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To: craig crawford who wrote (816)	9/23/2001 7:45:36 PM
From: craig crawford	Read Replies (1) \| Respond to of 1643

Nucor's Warning Shows Steel Industry Woes dailynews.yahoo.com Thursday September 20 5:53 PM ET By Jamie LaReau NEW YORK (Reuters) - Nucor Corp.'s (NYSE:NUE - news) warning on Thursday that its third-quarter earnings will be almost half of previous estimates points to further trouble ahead for the battered steel industry. Nucor, the No. 3 U.S. steel producer, cited weak pricing and a slowdown in nonresidential construction, among other reasons, suggesting other steelmakers will also warn amid weak automotive sales, the steel industry's second-largest customer behind construction, analysts said. ``If Nucor warns, it means that everyone else's numbers will go down. It's just a question of whether or not they'll warn too,'' said steel analyst Brett Levy of RBC Dominion Securities. ''What may happen is after the initial revision, you may see later in the quarter another revision. There's a lot of guys out there saying, 'We just want to see how bad it is.''' Many steel analysts have either already lowered their steel earnings forecasts or are in the process of doing so due to a U.S. economy that was barely growing before it was slammed last week by the attacks on New York and Washington. Levy said he is revising all of his forecasts on steelmakers based on flagging auto sales and weak pricing for cold-rolled, hot-rolled and galvanized steel, all used in automobiles and other consumer-related products. The prices of cold-rolled steel and galvanized steel dropped by $15 to $20 a ton in September from the prior month, Levy said. Most steelmakers had asked for a $20 a ton increase on cold-rolled and galvanized steel and a $40 a ton increase on hot-rolled steel at the beginning of the third quarter, but have not gotten it, analysts said. The attacks on the World Trade Center and the Pentagon (news - web sites) will most likely force prices even lower since consumer confidence will probably erode and the economy will slide further toward a recession, Levy said. WARNING'S MAGNITUDE SURPRISES Charlotte, North Carolina-based Nucor said on Thursday it expects earnings of 23 to 26 cents a share, down from the previous range of 45 to 49 cents. ``I expected them to pre-announce, but I was surprised by the magnitude of the pre-announcement numbers,'' said steel analyst Chris Olin of Midwest Research. ``They're missing by about 50 percent of their guidance. I expected an announcement in the 30-cent range.'' A group of 10 Wall Street analysts had forecast the company would report third-quarter earnings of 50 cents per share, according to research firm Thomson Financial/First Call. ``The third quarter has seen a continuation of the most challenging U.S. steel market conditions in two decades,'' Dan DiMicco, Nucor's chief executive, said in a statement. ``The anticipated second half 2001 recovery in the economy and manufacturing activity has not materialized.'' Nucor shares closed down $2.50, or 6.8 percent, $34.50 on the New York Stock Exchange (news - web sites). That is well off its 52-week high of $56.20. The stock has outperformed the Standard & Poor's 500 index (^SPX - news) by about 63 percent in the past 12 months. In an interview with Reuters, DiMicco said steel dumping has severely hurt prices for both hot- and cold-rolled steel. ``Cold-rolled prices that the Russians and Japanese are offering are ridiculous. Some have been down to $250 a ton to $265 a ton,'' he said. ``It's usually $200 a ton higher than that. It's a total disregard for our marketplace and a slap in the face to the U.S. government.'' DiMicco said Nucor's lowered earnings forecast is not a foreshadowing of future job cuts or layoffs. He said the company has reduced work weeks at some of its Vulcraft plants, its manufacturing plant that makes steel joist and steel deck, but its other plants are running at mostly full capacity. He said another reason for the warning was the ''significant'' cost the company took when it shut down a plate mill in Hertford, North Carolina, for 24 days to work on it. The temporary shutdown was only supposed to last one week. DiMicco said Nucor maintains a conservative balance sheet and remains very profitable. ``The steel industry will go along as the general economy goes and Nucor will still be at the top of the list of performers in the industry,'' DiMicco said. STEEL EARNINGS WARNINGS TO COME: The auto industry accounts for about 30 percent of the total sales of many steelmakers, Levy said. For Nucor, the auto industry accounts for only about 10 percent to 15 percent, DiMicco said. Olin said many steelmakers have already accounted for the economic and pricing weakness in their guidance, so he does not anticipate more third-quarter warnings, but does think company estimates for the fourth quarter and 2002 are still too high and will have to be reduced. The attacks on the U.S. further confirms the economy is entering into a recession and steel companies will be hit hard and probably won't see a recovery in earnings until 2003 -- at best, Olin said. ``There might have been some thought that there was a slight upside for steel prices and it looks like the exact opposite is going to occur ... they're actually falling.''