Nucor Corp (NUE) 2019 Q4 法說會逐字稿

Good day, everyone, and welcome to the Nucor Corporation Fourth Quarter of 2019 Earnings Call. As a reminder, today's call is being recorded. (Operator Instructions) 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.

Now for opening remarks and introductions, I would like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Good afternoon, and thank you for joining us for our fourth quarter earnings call and my first call as CEO of Nucor. I'm honored to have the opportunity to lead this company and to serve alongside the 27,000 men and women of Nucor who inspire me every day.

Joining me on the call today are the members of Nucor's executive team, including Jim Frias, our Chief Financial Officer; Craig Feldman, responsible for Raw Materials and Logistics; Ladd Hall, responsible for Flat-Rolled Products; Ray Napolitan, responsible for Engineered Bar Products as well as Nucor's digital initiatives; MaryEmily Slate, responsible for Plate, Structural and Tubular Products; Dave Sumoski , responsible for Merchant Bar and Rebar Products; and Chad Utermark, responsible for Fabricated Construction Products. I also want to thank John Ferriola for his leadership during the past 7 years as CEO and the impact he has made over his 28 years with our company. We thank him for his many contributions to Nucor and wish him all the best in his retirement.

At Nucor, our greatest competitive advantage is our culture, and the greatest measure of that culture is how we care for one another through the value of safety. 2019 was the safest year in our history, and I'd like to thank all of my teammates for achieving this tremendous result. Nucor is a continuous improvement company. Our challenge and opportunity is to achieve breakthrough improvements in this core value. Over the last several months, I've engaged our team to ask how we can continue to improve our performance and safety, and we plan to work together with our teammates to implement their ideas and strategies. I look forward to making 2020 an even safer year for Nucor together.

In 2019, Nucor record earnings of $4.14 per diluted share. This was a good result given the challenging steel market conditions that prevailed throughout much of the year. Strong performance in many of our steel products businesses helped partially offset the destocking that negatively impacted our steelmaking operations. In particular, I'd like to recognize both Vulcraft and Verco and our buildings group, which each achieved their most profitable year ever, as well as our rebar fabrication operations, which posted much improved results over 2018, reflecting both strong execution and favorable nonres construction market conditions. Thank you for this result.

We believe that inventory destocking concluded in the fourth quarter when customers resumed more normal buying patterns. General business conditions also improved as the fourth quarter progressed due to a number of factors, including a rate cut by the Federal Reserve, the new labor agreement between the United Automobile Workers and GM as well as progress on U.S.-China trade relations and the passage of the U.S.-Mexico-Canada trade agreement by Congress.

With regard to the USMCA, we applaud the House and Senate for passing the agreement with overwhelming bipartisan support. The new trade deal with Canada and Mexico is a significant win for the U.S. steel industry, especially given the revamped rules of origin that will greatly incentivize the use of North American steel in autos, auto parts and other products containing steel. All in all, we sense noticeably more optimism about the outlook for the U.S. economy as we head into 2020.

I'd like now to share with you my most immediate priorities for our company as I begin my tenure as Nucor's CEO. There are 4 key areas that we, as a leadership team, will focus on and execute on. First, we as a team, care for one another through the value of safety to further strengthen our culture, which is a key driver of our success.

Secondly, the execution of the $3.5 billion of growth projects we are bringing online. Execution begins with bringing these projects online safely and we have been doing that. Once they begin operating, we need to ensure that we stay focused on generating appropriate returns from these investments. All of these investments are focused on Nucor's goal of being the supplier of choice, both today and tomorrow. We're staying ahead of the curve and adding the high-value products that our customers are asking for.

Third, effective management of our portfolio of businesses to maximize our earnings potential. Ensuring our future success requires both making sound growth investments and addressing areas of underperformance. We will harness Nucor's culture of continuous improvement to achieve the full return potential across our entire asset base.

Finally, I've taken over the leadership of a company whose ability to attract, retain and develop great people has always been key to our success. We will remain relentlessly focused on talent. Our team members create the true value in our company. We have more than a 90% retention rate, and I believe we have the most engaged, passionate and driven team members in the world. We will continue to attract great team members by making sure the talent and passion of our team is more broadly recognized outside the company, and we are committed to further enhancements of our programs to develop and retain our valuable team members. There will be more to come in all 4 of these areas as the year progresses but I wanted to share these initial priorities with you today.

Let me conclude my prepared remarks this afternoon with an update on some of our more significant capital projects. We achieved important milestones on several of them during the quarter. At our DRI plant in Louisiana, the critical work of replacing the convection section of our process gas heater as well as realigning the reactor refractory was completed in November. The work was done safely, on time and within budget. We expect these projects will further improve the plant's reliability. My thanks and congratulations to the team in Louisiana for their successful execution on this key phase of Project 8000 and for the performance in 2019, which was our second-best year ever for uptime and output despite the 70-day planned outage.

Two of our growth projects, our Specialty Cold Mill Complex in Nucor Steel Arkansas and the new galvanizing line at Nucor Steel Gallatin, continued to ramp up production during the fourth quarter. Feedback from our customers on the product set of Gallatin and Hickman has been excellent, and now that we're operating, we've seen even more opportunities to align with our customers. Utilization at Gallatin's galvanizing line is already over 50% and Hickman's new cold mill is operating 24/7. We had contract customers for 31% of the new cold mill's capacity at year's end. Qualifications are ongoing and we expect to be IATF-certified by mid-2020 at Hickman's new state-of-the-art reversing cold mill.

Several other growth projects are coming online early in 2020 as well, including our new rebar micromill in Sedalia , Missouri, the new merchant bar quality mill at Nucor Steel Kankakee and our JV galvanizing line located in central Mexico that we are operating with JFE Steel of Japan. We have arced both the EAF and LMF furnaces at Sedalia in recent days, and our new teammates there are hitting the ground running, already serving customers with product made from billets. We expect the ramp-up to continue to go well.

Kankakee experienced some delays in equipment deliveries and the permitting process, but we expect to come in at our initial capital budget of approximately $190 million. We expect to start shipping product during the second quarter.

At our joint venture with JFE in Mexico, we look forward to beginning trial shortly and serving our automotive customers in central Mexico. The facility's opening has been delayed due to some challenges that we did not anticipate. For example, more difficult soil conditions required incremental piling, resulting in higher cost than budgeted. We also found that the local electrical system infrastructure was insufficient for our needs and decided to acquire additional land for our operational footprint. These events increased the total capital budget from our initial estimate of $270 million to approximately $360 million, with Nucor's share of these amounts being 50%. While this was disappointing, JFE and Nucor remain very excited about the JV's prospects and are very confident in the product and our partnership. This is especially so following the recent passage of the USMCA with its North American content rules.

Finally, we are excited to report that we have teammates on the ground and have begun excavation work for our new plate mill in Brandenburg, Kentucky. The mill is the largest investment in our company's history, and when it begins to operate in 2022, Nucor Steel Brandenburg will be able to produce 97% of the plate products demanded in the United States market.

With that, let me turn it over now to Jim Frias, who will discuss our financial results in greater detail.

Thanks, Leon. Nucor reported fourth quarter of 2019 earnings of $0.35 per diluted share. Included in these results were noncash impairment charges of $66.9 million or $0.17 per diluted share. Of that amount, $35 million or $0.09 per share related to our natural gas well assets, $20 million or $0.05 per diluted share related to a long-lived asset impairment in the steel mills segment and $11.9 million or $0.03 per share related to the write-down of certain intangible assets in the steel product segment. These results exceeded our fourth quarter of 2019 guidance range of $0.25 to $0.30 per share. The amounts of these noncash impairment charges were not included at the time we issued our guidance on December 12.

Our fourth quarter included better-than-expected performance across most of the steel mills segment. Our fourth quarter results included approximately $35 million or $0.09 per diluted share of preoperating and start-up costs related to strategic investment projects. That compares to approximately $28 million in the third quarter of 2019 and approximately $17 million in the year ago quarter. Excluding profits attributable to noncontrolling interests, the effective tax rate was approximately 24.5% for the full year. Going forward, we expect Nucor's effective tax rate to continue to be in the range of 24% to 25%, barring any unusual items.

In 2019's challenging steel market conditions, Nucor generated record operating cash flow of approximately $2.8 billion. Capital expenditures for 2019 totaled approximately $1.5 billion. For 2020, we expect capital spending to exceed $2 billion. Major components of this year's capital budget include the Brandenburg greenfield plate mill, the Gallatin sheet mill's hot band production capacity expansion, the Hickman sheet mill's new galvanizing line and our Florida rebar micromill.

In addition to investing for long-term profitable growth, Nucor's disciplined and balanced approach to capital allocation rewards our shareholders with attractive cash returns. Cash returned to shareholders during 2019 totaled $791 million or 62% of net income for the year. We paid dividends of $492 million. We also repurchased approximately $299 million of our stock, about 5.3 million shares at an average cost of just over $56 per share. With the dividend increase announced in December, Nucor has increased its base dividend for 47 consecutive years, every year since it first began paying dividends in 1973. Over the 10-year period ending in 2019, Nucor has returned a total of more than $6 billion to our shareholders through dividends and share repurchases. Our focus continues to be on effective stewardship of our shareholders' valuable capital via both disciplined investments that we expect will generate returns well in excess of our cost of capital as well as attractive cash returns to our shareholders.

Nucor's financial condition remains strong. We ended 2019 with $1.8 billion in cash and short-term investments. With total debt outstanding of approximately $4.3 billion, our gross debt-to-capital ratio was 29% at the end of the fourth quarter. Our $1.5 billion unsecured revolving credit facility remains undrawn and does not mature until April of 2023. Our next significant debt maturity is in 2022 for approximately $600 million.

Now turning to the outlook. Nucor's earnings in the first quarter 2020 are expected to increase as compared with fourth quarter 2019. We are encouraged by improving conditions in the U.S. steel markets entering 2020. We believe this reflects the end of the severe inventory destocking that occurred last year and ongoing modest growth in end-use markets overall. We expect first quarter earnings in the steel mill segment to increase from the fourth quarter due to price increases and expected higher volumes.

It is worth noting that December is a historically weak month, with the highest profit month in the fourth quarter for our steel mill segment. The profitability of the steel product segment is expected to decrease as compared to the fourth quarter due to normal seasonality. The performance of the raw materials segment is expected to increase compared with the fourth quarter due to improved pricing for raw materials.

It's worth noting the outlook from an end-use markets perspective. We see stable growing end-use markets accounting for approximately 70% of our shipments. Leon mentioned the strength of nonresidential construction markets. We see this continuing into 2020. Nonresidential is an important demand driver for our industry. Both order rates and backlogs are up across our buildings group and in our joist and deck business. We are also hearing similar things from our structural fabrication customers. Nucor is the leading supplier of structural beams in the U.S. with the broadest product offering. It's a privilege to support our fabricator customers on important projects across the country.

Thank you for your interest in Nucor. I will now turn the call back over to Leon.

Thanks, Jim. At this time, we're now ready to take your questions.

(Operator Instructions) And we'll take our first question from the line of Martin Englert with Jefferies.

So you provided some commentary on the demand front, and maybe if you could frame up what your expectations are for U.S. steel demand in 2020 versus last year, talking about some of the puts and takes amongst the end markets. And then also based on the activity that you're seeing today in the order books, what type of sequential change might you be expecting within steel volumes in first quarter here?

Okay, Martin. Let me begin first by stating how humbled and excited I am to be leading the Nucor team. I stand shoulder to shoulder. We're the greatest manufacturing team assembled anywhere in the world. And I'm surrounded with the most experienced executive team in the industry. And so as I mentioned in the opening comments, we do see 2020 being a -- shaping up to be a better year than 2019. Nonres construction is strong. We believe destocking has really been completed, seen some of the restocking. But as we talk about order entry rates, there's a marked improvement in Q4. We see that continuing. Our backlogs are strong, as Jim mentioned in his comments. The fabrication community, their backlogs are very strong into 2020. So we see the outlook is fairly optimistic as we move into 2020.

Okay. And then how -- sorry, go ahead.

Yes, the second question's about the volumes we're anticipating in Q1, and we don't give that specific guidance. I'll say qualitatively, especially regarding our sheet business, we've had 15 straight weeks where order significantly exceeded -- I say significantly, but more than 10% exceeded our production capacity. And so we've built our backlog by about 2 weeks since the end of September. That's about 2 weeks longer. So we're going to run the sheet business at least near full for the first quarter. The rest of our businesses had not really run full consistently for a number of years, other than say, periodically was full. But we feel very confident sheet will run full. We're not going to give guidance about volume overall other than to maybe give that data point. I think it's also worth noting that last week, the 3rd week of January, was one of the strongest weeks of order input we've seen in sheet since the improvements began in mid-October.

It sounds like a stronger start maybe on a sequential basis than what we've seen in a couple prior -- past few years or so, based on your commentary.

Really, maybe the last year. The year before that, it's going to be hard to beat. It's a pretty strong first quarter pickup in 2018.

Okay. Understood. And if I could, one more. With growth CapEx increasing, could you touch on any need to draw on the revolver, perhaps increase other debt to support the growth initiatives? And also remind us of minimum cash balances and leverage targets for the company.

Sure. So we're starting here with a very strong liquidity position, $1.8 billion in cash and short-term investments. And so we're going to have peak CapEx over the next 2 years, and then it should taper off based on the projects that we've announced and have in our pipeline actively today. And so we could be slightly cash flow negative over the next 2 years and then -- but over the next 5 years, we would expect to be strong cash flow positive. So right now, we would not expect to draw on the revolver. We would be more likely to issue CP if we got to that point. But with the $1.8 billion cushion, I don't see that likely this year.

Okay. So rather other debt forms as opposed to the revolver, if needed, but you don't anticipate that at this point?

That's correct. And again, we need about $400 million to $500 million cash, you asked that question, I didn't answer that part, just to sort of support the liquidity in the business.

Our next question comes from Chris Terry with Deutsche Bank.

Congrats on the new role, Leon. The question I wanted to dig into a little bit more was on CapEx. You touched on that last question but just a few more specifics, if I may. You said, I think, $2 billion around that level for 2020. You said $3.5 billion for your total projects. So from the calculation we've done, we've still got about $2.3 billion of that $3.5 billion still to spend. Can you maybe just give some color on how 2021 will shape up as you go through the numbers? And maybe after you've done those expansions, what the sustaining level would look like.

Yes. Our maintenance CapEx we think of as being in the range of $500 million per year. It's -- that's embedded in that more than $2 billion that we expect to spend in 2020. It's too early to say for '21, but I think '21 will be similar in levels to '20. Both years will be in the neighborhood of $2 billion or just north of there. And then it would be a fairly significant drop off relative to the things we've committed to at this point in time. We could, of course, identify other projects between now and then that would increase that. And the other thing is, each year as part of the year end process, we put up some slides that give color to our CapEx spending items, and we will be putting those up today after the call on our website for investors to see.

Okay. And that includes the -- what's the additional spending for the paint line that you announced in December? I assume that's around the $100 million level or something in that ballpark?

Yes. Chris, as we -- we're very excited about the announcement of our paint line and broadening our downstream offering to our customers. We've not released that number. As we're getting into this and kind of completing the engineering review, as we get that finalized, we'll announce that to you. I'm sure that we'll do in the coming weeks.

Okay. Just to reiterate from the first question, so you step through the next couple of years, you're comfortable funding the dividend and maintaining the business out until the CapEx drops off. You're comfortable managing your -- sort of the capital management part of the business even though the CapEx will be elevated for those 2 years?

That's correct, Chris.

Yes. Agree.

Okay. And the last one from me. Just in terms of the new Missouri mill, just wondered if you could give a few more specifics on the ramp-up of that and then just what you see in the rebar markets specifically.

Yes. We're very excited about the strategy behind the micromills, and I'll ask Dave Sumoski here in a minute to maybe provide a little update on Sedalia, specifically. But that investment strategy and that capital allocation philosophy to become and maintain the low cost position in rebar by serving those markets where our customers are at, high propensity to scrap, it's critically important to us in maintaining that. Dave, anything you would like to add? Give us an update on that.

Yes. The only thing I'd add to that, I mean, you hear that -- if you look at just the nameplates that it would indicate that we're adding about 700,000 tons of additional rebar. But there's more to our strategy than that. We have a very deliberate process to realign the product mix in the bar group -- in other groups, but specifically, we're talking about the bar group. This includes producing higher-value products of some of our other divisions. And that process has begun. It's been thought through for some period of time. And I'll just share a couple of examples. Its Jewett, Texas facility is now on pace to make about 150,000 tons of SBQ. And our Darlington mill now makes about 300,000 tons of rod. And when they add their degasser down there, they'll move up the value chain even more on the rod market and they'll start producing more SBQ.

So we are shifting rebar from some of our divisions to these new locations where it makes more sense. At the end of the day, we're going to move up the value chain, we will not abdicate -- we will not abdicate markets and customers that have been very good to us over the years, specifically on the start-up. I'm being told that we're going to melt the heat. We're going to go from melt shop all the way through the process on Thursday. We've already commissioned some of the proper -- some of the process in this and we run some billets through the line and shipped 700 tons out of there from other divisions just so we can get our ERP system up and working. That's where we're at.

Thank you, David. Did that address your question, Chris?

Yes. That's great. That's it for me.

Our next question comes from Timna Tanners with Bank of America.

So just wanted to step back and ask a couple of high-level questions, if I could. If we look at the steel products segment, profitability in 2019 was a step-up from 2018. And I'm just trying to figure out how much, if any, of that was related to declining steel prices? And how much might have been related to some of the growth projects? So if we look out to 2020, for example, with 2018 underearning and 2019 overearning, or should we consider it to be building from recent years?

Yes. Let me start out. Now, I'll frame it at the high level and maybe ask Chad Utermark or Jim to chime in. One of the areas, Timna, that I mentioned in my opening comments was to really begin to look at how we scrutinize some of the businesses that were not meeting our expectations. So one of the examples I'll share with you is in our products group, and Chad and the teams have done an amazing job of rationalizing a market that for many years was about 2 million tons. That shifted down over the last 6 to 7 years to about 1.2 million tons. So we've moved operations, combining the different manufacturing plants and brands. We run the same plants and really brought the market needs to fit our supply framework, and by doing so has really created a very positive cash position. So I would say that impact is -- and the result of the team achieving a record year is largely based on those decisions that we made as opposed to just the declining steel prices, which did have some factor. But Chad, anything you'd like to add on that?

Yes. Thanks, Leon. Yes. Thanks, Timna, for recognizing that. Obviously, lower raw material cost as well as the solid nonres construction market that we had, had an impact in a positive way to some of the record we set. But that record performance of the fabricated steel products segment is also benefiting from what Leon just talked about, this restructure, in particular, of our metal buildings business as well as rebar fabrication business. We're seeing the results. The restructure is resulting in a lower cost structure. Some of the capital investments in new equipment, changes to our process flow and the volume impact associated, especially with metal building group producing multiple brands at the same plant, is really paying off. So we're excited. I think there's even further opportunity for us going forward for us to improve our performance downstream.

Yes. The thing I'd add, Timna, is this. We took some of the rewards from the changes we've made to those businesses that Chad talked about, metal buildings and rebar fabrication, but we expect to reap further rewards from those changes in 2020. And so we're optimistic that 2020 is likely to be a better year. The other thing I'd say is our tube business, which we've built through 3 acquisitions a couple of years ago, didn't have its best year. They were much better in '18 than they were in '19, and we expect that business to do better in '20 as well. So we think 2020 should be a pretty decent year for us in steel products.

Okay. Super. And then I kind of want to ask the same questions about raw materials and long products because 2018 was a really good year. 2019 was a not-so-good year in all those categories and especially for raw materials there's been so much fluctuation. Like how should we think about "normal" EBITDA per ton or margin per ton or however you want to think about it? And same question for volumes in the long products. Like they fell off in 2019. And so kind of think about how some of these expansions or enhancements can result in better 2020.

Okay. Again, so I got the raw materials and the long products group, and again, now maybe ask Craig to chime in here. But look, at the end of the day, the longs business for us was a very profitable sector of our business. Market leadership in beams allows to operate in the roughly 65% to 70% range through most of '18. But again as we talked about in sheet, and Jim mentioned, specifically both plate and beams, we've also seen a market shift in order entries and backlogs.

And so we're seeing that market improve from '19. Again, I think a factor of that is the destocking that took place throughout 2019. And as we move into 2020, I think you'll see a much more level and tempered business conditions as we move through whether it's scrap or order entry rates. We believe we'll be more stabilized as we hit '20. I think '18, we saw our customers overbuying demand. In '19, we saw them underbuying. I think you'll see that more balanced. But Craig, maybe you've got some color on the raw materials?

Sure. Thank you, Leon. Yes, Timna, no doubt about it. The margin compression we've talked about on prior calls, particularly the DRI plants, has been a real -- it's on both sides. It's on the supply side, and of course, our selling prices were challenged in 2019. Going forward, we really don't share the EBITDA per ton numbers in that regard in the raw materials group or DRI. But I've just characterized it that a lot of the heavy lift that we've done over the last year or so, and we've highlighted Project 8000 a number of times on the call and the improvements that we made really focused on reliability going forward. So by the middle of the year, I would say that we'll be towards a more normalized run rate. I suspect that we'll see some relief on the iron ore pricing standpoint as well, and we feel very good about the work that we've done related to CapEx in improving the reliability going forward. The team in Louisiana has moved from between 250 tons an hour closer to 280 tons an hour. So we feel very good about the operational improvements that we've made there. And generally speaking, we don't know where markets will go, but a fairly positive outlook once we get past the first half of this year.

This is Dave. I'd just make one comments on the longs. If you're just looking at bars and the numbers there, 2 different businesses. So you got the SBQ product and then you got the rebar and the MBQ product. And on the rebar and MBQ product, '18 was a year. But we're tracking ahead of 2017, so if you look at that year on the pure bar side -- so that industry or that business is supported by the construction industry and that's why we still feel there's a strong construction market out there moving forward. Yes.

Okay. So it sounds -- okay, go ahead -- or I just can say that if I --

Speaking on engineered bars -- excuse me, engineered bars kind of lives, in our view, in a different ecosystem. We don't really sell into the construction market. A couple of our major markets, oil and gas and ag equipment were actually down. We've got the combined factors of destocking with both OEMs and service centers. So despite that, our engineered bar group, special bar quality picked up share in 2020 -- in 2019, excuse me. So again, not construction-related but a different market situation. So excuse me, Timna, continue your point, please.

Oh, no, not at all. I'm just trying to make sure I understood. So it sounds like 2018, tough comps versus 2019. You expect not the same destocking, better volumes and then sprinkle in some organic improvements, and that's how we should be thinking about 2020.

Yes. It is. Look, I think underlying demand is there. I think it's stable in some of the sectors that Dave already mentioned. Construction in particular is strong and we're seeing some slight improvements year-over-year.

Our next question comes from Curt Woodworth with Credit Suisse.

I guess my first question -- Leon, I guess Nucor has had a pretty consistent operating philosophy for a long time and it seems like the company has definitely sort of accelerated more of the build for spot mentality with a lot of the CapEx. So I'm just curious, with new leadership that are coming with new perspective, new opportunities, what do you see kind of changing at Nucor? Where do you think the most opportunity for improvement lies? And how do you think your maybe near-term agenda will be different from prior agendas? That's my first question.

Okay. Curt, I'd frame it up this way. It's much easier for me to talk about those things that are not going to change. Our focus on our core and our culture is going to remain very much intact. How we care for our 27,000 men and women of the Nucor family is critically important. They are the value generators for our future. The $3.5 billion of investment projects we've slated are equipment. They are things that can be bought. Our team is what revolutionizes and changes the market and the returns that we're able to achieve. So I couldn't be prouder of our team and we are laser focused. After the value of safety, Curt, on executing on that $3.5 billion, it is the second focus for our entire organization that we bring those projects in safely, on time and ahead of schedule.

And so that is where our focus is at. And then third, we move to really the portfolio management. How do we continue to think about growth in the short and medium term and long term? And then coupling that with, how do we scrutinize those businesses that have not returned the levels of profits and shareholder returns we've come to expect of ourselves, and the analysts and investors have come to expect of us? And so based on those focus, I would tell you that there's not a shift in what -- in how John led or Dan DiMicco led. What I would tell you is the destinations are very similar. The routes we may take to get there might be slightly different, different than the -- all of us use Waze or Google Maps to get into the city. I may go to New York City 5 different ways, 5 days in a row. But how I communicate the things that we do to achieve the results, the results are focused on the safety of our team and executing really well on the valuable shareholder capital that they entrust us with every day.

Okay. Yes, that makes sense. And then I guess, with respect to capital spending and sort of dating myself a little bit here, but if I look at your plate capacity since 2005, it's been pretty consistent around 2.8 million tons. And your 15-year utilization rate has been about 80% and you're at roughly 70% the last 2 quarters. So I'm wondering, tactically, if we get into a demand situation where plate stays -- demand stays weak, would you contemplate postponing plate mill CapEx?

Let me begin with a short answer. No, is the short answer. The longer answer is we've been in this business now for 20 years, Curt. We understand the markets that we serve. We understand the customer base that is asking for this, and this is something that we contemplated since going back to 2008. So our focus is for the long term. We understand there's going to be ebbs and flows in the markets. It's a cyclical business and it's a business we know well and we've been in and a part of for over 50 years. So as we think about plate, don't lose sight of the fact that we will have the most important product offering of any mill in 1 location located in the heart of the largest plate-consuming region in the United States. And so by doing so, we really believe we have a differentiated value proposition to offer our customer base that puts us in a low cost position, a market leadership position. And I'm incredibly encouraged by what MaryEmily and Johnny Jacobs and the team at Brandenburg are going -- will be able to do in our future in plates.

We'll next go to Andrew Cosgrove with Bloomberg Intelligence.

I just wanted to start off and see if you could shed some light on the nonresidential exposure by product, your sheet, bar, plate and structurals, if that's possible.

Andrew, give me a little more color. I'm trying to follow your question so...

Just curious, I'm just trying to square up -- yes. No, I'm just the square up the exposure to whether it's sheet, bar, plate and structural in the nonres segment. I mean the only reason I asked is because, just trying to make sense of I mean long products and -- I mean all longs are down pretty precipitously in 2019. Nonres construction was up low single digits. I understand there was some destocking, but I guess I'm just trying to see if nonres is still going to be strong and we're not going to get destocking. And we'll probably get restocking this year, where that might be felt the most?

Yes. Look, I would to tell you certainly, I think rebar fabrication businesses that are heavily put into the construction market, certainly, some of the structural capacity that we have is a big part of that. And then the downstream products in buildings and the Vulcrafts are all factors in nonres construction. So that's the biggest size of the new markets we serve. Roughly about 30% of our overall products move into that space. But one of the things you mentioned I would maybe characterize a little bit differently, we think some of the restocking has already occurred. And again, as we mentioned earlier in our comments, I do believe you will see a more balanced approach to 2020 in terms of the both service center and OEM buying patterns. And so we do believe demand is healthy and we're optimistic, too, as we head into '20. Dave, is there something you'd like to add?

Yes. I would just add that although there is no federal infrastructure bill out there, the states are really stepping up to the plate and they're doing a lot of work. So that's really been a boost in the nonresidential construction market, too, so I just wanted to add that.

Okay. And then I guess one on plate. I mean plate import last year were down 20-ish percent, and then obviously, plate shipments were also down 12% on your guys' front. I guess I was just trying to -- again, is that also just down to destocking? Or is there -- I guess maybe if you could give some color on specific end markets where there was some weakness in plate specifically? And maybe how you kind of see them shaping up right now?

Look, I'll start and then MaryEmily, maybe you chime in if I leave anything out. But as we think about the plate and the import levels, I would tell you one of the most impactful things is what we've been able to do over the last couple of years. We've won 12 trade cases since 2016 with plate. That has dramatically shifted the import coming into this country. Certainly 232 has helped, however, it is the long term of the trade cases that we've won and something over 160 cases that we've won, some dating back in plates in 1999. So our position through the long term ITC and the Department of Commerce commend them for what they've done and are doing. But that site has got to remain ever vigilant. And so that is a big part of why you saw the drop off in plate imports. MaryEmily, anything you would like to add on the market?

Just a little bit of color on that. You're right. We had the lowest level of imports in the last 5 years, last year, which was great. And we do believe that the overall market retracted but mainly that was due to destocking activity. And when you mentioned trade cases, there are still 17 active trade cases going on. So for 2020, we really look for the activity to be consistent. We feel like we're looking at a decent 2020 going forward. Thank you.

We'll next go to Phil Gibbs with KeyBanc Capital Market.

Welcome to the helm, Leon. Congratulations.

Thank you very much. I'm very excited and very humbled.

In terms of the rebar color, it sounds like you're just getting the Missouri mill started in the last week or 2. What's the thought around the ramp time line there? And then can you give us any color on the Florida mill as well? Because I know that was something that was supposed to be around mid-2020.

Certainly. Yes. Just at a high level, what I would tell you, Phil, is yes, the micromill in Sedalia is coming online as we speak. The team has done a great job in taking care of the team from a safety perspective, operating, costing and schedule. So we're excited about that. And then in the micromill in Frostproof, Florida, is still slated to come online in the summer of this year. So the other part of that maybe I'll ask Jim to frame some color because we do think about how are these investments returning and what is that long-term outlook. Maybe, Jim, you could add some color to those projects.

Well, first of all, specific to your question, I think it's likely that Sedalia reaches breakeven sometime in Q2. And overall, the galv line at Gallatin is already making a positive contribution. We have preoperating start-up costs in the quarter of -- I think it was $36 million in the fourth quarter. That's going to come down slightly in Q1 because some of these projects are starting to ramp. The Hickman cold mill is starting to ramp. So their preoperating start-up costs will come down as they go towards breakeven. On Sedalia, it's going to start have its preoperating start-up costs come down as they strive towards breakeven.

Now later in the year, we'll probably have other projects increase the pace of preoperating start-up costs. But the projects that are coming online right now, and that includes the galv line at Gallatin, the Hickman cold mill, the Sedalia bar mill and the Kankakee merchant bar mill, those 4 are going to make a nice contribution to Nucor by the end of this year and a really good contribution to Nucor next year. And given the broader number that the cumulative projects have, $600 million of EBITDA value, I would just say, if you do the math on the CapEx of those projects, you'll see a nice jump in that EBITDA that's going to benefit Nucor in '21, and we'll start to see some of that fruit by the end of this year.

At a high level, Jim, in the start-up costs, saying they're coming down a little bit sequentially here in the first quarter. But are you expecting the preoperating start-up costs in total to be lower in '20 than '19? Or is that not a good statement?

No. I would say -- I'd say, truly say, because you've got 2 big projects getting ramped. And they will -- and because they're bigger, they will have bigger preoperating start-up costs. So the expansion of capacity at Gallatin and the Brandenburg mill, when they come on, it's going to probably greatly increase our preoperating start-up costs for a period of time. And I don't have -- we don't forecast that out more than 1 quarter at a time, so I can't tell you what those numbers are other than in Q1, it's probably going to be slightly down. But I would expect for the year, it might actually be slightly up because those 2 bigger projects are starting to ramp up their costs.

Okay, fair enough. And then the comment on, I think, you made, Jim, on being cash flow negative for the next couple of years given the CapEx, are you throwing in the dividend in that discussion? Meaning, you're including the dividend in terms of you being cash flow negative?

Yes. I'm saying dividends plus CapEx against operating -- or cash from operations...

Okay. So you're not saying free cash flow negative. You're just saying after dividend.

Yes. Yes.

Or are we saying free cash flow negative?

I'm saying after CapEx and dividends.

Okay. And then lastly, just in terms of the first quarter so we're thinking about this right. Seemingly some operating leverage, at least in the sheet division from better volumes in Q1. But overall, as we look at the Steel business, should we think that realized metal spreads will be a positive contributor versus the fourth quarter?

Yes. I think so, Phil. And again, as we look at scrap, and obviously, an awful lot of discussions. Craig may want to add some color here, but the market demand standpoint is still strong. And I think one of the drivers that's not discussed an awful lot as we look at scrap is really the export market and the demand outside of the U.S. that has an impact on that. So Craig, anything you want to add on the raw materials scrap side?

Yes. Just in general, I would say that the -- there was a lot of commentary around and interest in the scrap market as it relates to steel, but I think the key driver is steel demand. And to Leon's comments and the rest of the teams, I think you hear a fair amount of optimism here. And that's what we're seeing. We're seeing the domestic demand for scrap is relatively strong, so -- well, absent the normal gyrations in the market, I would say. And we see a fairly -- a relatively stable price environment and again, driven by the steel demand -- underlying steel demand.

And Phil, just one point I want to clarify. I've made the statement earlier that Frostproof is expected to come online this summer. They'll start commissioning, but it will really come online in Q4 of this year.

We'll next move to Alex Hacking with Citi.

Let me add my congratulations, Leon, on the new role. I just have one question. Jim, I just want to follow up on the CapEx guidance, really, just to make sure I have it straight. I think you said 2021 would be $2 billion-ish, similar to 2020. If we take out $500 million a year for sustaining, that's about $3 billion on growth projects for the next 2 years. I guess that seems a little high compared to what we were thinking. We were thinking total budget of around of $3.5 billion with about $2.5 billion left to spend. I mean, I guess, can you help me close that gap a little bit? I know you mentioned all these...

Yes, there are some projects that aren't big enough that we're forced to call out that are embedded in there as well. They are improvement projects that we don't think of as being CapEx, they're not building new mill-type projects, so we don't call them out. So there's some other CapEx in there for things that are improvement projects as well.

And it does appear we have no further questions at this time. I'd like to turn the conference back over to Mr. Leon Topalian for any additional or closing remarks.

Thank you, Derek. Before concluding our call today, I want to express our appreciation to our shareholders. We value your investment in our company. We take the obligation seriously that comes with it. And we will treat your investment with great care. I also want to thank our customers. We are excited about the capabilities we are building to better serve you today and, most importantly, for tomorrow. Thank you for your trust and confidence that you place in the Nucor team each day to supply your needs. We look forward to building powerful partnerships to generate powerful results. And to our Nucor team, thank you for what you are doing for Nucor and our customers every day, and most importantly, thank you for doing it safely. We are committed to strengthening this core value and by doing so, help to improve the safety of our Nucor family and our industry. I'm excited for Nucor's future and for all of us working together to expand beyond and take Nucor to new heights. Thank you to everyone on the call for your interest in Nucor, and have a great day.

Thank you. And again, that does conclude today's call. Again, we thank you for your participation. You may now disconnect.