executing on the opportunities we see ahead to reward Nucor's shareholders with very attractive long-term returns on their valuable capital invested in our Company.

Our strong focus on growing long-term earnings shareholder value is evidenced by Nucor's dividend record, 41 consecutive years of increased base-cash dividends paid to our shareholders effective with the upcoming quarterly payment on February 11, 2014. John?

Thanks, Jim. Nucor's fourth quarter of 2013 performance was noteworthy for several important reasons. Our teammates delivered solid profitability in what are still very challenging markets. They achieved this while undertaking significant planned downtime for major capital projects at several of our largest steel mills. Those outages included four weeks at our Nucor Steel Berkeley Sheet mill, two weeks at our Nucor-Yamato structural steel mill, and four weeks at our Nebraska bar mill. We also absorbed the costs of starting production at our new direct reduced iron, or DRI plant, in Louisiana.

Further, I'm pleased to report a number of impressive achievements in the ongoing implementation of our capital projects. These initiatives grow Nucor's long-term earnings power by providing us new higher-margin product offerings, cost reductions and quality improvements.

Our Nucor steel Louisiana team began producing DRI on December 24.\ Within the first 24 hours of operation, output quality reached the world-class levels consistently achieved by our DRI plant in Trinidad that has been running since 2006. In fact, Louisiana's carbon content has recently exceeded Trinidad's best-in-class performance. Most importantly, the initial output from the Louisiana plant has performed very well at the Nucor mills that have consumed it. I would like to thank everyone on our team in Louisiana for their hard work and ongoing commitment to getting the job done.

The start up of the Louisiana DRI plants is a huge step forward in the implementation of our raw material strategy. We view our expanded DRI capacity and with our low-cost and long-term natural gas supply to be a game changer with Nucor's cost structure for the high quality iron units we need to expand our share of the higher value-added sheet, SBQ bar and plate markets. It is also a game changer by improving Nucor's operating flexibility with a significantly shorter Nucor supply chain for high quality iron users.

As Jim mentioned, in December we announced agreement with Encana to temporarily suspend drilling for new natural-gas wells given the current gas price expectations for 2014. The drilling pause demonstrates the flexibility of our partnership to adapt to changing natural gas market conditions. This flexibility is allowing us to make the best capital allocation decision for the current natural gas price environment.

Suspending drilling in today's gas markets is a win-win situation for Nucor. By the middle of 2014, when all in-process wells are completed, we will have just over 300 producing wells providing a full hedge for our Louisiana DRI plant's expected consumption into 2015. The cost structure of our drilled wells is such that they generate a modest positive return in 2013's low natural gas pricing environments. But with the gas requirements of the Louisiana facility hedged into next year, it is not a wise decision to use our valuable capital to invest more dollars in drilling for modest returns.

At the same time, we retained a valuable option to resume drilling in a higher natural gas pricing environment where drilling provides an attractive return on our investments. And we need to continue to hedge our gas consumption. Nucor and Encana will jointly decide when the time is right to resume drilling new wells.

In December, Nucor Steel Berkeley completed the installation of all caster and hot mill upgrades for its wide wire projects. This nearly $100 million investment provides Berkeley with the capability to reduce wire and lighter gauge sheet steel. New product offerings will include 72-inch wide hot rolled pickled and oil,72-inch wide cold roll and gauges as thin as 0.042 inches. The expanded product portfolio will allow Nucor to move up the value chain in agricultural, automotive, heavy equipment, machinery and pipe and tube applications. On January 21, our Berkeley team made history as the first Nucor flatrolled mill to produce 72-inch wide coils. This successful startup is timely as there's already strong customer interest in our new wider and lighter products.

During the fourth quarter our bar mill group achieved major progress implementing key components of its strategy to grow Nucor's participation in higher-margin SBQ products. Expanded SBQ product [draft] will support profitable growth for Nucor in energy, automotive, heavy equipment as well as other markets.

Our Nebraska mill successfully started up it's upgraded rolling mill that includes new shears and straightening equipment. A significant improvement in lane control and quality of shear cuts already being experienced will allow us to move up the value chain in SBQ markets. It also includes our cost structure as a result of gains in rolling mill yield. In 2015, Nebraska will complete its product expansion program with an upgraded electrical arc furnace power system and the addition of a [fifth gasses ram].

Our Memphis, Tennessee team has completed the installation and commissioning of a new quality assurance line which allows us to provide engineered bars for the most demanding applications. I would also like to congratulate and thank the Memphis team on achieving record earnings in 2013. Consistent with the Nucor culture, the teams can-do attitude and high energy level has allowed them to overcome many obstacles since their production startup at the onset of the current rate recession in September of 2008. The potential for profitable growth at Memphis in the years ahead is sizable and very exciting.

Our Nucor Steel Hertford County plate mill continues to successfully execute our strategy to expand Nucor's participation in value-added plate markets. During the downturn, Hertford County has invested in a heat-treat facility, a vacuum tank degasser and a normalizing line. These investments are already paying off. During the fourth quarter, Hertford achieved record heat treat treatments shipments. Our Hertford team also received approval to produce naval armor and API plate for energy markets.

Our Nucor-Yamato structural mill is on schedule for a mid-2014 startup of an approximately $115 million project to expand its sheet piling production capabilities. These offerings will increase the single-sheet piling widths by 22% and provide a lighter, stronger product resulting in lower installed costs. This initiative both moves Nucor-Yamato up the value-added chain in the piling business and allows us to realize more synergies from our highly successful 2012 acquisition of piling distributor Skyline Steel.

The Nucor team's work to build sustainable long-term profitability required that we take a proactive role in our nation's trade policy debate. Global steel production over capacity is the greatest threat to Nucor and to our entire industry. Illegal government subsidies from China and other countries have allowed large amounts of cost inefficient capacity to stay in production and dump steel into the global marketplace.

To this point, imports have significantly increased their share of the US market since 2009. While the domestic industry's capacity utilization remains stuck in the mid-70% range. On some products, such as rebar, domestic industry capacity utilization is even lower, in the mid-60% range. With the US industry capacity utilization this low, imports are not needed in the US market. They come here not because of demand, but because of foreign producer's excess capacity and on badly traded prices.

Nucor's is working hard to bring attention to the need for our government to enforce the rules they trade. We have fought two rulings in recent months by the US International Trade Committee. In December the US ITC voted in a five-year sunset review to keep in place the existing anti-dumping and countervailing duty orders on hotrolled sheet steel imports from China, India, Indonesia, Taiwan, Thailand and Ukraine. In November the US ITC preliminarily determined that there is a reasonable indication that imports of rebar from Mexico and Turkey have materially injured, or threatened with injury, US rebar producers.

While these rulings are encouraging to us, we are understand that much work remains in the fight for effective and timely enforcement of our nation's trade laws. Supporting our fight is the undisputable fact that American producers are among the lowest-cost producers of steel in the world.

We enter 2014 with great confidence and optimism about Nucor's future. Our team has invested significant capital during the current downturn to grow Nucor's long-term earnings power. Our balance sheet strength is unrivaled by any of our competitors. Our cash flow generation remains healthy throughout the cycle and will benefit from 2014's expected decline in capital spending.

Our industry-leading product diversity continues to grow as we move up the value chain in all of our businesses. Our low-cost structure will benefit from the implementation of our raw-material strategy and increase DRI production capacity. And most importantly, Nucor's culture remains as strong as ever.

In closing, I would like to comment on Dan DiMicco's retirement on December 31 from his position as Nucor's Executive Chairman. Those of you who follow Nucor regularly know that we enjoyed an unprecedented growth in profitability and shareholder value over his 12-year tenure as our CEO and leader. Dan's record for Nucor under his leadership is simply incredible. Dan, thank you. Your leadership has positioned Nucor well to continue our journey of climbing up the mountain with no top.

We would now be happy to take your questions.

(Operator Instructions)

Sal Tharani, Goldman Sachs.

I wanted to ask you a couple of things, first on -- how are things going on your automotive strategy and what do you see over the next few years? And the second thing will be on -- a little bit more color on your natural gas, but let's just start with the auto strategy.

Well, as I mentioned several times on previous calls, Nucor continues to develop and get qualified for advance high strength fields and applications in automotive. We particularly are focused on, as I mentioned in the past, on exposed applications.

I'm happy to report that the qualification process is continuing and we're doing quite well in both cold rolled and galvanized. We're moving well into the qualification period and we expect imminent supply contracts. In fact, I can tell you that, as we speak, we do have already in use an exposed applications steel products on cars in production and out on the roads today. So on the sheet side we continue to progress well on the qualification and implementation phase of moving into exposed automotive and other automotive applications.

In SBQ we continue to move up the value chain also. We're currently producing crankshaft steel, for several driveshafts. We produce axle steels at our Norfolk, Nebraska plant.

And as we mentioned in the script, we've made a lot of investments during the past downturn to continue to get better at that with degassers, our wide light project at Berkeley will help us continue to move up into the automotive exposed arena, and of course we have our automotive-rated galvanizing line in Decatur. So we feel pretty good about Nucor continuing to move into more automotive applications, and that's a focus of ours.

Obviously automotive is very strong now. We continue -- we believe it will continue to be strong for a while, so our focus will be to continue to move into more automotive applications.

I was wondering, this space is getting crowded with aluminum now entering the sheet market on the automotive side, and [piston] plant finally going to be sold to somebody who probably will be able to qualify soon. I'm wondering, how is it worth really pursuing that because historically you had shied away from that end market. Of course this end market is doing very well right now because construction is down. But how much effort and money are you still willing to put in this thing to get where you should have a critical mass in your hand?

Well, I'm not sure that we're going after a major component of the business. And frankly, given the investments that we've already made, Sal, we don't see the need to make many more large investments in any of our facilities, to move further into automotive. So we're pretty happy with where we're positioned from an equipment perspective.

As I mentioned before, qualification periods in automotive's a very long process. It usually runs about two years, and given where we are in that process right now we're pretty happy with the amount of business we've got. We do believe it will continue to grow. But we're targeting in 2014 to increase it by about 5%.

I want to comment on your question about aluminum. So let's take a look at aluminum. We recognize Ford's move into the aluminum arena with the F-150 but we still believe that steel, long-term, will be the material of choice for automotive production.

When we compare it to aluminum, and aluminum is two or three times the initial cost of the steel, there's significant costs to retool the automotive production facilities, and the repair and insurance costs for car owners with aluminum, we believe, will be significantly higher. So we still see a major role for steel in automotive. And Nucor, frankly, as well as the rest of the industry, continue to focus on developing advanced high-strength steels that will result in light weighting for the vehicles that's similar to aluminum, and do it more effectively.

Thank you very much. I'll get back in the queue.

Meredith Bandy, BMO Capital Markets.

I wondered if we could go a little bit bigger picture. There's been a lot of talk in the market generally about a manufacturing renaissance in the United States.

And I was wondering what your take on that is, and do you see data to support a renaissance? Or would you say that it's more anecdotal at this point? How do you think about it?

Well, we agree very strongly with the statement that the shale-gas revolution will in fact result in a manufacturing renaissance in the United States. And I don't have the data at my fingertips, but there's quite a bit of data out there supporting that position. The amount of investment in manufacturing over the last two to three years is measured in the billions of new projects.

We see it all the time as we visit with our customers, and we get it in the form of customer feedback. There's a -- Caterpillar, for one, is moving back into the states production back into the states, several of large equipment manufacturers are moving production facilities back into the states, so we think it is very real. We think it's very significant and we're investing in our Company to be ready for that renaissance when it occurs.

That's what the $8 billion dollars of investment we've made over the last couple of years is all about. We believe it's coming. We believe we'll be ready for it. And we believe we will be best positioned to take advantage of it.

Okay. And then what is the potential upside to Nucor? If you look at your total -- what's the ability to move in terms of either the number of shipments you can get or perhaps also the widening of margin that I think you talked about in your prepared remarks?

As it relates specifically to the renaissance in manufacturing it's hard to quantify that number. I think I'll leave it with the fact that we've invested heavily.

We've grown not only our volume but more importantly we've grown our value-added offerings to the marketplace. And as manufacturing comes back, you need those higher-value qualified steels, advanced strength and others, to fill the needs of the production that will be returning to the United States.

Meredith, this is Jim Frias. Another comment on that we've been operating the last few years in the 70% steel mill utilization rate. And historically normal markets in the past, not just the cyclical peak we saw in 2004 through 2008, we more typically operated in the low to mid-90%s of our capacity utilization. So that would suggest to you that there's a 20% to 25% upside just due to volumes on top of whatever the margin benefit is.

And I might also just add Jim's comments that as manufacturing moves back in it's going to need buildings. Those buildings are going to need foundations. We have rebar. We have foundation -- rebar formation -- forming companies.

We have rebar placing companies. We have metal buildings that we can supply to them, so as you see them moving back in, you'll see our downstream businesses benefit from that renaissance also, as well as our steel-producing divisions.

Thank you very much.

Luke Folta, Jefferies & Company.

First question on the DRI plant, it sounds like besides the storage tank issue that has gone as good as you can expect -- as you can hope, now that that's starting to ramp, can you give us an idea of when you think you can ramp the plant to full capacity? And also I thought it was kind of interesting you pointed out that it reduces your supply chain on the iron units side, that makes full sense. Is there a working capital release that you expect this year as you ramp that plant up?

I'll take the working capital part and let John answer the first half of the question. The working capital benefit is going to be relatively small, because it depends on how much we shift away from pig iron as the year goes on. And versus maybe using less prime scrap.

So I shouldn't say it is small. It's a fairly broad range is the way I should describe it. When we currently carry -- we're going to look up, while we're on the call, how much inventory we typically carry in pig iron and maybe give you a little tighter answer on that.

One thing that I would want to remind you is that one of the real benefits of the DRI facility is flexibility as well as a shorter supply chain. We will have the ability to switch iron units as pricing changes for the various commodities, and that's a really important point. And Jim, you'll look that up, and I want to mention a couple things about startup at the DRI plant.

First of all I want to again thank our team in Louisiana, a great bunch of guys. They did a great job working under very difficult circumstances. We had, as you mentioned, the dome situation, which was a setback. Our team found a workaround for that, in typical Nucor way.

We like to say at Nucor when we have a crisis we run towards it, we don't run away from it and certainly when we had the dome failure there was a need to run towards that situation, and we did it and the team did a great job coming up with a phenomenal workaround. That DRI facility is the largest DRI facility anywhere in the world, and as such, it's a complex operation and there will be some bumps in the road. I'm happy to say that in addition to the phenomenal quality that I've mentioned earlier, within 24 hours, to be up to quality levels that we've been achieving -- world-class quality levels that we're achieving in Trinidad, that's an outstanding performance.

We're currently running just slightly above 80% of capacity. That's pretty much right on track with our start-up curve that we expected. Frankly probably a little bit ahead of it. And we've had short periods of time when we've been able to ramp up for short periods of time to about 90% to 95% of capacity. So all of that gives us a good deal of confidence in the plant technology and in our teammates' ability to run that plant efficiently and effectively.

Okay. Secondly, it sounds like the experience so far has been really good. Have you gotten any closer to deciding when you might make the decision on the third DRI plant?

I'll say we've gotten first of all, it would be the second one in Louisiana. Our third one in the Company. Just so we're clear on that. And certainly we are looking at that. I don't want to say that we're any closer to making that decision.

We're just a couple weeks into the start up. We want to continue to evaluate the HYL technology, although we've been very impressed with it to date. And as with any plant, we went through this with our facility in Trinidad, during that first year of operations there's going to be some bumps in the road, and we expect it. You should expect it.

It won't come as any surprise to us when it happens. We're confident in our ability to overcome those bumps and continue to move forward, but there are going to be hiccups in the operations. It's a new facility, a complex operation and there will be some hiccups. So we're continuing to evaluate it and we'll make the decision on the second DRI facility in Louisiana at the appropriate time.

Okay. And lastly if I could on the natural gas drilling partnership, is there an approximate range in terms of what price nat gas has to get to before you think it's worth starting to ramp up drilling there?

I'll repeat what we said in the script. At last year's pricing we were able to have a modest profitable return, and so that should give you some indication. We're not going to go any further than that.

Okay. Thanks.

(Operator Instructions)

Matt Murphy, UBS.

Continuing on the nat gas, how did the decision process work, going forward? Is this something you evaluate year to year or you need to see the futures curve move to get more -- to get back to talking about drilling?

As I mentioned, it something that we'll do jointly with our partners Encana. I'm not sure that it be dependent upon the futures curve as such, per se. But obviously we would be looking for a sustainable price movement before we would make a decision to begin drilling again. Right now, we believe it's the best interest of our shareholders and best return for our capital to suspend the drilling.

The key here is to remember that we don't lose any of the gas that is still in the ground. It will always be there. We have the same amount of access to it. So as pricing increases it only gets better.

So we'll look at it with a very careful eye before we begin drilling again. We'll want to see a sustainable price move in natural gas so that we get a higher return for our investment. It's just common sense. We have nothing to lose and a lot to gain, and that's how we'll approach it.

Got you. And the other question on it would be, given it was modestly profitable in 2013, would you still be needing to disclose it as a separate segment, or does that get put off until it becomes more meaningful?

This is Jim Frias. At 300 and some wells that we'll have in process, with what's going to be finished drilling through about the middle of this year. That's not enough at that point to require the separate disclosure, it's not material enough. So it's going to at be some point in time, we don't have a specific number of wells that have to be out there producing that cross over that line, but we're not really anywhere near with the 300 plus small amount that we'll have in 2014.

I would just like to make one more point about the suspension of the drilling. I mentioned in the script but it's really a very significant point, and that is that we have covered our needs for the DRI plant in Louisiana. So our desire to hedge our bets on natural gas, which would mean a major risk to our DRI facility, we've got that covered.

So we've got that covered right now into 2015. So that would also factor into our decision. As we saw a need to continue or to grow the hedge in Louisiana, that would be a factor we would use in deciding to begin drilling again.

That's very clear. Thanks, guys.

Timna Tanners, Bank of America Merrill Lynch.

Not to go over this $400 million, but when we saw the announcement our first thought was, what's the other better use of that $400 million that you contemplate since the CapEx does fall substantially, what kind of other investments or alternatives do you have in mind?

Frankly, with the state of the economy and with the challenging market conditions in steel, we've been approached with more opportunities in the last six months than we have been in quite a while. I'm not going to state anything specific about where they are or what they are, but there's opportunities out there. Having said that, that doesn't mean just because we have it we're going to go out and spend it.

If it's not an opportunity that provides a great return on that investment, we're not going to move forward. Bear in mind what I mentioned during the last call, and I want to reiterate right now, our focus is on execution. We've invested $8 billion of our shareholders' valuable capital over the last -- since 2008. And our focus this year is going to be on execution.

Having said that, if the right opportunity comes along, whether or not we're able to conserve the $400 million on the gas or not, if the right opportunity came along, our financial strength and our balance sheet position would allow us to take advantage of it. But again, it's got to be the right opportunity with the right return on the investment of our shareholders' valuable capital. Other than that our focus will be on execute continuing to focus on being the low-cost producer driving our costs down and moving up the value chain in our product offerings.

Okay. So we'll just leave it that teaser of the lot of opportunities, I guess. That's interesting.

I really wanted to probe a little bit more on the guidance, given that you did talk about all the outages and all the different projects that you finished up in the fourth quarter. I thought most steel mills make the bulk of their money in the first half of the year for the construction season and so I'm a little bit confused as to how bad the weather you're contemplating would be to offset some of those normal positives and the switch from outages to normal operations.

We're not very effective predictors of the weather, okay? So let me start by saying that. But given the start of the year and the way that it is looking for at least the first quarter, we think there's going to be some weather challenges out there for the next three months.

And also bear in mind that when we talk about the impact of weather on our business, it's not just the downstream. We always tend to focus on the downstream businesses that are impacted. But remember we're a fully integrated Company, so when our downstream businesses are impacted, it impacts our steel production, it impacts our scrap operations, our whole raw-material chain.

So weather, for us, can have an impact on our profitability. And frankly Timna, we don't know what the weather is going to be. But given our best guess that's how we see it at this point in time. We'll come back as we always do in the middle of the last month of the quarter and give more direct guidance.

If I could -- a final piece. On DRI is it too soon to see the benefit because you're still working down some other inventory, like pig iron that you might have had to have in place as a cushion in case DRI didn't start on time?

Absolutely. That's part of the factor and again, Timna, I want to be very up front about this, we are a couple of weeks into production at our Louisiana facility and we know that during the course of the next 6 to 12 months there are going to be some bumps in the road, some hiccups in our production and so we'll factor some of that in.

We will have -- we'll keep a little bit more on hand to protect against some of those occurrences that we know are out there, we just haven't found them yet. Having said that, I want to reiterate that we have full confidence in our team in Louisiana. They will overcome those road bumps and continue to bring it online and exceed our expectations, I'm sure.

Okay. Thank you.

Evan Kurtz, Morgan Stanley.

Just a first question on rebar. We've seen quite a surge in import licenses in January so far. And I know we have the critical circumstances floating out there. I was wondering, walk us through the timing of how critical circumstances affect behavior? What you're seeing in your business? Should we expect some sort of big drop-off in inventories in the near term -- imports in the near term here?

As I mentioned we're working hard with our government to make sure that that, in fact, happens. There's no doubt in my mind, and in our minds, that rebar is being imported and dumped into the United States.

It's a really good sign when you get the kind of vote in the preliminary hearing that we were able to get. If I recall, I believe it was five to one, which is outstanding. The ruling is expected on -- towards the end of April, I think it's April 28 is when we'll have the final hearing and the ruling, so we're confident that at this point we'll get a favorable ruling. We believe that to be the case and we believe very strongly that it should be the case of critical circumstances.

And all of the penalties that come along with that, we'll be pushing hard for that. We've got a great team in Washington. A great team of government affairs here in Charlotte supporting that team and we're confident it's going to happen.

Great. And one on currency. We've seen. obviously, some pretty serious depreciation in a lot of the scrap consuming countries since the beginning of the year, particularly Turkey. How do you see that impacting the scrap business going forward? And more than that, how do you see that impacting steel in general, perhaps even DRI?

Keith, do you want to comment on scrap? I do know that we have seen that occur in currency. It's been interesting to see, though, the amount of exported scrap going to Turkey seems to have dropped off in the last couple weeks.

With their currency dropping off we've seen less activity on the coast. So in terms of how it will impact scrap market moving forward, the scrap market will continue to be regional and based on grades, but we're starting to see certainly cold weather one part of the country and less demand from the export standpoint on the East Coast and that's scrap's started to become a little more available to consumers here in the United States.

So to answer maybe two questions: one is we probably see a little bit of softening in the scrap market as a result of reduced export activity. And the recent run-up in scrap prices seem to be satisfying some demand.

And in terms of addressing the steel side, we're going to watch that situation very carefully. And if we see an increase in the imports of steel products from Turkey that result from that, we'll take the appropriate action.

Thanks, guys.

Michael Gambardella, JPMorgan.

Just wanted to touch base on an earlier question in terms of how much capability, unused capability, you really have or earnings power you have with some of the investments that you've made over the years. And the construction market being very weak compared to what it was at its peak, it's improving modestly, but how much earnings capability, if you had a decent construction market in the US, do you think Nucor has, with the buildup in terms of capital investment and the acquisitions you've made over the years?

Substantial. Do you need more clarification than that?

Sure. (laughter)

Obviously there's a lot of factors and too many factors to be able to give you a hard and fast number. Again, I'm just going to repeat what I've said. We've made the investments. We've made them to improve not only our volume capabilities but the value-added product capabilities we can offer to the marketplace.

We stand ready and poised to take advantage of the up cycle that's inevitably going to arrive. How quickly it arrives, how quickly the economy in the market ramps up will determine the kind of returns that we see on this investment. Will we see them? Absolutely.

When we see them? Is what's a little bit up in the air as dependent upon how quickly the economy and the market recovers.

One of your competitors this morning on their call mentioned that in terms of non-res construction, the choice business doing fairly well, Big Box type of builders really consuming, pushing up the joist numbers. Are you seeing anything on the non-res construction side other than the joist activity?

We've seen an increase in our backlogs. We've seen a modest improvement in the pricing that we've been able to -- pricing power we've been able to exercise in those areas. But again it's been a modest improvement. Just as we began to see things improve we saw the weather get a lot worse and that's impacted some of that.

But we believe that there will be an incremental improvement in the non-residential construction market during 2014. How quickly it ramps up is unclear. If you read all the projections, we read there's anywhere from -- some of the projections are 5% to 10% improvement in 2014 over 2013. So we think that that's probably a reasonable amount.

And last question just in terms of --

Michael, sorry to interrupt. This is Joe Stratman. I think you asked a question have we seen any other areas than joists, and we have seen it in backlogs in our structural business as well. We've ended the year with stronger backlogs than we've had in quite a while which is indicative of all that goes into nonresidential construction. And the other comment I'll add to that it's a good balance geographically and by sector of the types of projects we're seeing, so that's a good sign.

Thank you. One last question, on the sheet side. How much unused capability do you have on your sheet mills right now?

We're running probably somewhere around the neighborhood of about 75% to 80% capacity utilization. It goes up and down a little bit. One of the things that we've been a little bit encouraged by is the fact that we have seen some increase in our order book in sheet, particularly in cold rolled and in galvanized. The hot rolled market has been a little bit more challenged. The cold rolled and galvanized, partially being driven by automotive as well as heavy machinery, are doing very well.

Do you see some opportunities in sheets to pick up some share, given the participation that you have for scrap pricing or your costs to come down?

We always look for those opportunities. I would say it's a combination of those factors and probably more significantly the fact that we have a broader offering to the marketplace now. The 72-inch products coming off of Berkeley. That's a big -- we'll be able to attack different markets with that. And we still have balancing again that is still over capacity in the world and it's coming to the United States in the way of imports.

Will we gain market share? We believe we will. It's a factor of new products we can offer but it's also a factor of our performance. Our quality is outstanding.

Our on-time delivery is second to none, and our service that we provide for our customers is excellent. In fact you've heard me mention several times in the past calls our focus on commercial excellence and I find it kind of rewarding to be honest with you that in listening to some of the other calls from our competitors, the term commercial excellence seems to be coming up more from our competitors today, and I guess I'll just say imitation is the most sincere form of flattery when I think about that.

Thank you.

Brian Yu, Citi.

Congrats on the start up of the DRI. I know it's been a long time in the works. My questions go along those lines. So now that you're having improving success, would you be in a position to help either provide us with a range or guide our thinking in terms of dollar per ton savings you would expect? Maybe in the context of Brazilian pig iron at $3.85 and you've got the pile decks at $1.25, how we should think about the dollar per ton savings?

Brian, to help everyone understand that we do post a spreadsheet on our website. And you can go onto that website and work through the numbers based upon your best projection on iron ore costs, prime scrap costs, pig iron costs, and all of the rest. So I'll leave that to you to go through it. I'll just answer your question by saying again we are just a couple weeks into this process.

We're just going through the start up now. We're still evaluating what it's going to mean to us. It will change as the pricing of other iron units changes. We've said that many times.

In environments where you have high iron unit pricing it's going to be a very, very major contributor. In times and environments where iron unit costs are lower it will be a positive contributor of a lesser amount. So it's a function of many inputs. You are welcome to go onto the website and work with them and you can see them at different levels.

Okay. So it sounds like costs are tracking what you would expect thus far?

I'm sorry?

Costs are tracking -- yes.

Our production costs are tracking what we would expect, to date.

Great. Thank you.

Phil Gibbs, KeyBanc Capital Markets.

I had a question on your SBQ initiatives as far as new capabilities being brought online, and then also how your backlogs in that business are progressing as we enter the new year here?

Okay, well we gave you a quick update in the script. Jim Darsey heads up our bar mills. Jim, want to give an update?

Thank you, John. In 2013 our SBQ shipments were up 18% compared to 2012. We're entering 2014 with a solid backlog, and we've continued to make progress for the start up of our equipment, particularly at Nucor Steel Nebraska with the new finishing equipment that improves our quality and packaging. And Memphis has continued to make progress.

We just completed the installation and startup of the state-of-the-art, off-line quality assurance line that will enable us, as John mentioned in the script, will enable us to produce and inspect bar for the most demanding engineered bar applications. This fits right in with our strategy to grow our SBQ business into the automotive, into the forging industry, into the construction industry, heavy equipment, heavy-truck industry, and agriculture industry. And we continue to make steady and measured progress in those industries.

I appreciate that. And I've got a follow-up on DRI and I know you've already answered pieces parts to this, John, but any sense of magnitude that you can give us as far as the start up costs in the fourth quarter?

I know looking forward you said you're going to have reduced start up costs in the first quarter, but getting to a level where you're comfortable -- I know you said ups and downs but comfortable with the profitability and the potential of the assets, when should we be thinking about that sort of contribution? Thanks.

First is to pre-operating start-up costs. In the fourth quarter they were about $16 million, and we're expecting them to be lower by about $10 million in the first quarter. And the improvement is largely improvement at Nucor Louisiana, the DRI facility. That's where the improvement is coming from. And I'll let John speak further about what we expect from that point going through the rest of the year.

As I mentioned several times on the call, we're early in the process, so it's hard for me to give too much color to how we're going to play out during the rest of the year. We're confident in the technology, the initial results are outstanding, our quality is good, our volume is good and the process is stable. Having said all of that ,there will be bumps in the road.

As I've mentioned we're expecting them, we're confident we will overcome them, but it makes it very difficult for me to give any kind of projection at this point on the returns. We'll be better prepared to answer that as we get a little bit further down the road with operating that facility.

Thanks, John.

Andrew Lane, MorningStar.

Along the lines of your comment that imitation is the finest form of flattery, some of your peers are discussing an interest in DRI production. So I'm curious, over time do think they will be able to replicate the cost advantage? You appear to have established via in-house, low-cost DRI production, and if not what factors will allow you to sustain that competitive advantage?

Well, one of the major factors obviously one of the largest costs of DRI production second to iron ore is natural gas. And our natural gas working partnership agreement is a major factor in us being able to maintain a very competitive position in the production of DRI. I would also point out to you that we have a lot of facilities that can use the DRI.

When you build the DRI plant, if you plan to consume it yourself, it's got to be across a multitude of facilities. There's an investment required at each one of those facilities and feeding the material into the furnace, the equipment required to do that, we're in a position where we have the balance sheet to have been able to do that. And do it in the right manner so that we can feed a significant amount of DRI into the furnaces to get the kind of results we're looking to get.

So for those reasons we believe that, and frankly, having gotten a head start, the best way to learn about a process is to work with the equipment. We've been working with it now for a while. We'll continue to work with it.

In summa -- if a competitor to us to move forward with plans and DRI production right now, it would take them probably a minimum of two to three years, by the time you added all of the permits and went through the ordering of the equipment and the construction phase of it. I'm sure they would hit a couple of the bumps that we hit that would slow them down a bit.

So we think we would have a two- to three-year time advantage, and with that comes a lot of knowledge and a lot of experience that we think would give us a competitive advantage. So we believe that the way we went into this, and being first into it, and going into it in a big way as we have done, is going to give us a long-term ability to have the competitive position.

Okay, I appreciate that. Thanks. And then a follow-up, how do your DRI production costs in Louisiana compare to your DRI production costs in Trinidad on a per-ton basis, and do you anticipate the spread between the two to change over time?

Well again, there are different factors there that will impact the overall cost. But let me just say this. What you really have to compare is the conversion cost itself, okay? And we think that Louisiana, given the size of the -- and we have the advantage of volume and the technology itself, we think it's a little bit better technology. We think we'll be in at least the cost-competitive if not cost-advantaged position in Louisiana.

Okay. Thanks a lot.

David Lipshitz, CLSA.

Quick question on the sheet products. Where do we stand on lead times? Where are you out to right now?

Let's go by product.

He wanted sheet.

I was going to go by hot rolled, cold rolled, galvanized. In hot rolled, David, we're out to late February. And cold rolled and galvanized we're well into April.

Okay. That's all I have. Thank you.

Is that what you were looking for, David?

Exactly what I was looking for. Thanks.

Ignace Proot, Sanford Bernstein.

I have two questions. One question is related to your shipments of the fourth quarter, which were actually quite good. They were still above the Q1, the Q2 shipments which is in contrast of typical seasonal effects.

I was wondering, is this driven by fundamental demand that was there? Or is there still a bit of market share change that we have throughout the year, given some incidents of competitors? And if it was market share shift, what part of that could stick? That's the first question.

And the second question is going back to DRI, in the environment where still many iron ore producers cannot produce the DRI grade and several steel makers having more interest in actually buying more, how do you look at the DRI premium, the pellet premium?

Let me begin with your first question and we'll work into the second question. Maybe I'll address the second question first, while it's freshest in my mind. You gave me a bunch of questions there at one time.

Let's start with DRI. It's true that the demand for the pellet is improving -- is increasing. But we have multiple sources of the iron ore itself, and in our arrangements with those we feel confident that we'll be able to get the iron ore pelletized the way to the DRI level that we need, and we don't see that as a major obstacle going forward.

Perhaps you can you refresh my memory on the two parts of the first question? Okay. The question was with our shipments in the fourth quarter --

The question was really your shipments in the fourth quarter were still very good. I was wondering is that still fundamental demand or is it still a bit of the volumes that you took over from some competitors, given some instance of happened in the third quarter, and if so do you think a part of that market share shift could stick?

First of all, certainly there was a small amount of demand improvement in the fourth quarter. So there certainly was some demand improvement. But we also had a huge opportunity because of some challenges that some of our competitors faced in their production facilities. And that give us an opportunity to grow our market share, and whenever you have that opportunity, you work hard to keep it going forward, you work hard to keep it going forward through your performance.

We know that we serve those customers well. When some of our competitors, because of various situations, let their customers down, we were able to move in quickly, supply high-quality product on time, great service, phenomenal performance all at a very reasonable price. And we believe that as a result of that and as a result of new products that we've been introducing to the market, we did pick up market share and we will be able to hold a portion of that market share going forward.

Okay. Thank you.

That's all the time we have for questions today. I will now turn the call back over to Mr. John Ferriola for closing remarks.

Thank you, Jamie, and let me just wrap up by saying thank you to our shareholders. We appreciate your confidence and your support. Thank you to our customers. We really do appreciate your business.

And I want to say thank you to my Nucor teammates for creating value for our customers, generating attractive returns for our shareholders, and building a sustainable future for all of us. And most importantly, thank you all for doing it safely. Thanks for your interest in Nucor. Have a great day.

Thank you for your participation. This does conclude today's call.