Good day and welcome to the Steel Dynamics First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management's remarks, we'll be conducting a question-and-answer session and instructions will follow at that time. Please be advised this call is being recorded today, April 20, 2023, and your participation implies consent to our recording of this call. If you do not agree to these terms, please disconnect. At this time, I would like to turn the conference over to David Lipschitz, Director, Investor Relations. Please go ahead.

Thank you, Matthew. Good morning, and welcome to Steel Dynamics first quarter 2023 earnings conference call. As a reminder, today's call is being recorded and will be available on our website for replay later today. Leading today's call are Mark Millett, Chairman, and Chief Executive Officer of Steel Dynamics; Theresa Wagler, Executive Vice President and Chief Financial Officer; and Barry Schneider, President and Chief Operating Officer. The other members of our senior leadership team are joining us on the call individually. Some of today's statements, which speak only as of this date, may be forward-looking and predictive, typically preceded by believe, expect, anticipate or words of similar meaning. They are intended to be protected by the Private Securities Litigation Reform Act of 1995 and should actual results turn out differently. Such statements involve risks and uncertainties related to integrating or starting up new assets, the aluminum industry, the use of estimates and assumptions in connection with anticipated project returns and our steel, metals recycling and fabrication businesses as well as to general business and economic condition. Examples of these are described in the related press release as well as in our annual filed SEC Form 10-K under the headings Forward-looking Statements and Risk Factors, found on the internet at www.sec.gov, and is applicable, in any later SEC Form 10-Q. You will also find any referenced non-GAAP financial measures reconciled to the most directly compared GAAP measures in the press release issued yesterday entitled Steel Dynamics reports first quarter 2023 results. And now I'm pleased to turn the call over to Mark.

Thank you, David. Good morning, everybody. We certainly appreciate you all joining us for our first quarter earnings call today. As you read, once again our teams achieved a solid financial and operational quarter. It was highlighted by, most importantly, a consecutive quarter of significant safety improvement. 82% of our facilities were incident-free, and most importantly, our focus appears to be minimizing severity rate. We had record steel shipments of 3.3 million tons and adjusted EBITDA generation of a strong $950 million. Sinton's performance is showing improvement with a clear path to profitability in the second quarter '23 given the expectation of increased volumes. We are also making great progress on our aluminum flat rolled investment. There's great excitement within the prospective customer base for a new and innovative supply chain solution. As always, I'm incredibly proud of our teams. They are the foundation of our company and they drive our success. It is their culture of excellence and the intentional diversification of our product portfolio that allows us to maintain higher utilization rates and maximize opportunities, resulting in higher lows and higher highs through all market cycles and producing superior financial metrics. However, for safety, great financial performance is of no import without having our team safe. Often, employees are described as a company's most important resource. But for us, for Steel Dynamics, they're more than that; they're family. And now we number over 12,000 strong. We're focused to provide the very best for their health, safety, and welfare. We're actively engaged in safety at all times, keeping it top of mind and an active conversation at every level of the organization. With that focus, as I mentioned, the team's safety performance further improved in the first quarter '23. But there's more to do, and we will not rest until we consistently achieve our goal of zero injuries throughout our organization. So with that said, and before I pursue the quarter, Theresa.

Good morning, everyone. It's great to join you. I had my sincere appreciation and congratulations to the entire team for another strong operational and financial performance this quarter. Our first quarter 2023 net income was $637 million or $3.70 per diluted share, which includes costs of about $77 million, or $0.31 per diluted share associated with the startup of our Sinton Texas flat-rolled steel mill. Excluding those costs, first quarter 2023 adjusted net income was $691 million or $4.01 per diluted share. First quarter 2023 revenues of $4.9 billion were slightly higher than sequential fourth quarter results driven by record steel volume and increased metals recycling prices. Our first quarter operating income of $835 million was 10% higher than fourth quarter results driven by record steel volume. As we discussed our business this morning, we see positive industry fundamentals for 2023 and beyond, and we're focused toward a continued transformational growth initiative. Our steel operations generated strong operating income of $345 million in the first quarter. Record shipments of 3.3 million tons were partially offset by lower realized selling values. I also want to say congratulations to our structural and rail division, as they had another record earnings quarter supported by a strong construction market. Our flat-rolled steel mills were negatively impacted during the quarter with high cost pig iron that was purchased in early 2022 during the early stages of Russia's invasion of Ukraine. Based on current pig iron prices, earnings were impacted by approximately $50 million in the first quarter, but we have worked through that higher-priced inventory now. Operating income from our metals recycling operations was $43 million, over threefold fourth quarter results due to increased demand, driving higher prices and volume. Our Mexican recycling operations have proven to be a strategic key for both sourcing scrap for our southern steel mills and driving profitability. Thanks to the Zimmer and Roka teams. We appreciate you. The team continues to effectively leverage the strength of our circular manufacturing operating model, benefiting both our steel and metals recycling operations by providing higher quality scrap, which improves furnace efficiency and reduces companywide working capital requirements. Our steel fabrication operations achieved strong operating income in the quarter of $551 million, but lower than record fourth quarter results due primarily to seasonally lower shipments. Steel joists and deck demand remains very strong as evidenced by continued robust order activity. Specifically, our March order activity was extraordinarily strong. This is resulting in a strong order backlog extending into October and November of 2023. Based on our backlog, customer sentiment, and manufacturing momentum, we expect steel fabrication earnings to remain strong throughout the year, including the second half. Our cash generation continues to be strong based on our differentiated circular business model and highly variable cost structure. At March 31, we had record liquidity of $3.5 billion, comprised of cash and short-term investments of $2.3 billion, and our fully available unsecured revolver of $1.2 billion. During the first quarter of 2023, we generated cash from operations of $734 million. We spent approximately $226 million on capital expenditures. We believe for the full-year of 2023, capital investments will be in the range of $1.5 billion, the majority of which relates to our aluminum flat-roll mill investments. In February, we increased our cash dividend 25% to $0.425 per common share. Based on our ability to consistently generate strong cash flow and aligned with our growth strategy. We also purchased $354 million of our common stock, representing approximately 2% of our outstanding shares. At March 31, $980 million remained authorized for repurchase under our new plan. Since 2017, we've increased our cash dividend per share by 174%, and we've repurchased $4.5 billion of our common stock, representing over 30% of our outstanding shares. These actions reflect the strength of our capital foundation and the consistently strong cash flow generation capability. We continue to be optimistic and confident in our future. Our capital allocation strategy prioritizes high-return strategic growth with shareholder distributions comprised of a base positive dividend profile that's complemented with a variable share repurchase program. While we remain dedicated to preserving our investment-grade credit designation. We've strategically placed ourselves in a position of strength to have a sustainable capital foundation that provides the opportunity for meaningful strategic growth and strong shareholder returns, while maintaining investment grade metrics. Our free cash flow profile has fundamentally changed over the last five years from an annual average of $580 million to today's average of $2.6 billion. Our aluminum growth strategy is consistent with our unchanged capital allocation philosophy. We will readily fund our flat-rolled aluminum investments with available cash and cash flow from operations. We also plan to continue strong and responsible shareholder distribution as we have clearly demonstrated. We're squarely positioned for the continuation of sustainable optimized long-term value creation. Sustainability is also a significant part of our long-term value creation strategy, and we're dedicated to our people, our communities, and our environment. We are committed to operating our business with the highest integrity. In that regard, we will remain excited about our joint venture with Aymium, a leading producer of renewable biocarbon products. We believe our first joint facility could decrease our steel Scope 1 greenhouse gas emissions by as much as 35%. I want to specifically thank the biocarbon solutions team in Columbus, Mississippi that are doing a fantastic job, and we still hope to start operating this facility in early 2024. We have an actionable path towards carbon neutrality that is more manageable and we believe considerably less expensive than what may lay ahead for many of our industry peers. Our sustainability and carbon reduction strategy is an ongoing journey, and we're moving forward with the intention to make a positive difference. We plan to continue to address these matters and to play a leadership role moving forward. Before I hand the call back to Mark, for those of you that keep specific track of our flat-rolled shipments in the first quarter, we had hot-rolled and P&O shipments of 1,006,000. We had cold-rolled shipments of 132,000 and coated shipments of 1,192,000 tons. Mark?

Thank you, Theresa. Although there was some seasonality in shipping volume for fabrication, we saw yet another strong quarter driven by the sustained market strength and absolutely extraordinary execution by our team. The productivity of our operations is incredible. So thank you for all for the great job you all are doing up there. We continue to have high expectations for the fabrication business. We believe non-residential construction markets will continue to be robust in the coming years. Non-residential starts and build rates are forecast to remain strong throughout '23, and related spending has been significantly higher so far in '23 compared to last year at this time. There'll be continued onshoring of manufacturing businesses and infrastructure spending programs should provide momentum for additional incremental construction spending. More real time, our customers tell us demand remains solid, as confirmed by strong order entry rates, especially the most recent March order activity. Steel fabrication order backlog, as Theresa suggested, extends seven to eight months into October, November with strong pricing dynamics. Not only is it a significant contributor unto itself, our fabrication platform provides meaningful pull-through volume for our steel mills, particularly important in softer markets, allowing for higher through-cycle utilization rates. It also provides an effective natural hedge to lower steel prices. Our metals recycling platform achieved a strong first quarter. Congratulations to them. They are on a path to higher volumes and increased metal margin. After seven consecutive months of declining pricing in '22, ferrous scrap prices improved in December and throughout the first quarter, increasing well over $100 per gross ton. We expect scrap pricing to remain fairly steady at these higher levels based on increased seasonal North American steel mill demand in Q2 and Q3. Our metals recycling geographic footprint provides a strategic competitive advantage for our steel mills and our scrap generating customers. In particular, our growing Mexican volumes enhance our Columbus and Sinton raw material positions. It will also strategically support aluminum scrap procurement for our future flat-rolled aluminum investments. Our metals recycling team is working closely with both our steel and aluminum teams to expand scrap separation capabilities through process and technology solutions. Our low residual shred 1 is just one example of that. The impact of these efforts, along with others in the industry, is demonstrated that innovation will provide ample ferrous and nonferrous scrap supply in the years ahead. Our steel operations achieved record quarterly shipments of 3.3 million tons and solid financial results in the first quarter. The steel production utilization rate excluding Sinton was 94% compared to a domestic industry rate of 75%. Our higher utilization rates are clearly demonstrated throughout all market cycles. Value-added diversified product offerings provide broad optionality across all market segments. Enhanced supply chain solutions are driving customer preference and were supported by the internal pull-through manufacturing volume. Our higher through-cycle utilization rate is a key differentiator and supports our strong and growing through-cycle cash generation capability and best-in-class financial metrics. Looking forward, customer order entry is good and backlogs are solid. March in particular was a very strong booking month for the steel platform. Auto is solid. Auto production is expected to increase in '23 over '22 rates and dealer inventories have improved but still remain below historical norms. Build rate in '22 was some 14.3 million units, and we expect '23 to show 15.1 and a little higher in '24. Non-residential construction remains strong, as evidenced by strong fabrication backlog and long product steel volumes. Our long products are seasonally solid from a backlog perspective, and onshoring and infrastructure spending should provide further meaningful support in the coming years. Residential construction has softened to some degree, but that erosion appears to be easing a little, but that segment tends to be a small part of our overall portfolio. Oil and gas activity is very strong, driving improved orders for OCTG and line pipe, and solar continues to grow appreciably. At Sinton, we produced 420,000 tons of hot band in the quarter, which is 56% of eventual capacity. Fifth and daily records were achieved in March, clearly demonstrating the mill's ability to reach the 3 million tons. As we discussed in our first quarter call, production through the quarter was impacted by certain supply chain issues related to bearings and rolls needed for the caster. This issue has now been resolved, and we expect a significant advance in productivity and earnings in Q2, and we should see the mill being EBITDA positive in Q2 for sure. We believe full-year capacity utilization could be in the range of 80% of rated capacity. The team has clearly demonstrated the key competitive advantages of the Texas Steel Mill. Full product dimensional capability has been proven. We have gone down to 50-ish and all the way up to one inch and all the way out to 84-inch width. The customers are reporting that the surface quality is absolutely exceptional. The hot strip mill design has allowed for thermal mechanical rolling, which allows the production of higher strength grades with lower alloy content with a significant reduction in production cost. Grade 80, Grade 100 have been achieved, and we've already been approved and shipped some API grades. In my mind, this affirms our technical and process choices. And there's no doubt that this is the next generation electric arc furnace flat-rolled steel technology of choice. We certainly have gained strong market acceptance. Commercially, we can sell everything we make and then some. With the caster segment issue resolved, we're able now to fully leverage our heavy gauge wide capability. Our onsite customers are busy with two of them already expanding their capabilities. Our exceptional through-cycle operating financial performance continues to support our cash generation and growth investment strategies. Relative to our expansion into aluminum, the market response from both current and new customers across our targeted market segments has been incredible. To recap the project, that's a 650,000 metric ton aluminum flat-rolled facility that will be located in Columbus, Mississippi. The state-of-the-art facility serving the sustainable beverage and packaging, automotive and industrial sectors reproduces roughly 300,000 metric tons of can sheet, 200,000 metric tons of auto and 150,000 metric tons of industrial alloy. On-site melt cast slab capacity will be 600,000 metric tons, and that'll be supported by two satellite recycled aluminum slab casting centers, one in Central Mexico. We've already purchased the property there, and we're pursuing a Southwest U.S. site as we speak. Technology will include two cast lines, coating lines, and dense stream processing and packaging. We've expanded the project scope to include additional scrap processing and treatment to maximize aluminum recycle content. All the principal equipment is already on order, and we expect the roller mill to start up mid-'25, the Mexico Slab Center in the second half of '24, and the Southwest Slab Center probably in the first quarter of '25. The total project cost, including the recycled slab centers, is expected to be $2.5 billion, 100% to be funded with available cash and cash flow from operations. As we've said in the past, the expectation is to add somewhere between $650 million to $700 million of through-cycle annual EBITDA for the aluminum project, plus likely $40 million to $50 million for Omni. I think it's a very, very compelling investment premise. We see a market environment not unlike that in the steel industry when we started SDI 30 years ago. It's predominantly owned assets, little reinvestment, heavy legacy costs, inefficient with high cost operations. A significant aluminum flat roll supply deficit exists in North America and is expected to grow in the coming years. There is business alignment; we can leverage our core competencies of our construction strength and operational know-how, and also leverage Omni's recycling footprint as Omni is the largest North American aluminum scrap recycler today. SDI’s culture will drive high efficiency and low cost and throughout the industry, there's a very steep cost curve which is going to support margin—a very, very cost-effective, high-return growth initiative. We're excited and impassioned by our future growth opportunities as they will continue the high returning growth momentum we have consistently demonstrated over the years. We were added to the S&P 500 Index in '22. We are arguably one of the top five steel producers in the world as measured by market cap and the third largest in North America relative to capacity. All these achievements in a relatively short time frame. We celebrate our 30th year in our business in '23, and there are only better things to come. Our teams are our foundation, and I thank each of them for their passion and their dedication, and we are committed to them. I remind those listening today that safety for yourselves, your families, and each other is our highest priority. Our culture and business model continue to positively differentiate our performance, leading to best-in-class financial metrics. We're no longer a pure steel company, but an integrated metals business, providing enhanced supply chain solutions to the industry, in turn mitigating volatility and cash flow generation through all market cycles. We're competitively positioned and continue to focus on providing superior value for our company, customers, team members, and shareholders alike. We look forward to creating new opportunities for all of us today and in the many years ahead. So, with that all said, I'd like to open the floor up for questions.

Thank you. Your first question is from Emily Chieng from Goldman Sachs. Your line is live.

Good morning, Mark and Theresa. Thank you for taking my questions this morning. I wanted to ask a bit about the fabrication volume expectation there and just trying to take a look at the 1Q number. It certainly was a little weaker than anticipated. You mentioned that there was some seasonality and some customer supply chain constraints there. Can you provide some color as to what they were? And how we move past this and anything you'd highlight as we look forward to the rest of the year as to what that volume trajectory could look like?

Thanks, Emily. It's a great question. And there was seasonality in the first quarter, but there was also some movement because some of the customers are experiencing supply chain constraints as it relates to construction labor and as it relates to materials. So it's just simply pushing out orders. It's not changing the entirety of the volume itself. So the order backlog with some of these projects has actually pushed out even further than into that October, November time frame. So it's a shifting of volume, I guess is how I would phrase it. As Mark mentioned, and I mentioned in my notes as well, March was an extraordinary order entry for our steel and joists deck business. And that really is, I think, a testament to the strength of that market today. If you think about the benefits that are kind of outside of just the normal construction arena, if you think about manufacturing that has momentum behind it because of the Inflation Reduction Act, because of the infrastructure program, manufacturing onshoring, etc., we really expect our fabrication business to experience very strong volumes this year as it's supported by those extraneous additional tailwinds.

Thank you. Good morning, Mark and Theresa. A follow-up question on fabrication as well for me. In the past, you've talked about backlog pricing in the $5,000 per ton level. We've been hearing that price has definitely come in a lot from kind of peak levels last year. So I just wanted to get a sense for if you could comment on pricing you're seeing in the market. And then you talked about the March order entry being very good. Can you give us a sense of what the makeup of that backlog or that order entry is? And then if you give any comments on EBITDA per ton expectations?

Curt, you're trying to be tricky. You know, we won't give EBITDA per ton, but I appreciate you trying. As it relates to the order activity, to give you a sense of it, it was well more than double the order activity that we've seen kind of in the more recent time frame, January, February, December time frame. So it was incredibly robust, and most of that activity came from what I'm going to call industrial and manufacturing related business. So I think one needs to keep in mind when people talk about non-residential construction, I think they like to hone in on office space. There are many other categories that relate to what would impact steel joists and deck demand. That's where we're seeing a lot of momentum. So that order activity for us is very much focused on those larger projects. I think that a lot of the funding from those projects are actually already funded, they're not bank-funded, but they're project-oriented funding from large corporations themselves or now there's public funding support related to decarbonization efforts and the Department of Energy and the excess funds that will be coming in those arenas as well. So there are a lot of extra things, I think, that will support the volume going forward. But for us, it's primarily in that industrial manufacturing base at this point in time. As it relates to pricing, the commercial teams would be very upset with me. Barry is laughing if I were to try to give any commercial guidance at this point. I would tell you that, as we've said in the past, the average price in the entirety of the order backlog is still very high from a historic perspective. It's not at the peak pricing that we saw, but it's very much aligned with what we have seen for the entirety of last year as an average.

And just for clarity, when we say that the backlog isn't peak pricing, the sustained backlog that's extending out is at very, very, very good past pricing. The new pricing coming in, as you mentioned, is off a little from that for sure, but relative to historic basis, it is way, way higher than the historic norm.

Okay, that's helpful. And then just a quick follow-up on Sinton. As we think about that asset running at 56% utilization but having a net loss of $70 million, we would think that given where metal spreads are today, if that asset could be 70% utilized in the second quarter, it theoretically should make a lot of money, right? But it seems like there's still some kind of lingering startup issues, and you talked about some of the supply chain constraints. So can you help us understand a little bit about maybe the earnings power of that asset later this year or any frame of reference in terms of 2Q, in terms of what you think utilization rates could look like? Thank you.

Certainly. Great question. I'd say if you look at the first quarter and certainly the fourth quarter, you might say a couple of extraneous impacts from a cost perspective. We obviously have higher price pig iron coming through, given our order early last year, second quarter of last year with the Russia and Ukraine crisis. So that is peeling out now through the first quarter and a little bit in April. In anticipation of early startup of the downstream lines, we bought substrate, and again, that was at higher pricing, and that had to come through the system, and that is essentially sort of out of the system today. We were carrying that sort of burden in the fourth quarter and in the first quarter, and some of it will come into the second, but it's substantially reduced. Obviously, the main principal driver is volume. Volume, volume, volume drives the successful performance of any major capital asset, and certainly a startup asset such as this. We were at 56%. Our confidence in the technology, I think at least for me, is driven by windows of absolute amazing performance. Where we've had shifts, we've had weeks where we're at 75%, 80% of capability already. If you look at sequence lengths, which we and our industry for sure is an indication of the effectiveness of the teams and the equipment, we're averaging, I think, a little over 13 heats sequence. We've been as high as 22 heats, 23 heats, and each heat is whatever 200, 210 tons per heat. In my mind, amplifies the capability of the asset. We just have to get the reliability of all the equipment. And again, as you know, Curt, it's in line. So the melt shop, the ladle furnace, the caster, the rock and mill, the finishing mill, everything has to be running in unison. And we're getting there with the segment bearing and role issue behind us; I think we're looking for a sort of a step function improvement here in the next month or two.

Just as a reminder, on a through-cycle basis, we still believe very strongly that sitting when it has four of the value-added lines operating will have a through-cycle EBITDA in the range of $450 to $500 million per year. So that outlook hasn't changed. So it is a significant benefit long term. It's just a matter of this year.

Great. Thank you. I'm just going to try it in a different way without maybe discussing the absolute levels. It is clear that the EBITDA per ton and the profitability of the fabrication business is extraordinary relative to history. It actually started based on what I've seen before the pandemic, but it exploded throughout the pandemic and it has remained at those levels. How do you see the normalization relative to say 2019 or 2017 to '19 average? Do you expect to be able to sustain a significantly higher profitability relative to that '17 to '19 average, even if it is lower than what we're experiencing today? I mean you probably understand that we're trying to figure it out what is a much more normal potential run rate of profitability in that business, just given how extraordinary the results have been? Thank you.

Thank you, Carlos. I understand everyone is trying to assess the situation. Yes, we believe there has been a significant shift in how the commercial side of the steel joist and deck business has developed over the past two years. First, there is substantial volume, and we anticipate that demand will remain strong for quite some time, while supply is limited. In the current and future environment, it's important to consider not only the product itself but also the service associated with it. This service aspect requires time at the mill or facility, which holds value. Customers have come to recognize the importance of both the time and service elements, in addition to the highly engineered product. We see these as structural changes. I can't provide much more than that, but we expect strong volumes this year that will be comparable to last year. Our order backlog extends into October and November, and it features significantly higher prices, which are not far off from average pricing for 2022. We've provided multiple data points to assist you in your estimates.

I would suggest that it's and that's a great question, honestly, because we're wrestling with that. Ourselves right now to be honest, and trying to understand fully some of the approval certification process of can sheet as opposed to auto sheet. The fact that we're creating slab ahead of time will aid that, and the fact that we have on the automotive side some very, very good relationships with two or three key auto producers that are seeking our aluminum. I think that will accelerate that certification process. So, from the standpoint of actual ramp, I would imagine it wouldn't be too much different than you would expect for any facility. Sort of 50% for the first 12 months, 80% for the second 12 months, and then ramping up thereafter. That would be probably as good estimation as I would suggest to you.

Hey, good morning, everyone. Wanted to start off and ask a little bit more color on garage doors. I know you have a great position in garage doors and also on the warehousing side; if you could provide some more color on those end markets?

The garage door segment is experiencing a slight decline, Timna, which aligns with the downturn in the residential market. Usually, when the housing market softens, the replacement business tends to increase. It's not a direct correlation, but there is a noticeable decrease. Regarding the warehouse market, I assume you are referring to distribution warehouse facilities. There's been a lot of discussion about Amazon's overbuilding, but they weren't a major customer for us. Other warehouse distribution companies are not facing the same level of decline. On a positive note, cloud computing and pharmaceuticals are performing exceptionally well. As Theresa pointed out, we are beginning to see a genuine resurgence in reshoring and industrial manufacturing growth, including companies like Tesla and battery production facilities. We are very enthusiastic about the ramp-up of the galvanizing process at Sinton. Currently, we need to support our paint lines, so we are integrating automotive discussions and trials into our production facilities. However, we are also focused on ensuring the entire plant is operational. With all units starting up simultaneously, it is essential for us to supply the paint line and cater to our wider range of customers in the galvanized sector. We are truly excited about the capabilities we have observed in the galvanizing line, especially when combined with our technology on the hot side. Up to this point, we have not started sending material to automotive plants, but we are actively engaging with customers who have confidence in our future, and they are eager to collaborate. When they visit our facility, they recognize a clear path forward. Our technical teams are heavily involved in these discussions and are well-supported by our Columbus operations, which currently handle the bulk of our automotive work. We are looking forward to progress, and it is crucial that we move at a pace that our technical teams are comfortable with, so that once we secure that business, we can assure them of delivering a quality product. The strength of Sinton's diverse product portfolio allows us to tap into various market segments, providing us with increased flexibility. At present, the energy market is exceptionally robust. The OCTG line pipe market is strong and is expected to remain so throughout this year and into the next, particularly with ongoing infrastructure expansion. Interestingly, we are observing a surprising uptick in the energy markets for heavier plate products that we produce at our other mills, especially now that we have addressed the caster issue and can produce full 1-inch thickness. We are able to adapt and navigate through different market segments, which is a significant advantage for Sinton and all our flat-rolled facilities. Well, I think the AMSA situation certainly aided both not just the Mexican market but the U.S. market because Mexican output and capability has been sort of focused or redirected squarely within the Mexican market itself. That's helped us. I think the customer base of AMSA is when you go through a shockwave like this, you sort of reflect on your future. They see a need for optionality. Even when AMSA comes back, I think we're confident, in all honesty, of maintaining a lot of that business. So it's been very fortuitous for us.

Yes, hi. Good morning. Thank you for taking my question. The first one, and I apologize, it's again about the fabrication outlook. You flagged that you're targeting volumes of last year. So strong volumes, is that fair then to assume a strong pickup than in volumes into Q2? And also the second part to that question is maybe on the moving pieces there for the outlook. It's also on the cost side, can you discuss a little bit the cost side there especially into Q2? I mean, we've seen flat steel prices double over the past month. The backlog is kind of locked. So anything you can say there in terms of potential cost pressure into Q2 that would be helpful.

Thanks, Tristan for the question. Yes, traditionally, you're always going to have your strongest construction months and project months and quarters in the second and third quarter. So we absolutely would expect to see stronger volumes in that time frame for our fabrication business, as well. As it relates to cost, we generally sometimes it changes, but we generally keep around eight weeks or so of steel on the ground for our fabrication business. Uniquely, we use primarily flat-rolled steels, a little bit of merchant steels in the process. If you can kind of follow that bouncy ball with how you feel the pricing will look going forward and what's done in the recent past, that should give you some inclination of how the metal margin will move pushing forward into the second quarter.

I want to emphasize the obvious here, because we all tend to sometimes focus near-term, but the New Millennium fabrication business as a whole is incredibly important, A, for pull-through volume, particularly in softer markets, as we said earlier, allowing the higher utilization rate through our steel mill. But it's also in this environment that maybe as steel pricing comes up, you get a little bit of squeeze on the other side. But there's a very strong natural hedge to our business here, and we've been very intentional with our growth into sort of value add, sort of diversification of our portfolio and the businesses that we grow to try and mitigate that volatility of through-cycle cash generation and not be as cyclical as we once were maintaining higher highs and higher lows, for sure.

Yes, so as we talked about it, there was a significant amount of working capital build in 2022. Much of that was not structural; it had to do with us layering on some additional raw materials with pig iron and some additional substrate that Mark mentioned. We have been able to work through most, if not all of that. We still expect to have some working capital give back as we head into the second quarter, as we kind of still right-size some of our inventory levels, etc. So it may not be as significant of a benefit as you've seen in the last two quarters, but we definitely think working capital will be a funding source heading into the second quarter.

Thank you very much. Good morning, everyone. Two quick questions for me. One on steel and one on aluminum. On steel, you're very obviously growing your volumes both quarter-on-quarter and year-on-year, and it certainly looks to be faster than the market. So you guys seem to be capturing market share. Assuming you agree with that, can you give us a little bit of color on where specifically you're capturing market share from peers? Is it non-res? Is it autos? Is it energy – possibly all of the above. But is anything kind of standing out? And maybe also why you're able to capture that market share, obviously. And then secondly, on the aluminum question, obviously, you're targeting automotive, among other sub-industries. Where specifically will the aluminum go in automotive? Is this going into auto body sheet that historically has been dominated by steel and especially steel supplied by the blast furnaces? Is that where you envision the aluminum to go? Those are my two questions. Thank you very much.

Okay. Well, for the standpoint of our increase in volumes, I'd say yes, we are picking up market share. The geographic location of the Sinton, Texas plant is pivotal. Obviously, that was an underserved market. We have access into Mexico now much, much, much cheaper than any other U.S. mill to the tune of, well, we can get it down there for $30, whereas if you're bringing it down from Northern Indiana, it's probably $100 plus. So there's massive geographic sort of advantage for that mill. And we're picking up, as I said, Mexican market. We're picking up energy again because of that location, OCTG and line pipe. So that is one sort of driver. The second driver, I think, and I've got to applaud the automotive team. They've done a phenomenal job over the last two or three years. The traction there is amazing, particularly with the European auto producers, and we're favored because of our carbon footprint and our sustainability profile. Our mills will be, they report, not us, but they report that our Columbus facility and our Butler facility are probably two of the lowest carbon producing facilities in the world. We're gaining a lot of market share from that. I think those are probably the principal gains there. On aluminum, firstly, there is a substantial supply deficit in that industry; in can sheet and aluminum is reliant on a very, very large portion of imports today. We would intend or believe that our low-cost position, our efficiency, and our commercial approach will be very, very well received and will offset some of those imports and pick up the share of growth in that industry. You mentioned kind of the steel aspect. Having aluminum in our portfolio gives us the advantage, I guess, if there is a steel decline in any one area with a pickup in aluminum, we can penetrate that or take advantage of that. Again, the facility is not — in this case, unlike our start in steel, we're not revolutionizing the technology necessarily. It's absolute state-of-the-art technology for sure. But it will have the same capability of any high-class new aluminum facility in the world. So both unexposed and exposed.

Thank you.

Good morning, John.

Congratulations on all the progress. I'm looking at your almost $1 billion of cash flow for uses in the quarter; it's just so large and formidable without Sinton at a positive EBITDA and sheet prices were a little low. The numbers are just so big. My first question is, what will you do with all the money? Would you perhaps invest more in scrap? Ferrous scrap, non-ferrous iron ore, lots of opportunities and raw materials or resources? And second, you had a $418 million deduction from cash flow for accrued expenses. I was just curious, what was such a big accrual?

John, I'll take the last one. That's a simple one. We have a companywide profit-sharing plan. That's how we provide for retirement for all of our 12,000 people. It's simply 8% of pretax earnings. Since we had a record 2022, we were able to give all the employees $422 million in total. That payment went out in March. So that's the reason for the significant change.

So it should really be almost amortized uniformly over the quarters from the standpoint of forecasting cash flow?

Yes. Well, I mean, you could do it that way, but in actuality, it comes out in March. But, yes, you could look at it that way.

And actually, John, if you're within about 100 miles of any of our facilities on March the 15th, you would have heard the shout and screaming and the crying as to the amazing thing that is, and it's massive, massive, massive boost to our employees. As I tell each and every one of them, it is not a gift. Each and every one of them has earned that profit-sharing check. So sorry that's profit-sharing. Relative to investing our wealth, so to speak, scrap iron sort of backwardly integrating is not a primary target, certainly iron is certainly not a target at this moment in time. We will and we are looking at options for during a strategic supply of our own pig iron, a green supply, so that's ongoing but not a massive capital expenditure once we move forward with that. On the scrap side, we are spending money on segregation, different ways of cleaning up all the different scrap flows to maximize recycled content in the aluminum business and also to reduce the residual level of the obsolete flow again to supplant some of the prime scrap. That's working out incredibly well, particularly when there's a good spread between obsolete and prime. Not only are you securing a flow of prime scrap, but the cost impact is a very significant reduction in costs or savings. But again, we have smaller investments in segregation there; you see us spend a few dollars expanding our scrap footprint in the Southwest, but we're not talking about anything that's going to impact the balance sheet. In all honesty, we expect that cash flow to continue. We will continue, I think just the same cash allocation strategy that we've had in the past with a strong balance sheet, huge liquidity; it allows us to have a balanced perspective. We'll continue to have a positive dividend profile. You saw us increase, was it 25% here earlier this year? We'll continue to repurchase our shares. We think it's still an incredible value today, sure. We're continuing with the organic growth. We got four coating lines going in, starting up later this year. We got the aluminum project. The team for 30 years have continually found good, cost-effective, high-return organic growth projects. There's a bunch in the pipeline there. Obviously, we continue to review the M&A activity as it comes across our desk. So we're very, very blessed for sure.

Thank you. And congratulations.

Thank you, John.

Thank you. That concludes our question-and-answer session. I'd like to turn the call back over to Mr. Millett for any closing remarks.

Super, thank you. Well, again for those that are still on the call, I just want to appreciate your time today. Appreciate your support for our customers. Thank you, thank you, thank you. We can't do it without you. And to our team, each and every one of you, you do a phenomenal job each and every day. Just do one thing for us and me personally, be safe, look after each other. Have a good day. Bye-bye.

Once again, ladies and gentlemen, that concludes today's call. Thank you for your participation and have a great and safe day.