Nucor Corporation (NUE) Q4 2022 Earnings Call Transcript

Nucor Corporation (NYSE:NUE) Q4 2022 Earnings Call dated Jan. 26, 2023.

Corporate Participants:

Jack Sullivan — General Manager, Investor Relations

Leon J. Topalian — President and Chief Executive Officer

Steve Laxton — Executive Vice President, Treasurer and Chief Financial Officer

Daniel Needham — Executive Vice President, Commercial Strategy

Al Behr — Executive Vice President, Plate and Structural Products

Noah Hanners — Executive Vice President Raw Materials

Dave Sumoski — Chief Operating Officer

Rex Query — Executive Vice President, Sheet and Tubular Products

Calob Strother — Commercial Director, Plate and Structural

John Hallatz — Executive Vice President of Bar Products and Fabrication

Analysts:

Lawson Winder — Bank of America — Analyst

Phil Gibbs — KeyBanc Capital Markets — Analyst

Curt Woodworth — Credit Suisse — Analyst

Timna Tanners — Wolfe Research — Analyst

Carlos De Alba — Morgan Stanley — Analyst

Tristan Gresser — BNP Paribas — Analyst

Presentation:

Operator

Good afternoon and welcome to Nucor’s Fourth Quarter Earnings Call. [Operator Instructions] I would now like to introduce Jack Sullivan, General Manager of Nucor Investor Relations. You may now begin your call.

Jack Sullivan — General Manager, Investor Relations

Thank you, and good afternoon, everyone. Welcome to Nucor’s fourth quarter and year-end 2022 earnings review and business update. Leading our call today 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, who may provide comments during the Q&A portion of the call. They include Dave Sumoski, Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Noah Hanners responsible for Raw Materials; John Hollatz, Bar Products and Fabrication; Doug Jellison, Corporate Strategy; Greg Murphy, Business Services, Sustainability and General Counsel, Dan Needham, Commercial Sstrategy; Rex Query, Sheet and Tubular products; and Chad Utermark, New products and Innovation.

This morning, we posted our earnings release and an updated slide deck to the Nucor Investor Relations website. We encourage you to access these materials as we will 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 than forward-looking statements and involve risks and uncertainties 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.

Leon J. Topalian — President and Chief Executive Officer

Thanks, Jack, and welcome everyone. I’d like to begin by highlighting some recent organizational changes. Earlier this month, Noah Hanners joined the executive team as EVP for Raw Materials. Noah is a West Point graduate with his Bachelors of Science in Mechanical Engineering and his MBA from UNC Chapel Hill. He also served our nation in the United States Army for nine years. Noah began his career with Nucor in 2011 at Nucor Steel Darlington and has worked at several of our divisions, most recently serving as Vice President and General Manager of the David Joseph Company.

Doug Jellison, previously, EVP of Raw Materials has accepted the newly created role of EVP for Strategy. Doug has been with Nucor for more than 30 years and has a great understanding of all of our business segments. As we continue to grow Nucor, Doug will continue to help ensure we are further leveraging our competitive advantages, across the enterprise. Congratulations to both Noah and Doug.

Now turning to our year end review. I’m proud to announce that 2022 was the safest and most profitable year in Nucor’s history breaking prior records set in 2021. In the face of uncertain and at times volatile market conditions, we stayed focused on our goal of becoming the world’s safest steel company and our mission to grow the core, expand beyond and live our culture. In terms of safety, we established another record-low injury and illness rate for the fourth consecutive year. 20 Nucor divisions went the entire year without a single recordable injury. And we set new records across each of the four primary safety metrics that Nucor tracks. And we achieved all of this during a period of rapid growth, welcoming over 2,000 new team members to the Nucor family throughout the year. I’m inspired by the way, each member of the Nucor team has embraced our most important value, the health, safety and well-being of all 31,000 team members who make up our family.

Turning to financial performance, we earned $4.99 per share in the fourth quarter of ’22 on our way just setting a new earnings record of $28.79 per share for the full year. This represents a 24% increase over the annual EPS record we previously set in 2021. Our operations continue to generate strong cash flow with a record $11.6 billion of EBITDA. This allowed us to advance our strategy along several fronts while also returning $3.3 billion to shareholders through dividends and share repurchases, consistent with our capital allocation strategy of returning at least 40% of earnings to Nucor shareholders.

Our return on invested capital stands at a healthy 35%, and we closed out the year by announcing the 50th consecutive annual increase to our regular dividend following Nucor’s original listing on the New York Stock Exchange in 1972. This places Nucor among an elite group of roughly 40 dividend kings referring to publicly-traded companies that have consistently increased annual dividends to shareholders for over half a century. These successes were in large part made possible through their hard work and dedication of the Nucor team who executed our strategy to achieve world-class performance. As most of you know, we share our profits with our team. And in just a few weeks, we will reach a milestone never achieved before Nucor’s history, delivering nearly $1 billion back to our teammates.

In 2022, we made considerable progress along all of our strategic initiatives, deploying approximately $2 billion in capex in completing five acquisitions, valued at approximately $3.6 billion to grow our core and expand beyond, but we didn’t just invest in new assets and business lines, we invested in a more sustainable future. We did this through new partnerships in capital commitments toward technologies that can help reduce our carbon footprint even further. In December, we announced an equity investment in Electra a bolder based startup that has developed a process to produce carbon-free iron used in making steel. In November, Nucor became the first major industrial company in the world to join the United Nations 24/7 carbon-free energy global compact, which aims to accelerate the world’s transition to clean, affordable, and reliable electricity.

Nucor also co-founded the Global Steel Climate Council in international coalition advocating for a single transparent global emission standard that is focused on steelmaking emissions. And last week, the NRC officially certified NuScale’s design to build a small modular reactor, the first-of-its-kind of proof for use in the United States. Nucor’s minority investment in NuScale will continue to support the development of this technology with the goal of producing 100% carbon-free electricity.

Our mission to grow the core, expand beyond and live our culture is delivering results for our company and our shareholders. In our steelmaking operations, we invested in new capabilities to produce more value-added products and improve operating efficiencies that can earn higher and more sustained margins. In our downstream operations, we continue to expand into new steel adjacent markets where we can offer differentiated solutions, including overhead doors and utility towers. These represent unique opportunities in faster-growing markets where Nucor can leverage its core competencies, supply chain efficiencies, in market channels to create incremental value for shareholders. And we lived our culture. For over 50 years, Nucor’s unique culture has created value for shareholders, as it empowers and incentivize teammates to take ownership of decision-making, drive efficiency and pursue innovation.

Let me provide an update on some of our larger initiatives to grow the core, starting with our Brandenburg plate mill. Nearly four years after it was first announced, the Brandenburg team rolled their first steel plate on December 30th. They are now focused on final commissioning of the mill and plan to begin customer shipments by the end of the quarter. Last week, we announced, the Brandenburg mill would produce a new product called Elcyon, on a sustainable heavy gauge steel plate designed to meet the growing demands of the offshore wind industry. Congrats to the entire Nucor Brandenburg team for delivering one of the safest mill startups in Nucor’s history and for completing it on time and on budget.

Turning to our sheet operations, we announced plans to build a continuous galvanizing line at California steel industries to serve construction markets in the Western United States. Recent closures of galvanizing capacity by other suppliers in the West presented Nucor, a unique opportunity to better serve this region. This new galv line along with line we completed at Nucor Gallatin in 2019 and future lines planned for Berkeley and Nucor West Virginia will position the company as a supplier of choice for the cleaner value-added sheet products our customers are seeking in several key markets. Investments like this help forge even stronger relationships with our key customers like Trane Technologies which ordered Nucor last week with their 2022 Supplier of the Year Award.

Now shifting to our expand beyond strategy. I’d like to provide an update on a few of our recent acquisitions we’ve completed, beginning with our midyear purchase of CHI Overhead Doors. When we announced this transaction and held a special investor call last May, we spoke about CHI’s 230 million LTM EBITDA, it’s 30% EBITDA margins and average annual revenue growth of 10%. In the last six months following our June closing, CHI generated record EBITDA of nearly $170 million finishing the full year with over $320 million of EBITDA and expanding margins. Within the first six months of closing, we’ve taken our implied trailing EBITDA acquisition multiple down from 13 times to just over nine.

Going beyond the strong financial results, I want to commend the entire CHI team for executing such a quick and seamless integration into Nucor. We’re already seeing the benefits of our combined operations including improvements to CHI’s safety performance. Thank you. Thank you, team CHI, and all of the Nucor team members who have come together to make this an incredibly successful transition. And we’re starting to realize supply chain synergies as well with CHI developing plans to source most of it sheet bar and tube from Nucor divisions. The sales team at CHI is collaborating with Nucor’s regional commercial groups and cross-selling efforts have begun as CHI grows its share of the commercial overhead door market.

Last year, we also acquired Summit Utility Structures, producer of steel structures for the utility, telecommunications and transportation sectors; it’s an area that we see considerable growth potential in. Then in December, we announced plans to construct two new state-of-the art tower production plants. These highly automated facilities will help meet the growing need for utility infrastructure, as our nation’s electric transmission grid is modernized and hardened.

Turning to the broader economic backdrop, we recognize there continues to be uncertainty. But we also see tailwinds that should benefit Nucor as well as the American steel industry throughout this decade, including the Infrastructures Act, the CHIPS Act and IRA that are all starting to work their way into the steel sector. These programs aligned perfectly with Nucor’s unmatched and unrivaled product capabilities to meet the growing demand of our customers today and well into the future.

With that, let me turn the call over to Steve Laxton, who will share more about our Q4 performance. Steve?

Steve Laxton — Executive Vice President, Treasurer and Chief Financial Officer

Thank you, Leon. As Leon mentioned, our earnings of $28.79 per share established a new record for the company. These results highlight the earnings power of Nucor’s diversified portfolio and an industry-leading capabilities. 2022 was also a noteworthy year for cash flows in Nucor. For the year, cash from operations exceeded $10 billion for the first time in our history and free cash flow topped $8 billion. Over the past five years, Nucor’s generated $16.6 billion in free cash flow. During that same time period, we returned $9.7 billion directly to shareholders through dividends and share repurchases, while at the same time investing over $12.8 billion in our business. Through capital expenditures and acquisitions to further strengthen and grow our earnings base. These results demonstrate continued and consistent adherence to our balanced capital allocation framework. Nucor’s efficient manufacturing business model is a powerful through-cycle cash-flow generator.

Turning to our financial results for the fourth quarter, earnings for the steel mills segment were down nearly 60% from the prior quarter. Shipment volumes fell 13% reflecting normal seasonal weaknesses and some purchasing hesitancy as prices were trending lower for much of the quarter. Overall metal margins contracted as lower realized pricing outpaced lower cost per metallics. Conversion costs were slightly lower compared to the third quarter, despite lower utilization rates in part due to energy cost, which fell approximately 10% on a per ton basis. Alloys and consumable costs also trended slightly lower.

Shifting to our steel products segment, we continue to see very strong performance with segment earnings of $1.1 billion in the fourth quarter, this is down about 10% from the third quarter’s record results, but still represents the third best earnings quarter ever for this segment. Contributions from most product lines were down from the respective third quarter levels, reflecting normal seasonality. CHI Overhead Doors was a notable exception as Leon touched on earlier, posting fourth quarter earnings, 20% higher than the prior quarter.

Turning to raw materials. This segment saw a negative earnings for the quarter as DRI and scrap processing results were impacted by lower volumes and falling prices for much of the quarter. We also took both DRI facilities offline for planned maintenance and elected to extend those outages for additional services until we saw signs of improving conditions later in the quarter.

On the capital deployment front, Nucor’s capex for the quarter totaled approximately $520 million, bringing total capex for the year just under $2 billion. We’re forecasting capex in 2023 at $3 billion, including some catch-up spending originally slated for 2022, new growth initiatives and general maintenance. The earnings presentation we posted on our Investor Relations site this morning has additional details on our 2023 capital spending plan including projected allocations among primary capex categories and a preliminary look at the anticipated pace of spending on a few of our major growth projects over the next couple of years.

I’d like to take a minute and provide an update on the strong results we’re already seeing from recently-completed investments. While strong conditions in 2022 certainly aided performance, we believe these were prudent, timely and well-executed investments that are yielding excellent returns and position the company for continued future success. The roughly $2.2 billion we invested in sheet and bar projects that have been up and running for the past few years, generated an estimated $620 million in EBITDA for 2022. And the businesses we acquired over the last two years for around $4.5 billion establishing four new downstream platforms generated EBITDA of nearly $500 million over the course of the year. We believe this puts us well on our way to reaching our annual run rate EBITDA goal of $700 million for our expand beyond businesses. Collectively, these strategic investments and those to come, provide significant earnings catalyst and position Nucor for sustained value-creation long-term.

Turning to our balance sheet, we finished the year in a very strong liquidity position, with over $4.9 billion in cash and short-term investments and our $1.7 billion revolving credit facility remains undrawn. We’ve been intentional about building liquidity towards the end of the year in light of uncertain economic conditions coupled with near-term uses of cash, including our 2022 profit-sharing payouts that are earned by our teammates, our capital spending plans and maintaining our commitment to meaningful direct returns to shareholders.

In addition to ample near-term liquidity, Nucor’s balance sheet continues to be in a position of strength with total debt-to-capital of around 25% at the end of the year and debt-to-EBITDA well under one turn. Earlier this week, Fitch Ratings published its first credit rating on Nucor with long-term and short-term unsecured ratings of A-minus and F1, respectively. We were pleased to see Fitch recognize Nucor’s credit strength. During the quarter, we repurchased 3.1 million shares valued at $403 million and made dividend payments of $130 million for a total of $533 million return directly to shareholders which represents more than 42% of our quarterly net earnings. Over the last five years, we’ve returned $9.7 billion to shareholders representing approximately 52% of total net earnings for the period.

As we look ahead to the first-quarter of 2023, we expect earnings from our steel mills segment to increase compared to fourth quarter results on higher shipments, improved metal margins and expected higher realized prices. In our steel products segment, we expect lower earnings in the first-quarter compared to the fourth quarter due to seasonally lower volumes and lower pricing in some products. However, it’s worth noting that earnings are expected to remain higher than the first quarter of 2022.

Our raw materials segment earnings are expected to improve on more stable pricing and higher shipment volumes. While operating income from these three segments is expected to be higher compared to the fourth quarter, we expect consolidated earnings for the first quarter to be lower due to higher intercompany eliminations and the absence of one-time state tax benefits that were realized in the fourth quarter. We remain relatively optimistic 2023 will be another strong year of earnings for Nucor, despite entering a period of increased economic uncertainty.

Overall, non-residential construction spending continues to be robust. Federal support for infrastructure and energy projects will begin to show impacts on demand in 2023. Other positive drivers of demand include reshoring of manufacturing, energy infrastructure demand, clean energy and storage projects, EV factories in semiconductor plants. In closing, we believe, medium and long-term fundamentals of our industry and key demand drivers remain relatively positive. This coupled with our growth initiatives and investments that advance our strategy to grow our core and expand beyond position Nucor for strength well into the future.

With that, we’d like to hear from you and answer any questions. Operator, please open the line for Q and A.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions] And our first question here comes from Lawson Winder with Bank of America. Please go ahead.

Lawson Winder — Bank of America — Analyst

Good afternoon, Leon. Good afternoon, Steve, thanks for the presentation. Also congratulations to Noah and Doug on the new roles. And also, I’d just say nice work to whoever create those slides, that looks great. So I wanted to follow-up, Steve, on your last comments on market demand. Could you maybe provide a sense to the extent to which demand might be driven also by restocking versus some of these actual real demand drivers that you’re highlighting? And then in terms of these real demand drivers, you highlighted [indecipherable] like electricity grid, which is moving the needle most for Nucor? Thank you.

Leon J. Topalian — President and Chief Executive Officer

Hey, listen, I’ll start us off and ask Dan Needham, our EVP of our commercial to jump in and paint some perspective around what we’re seeing in terms of the traction we’re getting from some of the programs that we discussed, but I want to begin with saying thank you for recognizing that. And thank you to the 31,000 team members who made a historic year for our company. And thank you to our customers, who made all of that possible. I couldn’t be more proud that our team executed its fourth consecutive safest year in our history. It is the most important value that we have at Nucor and none of us in our executive team, take that for granted and I look forward to 2023, setting a new safest year in our history.

So as we unpack the first question that you began with or started and really understanding the demand trends real versus the restocking, look, I think we’ve certainly hit the bottom as we think about distribution, and we’re going to see that continue to restock as we move into the Q1, but that to me is not what’s driving demand, if you actually look over the let’s say the last eight or 10 weeks in the sheet group for example, our bookings are up 45% to 50% during that time period. Our backlogs iver the last, let’s say, Q-over-Q, have climbed about 16%, so that drive is there, that demand is there, that’s pulling that. The other side is a non-res construction, obviously, Nucor’s channel in that market is over 50%, so we’re heavily invested in that. But there are so many incredibly positive signs and well. 2022, was a historic year and were slightly off in terms of order activity. We think it’s going to be another very strong year there, non-res construction will remain robust, as we move forward and there’s several things that are going to drive that they will touch on herein just a second.

And then really the other piece is, our plate strategy and long product strategy that continues to produce and perform incredibly well as we move through the back-half of ’22 into ’23, but as we talk about the Infrastructure Act, the CHIPS Act, Inflation Reduction Act, automotive improvement for 2023, all of those are going to have meaningful and tangible impacts to our business. Dan is going to touch on a second the infrastructure bill, but I just want to put some context to the CHIPS Act. It’s a $55 billion package that Congress passed, what does that translate to? To about 27 different meaningful CHIP plants that are going gonna be produced, some of which pushing $20 billion on their own individual clients, well, what does that actually translate and what’s that look like? That market segment as we think about advanced manufacturing is requiring something different for future, our customers in that sector are requiring the most sustainable comprehensive differentiated value products and solutions that are available to the market. Nucor is incredibly well-positioned to meet that growing demand in every category and every sector. So we feel very good as we enter 2023, that will be a strong year, maybe not as strong as ’22, but a continued strong year but Dan, why don’t you paint a little context on the Infrastructure Act and what we think we’ll see in 2023?

Daniel Needham — Executive Vice President, Commercial Strategy

Okay. I appreciate the question. Lawson. In particular, what we’re seeing in forecast out there from construction indices are predicting infrastructure starts to increased 16% in 2023 and additionally 10% in 2024, but more specific to that we are seeing activity today on the Infrastructure bill. In January, the Biden administration announced $2.1 billion in funding for four major bridge projects, the most notable being the Bridge over the Ohio River connecting Ohio and Kentucky on I-75 and I-71. You also asked a little bit and Leon touched on the advanced manufacturing. But the other thing around the advanced manufacturing, the activity is increasing tremendously in that space, not only in chips, but also on the EV space and batteries, but those plants are quite large and requirements from a grade and size standpoint, there’s only a few suppliers that are capable capable of serving that and Nucor is well-positioned to do that. If you think about the breadth of our products, our capabilities in the construction side from structural buildings to racking systems to now insulated metal panels and garage doors, our capabilities are unparalleled. One thing. You also mentioned was the Inflation Reduction Act around energy, we’re seeing activity grow in that space as well. And additionally, our breadth of capabilities fit that space very well additionally, and if you think about our leading low greenhouse gas intensity offerings, the requirements in that space, we’re well-poised to help the energy — U.S. energy market move towards decarbonization.

The last point I’d like to make is, in all of these, they are not mutually exclusive, they’re all interconnected, and we have customers in these spaces in automotive and energy, that have requirements on the construction side and a couple of years ago, we created our focus on our solutions teams and we have teams around construction, automotive and energy, that are best poised to recognize these opportunities early in the design conceptual phase of these projects and work with the owners, developers, engineers to provide a valued solution for all involved. Including Nucor.

Lawson Winder — Bank of America — Analyst

Yes, thank you, Dan, and thank you, Leon, fantastic color. Maybe just one follow-up for me. If you could comment perhaps on the ramp-ups at Gallatin. Brandenburg through 2023, including your thoughts on profitability.

Leon J. Topalian — President and Chief Executive Officer

Yeah, absolutely. As we touched on in my opening comments on Brandenburg we’re incredibly proud of the team, the work that they’ve done, what they’ve been able to accomplish. And again, I’ve been at Nucor a long-time now and 26 years from a construction standpoint, from a safety standpoint, from a budget standpoint, this project exemplifies the very best of what our team has done and produced. Al Behr will share few more highlights of that because we’ve got some recent milestones the team has reached here in just a moment. Turning to Gallatin, again, we were about six months behind where we want it to be on their ramp-up. However, over the last few months, that team has done a phenomenal job bringing that new cash-run equipment online. As I mentioned during the last call, this really wasn’t just a brownfield, it was a complete mill modernization with software and automation tying that entire complex together. So it was a significant undertaking. All that being said, the bottom-line at Gallatin in Q2, we expect them to be at full run-rate capability. We’ll see how the market needs and demands go and meet that demand. But the other piece, and point that. I would share as we expect Gallatin to be profitable in the second-quarter as well. So maybe you want to touch on a few other things at Brandenburg.

Al Behr — Executive Vice President, Plate and Structural Products

Yeah, I’ll be happy to Leon and thanks Lawson. We love talking about Brandenburg. Obviously, we’re really excited about it. We’re sitting here today, and exactly where we want it to be and likely onset. I just congratulate not only the Brandenburg teammates that have just crushed it in building this project and bringing it in on-time and on-budget, but also our greater plate group teammates at Hertford, at Longview, at Tuscaloosa that have created an environment in which this mill is going to be excited, so. And as Leon alluded to, just yesterday. I’m happy to report that we made our first customer shipments out of Brandenburg. So we are on the Board. And we’re ready to go.

In terms of the ramp-up and how we’re thinking about 2023, I’ll share with you that we’ve got really three focus areas, Lawson, that we’re going to think about, number one is the teammates that we just talked about that they are the difference makers, they are our competitive advantage. You’ve seen what they’ve done on this job site and in the market and what they’ve created. We’re going to continue to focus on them, but also that those are the men and women that take care of our customers, which is the second area of focus. So with our customers, we’ve got existing customers that have helped us get to this point with our plate business, but also new customers and new markets that are new areas for us to go and serve that we couldn’t touch before that If you remember back in 2019, the strategy around Brandenburg was to build the most broadly capable mill in the Western Hemisphere and put it in the biggest plate market in the U.S. That’s what we’ve got, we’ve built the capability set and we intend to go use it.

So with those two focuses, then at least the third one, which is driving incremental returns for the enterprise. We’ve had the support from teammates, customers and our shareholders to put this project on the ground and now we just couldn’t be more excited to start driving returns with it and we’re excited about what 2023 will bring.

Lawson Winder — Bank of America — Analyst

Thanks, Al.

Leon J. Topalian — President and Chief Executive Officer

Excellent. Thanks very much, Lawson.

Operator

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

Phil Gibbs — KeyBanc Capital Markets — Analyst

Hey, good afternoon.

Leon J. Topalian — President and Chief Executive Officer

Hey Phil, how are you?

Phil Gibbs — KeyBanc Capital Markets — Analyst

Doing well. Thank you. How do you guys see the global pig iron trade unfolding this year given the 25% reduction in 2022, do you see supply chains having reoriented at this point. Is there a reduced dependency on it, given some of the new projects that have been announced by the blast furnace folks or others, just what’s the — what’s the reconstruction in that market right now?

Leon J. Topalian — President and Chief Executive Officer

Yeah, I’ll kick it off. Phil and then ask Noah Hanners of our Raw Materials to comment on that, but I just want to point out, because Noah was in the — the Vice-President of Rollover DJJ at the time. And again, as we’ve mentioned a few times on this call, the day that the Russians invaded Ukraine was the last day we took any material from them. And so it required Nucor to pivot incredibly quickly, Noah and the entire DJJ team stepped up. Our teams across Nucor stepped-up. Because of the long-tenured relationships that we have around the globe, because of the relationships that DJJ has built with partners and customers in South America, we were able to pivot move very very quickly in bringing new suppl into Nucor. At the same time, our teams have also technically figured out how to reduce our use move from, roughly what was about 10% of our pig iron use across the sheet group down to 5% or 6%, so the overall tragedy that is still continuing to unfold in Ukraine has created a silver lining for Nucor, and how we think about raw materials, our positioning strategy and our overall use and consumption, but maybe Noah, just paint picture as we think about ’23 and how that’s going to shape out.

Noah Hanners — Executive Vice President Raw Materials

Yeah, first of all, thanks for the question, Phil. And really for the opportunity to talk about our team and the performance through 2022 because I think it was really formative for how we think about employing raw materials going-forward. So the short answer I think to your question about the balance of global pig iron supply is, the Ukrainian — invasion of Ukraine was really impactful, it’s roughly 50% of the supply that went offline when Russia invaded. But more important to us, the strength of our raw material models and the flexibility we have. If you think about how we operate about a third of our raw materials are self-sourced between the DRI plants in our recycling group assets. So you combine this with what’s really unmatched coverage of the market through our DJJ brokerage team. And the flexibility of our mills in terms of what they can melt to make our products for our customers and we can be extremely agile, so we’re able to as Leon described quickly change our melt mixes, maintain our focus on value-in-use while minimizing our cost and making the products our customers need. So again, if you look-back to 2022, it’s a testament to this flexibility, we. We prepared for the invasion to the best of our ability. And we had indications that was coming. We were able to quickly pivot, adjust our melt mixes at the mills, minimize our pig iron and immediately cease purchasing from Russia. So, I’m extremely proud of our team for their ’22 performance. They executed and I’m also confident in our flexibility and the strength that provides us going forward.

Phil Gibbs — KeyBanc Capital Markets — Analyst

Thank you. And then in Fabrication, you gave us a range basically somewhere between the fourth quarter of ’22 and the first quarter of 22, given profits, should we essentially split the difference there or is it going to be closer to one versus the other? And then within that, how are [indecipherable] prices holding up relative to the second half. I know that they were historically strong.

Steve Laxton — Executive Vice President, Treasurer and Chief Financial Officer

Yeah, hey Phil, this is Steve. Thanks for the question. And that’s been an outstanding segmented, it’s really driven fantastic results for the year, it’s been one of the key catalyst, so while we do see some moderation from that group, it’s still very strong. I’m not going to guide you leaning one way or the other necessarily from ’21 versus ’22 or something like that, but you’re seeing some moderation there, but still outstanding performance from that group well above — you should expect well above historic norms for that group as we head into at least the first-half of the year where we have some visibility.

Leon J. Topalian — President and Chief Executive Officer

Thanks, Phil.

Operator

Our next question will come from Curt Woodworth with Credit Suisse. Please go ahead.

Curt Woodworth — Credit Suisse — Analyst

Yeah, hi, good afternoon. Leon and team. Hope you’re well.

Leon J. Topalian — President and Chief Executive Officer

Thanks Curt, yes. Hope you are as well.

Curt Woodworth — Credit Suisse — Analyst

Thanks. So. I just wanted to drill down into the margin structure in the mills segment. If I look at 2021, your reported metal spread was about 720. And then if I look at the back-half of ’22, it was about the same at 710. But your EBITDA per ton at least based on my math, went from 410 to only 185, so that seems to imply a pretty big step-up in conversion costs. And I know that there could be some Gallatin start out and other issues, but is that is that math roughly correct and can you just talk to how you see conversion costs trending into the start of this year?

Dave Sumoski — Chief Operating Officer

Yeah, thank you, Curt. This is Dave Sumoski. Inflation has certainly been a factor for us on our interconversions costs, it probably falls anywhere within USD40 to USD80 depending on the division. Couple of divisions would be higher than that Gallatin being one of those, but those are outliers. So, inflation has been a big factor. Two other big hitters, I think you have to remember — well, two other big hitters are, as we bought CSI and ramped it up this year, we run slabs through that facility and the cost of the slabs go right directly into our cost of goods sold. So we had some pretty expensive slabs on the ground. So that was a pretty big hit year-over-year for our cost of goods sold in. And then, across all of our divisions, we had significant inventory adjustments throughout the year and those inventory, the cost of those inventory adjustments goes right into our cost of goods sold as well. So those three factors were pretty big — were very big and that’s why you see that big increase.

Curt Woodworth — Credit Suisse — Analyst

Okay, that’s helpful. And then second question is, if. I look at slide seven, on the expand beyond, you’re talking. I think targeted EBITDA across those assets of roughly $700 million. It seems like you’re making good progress on CHI to get to the 400 number, but can you kind of help frame like — roughly like where we are in that progression? And then when you look at. I guess those business segments. Can you talk about growth potential within those or how should we think about maybe how much capital you would look to allocate M&A-wise into expanding beyond the core this year, if you have any preliminary views? Thank you guys.

Leon J. Topalian — President and Chief Executive Officer

Yeah, Curt, I’ll begin and let Steve sort of talk about the — as we think about through-cycle EBITDA, but I’ll touch on your second question first, you know, as we continue to think about the growth of Nucor, we’re coming off two historic years in really over the last several years, our strategy has not changed. Our mission and our vision is very clear that is to grow our company period and we’re going to do in two ways, Nucor and expanding beyond, you’ve seen our investments in the core and while we’re certainly not done, those will be probably more in line with what you’ve seen in terms of positioning strategies moving into more galvanized, more prepay, more higher-value added products as opposed to what we’re doing in West Virginia in terms of greenfield facility. But on the expand beyond piece, you know, Steve, Alex Hoffman, who heads up our business development team and our executive team is focused on growing and looking in that expand beyond area for those adjacent companies that have sort of a steel centricity at some piece that are efficient manufacturers, because that’s really where we see the value set in coupling. That’s one of the reasons why we were so excited. About CHI, again, couldn’t be more proud of [indecipherable] the entire CHI team for how they’ve performed through this year and again their EBITDA and where we sit today so far beyond the the models that we’ve built out. So that focus for us is going to continue. We’re going to continue to look to grow Nucor to position Nucor well into the future and be generating significant revenues as well as our bottom-line net earnings through the expand beyond businesses that we continue to acquire.

Steve Laxton — Executive Vice President, Treasurer and Chief Financial Officer

Yeah, Curt. I’ll just add a couple of comments there to what Leon said. In terms of where we are with these particular platforms, so it’s not a significant amount of capital other than what we’ve announced on the towers business to achieve the $700 million target that we outlined for these businesses. So we are well along that path. Very proud of the teams that are in these four platforms, the work they’ve done so far to integrate into Nucor as Leon touched in his opening remarks, has been very solid and I think they just undermine what Nucor’s business model really is. At our heart, we’re a strong diversified industrial manufacturing model and we’re able to leverage that model in businesses and across a broad-spectrum of our portfolio to drive value, so If you’re looking for how much money might be in new expand beyond platforms as Leon said, we are a growth company. And so, we’re not done yet, but these platforms that are established are well on their way to that $700 million figure.

Curt Woodworth — Credit Suisse — Analyst

Great, thanks very much. Best of luck.

Operator

Our next question will come from Timna Tanners with Wolfe Research. Please go-ahead.

Timna Tanners — Wolfe Research — Analyst

Yeah, good afternoon, everyone. I wanted to explore a little bit that outlook and then ask a question about volumes and I think they’re a bit tight. But to start with the outlook in the steel mills, in particular, you talked to improve profitability on higher volumes and improved margins, specifically in the sheet business. So the higher volumes, I get seasonally and off a pretty low-base at 70% utilization. On the margin side. I mean, it looks like trending prices at 750 hot-rolled and compared to Q4’s average price of 960 looks like a tough comp and costs have increased and those deeper discounts on your quarterly contracts and monthly contracts. I’m just trying to figure out if your guidance is more about the volume side or if I’m missing something on mix or costs?

Leon J. Topalian — President and Chief Executive Officer

Yeah. I mean, Timna, I’m not going get into the contract to contract comparison. But again, all contracts are not created equal. They’re not all on a calendar year, they’re not all one year contracts and they are different escalators built-in accordingly. And so again we feel really good about our strategy and that strategy really comes back to the pre-announcement, as we were getting ready to announce, West Virginia to build the most diversified capability set not capacity. And so if you look at the sheet group in particularly has done this year they’ve matched demand. They matched the market and what was required and that flows through and you can look very quickly to see our EBITDA per ton. And what we’ve been able to return back to our shareholders in our performance. And I’m very proud of. If you think about our positioning as we move forward, we’re going to we’re going to match that. In my answer to the Gallatin question that mill will have the capability to run at full steam come Q2, but we’ll be very mindful about how we bring those tons into the marketplace. So again, we’re going to be very thoughtful about how we do that. Rex, anything you’d like to touch on in terms of that customer segment as we move into ’23.

Rex Query — Executive Vice President, Sheet and Tubular Products

Yeah, Timna, thanks for the question. The only thing. I would really add. If you look at the volatility we had from what we saw in really the second-half of ’22, but if you look at where CRU stood in third quarter, and then the drop in the fourth quarter and now what we’re seeing now. It’s a really short window, and I think that’s to Leon’s point, we have a long-term strategy and in the short-term, you may see us do things from a quarter-to-quarter based on what the markets happening. We chose, very specifically, not to participate in some of the spot market as heavily as we saw some of the lower pricing. So you will see some lower volumes, but we are a margin focused company long-term as a group as a sheet group, our goal, our purpose is to generate a return for our shareholders on our investment. So that be the only addition. I would have.

Timna Tanners — Wolfe Research — Analyst

Okay. I was just trying to understand the margin guidance on the sheet side, in particular, if that was a pricing or cost-driven, but I don’t want to press on contracts. I understand that’s sensitive, so I guess I’ll switch to the second one, if you have anything else on the cost side that would be great. But on the utilization at 70% in the fourth quarter and that one of your peers earlier today touting at above 85% utilization. Should we think about that ramping-up, given all the positive commentary on demand that you’re explaining, Slide 17 and the ramp-up of of course Gallatin and Brandenburg. I mean, is it reasonable to expect that there should be a commensurate increase with the new capacity coming on or to more normal utilization levels?

Leon J. Topalian — President and Chief Executive Officer

Yeah. I think you’re going to watch that unfold. And again, I’m not going to comment on what our competitors strategy or positioning is, however, obviously one of our competitors has got a new mill, and a lot of assets sitting on the books and they’re going to do whatever they’re going to do in bringing that mill up. At the same time, we’re going to focus on what Rex said in providing a return to the margin that drives our business. And so, we’ll meet the demand out there, we’re not going to chase tons or pull-forward demand that isn’t real. But again. I think what we’re seeing in the indicators at the sheet group is seeing over the last two months are very favorable and I think that will continue and you’ll see the uptick subsequently, in our utilization rates as we head into the back-half of Q1 into Q2.

Timna Tanners — Wolfe Research — Analyst

Okay, thanks, everyone.

Leon J. Topalian — President and Chief Executive Officer

Thanks, Timna.

Operator

Our next question will come from Carlos De Alba with Morgan Stanley. Please go-ahead.

Carlos De Alba — Morgan Stanley — Analyst

Thank you very much. Good afternoon, Leon, Steve. I have couple of questions, one is on startup costs and the other is on corporate and eliminations segment or line in reports. First on the startup cost, as you complete some of the projects [indecipherable] above the play meal. How do you see the startup costs coming out in 2023, given the big increase that we saw $250 million in 2022 versus $130 million last year. Any clarity there will be great understanding that you are always growing company, but any color would be useful.

Steve Laxton — Executive Vice President, Treasurer and Chief Financial Officer

Yeah, hey, Carlos and thank you for that comment. And that’s what I’d like to start where you ended, Nucor is very much a growth company and you do see different treatment of startup costs from us versus some of our peers, some of them like to make adjusted earnings, we don’t view that as an adjustment, that’s just part of what we do, we’re a growth company, you’re going to see that going-forward from us. Continued startup costs preoperating startup cost, it was $73 million in the last quarter. We expect it to be down just a little bit in the first quarter and some of the variability as you start to model out the year, will have to do with spending and the pace at West Virginia. So you’ll have to just kind of stay tuned on that. But for the next quarter you’ll see that come down slightly from the fourth quarter. Does that address your question adequately?

Carlos De Alba — Morgan Stanley — Analyst

Yeah, definitely. Thanks Steve. And then the other question is on corporate and elimination. The reports was $77.1 million in the quarter. If I adjust back for the tax credit and the tax — the change in the valuation allowance. I think I calculate and I’m assuming that this is all on just the same figure pretax and after tax, I calculate that line would have been around $71 million negative, $71.4 million negative, which will be a substantial improvement versus the $441 million reported in the third quarter and $617 million negative in the fourth quarter of 2021. So I wonder if you can comment a little bit about that delta, which has definitely helped the quarter and I assume from your guidance that is not going to be such as positive tailwind in the first quarter of 2023.

Steve Laxton — Executive Vice President, Treasurer and Chief Financial Officer

Yeah, very much, so the components that go into that segment, the corporate and elims number, you’ve got several different things, administrative costs, you get interest costs and compensation-related costs, the largest of which is profit sharing, which as Leon said, we are thrilled that our team earned almost $1 billion in profit-sharing this year in which we get paid out in March. But the big swing from last quarter to this quarter was really the inventory valuations that occurred in our intercompany elims, that’s why it swung to the to the positive credit that you see. So that’s what we don’t expect to have going-forward, that’s going to be the biggest change between Q4 and as we head into Q1 and there’s really two components to that, if you start to look into your model on a little bit more detail. One part of that was the DRI losses we had, which of course wiped out any profits intercompany profits between DRI. And the other part is really around volumes. And that was more pronounced in our downstream steel products segment than it was anywhere else. We just — we shipped a lot Carlos toward the end of the year, even more than we expected. So that’s partly why you saw a little bit of increased free cash flow from working capital as well from that factor.

And as — just to close the loop here between — Dave Sumoski commented earlier, it’s one of the drivers of why, sometimes it’s a little complicated to look at our cost, when you’re looking at a segment and you’re trying to dial into steel mill cost, part of these elim numbers were actually falling out of that segment number and down into the total corporate number elims number as well. So that it does give a little fussy when you’re trying to trying to loop that.

Carlos De Alba — Morgan Stanley — Analyst

All right, excellent, well, thank you very much.

Operator

Our next question will come from Tristan Gresser with BNP Paribas. Please go ahead.

Tristan Gresser — BNP Paribas — Analyst

Yes, hi, thank you for taking my questions. And the first one on plate, please. Can you explain a little bit the strategy and it’s kind of a question in three parts. The first one on the volume side, if I look at plate volumes. So for the year there are around 1.5 million ton, usually you’re around 2 million ton. So how — what’s the target really, with the new facility for 2023, and also if you can talk a little bit about the mix, the target product mix and market mix for the new facility. The second kind of part of the question is more on prices. When you look at plate prices drift lower this year, really strong. Do you believe that the demand environment you’re seeing is kind of warranting those elevated prices and now we’re back to kind of a more normal kind of price-cost relationship or do you believe some normalization should still take place there? And finally with those elevated prices domestically, how do you view the import risk. There has been a new trade case. How do you feel about that. Do you think the U.S. market is definitely well-protected there? So, thank you.

Leon J. Topalian — President and Chief Executive Officer

All right. I’m going to begin and then let Al talk more specifically, but I want to begin with telling you our prices in plate are not elevated and I do look forward to their returning to normal levels closer to $2,000 a ton. And so being a little facetious with you, Tristan. But we don’t think they’re elevated at all. We think there the supply-and-demand environment and In a commodity business demand will always dictate pricing, and so that is the driver. And so I would again tell you that they’re not elevated. In terms of import risk and you mentioned the trade case, actually Al testified here, not too long ago on that case, the ITC is found and upheld that sunset review on those countries. And so the protections that are in-place today, not just on plate, but all of our products. is so greatly enhanced from what we saw six-seven years ago, in 2015, for example, it was only about 50 or 55 trade cases that were won against countries found dumping or illegally subsidizing their steels, today that is closer to a 150 and so regardless of administration. We’ve had great success in advocating for our industry and holding those countries accountable with countervailing duties or anti-dumping margins for bringing again not just plate but sheet and rebar and other products into this country illegally but Al, you want to touch on short of that that makes the strategy for Brandenburg and how do you expect to ramp that up?

Al Behr — Executive Vice President, Plate and Structural Products

Yeah, it’s a great question, Tristan. There’s a lot to unpack there. I’ll talk through a few of it and then I may ask MAS Caleb Strother, who is our Director of Commercial for our Plate and Structural Group to talk with a few more specifics, but to echo what Leon said, no, certainly not, we think plate prices are at a range where the market is bearing them and they think they are fair and we don’t see them as elevated at all. What we did with our order book or the way we bifurcated our order book through this year, we separated coil and cut-to-length plate from discrete plate that was one thing we did to make sure that the highly-differentiated product like discrete plate that can only be made at the plate mill collects the premium that is warranted versus some of the other products that can be more influenced by hot-band pricing. And so that’s been largely successful if you follow the pricing on both of those and. I know you do, you can see that we were able to decouple those two. So as we sit now, our order book — our mix on plate is about two-thirds discrete plate and about one-third coil or cut-to-length plate and as Brandenburg comes up, Brandenburg is going to be mainly a discrete plate mill. It’s got a stucco mill, it can run coil plate that’ll be highly-specialized plate very value-added. We won’t run a lot of coiled plate out of Brandenburg, it’s discrete plate. So it’s going to move our mix to about 75% discrete. We see that obviously is a good thing.

You asked about tons, I’ll give you a rough accounting of the tons during ramp-up year, and then ask Calob to chime in on some of the markets, but we’re expecting somewhere in the 10,000 to 20,000 ton range of shipments in Q1. So that’s be primarily a ramp-up quarter. Second-quarter probably on the range of 100,000 tonnes. And then somewhere in the 200,000 ton range in the second or excuse me, in the third and fourth quarter. So somewhere in the 500,000, to 600,000 tonnes. I think we would expect out of Brandenburg this year, obviously, the market will dictate part of that and but we would expect to be at run-rates capable of capacity by the end-of-the year. So Calob, maybe if you want to talk to us a little bit about some of the market strategies and some of the areas we hope to penetrate with our broader capabilities.

Calob Strother — Commercial Director, Plate and Structural

Sure, thanks, Al, and thanks, Tristan for the question. Brandenburg brings a whole diversified product mix that we haven’t had with our plate group prior, when you’re looking at plates up to 14 feet wide, 14 inches thick and 1,500 inches long, this helps support a lot of initiatives that are going on the market. Dan touched on the IRA and infrastructure package, Brandenburg is well suited in the middle of the country to help supply those customers with solutions that our plate group hasn’t been able to offer in the past. Also with our announcement of Elcyon, you look at further investment in greening of the energy grid that’s happening in our country, Brandenburg is well suited to supply the [indecipherable] play that will be required for our U.S. fabricators and as well as globally around the world for other fabricators.

Tristan Gresser — BNP Paribas — Analyst

All right. That’s that’s very helpful and just a quick follow-up in terms of wind and renewable. How much of the percentage of demand or volumes could that be?

Leon J. Topalian — President and Chief Executive Officer

The percent of — the volume out of — well. I would just tell you, energy, roughly around 10% of our overall mix is probably where we see it that could ebb and flow a little bit depending on demand and timing, but that’s roughly where we are at as a company.

Tristan Gresser — BNP Paribas — Analyst

All right. That’s really helpful. If I may, just another one also kind of big-picture, but moving from plate to rebar, can you discuss a little bit, what are you seeing on the market more kind of near-term but also more medium-term, as you ramp-up your new micromill and also what’s kind of the timeline is summer 2024 the right kind of timing to think about this facility and the impact on the infrastructure bill. Is it something you’re looking at to kind of move meaningfully into Q3, Q4, is that the right way to think about it? Thank you.

John Hallatz — Executive Vice President of Bar Products and Fabrication

Good afternoon, Tristan. This is John Hallatz. Thank you for the question. We feel our bar portfolio and long products is really going to benefit from what we see coming in 2023 related to the Infrastructure bill, where the rebar market will grow by 1.5 to 2 million tons per year, and we’re planning on ramping-up our mill in Kingman, should ramp-up about October of 2024 and Lexington in the middle of ’24, so we feel like we’re well positioned to take advantage of that market.

Leon J. Topalian — President and Chief Executive Officer

The other thing. I would add, John, and Tristan, just in closing that, the positioning of Lexington and the overall micromill strategy Is to locate in the growing regions in the Atlantic post that where Lexington, North Carolina sits is going to be very key in the growth of that sector in that market, we have proximity to the lowest price scrap and again the customers that will be supplying. That strategy, as John pointed out, has been incredibly important for Nucor, that will continue to help shape and again provide the returns that we’ve seen in rebar and quite frankly of our long products.

The other pieces, you asked about the Infrastructure Act. That will take meaningful shape probably second, third, fourth quarter, certainly in the back-half of the year, but as Dan Needham mentioned earlier, make no mistake, the order activity, the quotes, the interest in the bar group, our products [indecipherable] decking, it’s already begun. So we’re already seeing the pre bids in activity already starting. So again, that’s not — just wishing and hoping we’re seeing that activity, we’re seeing some of the approvals in the bridge and highway programs actually get funding now and that will have a meaningful and substantive impact we estimate and most of the outside groups estimate for every $100 billion in infrastructure, they’re going to be about 5 million tons of steel that will flow-through. And again the product breadth and offering that Nucor has today, puts us in an incredibly advantageous position to serve that growing market.

Tristan Gresser — BNP Paribas — Analyst

All right, thank you very much.

Operator

This concludes our question-and-answer session, I’d like to turn the conference back over to Mr Leon Topalian for any closing remarks.

Leon J. Topalian — President and Chief Executive Officer

Thank you. In closing. I just want to thank our team for a historic year in delivering the safest and most profitable year in Nucor’s history. Thank you to our customers, who enable our success. We appreciate the trust you place Nucor with every order and we’ll continue to work hard to earn your business. And finally, thank you to our shareholders. We take seriously the stewardship of the valuable shareholder capitol you entrust us with. Thank you for your interest in Nucor. Have a great day.

Operator

[Operator Closing Remarks]