Good morning and welcome to Nucor's Third Quarter 2023 Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Jack Sullivan, General Manager, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Nucor's third quarter 2023 earnings review and business update. Leading our call today is Leon Topalian, Chair, President and CEO, along with Steve Laxton, Executive Vice President and CFO. We also have other members of Nucor's executive team with us, including Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Brad Ford, Over Fabricated Constructions Products; Noah Hanners, Raw Materials; John Hollatz, Bar Products and Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel; Dan Needham, Commercial Strategy; Rex Query, Sheet and Tubular Products; and Chad Utermark, New Markets and Innovation. We posted our third quarter earnings release and investor presentation to Nucor's IR website. We encourage you to access these materials, as we'll cover portions of them during the call. Today's discussion will include the use of non-GAAP financial measures and forward-looking information within the meaning of securities laws. Actual results may be different and involve risks outlined in our Safe Harbor statement and disclosed in Nucor's SEC filings. The appendix of today's presentation includes supplemental information and disclosures, along with a reconciliation of non-GAAP financial measures. So with that, let's turn the call over to Leon.

Thanks, Jack, and welcome, everyone. I would like to begin today's call by highlighting the tremendous performance of our 32,000 Nucor team members through the first 9 months of the year. The investments we're making to grow our core and expand into new markets are generating strong returns for our shareholders, and our team continues to operate efficiently and safely. In fact, we're on pace to deliver our fifth consecutive year of record safety performance, further proof of the world-class performance by our Nucor team members who live our culture each and every day. Looking at our financial performance in the second quarter, Nucor generated approximately $1.8 billion of EBITDA and $1.1 billion net earnings, or $4.57 per diluted share. This brings our year-to-date net earnings to $3.7 billion, or $14.83 per diluted share. Even though we still have one more quarter to go, our year-to-date earnings through September already represent our third best full year in Nucor's history. In keeping with our investor-focused capital allocation strategy, we've returned $627 million to shareholders in Q3, representing 55% of our net earnings for the quarter. On the operational front, total shipments to outside customers were approximately 6.2 million, down 5% compared to the prior quarter, and down 3% compared to Q3 of 2022. Total steel mill shipments for the quarter were nearly 5.8 million tons and downstream steel product shipments to outside customers were roughly 1.1 million tons. Earlier this month, we launched a National Sustainability Campaign branded 'Made for Good,' which highlights our commitment to producing the world’s most sustainable steel and our efforts to lead others in our industry to adopt practices that reduce emissions. Our circular recycling-based process gives us a competitive advantage, as more customers look to reduce emissions in their supply chain. But we're taking steps to differentiate ourselves even further. We're not just talking about sustainability; we're making investments in forming partnerships to accelerate a cleaner future for Nucor, the broader steel industry, and all industrial manufacturers. And in almost every month of the past year, we've done something to move the needle in that regard. We've entered into another renewable energy PPA invested in technologies to develop advanced forms of nuclear power generation and zero carbon iron making, formed a partnership to capture, transport, and sequester CO2 emissions from our Louisiana DRI facility, introduced Elcyon, our new sustainable heavy gauge steel plate for the offshore wind energy industry, and helped lead the Global Steel Climate Council, a coalition of global steel companies and industry partners to develop a clear and unbiased global standard to measure and report carbon emissions. Consistent reinvestment in our businesses has played a critical role in our company's growth. We make investments after we identify strategies that have compelling risk-adjusted return opportunities for Nucor's shareholders. I'd like to highlight three important milestones we've hit recently across sheet, plate, and bar with a reminder of the strategic rationale behind each investment. Starting with sheet, last week, we were joined by hundreds of leaders in West Virginia in Mason County for a groundbreaking event to celebrate the start of the construction of our newest sheet mill. This investment in West Virginia, along with additional galvanizing paint in tube lines we are adding at other sheet mills, will enable Nucor to produce higher margin value-added products for a broader set of customers, especially those who value high-quality steel with a lower carbon footprint. By 2026, we will have more than doubled our capacity to produce higher value sheet products compared to our capabilities in 2020. Turning to plate, earlier this month, we celebrated the official grand opening of our state-of-the-art mill in Brandenburg, Kentucky. This investment positions Nucor as the most capable plate supplier in the largest plate-consuming region of North America, able to produce specialty plate products that support our nation's economy and security in critical areas such as wind, long-span bridges, military applications, power transmission, amongst many others. In August we held a groundbreaking ceremony for our rebar micro mill in Lexington, North Carolina. This mill will help us to capitalize on growing demand for rebar in the growing Mid-Atlantic and Southeast regions over the coming decades. The modernized equipment and processes at this new mill will enable us to achieve both improved margins and lower emissions intensity from our rebar operations. The team in Lexington is making great progress on the construction, and we look forward to starting the mill up in early 2025. As we have said many times, the goal of our growth strategy is to expand our capabilities to better serve our customers and grow our earnings for our shareholders. The new capabilities we're adding in our steel mill and steel product segments are diversifying our customer base and creating more opportunities to cross-sell various products. A lot has already been said about the magnitude of the three steel intensive megatrends, each fueled by supportive federal legislation. We like to think of these three as the rebuilding, repowering, and reshoring of the U.S. economy. And with Nucor's unrivaled scale and diversity, we are favorably positioned to capitalize on these growth drivers. Investors have been asking where we are in the cycle of these megatrends and what steel products Nucor is best positioned to supply. I'd like to share a few thoughts on that and since it's baseball playoff season, I'll use a few baseball metaphors to help make my point. Based on current production and order books, it feels like we're still in the early innings across all three. To be clear, innings played is not intended to reflect unshipped, and some innings may last longer than others. It's meant to indicate where we believe we are along the continuum from federal and state level appropriations, project engineering and development, the permitting and bidding process, and ultimately taking orders in manufacturing steel products. While all three are still early in the process with still plenty of upside to come, we feel like the IIJA has progressed the least with respect to steel-related orders. The CHIPS Act has probably had the biggest impact on our order book thus far, and the IRA falls somewhere in between. As it relates to the rebuilding effort with funding through IIJA, we have shipped tons related to the first wave of bridge projects involving Nucor plate, beam, and piling products. But we believe a lot more has yet to make it out of state-level permitting and the bidding processes, especially with respect to highway construction and power transmission, which will require a great deal of rebar, plate, and heavy sheet. Back to my baseball analogy, the game has started, and we've probably neared the bottom of the first, but some fans are still tailgating, while others are just entering the stadium. On the repowering front, the financial stimulus under the IRA occurs through tax credits as opposed to the longer allocation process under the IIJA. This probably gives the IRA a slight edge on timing, but renewable and energy storage projects still take a while to secure financing and all the necessary permits. So while we are starting to see more orders relating to ground-mounted solar and onshore wind, there's still a lot of upside remaining in the years yet to come. Finally, the reshoring efforts supported by the CHIPS and Science Act has promulgated announcements for at least 37 projects worth approximately $370 billion. Nucor is already delivering steel products to a few of these. But these projects can take several years to complete and will shift from one steel product to another as construction progresses. When it comes to an advanced manufacturing facility, including semiconductor, battery, and EV plants, Nucor can produce an estimated 90% of the required steel. Some of the higher steel intensity products represent home runs for Nucor, but there are plenty of companion tons representing base hits. In many cases, the profit margins of base hit orders can be quite compelling. Needless to say, we're excited about what these megatrends can mean for the U.S. economy, and Nucor plans to be the leading supplier of the steel with which it's built. With that, I'd like to turn it over now to Steve Laxton, who will provide additional details about our Q3 performance and outlook for Q4. Steve?

Thank you, Leon, and thank you all for joining our call this morning. With third quarter consolidated net earnings of more than $1.1 billion, we exceeded the midpoint of our guidance by about 10%. The main driver of this exceedance was better performance in September than we expected from many of our businesses, most notably in our bar mills and several downstream steel products divisions. The strength of Nucor's business model and growing earnings power were on display yet again. The third quarter was our 10th consecutive quarter where both net earnings exceeded $1 billion, and return on equity exceeded 25% on a trailing 12-month basis. With respect to our operating segment results, our steel mills group generated $883 million of pre-tax earnings in the third quarter, a decrease of 37% from the second quarter. While volumes declined roughly 4% from the prior quarter, lower realized pricing accounted for most of the earnings decline. As an example, our realized sheet pricing for the third quarter fell by roughly $80 a ton compared to the prior quarter, outpacing more modest declines in our cost of scrap and ore base metallics. Our utilization rate for the quarter was 77%, down from 84% in the prior quarter. This lower utilization rate was a key factor affecting higher price per ton conversion cost at our steel mills. We continue to see excellent results from our steel product segment. Pre-tax earnings for steel products were approximately $807 million for the third quarter. As you know, our steel products business produces the most diverse set of solutions in our industry and we are benefiting from this broad range of capabilities. During the quarter, we saw stronger contributions from areas like rebar fabrication, pre-engineered metal buildings, and insulated metal panels. These partially offset some declines in joist and deck and tubular products. While joist and deck profitability continues to moderate from historically high levels, it remains well above pre-pandemic averages. Although there is a lingering lack of clarity with the overall economy, we're still seeing areas of growth within non-residential construction. Here again Nucor's diverse product range is allowing us to see gains with advanced manufacturing facilities and data centers on the buildings front and transportation and energy on the infrastructure front. Our raw material segment produced pre-tax earnings of $71 million for the quarter compared with the prior quarter; we shipped lower volumes and saw lower realized pricing in both our DRI and recycling businesses. Nucor generated nearly $2.5 billion of cash from operations during the third quarter and $5.6 billion through the first 9 months of the year. This strong cash flow enabled our balanced approach to capital allocation. Our framework for capital remains the same. We expect to maintain a strong investment-grade balance sheet, make meaningful direct returns to shareholders, and create long-term value by redeploying capital and advancing our strategy. Nucor's balance sheet remains strong with a total debt to capital of just around 24% and more than $6.7 billion of cash on hand at the end of last quarter. This level of liquidity provides support as we move into a period of accelerated capital spending over the next year with large capital projects such as our West Virginia Sheet Mill, while also enabling potential M&A activity. Nucor has a long track record of returning capital to shareholders. Since 2020, Nucor has returned approximately $9.3 billion back to shareholders through dividends and share repurchases. Year-to-date, Nucor has returned nearly $1.8 billion or 47% of net earnings to shareholders. Turning to capital spending, as you may recall, initial progress on several of our growth projects was slower-than-anticipated. In particular, our largest project in West Virginia was delayed. Because of the slower spending and timing delays, we're reducing our 2023 capital spending estimates from $3 billion to approximately $2.4 billion, with the difference between those figures being pushed into 2024. For our fourth quarter outlook, we expect consolidated earnings to be lower than the third quarter with declines across all three segments. At the steel mills, we expect earnings to decrease compared to the third quarter results on lower realized prices and slightly lower volumes. Given that most of our sheet business is sold on contracts, recent improvements in pricing are not expected to improve average realized selling price until later in the quarter. In our steel product segment, we expect slower volumes and lower realized pricing as well. For the raw material segment, we expect lower earnings in the fourth quarter due to margin compression and planned outages at our DRI operations. Looking ahead into 2024, we have attractively priced backlogs into the second quarter for some of our steel products, with continued strong order activity expected in manufacturing, data centers, and energy. So while we remain constructive over the long-term due to expected secular demand drivers, near-term market conditions have softened. We attribute this to uncertainty arising from the United Auto Workers strike, higher interest rates, credit tightening, elevated geopolitical risk, and concern about another potential U.S. government shutdown. As of today, we expect the sequential declines in our fourth-quarter earnings may exceed that of our third-quarter decline. With that, we'd like to hear from you and answer any questions you may have. Operator, please open the lines for Q&A.

The first question is from Tristan Gresser of BNP Paribas. Please go ahead.

Yes. Hi, thank you for taking my questions. The first one is on capital allocation. Could you remind us what is the place of inorganic growth in the strategy? I think you touched on potential M&A. I think in the past you viewed M&A as more on the downstream side, but how do you view the upstream and how do you view the current federal market at the moment? That's my first question. Thank you.

Yes, Tristan, I'll start and then have Steve address the latter part of your question. Reflecting on our mission statement since I became CEO in 2020, our goal has been to grow our core business and explore new opportunities in liberal culture. When we consider growth, it revolves around these two aspects: enhancing our core projects, such as our sheet mill in West Virginia, which has been particularly exciting; we recently had a fantastic groundbreaking event attended by our team, senators, and local officials, and we are very enthusiastic about this location and its ability to produce high-quality steel. Projects like Lexington, North Carolina, represent expansions in galvanizing, sheeting, and painting. On the other hand, we are also looking to expand into areas like our investment in CHI in the overhead door segment and warehouse systems, as well as towers and structures—elements of Nucor that will drive more consistent earnings, achieving a greater high and a stronger low. Many of these ventures operate outside the conventional cyclicality associated with the steel market we've long been tied to, allowing us to maintain a balanced portfolio and enhance returns for our shareholders. While we haven't detailed specific dollar amounts for each investment bucket, our focus is on creating economic value and maximizing every capital dollar for projects that can approach double our cost of capital. Ultimately, we also consider cultural alignment and whether these investments renew our core, as the driving force behind Nucor and every KPI we track is our 32,000 dedicated employees; it's our culture that influences every outcome, benefiting our shareholders.

And Tristan, the other thing I might add to what Leon said was, you started the question with capital allocation. And just as a reminder, Nucor has been, and Leon used the word balance. Balance is really the key summary there. We have a disciplined and consistent approach to returning capital back to shareholders, which we enforced for a number of years, reinvesting in our business. Your question was about how do we look at organic versus inorganic, and as Leon walked through some examples, you can see that we take advantage of opportunities where we can create value. So we don't expressly have an inorganic or M&A strategy. We have a strategy, and M&A is a tool by which we use to implement that strategy.

All right. That's clear and helpful. Maybe a quick follow-up on that. But when you look at M&A, are there particular red lines? I mean, where do you think there could be interest in certain upstream assets to get certain types of grades and quality? I think one of your peers earlier mentioned that the flat rolled market was pretty fragmented. Is that also something you view in terms of share?

Yes, Tristan, the short answer is yes. We consistently review a multitude of variables related to upstream product differentiation and other materials. One of the advantages of having a comprehensive strategy is that it guides us on what to pursue and what not to pursue. The investments I highlighted reflect the opportunities we are actively seeking in our pipelines, driven by existing megatrends that provide a distinct value proposition for our customers. For example, we are focusing on trends like towers and structures, sustainability, and iconic steel with zero net carbon footprints, as well as the manufacturing expansion for electric vehicles, battery plants, and data centers, where Nucor is well-positioned. All the factors you mentioned play a role in how we approach M&A. Ultimately, the key considerations for Steve and me are whether we can generate economic value added for each dollar invested that exceeds our cost of capital, while also enhancing the overall stability of our earnings through consistent performance over the long term.

All right. That's it. That's very clear. Thank you. And if I might just have a follow-up on the rebar market. You just announced you’re looking for some investment there. Basically, what are you seeing in terms of supply and demand medium-term? I know there's been a lot of projects announced, but I'm not sure if they're going through with the interest rates being where they are. So how comfortable are you with the medium-term supply and demand balance you're seeing on the rebar market to make this type of investment? Thank you.

Yes, Tristan, I'll start it off and maybe ask John Hollatz, our EVP over bar products to comment as well. But, look, we announced an exploration that we're going to look into the Pacific Northwest, as we think about what we've done in the bar group itself and our footprint in rebar is significant. Our micromill strategies and what we've seen in Sedalia, Frostproof, and now what we're getting to see come online in '25 in Lexington, North Carolina, gives us a lot of excitement and optimism, but so do all our other facilities that are running rebar. The market is growing; we know that. We know it's going to grow similar to that 2 million ton range. To your point, there's a lot of announced capacity; not sure all of that will see light of day. But again, we know the Pacific Northwest we have our Seattle operations play. It's been running for a long time and consistently one of our great financial performers and return to the team there does an amazing job. So we know the customers there, we know the growth that's going to be there. Again, we think it holds a great deal of promise as we evaluate this in the coming months. John?

Yes, thank you, Leon. As Leon mentioned, we're really proud of what our Seattle team has delivered since we bought that mill with the acquisition of Birmingham Steel in 2002. Our team has also done a really good job of positioning us for future success in this market. We're really optimistic about the growth opportunities that we see in the Pacific Northwest and in the Canadian markets. The challenge that we faced with our Seattle facility is it's been in its current location since 1905. The mill sits on a very small footprint. Over the last century, the city has really grown around us, which has limited our ability to grow our capacity and our capabilities. So the strategy here is really to position Nucor for success for the next 50 years to take advantage of the cost and the efficiencies that we've experienced with our micromill technology as well as increase our product offerings. We're certainly well aware of all of the other mills that have been announced. We're following those projects closely. We're really not in a position to speak on that. But we're excited about what we're doing at Kingman, and we're excited about what we have coming up in Lexington as well.

All right, I appreciate the color. Thank you very much.

The next question is from Carlos de Alba of Morgan Stanley. Please go ahead.

Yes, good morning everyone. Just on the steel products, the steel fabrication business, you did mention that profitability has moderated, although it remains quite strong above pre-COVID levels. Can you provide a little bit more color regarding your order book, your backlog? Where does it extend to? And any sort of magnitude of the potential continued deceleration if that is what you're seeing in the fourth quarter and perhaps into the 2024 year in terms of pricing and volumes? Anything will be quite important for us.

Yes, Carlos, thank you for the question. I'll start off and then ask Brad True to provide some insight. We will not be sharing any pricing predictions for the latter half of this year or into 2024. However, I want to emphasize that context is crucial when discussing our steel products segment. This segment is currently responsible for 40% of our overall net earnings, which has been a significant opportunity for Nucor. Over the past seven quarters, it has generated more than $1 billion each quarter, totaling $7 billion in earnings, making it a strong growth platform for us. While we have seen a softening, with a decrease from the peak levels of 2021 and 2022, we are not experiencing a drastic drop in orders. The backlog is softening, but it remains 20% to 25% above pre-pandemic levels. We are still hopeful as we close out 2023 and move into 2024, with some backlogs extending into Q2 already, along with favorable pricing. Brad, do you have any additional details to share?

Yes. Thanks, Leon. As Leon mentioned, backlogs have come down some but are still well above pre-pandemic levels. We have strong pricing in our backlog. We'll see some seasonal slowdown as we normally do this time of year, but we'll still have great results and strong earnings in Q4. One thing I would mention in addition is our diverse product portfolio continues to differentiate Nucor. While we saw moderating pricing and volume mainly driven by warehouse demand in our joist and deck business, we saw near-record and record earnings in our pre-engineered metal buildings businesses, our insulated metal panel business and rebar fabrication. All three had stronger earnings quarter-over-quarter. Again, we'll see some seasonal slowdown in construction, but we really believe there's been a structural shift in the earnings profile of our fab product businesses. The other thing we're seeing is a lot of cross-selling opportunities. We are bringing multiproduct solutions to our customers that bring value to them, bring value to Nucor in a way we've never done in the past.

Thank you for that. I would like to press on the point. What do you think has changed compared to pre-pandemic conditions that has enabled the company to secure a higher price and, consequently, much higher margins than in the past? Can you identify something fundamentally different from what we previously experienced, considering that the construction market is softening? Wouldn't that potentially lead to a looser market and thus lower your pricing?

Carlos, look, what I would touch on immediately out of the gate is what Brad just mentioned, which is our product breadth is a key differentiator. We are not underestimating the entire commercial team at Nucor. We're approaching that market to look and say, how do we provide a solution set not just provide and sell a product. So our teams, our Construction Solutions group, our Energy Solutions groups are going out now and meeting with customers, attaching them to maybe areas and products that weren't traditionally purchased either mill direct or that weren't coupled together that we now can bring to bear as an entire offering to provide a solution set. As we think about the manufacturing build-out and warehouse build-out, how do we now look to offer again, the complete solution, not just in piece or part on a single product. So I would tell you that this is gaining a lot of traction and intention. The other piece is sustainability. There are a lot of people that are trademarked and branded their products in the green space, but very few, if any, in the world at our scale. So the scale of which we're running our iconic products and net zero products today is getting a lot of attention, not just through the OEMs in automotive. There's a much more diverse customer set today that we're seeing that are demanding those products across the industry.

Great. Thank you. Sorry.

Add one other element to that. You'll recall you followed us for a long time, but Nucor took some actions several years ago to restructure a few different businesses in that downstream steel products group. While that's not something we really love doing, the teams did a wonderful job to bring efficiencies within our own systems there to use it. The predominant reason is exactly what Leon outlined.

All right. Great. Thank you.

Thanks, Carlos.

The next question is from Bill Peterson of JPMorgan. Please go ahead.

Yes. Hi. Thanks for taking the questions. A couple, I guess, market-related questions. So if we think about the steel market today, I'm trying to get a sense of how you're anticipating the market reactions to maybe a prolonged UAW strike versus maybe in the median end, especially in the context of we've seen some mill discipline in the past few months and some of the maintenance extended. Just to get a sense of how the reaction would be under those two scenarios?

I'll start with the first question. I'm not sure I fully understood the second part, Bill, so please feel free to re-ask it if needed. Nucor's current exposure to the automotive sector is approximately 1.5 million tons, which accounts for about 5% or 6% of our total volume, so it's not a significant exposure for us. We are closely monitoring the automotive sector in the U.S. and the overall economy. If this situation continues for an extended period, it could have a more significant impact on the broader industry. However, we remain enthusiastic and committed to doubling our capacity from 1.5 million tons to around 3 million tons in the next 3 to 5 years. Over the past several years, we have continued to grow and have established ourselves as a preferred supplier, winning the GM Supplier of the Year Award for four consecutive years. We are excited about our team's efforts to produce some of the most advanced high-strength steels available. Despite some statements from competitors, Nucor is well-positioned to produce the most advanced grades needed by the U.S. auto industry. In the wider context, the longer this situation lasts, the more we will see effects on the overall economy, but it should not have a significant impact on Nucor. I hope this situation resolves quickly so we can move forward and continue to generate results. There is still a lot of demand out there, and even with the strike, the expectation is that around 15.2 to 15.3 million units will be produced in 2023. I hope we can get back on track and keep supplying that market.

Yes. No, that addresses the question. I had a question on CapEx. You talked about the CapEx now projected at $2.4 billion versus prior $3 billion. I guess how should we start thinking about next year, I guess, with the additional $600 million? And I guess, even maybe over a few years, what does the normalized level start to look like for the company, given the projects you've outlined?

Yes. Hey, Bill. Thanks for the question. So I think it's a good indicator. First of all, we will give guidance on the year after we get approval from our Board on capital spending, which we do at the end of every year. So stay tuned on our next call, we'll give a more precise update. But directionally, you should assume that our capital spending will be heavier than historic averages. When you look at the pipeline, some of the bigger projects coming through right now, you can see that we're going to be spending more over the next year or two. As a framework item for you to help in some of your modeling, our maintenance CapEx, what we consider maintenance, that we would include spares and safety-related CapEx as well, and that’s probably somewhere around $600 million a year. We've given a little bit of the Investor Relations team put out the slide deck sometime around the first or second quarter that showed some of the larger projects getting spent this year versus next year. You can use that as a good framework for estimating your next year fee.

Great. Thanks for that. If I could sneak one more, kind of, again, a bigger picture. We were aware that the U.S. may be looking to remove the EU tariff rate quotas. Understanding that nothing was concluded at this time, and it remains fluid. I guess how would you see this impacting the U.S. steel market? What are the potential outcomes should the quotas be increased? I'm asking in the context of Nucor's obviously been an important part of the U.S. steel market.

Yes, Bill, look, there's a lot going on. The talks today with the global arrangement in the European Union. We've seen over the last three years us move from a tariff to a tariff rate quota. The important picture really has been pretty consistent over the last several years. It's still probably a little high in some areas, but that 20%, 21%, 22% of the overall market. Again, I think a healthier number is in that 15%, 16%, but I don't see a material change because we have it when we watch the USMCA and perhaps did the Corus agreement with Korea, and the agreements with Brazil and other nations, we haven't seen that open up the floodgates. One of the bright spots is the confidence that I have in Secretary Raimondo, Commerce Secretary or USTR and Katherine Tai, her counsel. They are very accomplished leaders, and they know this industry incredibly well, and Nucor will remain a tireless advocate to make sure we create a level playing field in the United States. Those three leaders really understand this industry well, and they're doing a really nice job of making sure that shifting to a TRQ does not open up the floodgates to see a massive uptick in dumping legally or subsidized steels into the U.S.

Yes, thanks for those insights.

Thanks, Bill.

The next question is from Martin Englert of Seaport. Please go ahead.

Hello. Good morning, everyone.

Good morning.

Estimated steel conversion costs for the quarter had increased to around $518 per ton. While I understand some of it includes some substrate costs, can you discuss some of the sequential impacts qualitatively both on anything to do with substrate as well as the true underlying conversion costs? I think you alluded to some of this related to the lower utilization quarter-on-quarter in your prepared remarks as well.

Martin, thanks for the question. I think you summed that up actually pretty well. Utilization rates have a big impact on the cost; that's a major driver, and you highlighted that. We also saw a cost increase in supplies and services and consumables. So these are product-related costs. I think what's important too, Martin, is to keep in mind, in general, when you look year-over-year, commercial costs are down, and I think that's encouraging against the backdrop of what we would have had. We were having this conversation a year ago; we were all concerned about inflationary pressures in the cost system. Those appear to have moderated notwithstanding the quarter-over-quarter changes we had, which were predominantly due to our own production choices of the company. Is that helpful?

Yes, helpful. Anything with pivots with substrate costs or not a material impact quarter-on-quarter.

By substrate, you mean raw materials?

Meaning when you have that, if you need to purchase substrates that wouldn't be captured in the ferrous cost, right?

Yes. That's correct, Martin. That’s a good point. The slab purchases at CSI, we record in consumables, not in the raw materials. So that does have an impact. That's part of the change that you're seeing that's not reflected in the raw material scrap numbers.

Okay, I understand. I'm trying to interpret your comments regarding inflation and its implications, as well as the concerns we had a year ago. When reflecting on conversion costs from the latter half of last year, it seems there might be a slight increase in those costs due to the anticipated lower volumes and reduced utilization in the steel business. However, you mentioned that this quarter, the costs were actually lower than the comparable period from last year. Is that the correct way to consider this situation?

Yes. I think if you're forecasting for the fourth quarter, you might expect costs to remain relatively stable compared to the previous quarter rather than seeing an increase. This is due to current trends; for example, sheet prices have likely stabilized. This will affect how costs are processed within our system. Therefore, you might not experience the same rate of increase on a per ton basis heading into the fourth quarter as you did in the third quarter.

Understood. Could we briefly discuss seasonality in 4Q within the steel business? Recent years, some of the sequential declines have been rather steep in excess of 10%. Before that, it was kind of around mid-single digits. I think you had commented in prepared remarks earlier in the discussion of about anticipating maybe a small sequential decline in volumes in the fourth quarter here. Any other color to add there or thoughts?

Yes, Martin, considering the current situation and what Brad mentioned regarding downstream products, order book, and backlog, it seems that the trend is moving closer to historic averages rather than the volatility seen over the past year or two, which is likely a fair assessment.

Okay. If I could one last one, again, that's going to come back to some of the prepared remarks on expecting declines in pricing across the three business segments into 4Q here, but specifically narrowing in on steel products here. It was a fairly small decline of about $47 per ton sequentially. Thinking about the commentary on the backlog extending into next year and still good pricing off from peak. But any color regarding the cadence of steel products pricing 4Q versus 3Q, whether it would be something on a $50 or something differing in magnitude?

Hey, Martin, it's Leon. I’m not sure we will provide additional details on the pricing outlook. We have noted some softness as we approach the last quarter of this year, especially in our steel products, which have generated significant returns. Additionally, there’s been a fundamental shift in the overall market, leading to a reset in pricing levels that seem more sustainable. While we experienced some softness heading into the last quarter, the resilience of that sector has been impressive, dating back to the pandemic. We see it as one of our strongest performers as we enter 2024, and we expect this trend to continue.

Okay. I appreciate all the color and nice job navigating the down market. Thank you.

Thanks, Martin.

The next question is from Katja Jancic of BMO Capital Markets. Please go ahead.

Hi. Thank you for taking my questions. Quickly on the Brandenburg Plate Mill, can you let us know what the production level was this quarter? And how we should think about the ramp-up at the mill in 4Q and also into next year?

Yes, Katja, this is Al Behr. Thank you for the questions. I’d like to make some comments about the ramp-up in Brandenburg. There are many aspects of the mill's capabilities that are progressing well. Our strategy for building Brandenburg was to enhance our plate production. We achieved several milestones this quarter, including running the caster at full capacity and successfully cross-rolling plate close to the mill's full width of 168 inches. We've also commissioned our continuous heat treat lines. The team is diligently working to reach important milestones. Regarding volume, we previously projected about 300,000 tons in the second half, but we now expect it to be closer to 160,000 tons. This is partly due to the mill's inherent complexities, equipment, software, and automation challenges. Additionally, we made a strategic decision to utilize Brandenburg for its intended purpose, which is to target market sections where we haven't been able to compete effectively. Instead of just focusing on volume targets that could negatively affect the returns from our other two plate mills, we want to be strategic about how we increase production. Thus, the best estimate I can provide for the second half is around 160,000 tons total. We are also looking ahead to the following year.

And for next year, is there any color you can provide about the ramp-up, or how much it could produce?

Yes. I would say we'd be closer to what we would have intended for the run rate through this half. I think we'll be up north of 0.5 million tons for the year and probably more than that, but we'll continue to stay focused on driving incremental return through the group and being as strategic as we can about using those tons to our best strategic advantage.

Perfect. Again just quickly on the tax rate. It seems like the tax rate this quarter was a little lower. How should we think about it in 4Q? Is there anything we should be thinking about there?

Yes. I think the guidance on the tax rate is that will move around a little bit with how you believe the year is going to end up. You pay your taxes quarterly, but it's based on an annual estimate. I'll let you use your own modeling to estimate what you think the fourth quarter is.

Okay. Thank you very much.

The next question is from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

Hey, good morning. Steve, I just wanted to qualify the comment you made about the fourth quarter decline being more than that of the third quarter decline on a sequential basis. Were you talking about absolute EBITDA dollars? Or were you talking about more of a percentage?

Yes. Hey, Phil. Thanks for the question. On the fourth quarter outlook, that's really more about the total EBITDA outlook. But I think if you're looking at the change that happened in the third quarter, that's a very good indication for the direction that we are seeing headed into the fourth quarter if you want some framework. So again, I'll let you decide how you want to fit that into your own estimates.

And then on Gallatin, did you provide any information on the state of that project?

Yes, Phil, I'll ask Rex Query to give you an update, part of his group, the Sheet group.

Yes, Phil, thanks for the question. Currently as we mentioned in our second quarter call, we are at full run-rate capability. With that said, during the third quarter, we continue to work on some of our automation issues, which have impacted our consistency. But really from a production standpoint, as we look at our entire group, we've gauged on what demand is in the marketplace. That’s really what we focused on. But again, just to reiterate, I mean, in Gallatin we are on full run rate capacity at this point.

Thank you. Lastly for me is on the new announcement in the Northwest with the rebar micro mill. I guess really what drove that decision? What are the expectations for when that could be contributing?

Yes, Phil, again, it was an announcement that we are going to work through, and John Hollatz and his teams are going to work through and look at the diligence and all the variables that go into bringing that project to fruition. The drivers of that, I think John touched on really well. That mill has been around since 1905, and as that city has grown up, expanding that footprint becomes a significant challenge. How do we do that? How do we continue to serve our customers? How do we continue to serve those markets and gain new customers? Again, we see some opportunities out there that are compelling that we think the strategies that the team is engaged on are going to potentially effectuate a great long-term outcome. Seattle has been an incredible producer for Nucor, for our customers, shareholders. Again, against that backdrop of providing the most capabilities for our customers are really the drivers behind this exploration and our future.

Thanks, Leon. I had one further, and I apologize, but it just popped in my mind here. What's the current appetite for M&A across the spectrum, whether that's in mills or fab or recycling? I know you've made a lot of internal investments so you can be more in control of the long-term asset quality and cost base of what you're investing in. But what's the appetite to add on that capability with M&A? And how willing are any of the potential targets you're looking at? Thanks.

We've generated a significant amount of free cash flow and currently hold a substantial cash reserve, along with the best credit rating in the industry. That being said, there is no sense of urgency; we weren't desperate in '21 and '22, and the record years for Nucor were a result of a disciplined approach to growth. We are committed to growth and investment while continuing to maximize returns for our shareholders and being responsible stewards of their capital. We plan to return 40% to our shareholders and maintain a strong credit rating while further investing for the future. Our appetite for opportunities remains robust, but we are approaching this with discipline, ensuring that we do not invest recklessly. We are focused on opportunities that will create economic value added for our shareholders. This is guided by Nucor's culture, which has been integral to our success for 60 years, as we evaluate potential companies for engagement and integration into Nucor.

The next question is from Timna Tanners of Wolfe Research. Please go ahead.

Good morning everyone. I wanted to follow up on Phil's question and rephrase it a bit. On a recent call, we heard that there is a perspective from one of the other steel mills suggesting that further consolidation in the flat-rolled sector might be possible. Do you believe that more consolidation is feasible, given that you have been investing to grow organically? Additionally, do you think that this consolidation could happen without facing any antitrust issues?

Yes. Look, Timna, I think like you, we are watching that play out as well. We'll see how that shakes out in the coming weeks, months, and years. But again, what I cannot speculate on some of that, what I can tell you for sure is our strategy is clear in how we want to think about growing this company and investing for our future. Historically, what we've seen is the industry is consolidated. That's been a healthy thing for the steel industry. It's been a good outcome. So whether or not certain companies meet DOJ hurdles, I can't even begin to speculate on, but again, like you, we are watching how this plays out, and we'll stay tuned.

Okay. So let me switch gears a little bit and kind of ask, on the flat-rolled side, you've been ramping up Gallatin and Brandenburg for a while, but it doesn't seem like you're running flat-rolled anywhere near full-out. If we look at the sheet volumes, they're down quarter-over-quarter despite Gallatin ramping up. So you're running your sheet at less than full utilization, but you're also starting a new sheet mill. Is that going to displace any capacity? Or are you thinking that will be incremental? Because I know on the rebar side, you've been pretty disciplined and not adding a lot of extra capacity, but is flat-rolled a different market for a reason that I might be missing? It would be great to hear your thoughts on that. Thanks.

I want to share a couple of perspectives. First, I want to separate Gallatin and Brandenburg. Brandenburg has not been in the startup phase for a while. They are on track and successfully completed that project on schedule, on time, and within budget, achieving one of the highest safety records in Nucor's history. I am extremely proud of their execution and how the plate group is performing in the market. This is quite different from Gallatin, where I am not sure everyone is aware of the circumstances. During my visits to Gallatin, I saw that they had to adapt the integration of what we refer to as a brownfield, but in reality, it felt more like a greenfield project, especially regarding automation and control systems needed for the new equipment to operate. The team has worked exceptionally well and safely, but there were significant startup challenges that set us back by 6 to 8 months from our initial expectations. In response to your question about whether we will tie utilization rates to outcomes, the answer is no. We will ensure that the tons we bring to the market are balanced. We will not just run 1-inch plate at Brandenburg simply because they can if Hertford or Tuscaloosa is already able to produce that and meet customer demands. Rex or Al, do you have any additional comments?

Tim, this is Rex Query. As I assess our capabilities across our sheet mills, we are organizing our product offerings based on the capacity and efficiency levels of our various plants. For instance, our pickle galvanizing line at Gallatin has consistently supported the automotive market, particularly for heavy frame applications, despite the changes happening there. Additionally, we have plans for expansion in the coated side, including a new Gallatin project in Berkley, which will provide significant automotive supply from that facility. We are focused on enhancing our capabilities through investments in various areas, ensuring we not only increase volume but also improve value for our customers. Our primary focus will be on profitability and margins moving forward.

I was just trying to get an answer to the question about the sheet mills. Will the additional Westford facility provide added capacity, or as you mentioned regarding rebar, could it replace existing capacity? If it does provide added capacity, is there room for an additional 3 million tons in the market? Thank you.

Yes. Look, I think it's a fair question, and it's going to be both. This is the short answer. Part of the driver for that, as we think about the sustainability model and where our customer segment is asking us to go and has been asking us to go. That's going to be an incredible need. Don't forget that that mill is going to sit in the largest sheet-consuming region in the United States, where Nucor is underserved. We don't have as much market share that we know we are going to be able to go in and provide for our customers. There’s no doubt that both pieces of that strategy are going to come into play in the coming years as we ramp that up. No, we are not building 3 million tons of capacity that we think we're going to run in 2.1. We have full expectations that we are going to build it to 3, and it's going to run at 3.

Okay. Thank you.

What you just said, the incrementally in new capacity.

Got it. Thanks again.

This concludes our question-and-answer session. I would like to turn the conference back over to Leon Topalian for closing remarks.

In closing, I'd like to thank our Nucor team members for the way you've executed our growth strategy and continue to raise the bar on our safety. Let's carry this performance through and finish the rest of this year and make this the fifth straight year of record performance. I'd like to also thank our customers for the trust you place in us with each and every order. Finally, thank you to our shareholders and the trust you place in us to be great stewards of the capital. Thank you all for your interest in Nucor, and have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.