Good day and welcome to the Steel Dynamics Fourth Quarter and Full-year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After management’s remarks, we will conduct a question and answer session and instructions will follow at that time. Please be advised this call is being recorded today, January 26, 2023, and your participation implies consent to our recording 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, Jenny. Good morning, and welcome to Steel Dynamics Fourth Quarter and Full-year 2022 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, President and Chief Executive Officer of Steel Dynamics; and Theresa Wagler, Executive Vice President and Chief Financial 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 assumptions in connection with anticipated project returns and our steel, metals recycling and fabrication businesses as well as to general business and economic conditions. 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 comparable GAAP measures in the press release issued yesterday entitled Steel Dynamics reports fourth quarter and full-year 2022 results. And now I’m pleased to turn the call over to Mark.

Thank you, David. Good morning, everybody. Thank you for being with us for our fourth quarter and full-year 2022 earnings call. And as I think you saw, operationally, our teams had a very, very, very solid fourth quarter. Our New Millennium Building Systems platform generated record steel fabrication earnings, Sinton is showing significant operating improvement with a clear path to profitability in the second quarter of 2023. Our new aluminum group is making great progress on our aluminum flat-rolled investments, and I will share more details later in the call. Relative to full-year 2022, the entire Steel Dynamics delivered an exceptional performance with record sales, earnings and cash flow generation. I think it was a tremendous achievement, and I’m incredibly proud of our team. They are the foundation of our company, and they are the ones that have truly driven our success over the years. It is their culture of excellence and the strategic positioning executed over the last number of years that allows us to maximize opportunities resulting in higher lows and higher highs through all market cycles. However, none of this matters without keeping our teams safe. Often, employees are described as a company’s most important resource. But for Steel Dynamics, they are more than that, they are a family. And now we number over 12,000 strong. We are continually focused and provide the very best for their health, safety and welfare. We are actively engaged in safety at all times at every level, came in to top of mind and an active conversation at all levels through the organization. And with that focus, the team’s safety performance improved significantly in 2022. We but there is certainly more to do as we will not rest until we consistently achieve our goal of zero injuries. But before I add any more detail, Theresa, would you like to give us some detailed financial results.

Thank you, Mark. Good morning, everyone. I add my sincere appreciation and congratulations to the entire team. We continue to hit new milestones throughout the company achieving record annual performance in 2022, with record revenues of $22.3 billion derived from strong product pricing and volumes across all of our operating platforms. Record operating income of $5.1 billion and net income of $3.9 million or $2.92 per diluted share, and record cash flow from operations of $4.5 billion with EBITDA of $5.5 billion. As Mark mentioned, is truly an exceptional performance. Regarding our fourth quarter 2020 results, net income was $635 million or $3.61 per diluted share which includes additional performance-based special compensation of $24 million or $0.09 per diluted share that was awarded to all nonexecutive eligible team members and recognition of their extraordinary performance and costs of approximately $168 million or $0.67 per diluted share associated with our Sinton Texas flat-rolled steel mill ramp. Our fourth quarter 2022 operating income declined 35% sequentially to $759 million due to lower realized selling values and seasonally lower shipments within our steel operations, which individually generate operating income of $178 million with shipments of 3 million tons in the fourth quarter. Our flat-rolled steel mills were negatively impacted during the quarter with high-cost pig iron that was purchased earlier in 2022 during the early stages of Russia and Beijing of Ukraine. Based on current pig iron prices of $500 per ton versus our average cost incurred in the fourth quarter, earnings were negatively impacted by about $80 million. We expect to see that continue into the first quarter and the negative impact is likely to be around $60 million as we work through all the higher price pig iron before the end of the first quarter. For the full-year 2022, operating income…

Thank you, Theresa. Well, as was mentioned, steel fabrication saw phenomenal results in the platform in the year. And again, thank you to the Penal team. I think their effectiveness and their efficiency and their output per employee exceeds anyone in the industry. So congratulations to you and thank you for all you do there. It was another record quarterly performance, and record annual operating income of $2.4 billion for the year, with record shipments of 856,000 tons. Although the macro industries remain a little mixed, we believe nonresidential construction markets are and will continue to remain strong throughout the year. Despite lower ABI indications, I believe overall architectural firms remain optimistic for 23 Dodge Momentum Index improved around about 6% in December. And nonresidential starts and build rates are also forecast to remain solid through the year. I think the continued onshoring of manufacturing businesses and the infrastructure spending programs will start kicking in that will continue to provide momentum for construction spending. More relevant, I think our customers certainly tell us demand remains solid in spite of economic uncertainty, and it is certainly confirmed by current order rates, not only in the joist and deck business but also our structural products business as well. Our steel fabrication order backlog extends through the first half of 2023, with strong pricing dynamics. And with continued solid order intake rates, we expect to see continued strong volume and performance those operations throughout 2023. And the fabrication platform is not only a significant contributor itself, but it provides significant pull-through volume for our steel mills, allowing higher through-cycle utilization rates, and it also provides a meaningful natural hedge to lower steel pricing. Our MEL’s recycling platform had a solid year, especially in light of the challenging pricing environment. During 2022, ferrous scrap…

Thank you. [Operator Instructions] Your first question is coming from Emily Chieng of Goldman Sachs. Emily your line is live.

Good morning, Mark and Theresa and thank your taking my question. I would like to start with the aluminum rolling mill and what progress you have made there. Maybe curious as to how many sort of contract negotiations or discussions you have started to have with different customers. Maybe what end markets you have been targeting so far and as you think about how Steel Dynamics may ultimately disrupt this industry, are there any indications that the pricing construct that we have historically seen of this industry could change.

Thank you good morning and thanks for your question. I do believe that - when one says disrupt an industry that can be taken both positively and negatively. I think from our perspective, we look at it from a very positive nature, creating optionality for the customer base, many of our existing steel customers also buy and consume aluminum and so it is great to be able to create further value for them. I do believe that our advantage and we have seen that over the last 30-years in steel, in that the power of our culture allowing us to leverage state-of-the-art equipment tends to drive very, very effective, highly efficient, low-cost operations and in any commodity any commodity market, the low-cost producer will survive and thrive and allow superior financial metrics through the cycle. And so the mill itself, the combination again of our culture, as stated on the equipment, just simply the plant layout, the high recycled content that we will enjoy the improved yield impact through the process, the low overhead cost all will combine to provide a very low cost solution and allow us to, I think, penetrate those markets quite effectively. Will that change the pricing environment? I don’t think so. We will be just a partial participant initially anyway in that marketplace.

From a progress perspective Emily, I think that Mark mentioned earlier that we do have locations that we have in mind and we are negotiating right now for both of the recycled slab facilities plus we now have a location. And so there is a lot of excitement happening in Columbus, Mississippi. Last year, we spent about just a little over $120 million on the investments going forward, just to kind of recalibrate since we do have an increased amount of $2.5 billion. In 2023, we are likely to spend somewhere between $900 million and $950 million in capital, in 2024, $1.2 billion, with the remaining $200 million to $300 million during the startup year of 2025. So the teams are pushing forward very quickly.

All right. Thank you for the color.

Thank you. Your next question is coming from Carlos de Alba of Morgan Stanley. Carlos your line is live.

Thank you very much Mark and Theresa. So on capacity, I would like to discuss capacity utilization, both for the industry, the company as well as the expected ramp-up of the fourth value-added current lines. So you guys have been running as you described in earlier comments at a higher capacity the decision in the industry. But now the industry in the U.S. is running around just slightly above 70%, 75%. How long can this persist, do you think, given that prices are increasing, supply discipline has been there so far. But there are some folks out there that are doing as well as you clearly by the numbers that you have posted. So how do you see the situation evolving Mark perhaps on these? And then in Mark, how do you see the ramp-up - the expected ramp-up of the capacity utilization of the four value-added lines. You mentioned that you see 80% in 2023 for Sinton, but any color on the fourth order lines would be great.

Thank you Carlos, you were like a machine gun there. So I’m not so sure I got all your questions. I think from a ramp-up, I will work backwards, but from the ramp-up of the coating lines, those will be, I think, very, very, very strong. Obviously, we have many, many galvanizing lines, prepaint lines throughout the company, and we will harness all our technical resources there to get those lines up quickly. We certainly have the substrate available to fully load those lines. So I think the ramp up, again, those lines of start up at second half, perhaps fourth quarter and will ramp up quite quickly through the rest of the year into the following year.

As it relates to the first part of your question, Carlos, around utilization for the industry. I would point out that even if you go back to more challenging times like 2015, et cetera, our utilization still remained very high, and that is because of the power of our pull-through volume, which we would anticipate as well. But we are really optimistic for 2023 with the additional on shoring of manufacturing businesses, which you are seeing in reality as well as with the infrastructure program and other investment opportunities. We think that steel demand in the U.S. will continue to stay steady to potentially increasing as well as the trade benefits of melting and casting in the U.S. for the U.S. producer. So yes, flat-rolled prices specifically have improved recently, which we think that they should have. We don’t think that, that is going to have a negative impact. We think that will be a positive impact, and we think both industry utilization rates and ours specifically, should remain steady to improving in 2023.

All right. Great. Thank you very much Mark and Theresa. I’m sorry Mark I will slowdown next time.

Thank you very much. Your next question is coming from Timna Tanners of Wolfe Research. Timna your line is live.

Hey good morning guys. I wanted to ask about the downstream, the fabricate segment please. Just a little clarity, if you could, on the guidance. As I understand it, you talked about some slippage from very high levels, but still above historical levels. But historically, EBITDA per ton prior to 2022 is $190 a ton, and 2022 is $2,850. I’m just wondering if you could provide a little more color on where we should fall between those two extremes. And maybe if you could, it would be helpful. I know Nucor mentioned a year-over-year comparison? Or if there is anything that you can provide a little more clarity on that, that would be great.

I think one has to recognize that the industry has gone through quite a consolidation comparing it to some years ago and that has allowed sort of market strength or strong market pricing compared to history, and that will continue. The year as it is unfolding, we are entering the year with an absolute solid backlog through the middle of the year for sure. The order input rate is indeed off the kind of the frenetic crazy pace that it was 12-months ago. But it is very, very, very solid, and we believe that it is going to be a very, very good year for us at year-end. And I believe there is some concern maybe as I said earlier, the macro indices may not look as rosy as some would think. And some believe that there is economic uncertainty out there, as I hopefully articulated, we don’t see the gloom and doom that everyone else is seeing it. Our order input rates across all our sectors with the 1 exception, a little off on residential is solid. And our December bookings record level on a historic basis similarly year-to-date. So we just see strength through the year through our lands through our order book.

Okay. Mark, does that strength on volumes, strengthen prices into margins I mean do you expect year-over-year to be up and just like I’m saying it is a big gap. I get that it will be higher than it is been historically, but any color on if we should expect some continuation of what we saw in 2022?

Well, I think the steel space will -- I know I’m saying that the steel space will appreciate from the lows. Obviously, we are seeing the hot-band pricing off the market pricing of 650 and it is up away over 700. In fabrication, the spreads will likely come off a little. They certainly haven’t to any large extent at this point. You are certainly seeing people say, well, our projects are getting delayed, we are not seeing any cancellations at all. We are seeing projects delayed some. But in my mind, it is not an unhealthy thing in all honesty, because it is just protracting or extending the cycle -- the business cycle in that arena.

Okay, thanks Mark.

Thank you very much. Your next question is coming from Curt Woodworth of Credit Suisse. Curt your line is live.

Yes, thanks good morning, Mark and Theresa, how are you? Good. I just want to follow up on the fabrication comments. So in the past, you have talked about you have had backlog basically priced through the middle part of this year, and I think you had discussed I believe pricing in the 5,000 or higher level. So I just wondered if you could confirm that, that is kind of the price level your backlog is at. And then if you are sold through the first part of this year, I assume you are bidding projects now for can you comment on price levels you see there? And then with respect to some of the delays or project push outs from what we have seen, the data center and some of those areas are still very strong oil the Amazon type warehouse spent a lot of those have been canceled. So if you could just kind of help us maybe understand a little bit of the DNA of the backlog would be helpful.

Good morning Curt. So from the perspective of pricing, Obviously, we are not going to give specific pricing. But you would have seen that the pricing held in very steadily in the fourth quarter from an average perspective. And we have seen very steady pricing in the backlog as well. So I would err on the higher side if you think about what is in the backlog. And that is why we have great confidence in the earnings resiliency of the fabrication business through at least the first half of this year. And the order backlog, it is an interesting question because it is broadened out, wherein as it was very concentrated in warehouses, it is broadened out now into more, I would say, infrastructure type hospitals, schools, churches et cetera, so that is a good thing and that is what we think we are seeing more of. We expected very strong volumes for fabrication in 2023 from what we are seeing so far. And Mark mentioned the order entry activity is very good from a historical. So then you can contemplate what you think steel prices will be to make an estimation of whether you think we will continue to see expanding spreads in fabrication or not. That is what we saw in the fourth quarter definitively. Mark, do you want to add anything?

And just the one comment, though, I think it was mentioned that the distribution warehouses are again canceled. We actually are only seeing that in one customer. Well, actually, not a customer of ours, but one company the distribution warehouse business in our backlog is solid and not getting canceled out. So that is not a comprehensive issue. And just to reemphasize what Teresa said on earlier on the reshoring. Reshoring is real. It truly is. That is going to be supportive of that business. And if you look through just the size of some of these factories, the battery manufacturing facilities is a huge, massive, massive facilities that will require a lot of joists and deck. So again, it is off the frenetic pace that we saw, but it is a very, very, very solid sector for us for the rest of the year.

Okay. I appreciate that. And then just a follow-up on Sinton. What were the volumes shipped this quarter and we look at start-up costs for the year is roughly $430 million. So those material drag on your profitability. Can you comment on maybe when you would expect to maybe breakeven with respect to start-up costs and do you have any guidance for what start-up impact would look like in the first quarter? Thank you.

Yes. So from a volume perspective Curt, Sinton had shipments in the third quarter of around just under 270,000 tons, and it increased to just under 340,000 tons for shipments in the fourth quarter, and we expect to see that improve in the first quarter and then have a significant improvement in the second quarter of 2023. From an impact, we still expect to see losses as they work through the higher-priced pigeon which is obviously matching against lower steel prices than they were at this time last year. And so like it will be -- it should improve over the fourth quarter losses pretty significantly, but still be higher than we would like to see maybe around the $10 million mark.

Great. Thanks very much.

Thank you. Your next question is coming from Tristan Gresser of BNP Paribas. Tristan your line is live.

Hi, thank you for taking my questions. Maybe just a quick follow-up on Sinton. Are you able to share any EBITDA annual contribution you are expecting for next year or maybe kind of a sense of how this compares versus the normalized EBITDA target you mentioned and given maybe a slower start-up and then some ramp-up of the coating lines as well in Q4 that is going to help. So any kind of a sense you can give us that would be great.

So I think Mark mentioned the ramp-up for the two additional value-add lines that will be in Sinton the third quarter of 2023. Those should ramp, we expect fairly quickly to start benefiting their product mix. We are not going to give full-year guidance for Sinton as far as EBITDA. But I would tell you that I think Curt mentioned earlier on the call, that the losses in 2022 were over $400 million, and it is going to swing to a significant positive for 2023. So just that differential alone will have a significant momentum benefit to our earnings in 2023, but it is just too early for us to give an estimate, but it won’t hit through cycle EBITDA in the year where we are still ramping up production.

Okay. That is really helpful. And my second question is more on the demand side. You talked about steel demand increasing in 2023. Can you give us a sense of what kind of number you are seeing and maybe diving into your key end markets also there if you are able to share some quantitative number that would be great.

I guess from our perspective, the higher demand translates to, in large part, to price up point and spread support. Our operations are already running at quite a high utilization rate. Further demand, obviously, is certainly going to help our Sinton facility. And given the market sectors, energy is very, very strong in that area in Texas. That is helping us. And the challenges that we are seeing in Mexico and the imports of sheet coming up from Mexico into the Southwest markets, but also even under the Midwest have essentially mitigate they are staying in Mexico now. So that is going to create good demand and great dynamics. So from a market perspective, we will certainly be able to support all the capability that the ramp-up will allow.

Okay, thanks for the color.

Thank you. Your next question is coming from Andreas Bokkenheuser from UBS. Andreas your line is live.

Thank you very much. Just one question for me. Just switching gears a little bit over to the long steel segment, what are you seeing there in terms of potential new orders coming in from the infrastructure bill, the IRA. Are you seeing anything yet there? We have obviously seen rebar is kind of coming down for the last six, seven months. It doesn’t feel like the infrastructure build is kind of abating yet. But what are you seeing on your side to kind of stop the rebar price decline?

Well, as we have suggested in the past, we are not big in the rebar markets in at. But nonetheless, from our structural long products perspective, the infrastructure bill or spending is not necessarily kicked in yet. It typically takes six to nine months for that to materialize. And obviously, it is too soon. But come the summer of this year, I think you will start to see some benefit there.

Got it. That’s very clear. Thank you Mark.

Thank you. Your next question is coming from Lawson Winder of BofA Securities. Lawson your line is live.

Hi. Good morning Mark. Good morning Theresa, thank you for today’s call. Maybe could I ask about the dividend outlook and just kind of get your thoughts on return of capital. So last year, you bumped the dividend quite substantially. And this year, you have expressed some confidence in symptom and Sinton wasn’t contributing, in fact, was a drag in 2022 so maybe just kind of your thoughts around 2023. Thank you.

Good one. I’m smiling because Mark tosses things my way, and it is funny how he does it. But from a dividend perspective, we do like to grow the dividend in a way that is consistent so that we are constantly having increases across the spectrum. And I think as I mentioned, since 2017, we actually increased the dividend by almost 120%. And we like to do that lockstep with free cash flow increases that are through cycle like Sinton. I would expect that we should have a pretty significant increase coming forward as well. We like to do those traditionally in the first quarter time frame. We have additional projects that are a little bit smaller, but that are coming online in 2023 that will add to through-cycle earnings. And given our stock price, which has been fantastic, driving up recently, you should expect to see strong shareholder distributions continue, and that would include a strong increase in the dividend coming forward.

Okay, fantastic. Thank you. Congratulations.

Thank you very much. [Operator Instructions] Our next question is coming from John Tumazos, of John Tumazos Very Independent Research. John your line is live.

Thank you. I try to keep a little spread on non-scrap cost of goods sold per ton just taking your total corporate revenues per ton and pretax per ton and subtracting scrap profits and it peaked a year ago at 673 and was only 4.56% this quarter. Are the bigger contributors to that the much lower price of purchased steel for your galvanizing and painting, et cetera, divisions first, lower profit sharing improvement in the Sinton mill as it ramps up, and hopefully, it will be the lowest cost when it is four and maybe a mix shift into some. So please explain - by the way, Nucor’s non-scrap cost of goods sales went up and were the highest in the last two-years in the current quarter. So there is the opposite direction, but that is a separate problem to figure out.

John, great to have you on the call as always, and thanks for the question. I think the biggest parameter is substrate costs. As we have -- over the years, we have ramped up the tech substrate, Holland substrate and even at Sinton, we actually pre-purchased about 150,000 tons, maybe a little more to load the downstream coating lines in preparation for when the hot mill started up. So you are certainly seeing that influence our costs, for sure.

And the other thing that you hit, John, was spot on as well. It has to do with mix. So if you think about the increase in the impact from our fabrication business, that we would have had some change in that as well. So I think it is both mix and what Mark talked about is the steel substrate.

In your steel mills, with the normal non-scrap cost of goods sold be closer to $200 a ton or $250 tons or $300 tons.

We have always tried to not share that information, John. So I would prefer to stay that way. I would tell you though that, one, our conversion cost is probably as good as anyone in the world. And number two, the people don’t necessarily recognize the offsetting sort of efficiency or effectiveness of volume. So on our process lines, carbonizing lines prepaint lines, even though some of the input costs have appreciated, the fact that our teams continually just improve productivity, put more volume through offsetting the sort of the overhead and the fixed costs. Our actual processing costs on those lines have been sort of almost stagnant for the last, I don’t know, how many years.

Thank you.

Thank you very much. There appears to be no further questions in the queue. I will now turn the call back over to Mr. Millett for any closing remarks.

Thank you and thank you for everyone on the call for your time today. Certainly, thanks to our team. I want to remind each and every one of you that you do contribute, you do have an impact on our success and stay safe and keep each other safe. Customers, we can do it without you. And I would just like to reemphasize those that have invested in us, there is a growing cadre of folks that are building positions that - they really are recognizing the power of our culture. It is different. We are different, and we drive absolutely different results. Our business model allows us to perform and maintain a higher through-cycle cash generation than our peers. And I think hopefully, people are starting to recognize that that our capital allocation, our growth is incredibly disciplined, particularly on the acquisition side. And I think that that speaks to just our underlying results. It is interesting if one measures the earnings power of our company on an employee basis, we are substantially higher than anyone else out there in our peer group. And again, it speaks to our overall efficiency and effectiveness of the culture, the strategic decisions that the team has made over the years, and it will continue to drop to the bottom line. So investors that support us, again, many, many thanks to you as well and with that said, have a great day.

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