Transcript NASPD Fall Conference Boston ● October 10, 2008 Keith Busse Chairman & CEO October 10, 2008

NASPD Fall Conference
Boston ● October 10, 2008
Keith Busse
Chairman & CEO
October 10, 2008
1
Forward-Looking Statements
This presentation contains predictive statements about future events, including
statements related to conditions in the steel marketplace, future growth of Steel
Dynamics’ revenues and profitability, the construction and operation of new or existing
facilities, and the operation and future results of SDI’s related businesses. These
statements are intended to be made as “forward-looking” within the safe harbor
protections of the private Securities Litigation Reform Act of 1995. Such predictive
statements are not guarantees of future performance, and actual results could differ
materially from our current expectations.
We refer you to our detailed explanation of the many factors and risks that may cause
such predictive statements to turn out differently, as set forth in the most recent Steel
Dynamics’ Annual Report on Form 10-K and in other reports which we from time to time
file with the Securities and Exchange Commission, available publicly on the SEC’s web
site at www.sec.gov and on our Web site, www.steeldynamics.com.
October 10, 2008
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Increasingly Diverse Product Mix*
October 10, 2008
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Many steel companies went bankrupt, were
reorganized or purchased—1998 to present
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Bethlehem Steel
National Steel
LTV
Wheeling-Pittsburgh Steel
Geneva
Gulf States
Northwestern Wire and
Steel
Birmingham Steel
Republic Technologies
GS Industries
Acme Metals
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Trico
Qualitech Steel
J&L Structural Steel
Laclede Steel
Erie Forge & Steel
Freedom Forge Corp.
Sheffield Steel
Calumet Steel
Galvpro
Metals USA
WCI … and others
Over 35 filed for bankruptcy from 1998 to 2002
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October 10, 2008
Major Steel Producers Operating in U.S. Today
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Nucor
Mittal
US Steel
AK Steel
Steel Dynamics
Commercial Metals
Gerdau Ameristeel
Severstal
October 10, 2008
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Integrated and EAF Production
100
Percent of U.S. Steel Production
90
80
70
60
50
58%
Integrated
50%
EAF
40
30
20
10
0
1950
1960
1970
1980
Source: American Iron and Steel Institute
6
1990
2000 2007
October 10, 2008
Growing Chinese steel industry a potential
threat steel production Chinese Steel Exports to U.S.
Chinese
6
600
Millions of tonnes
500
5
400
4
300
3
200
2
100
1
0
2000 2001 2002 2003 2004 2005 2006 2007
Source: IISI
Millions of tons
0
2000
2001
2002
2003
2004
2006
2008*
2005
2007
Source: U.S. Dept. of Commerce
* July 2008 YTD annualized
October 10, 2008
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Domestic Steel Production, 1950-2007
160
150 million tons at peak
140
120
100
80
60
108 million in 2007
40
20
0
1950
1960
1970
Source: American Iron and Steel Institute
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1980
1990
2000
October 10, 2008
The U.S. Is Likely to Remain “Steel Short”
Production Capacity
Less Exports
105 – 110 million tons
5 - 15
Domestic Supply
95 - 105
Domestic Demand
115-140
Shortfall
15 - 30 million tons
(Must be made up by steel imports
or increased domestic production)
October 10, 2008
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Structural Mill Expansion
New Medium Section Rolling mill
expected to double Columbia City
capacity to 2 million tons per year
October 10, 2008
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A Winning Culture
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Performance-based incentive
compensation
Employees have keen sense
of ownership
Minimal bureaucracy
Productive teams
Adaptable and fast to react
Passionate
October 10, 2008
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Strategic Direction
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Sustain employee and operating culture
Grow organically in steel
– Greenfield
– Expand existing facilities
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Pursue M&A growth opportunities
Backward integrate to secure consistent
supply of raw materials
Integrate downstream to diversify
portfolio of value-added steel products
October 10, 2008
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Annual sales growth since start-up in 1996
2008
??
Billions of dollars
$8.0
2007
7.0
$6.2 billion
Pro forma with OmniSource
6.0
5.0
$4.3
billion
$4.4 billion
reported
4.0
First Half
2008
3.0
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2.0
SDI
1.0
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
October 10, 2008
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Annual profit growth since start-up in 1996
$1,000
First Half
2008
Millions of dollars
2007
800
$4.4 billion
$691 million
Operating income
600
$610
million
400
200
0
1996
$353
million
$395 million
Net income
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
October 10, 2008
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2008
2007
shipments:
5.6 million
tons
SDI’s shipments continue to grow
Steel segment shipments
7.0
Est.
Millions of tons
6.0
2008
6.2 million
tons
Projected
5.0
Expected
2009
Capacity
7.7 million
tons
4.0
3.0
2.0
1.0
0
1996
1997 1998 1999 2000 2001 2002
2003
2004 2005 2006
2007
(including
The Techs)
October 10, 2008
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Flat Roll Division
Butler, Indiana
Flat rolled
sheet
October 10, 2008
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Jeffersonville paint line photo
Flat Roll Coating Plant
Jeffersonville, Indiana
2008 Start-Up
SDI’s second paint line
October 10, 2008
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The Techs
• Strategic acquisition, July 2007
• 3 galvanizing plants in Pittsburgh
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GalvTech
Non-automotive, OEM customers
• Cash deal: $373 million
MetalTech
• Excellent operation—
set production/shipping
records in first half 2008
NexTech
October 10, 2008
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Long products: Growth and Product Diversification
5-Year Growth in Shipments
3.0
2.6 million
Millions of tons
2.5
SWVA
2.0
Roanoke Bar
1.5
1.0
Engineered Bar
.5
0
2002
Structural & Rail
2003
2004
2005
2006
2007
October 10, 2008
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Structural & Rail Division
Columbia City, Indiana
Wide- flange beams
October 10, 2008
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Structural Mill Expansion
New Medium Section Rolling mill
expected to double Columbia City
capacity to 2 million tons per year
October 10, 2008
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Engineered Bar Products Division
Pittsboro, Indiana
Round SBQ bars
October 10, 2008
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Roanoke Bar Division
Roanoke, Virginia
Merchant bars
October 10, 2008
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Steel of West Virginia, Inc.
Huntington, West Virginia
Specialty shapes
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Trailer beams
October 10, 2008
New Millennium
Building Systems
• Joists, trusses and girders
• Decking
October 10, 2008
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Metals Recycling
OmniSource scrap facilities are
strategically located near SDI’s
Indiana steel mills
OmniSource is a large processor
• of
OmniSource’s
facility
locations
both industrial
and
obsolete
are highly
complementary to
ferrous
scrap
OmniSource
Sturgis
SDI steel mills
SDI’s steelmaking facilities
Nonferrous operations are
• among
Provides
significant
potential
the
largest in
U.S. for
transportation synergies
OmniSource currently operates
11 ferrous-scrap shredders
Recycle South
1H 2008: Acquired remainder of
Recycle South; Sturgis assets;
started up new Indianapolis yard
October 10, 2008
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Combined: OmniSource, Recycle South, Sturgis
Ferrous capacity
Nonferrous volume
7.0 million tons
>1 billion lbs.
Employees
2,900
Locations
78
Shredders
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August 2008 photo
New shredder at Holt Avenue, Indianapolis
October 10, 2008
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Mesabi Nugget
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Iron nuggets will supply
SDI’s EAF steel mills
97% pure iron
ITmk3® process pioneered
by Kobe Steel
Environmentally friendly and
lower energy required
2004 photo at pilot plant
October 10, 2008
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Mesabi Nugget Plant
Hoyt Lakes, Minnesota
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$235 million project
81% SDI / 19% Kobe
Expected start-up mid-2009
500,000 metric tons
August
2008
August 2008 photo
October 10, 2008
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Mesabi Mining, LLC
Hoyt Lakes, Minnesota
• 6,000 acres
• Long-term supply of iron ore
• Mine and concentrate taconite
to produce iron feedstock for
nugget plant(s)
August 2008 photo
October 10, 2008
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Steel Dynamics vs. U.S. Competitors
Operating Income per Ton Shipped
Dollars
$162
150
100
$188
$122
$154
$133
$80
$43
50
0
-50
-100
-150
-200
2002
Steel Dynamics,
Steel Operations
2003
Nucor
2004
AK Steel
2005
US Steel, flat-roll
2006
2007
CMC, domestic mills
1H 2008
Gerdau Ameristeel
Data Source: Company SEC filings
October 10, 2008
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Steel Dynamics vs. U.S. Competitors
EBITDA Margin
30
25
Percent
28%
25%
22%
18%
20
24%
19%
18
%
15
10
5
0
2002
Steel Dynamics
2003
2004
Nucor
AK Steel
2005
US Steel
Data Source: Company SEC filings
EBITDA is earnings before interest, taxes, depreciation and amortization
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2006
2007
Commercial Metals
1H 2008
Gerdau Ameristeel
October 10, 2008
www.steeldynamics.com