Nucor Corp. (NYSE: NUE) Q1 2021 earnings call dated Apr. 22, 2021.
Corporate Participants:
Leon J. Topalian — President and Chief Executive Officer
David A. Sumoski — Chief Operating Officer
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
Al Behr — Executive Vice President Plate and Structural Products
D. Chad Utermark — Executive Vice President Fabricated Construction Products
Douglas J. Jellison — Executive Vice President responsible for The David J. Joseph Company and Logistics
MaryEmily Slate — Executive Vice President of Commercial
Daniel R. Needham — Executive Vice President Bar and Rebar Fabrication Products
Analysts:
Carlos De Alba — Morgan Stanley — Analyst
Emily Cheng — Goldman Sachs — Analyst
Seth Rosenfeld — Exane BNP — Analyst
Timna Tanners — Bank of America — Analyst
Andreas Bokkenheuser — UBS Securities LLC — Analyst
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
David Gagliano — BMO Capital Markets — Analyst
Presentation:
Operator
Good day, ladies and gentlemen, welcome to the Nucor Corporation First Quarter 2021 Earnings Call. [Operator Instructions]
Certain statements made during the conference call will be forward-looking statements that involve risks and uncertainties. The words we expect, believe, anticipate, and variations of such words and similar expressions are intended to identify those forward-looking statements which are based on management’s current expectations and information that is currently available. Although Nucor believes that they are based on reasonable assumptions there can be no assurance that future events will not affect their accuracy. More information about the risk and uncertainties relating to these forward-looking statements may be found in Nucor’s latest 10-K and subsequently filed 10-Qs, which are available on the SEC’s and Nucor’s website. The forward-looking statements made in this conference call can speak only as this date and Nucor does not assume any obligation to update them either as a result of new information, future events, or otherwise.
For opening remarks and introductions, I would like to turn the call over to Mr. Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead.
Leon J. Topalian — President and Chief Executive Officer
Good afternoon and thank you for joining us for our first-quarter earnings call. Joining me today are the members of Nucor’s executive team including Jim Frias, our Chief Financial Officer; Dave Sumoski, our Chief Operating Officer; Al Behr, responsible for Plate and Structural Products; Craig Feldman, responsible for Raw Materials; Doug Jellison, responsible for DJJ and logistics; Greg Murphy, responsible for Business Services and General Counsel; Ray Napolitan, responsible for Engineered Bar Products; Dan Needham responsible for Bar and Rebar fabrication products; Rex Query, responsible for Sheet and Tubular Products; Mary Emily Slate, responsible for our enterprise-wide commercial group, and Chad Utermark, responsible for Fabricated Construction Products.
I want to take just a minute to congratulate Ray Napolitan on his upcoming retirement in June. Ray has been an invaluable part of the executive leadership team and I will greatly miss his leadership, strategic vision, and keen insights. I wish him and his wife Jodie a long, healthy, and happy retirement. Thank you both for your commitment and sacrifices during your 25 years with Nucor and on behalf of our 26,000 team members, thank you.
Craig Feldman will also be retiring in June. Craig has been a part of The David Joseph Company in Nucor for over 30 years and I would like to thank him for his commitment, dedication to the DJJ team and Nucor for three decades. Craig, we wish you and Sherry a very long, healthy, happy retirement and on behalf of our entire team, thank you.
As we continue to work toward our goal of becoming the safest steel company in the world, we are maintaining our focus, especially as our operations have ramped up across the company in response to strong steel demand. Knowing where to focus our efforts can bring tremendous improvement in safety performance. Looking at our safety data, approximately 40% to 50% of our recordable injuries are hand-related. To address this, we held a wide hand-safety week at the end of February. We are optimistic that our increased focus in this area will enable us to make meaningful progress toward our goal. I want to thank all of our teammates for your commitment to improve the most important value in our company, the safety, health, and well-being of our entire Nucor family.
This past quarter was our best quarter in Nucor’s history. I’d like to thank our customers for the trust you place in us with each and every order. And I’d also like to thank our team who make extraordinary results like these possible. Net earnings per share of $3.10 far surpass our previous quarterly record of $2.31 sent back in the third quarter of 2008. Robust cash flow from operations during the quarter allowed Nucor to return $425 million to our shareholders, while maintaining our strong liquidity position. Demand for our products remains quite strong with healthy volumes in metal spreads across our diverse portfolio of products. Capacity utilization at our steel mills increased to 95% for the quarter from 87% in the fourth quarter of last year.
Many of our product groups are running at or near full capacity. We have had some spare capacity in long products. We are adding shifts at many of our steel product facilities to meet robust market demand. It’s gratifying to see such strong performance across all of Nucor. We are clearly reaping the rewards from our prior investments in the more strategic approaches, we are taking with our key end use markets.
Most of the end use markets we serve remain strong and inventories remain lean across supply chains. We have greater certainty today, that the current favorable demand outlook will persist through the rest of 2021. We are benefiting from our strategy of intentionally targeting our product capabilities at attractive sub-segments of our various markets. Our latest project announcements continue in this vein, namely the new tube mill we are building in Kentucky and the new insulated panel facility in Utah.
We also see indications that the strength in non-res construction is broadening out beyond the warehouse, data center and cold storage sub sectors. The ABI index turned positive in February after 11 consecutive months of contraction. And the Dodge Momentum Index recently registered 151.4 which I believe is the highest reading since 2018. Also backlogs across our steel product segments are all very strong. Our fabricating partner customers are reporting, strong demand in strong inquiry activity in the construction and fabrication markets.
I’m particularly excited to see the business momentum being generated by our construction solutions team. We formed this group last year, so we can develop deeper strategic relationships in the construction market and better leverage our diverse product offering. The team regularly interacts with a broad set of influencers including owners, developers, architects and engineers.
We also recently launched a trademarked high strength beam product called AOS, A Grade A913 beam. AOS beams are produced efficiently from sustainable, recycled steel at our Nucor-Yamato steel plant and allow for faster and lighter construction. Nucor-Yamato is the only producer of these Grade A913 high-strength beams in North America. We are already realizing attractive orders from this effort and are optimistic that we will see many more opportunities as we leverage the unique capabilities of the Nucor portfolio, including AOS.
We are also pleased that President Biden has put forward an ambitious infrastructure plan. We look forward to working with the administration and Congress and are confident our country can make a meaningful investment with sustainable funding to rebuild our nation’s infrastructure. Action is long overdue as the recent grade of C minus by the American Society of Civil Engineers U.S. infrastructure report card illustrates, in the last five years Nucor alone has melted, poured and shipped over 130 million tons of steel rebar, plate, structural beams, sheet and countless other steel products. We are well positioned and ready to help our nation build back better.
Turning to the Automotive market. We expect the industry to produce approximately 16 million vehicles this year. The shortage of semiconductors, severe weather impacts and other issues have hurt recent production volumes in the auto market. We expect the difficulties to continue into the third quarter. Even with these disruptions, our mills have been running full out to satisfy customer requirements from the auto sector.
It’s also worth noting that light vehicle demand is very strong and inventories are quite low. We expect that sector will be running hard to get caught up with the demand for at least the rest of the year. We continue to see strong demand in the renewable energy market, and we believe that the steel needs of this sector will grow rapidly in the coming years. The Biden administration has set a goal of deploying 30,000 megawatts of offshore wind power by 2030. This could require as much as 8 million tons of steel.
We look forward to supplying the requirements of the renewable power sector with steel and steel products that have much lower levels of embedded CO2 emissions than those of competitors and are a natural fit for the renewable energy applications. We have the right capabilities to provide steel products to this market and executing power purchase agreements, like the ones we have concluded with Orsted and EDF helps us to develop constructive commercial relationships in this sector, while lowering our overall CO2 intensity even further.
In other markets, agricultural trucks and other heavy equipments are all showing strength. The oil and gas market is improving with rig counts climbing gradually from the depressed level seen last year. The appliance market is benefiting from the economic rebound in direct payments, people are receiving as part of the COVID relief passed by Congress.
Now I’d like to give you a brief update on the progress of several of our strategic growth projects. Following a pandemic related delay, commissioning resumed last fall at our galvanizing line JV with JFE in Mexico. The team there is busy trialing and qualifying product with automotive customers, as well as shipping product for alternative end-use applications, while this work proceeds. The commissioning of our new Gen 3 galvanizing line at Nucor Steel Arkansas is expected to occur in the third quarter with prime production off that line to follow soon after.
We are excited about the advanced capabilities this project will give the mill. And I think it is fair to say that our customers are excited as well. The expansion and modernization project at Nucor Steel Gallatin in Kentucky is on track to produce steel by the end of the year. To prepare for commissioning the Gallatin mill will be shut down for three weeks, sometime in the fourth quarter.
We are anticipating a gradual ramp-up of the incremental capacity at Gallatin expecting to achieve 1 million tons of incremental output from the upgraded facilities in 2022 and to achieve the full benefit of the added production capability of 1.4 million tons in 2023. We also remain on schedule, with the construction of our new plate mill in Brandenburg, Kentucky. We see Brandenburg’s commissioning time frame, which is scheduled for start-up in late 2022 is ideally suited to serve the offshore wind market. Nucor Steel Brandenburg will be one of only a very few mills in the world, capable of reliably supplying steel plate suited to offshore wind market applications and expectations.
Now, Jim Frias will provide more details about our record financial performance in the first quarter. Jim?
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
Thanks, Leon. First quarter earnings of $3.10 per diluted share were at the high end of our guidance range. Nucor’s record quarterly earnings were driven by strong performances across our broad portfolio of steel making, downstream and raw materials businesses and highlights the success of our 26,000 team members at building a stronger and more profitable Nucor. The performance of our steel product segment was perhaps the biggest surprise of the quarter, as it delivered improved earnings over it’s very strong fourth quarter results, countering the normal seasonal trend and overcoming the impact of a temporary margin squeeze due to the quick run up of steel prices.
The just completed quarter included some initial returns from our multi-year growth investment projects. Our Hickman Arkansas sheet mill’s specialty cold rolling mill is rapidly expanding its portfolio of high-strength, lightweight products increasingly demanded by OEM customers. The mill ran at 111% of nameplate capacity in the first quarter, with cash flow and profit contribution, well ahead of the project’s capital authorization budget.
Our new Gallatin Kentucky hot band galvanizing line production rate in the first quarter was 116% of its design capacity, with cash flow and profit contribution substantially exceeding our capital budget projections. Our Gallatin teammates are building a strong portfolio of automotive and other customers in the underserved Midwest heavy gauge galvanized hot band market. The Sedalia, Missouri rebar micro mill completed its first year of production in February, with cash flow and profit contribution also significantly ahead of the projects budgeted performance. Sedalia spooled rebar product continues to enjoy strong commercial success.
Our second rebar micro mill located in Frostproof, Florida began production in December and achieved profitability for the month of March. We congratulate our Frostproof team for their incredibly fast ramp achieving this significant milestone well ahead of schedule. Our Kankakee, Illinois merchant bar rolling mill completed equipment commissioning in December, product trials in February, and achieved positive cash flow for the month of March. Further upgrades to Kankakee’s melt shop are proceeding and on schedule for completion later this year. With its new capabilities, Nucor Steel Kankakee is well-positioned in the heart of the Midwest MBQ market to serve our customers with a state-of-the-art mill and an unrivaled product portfolio. We are delighted with the successful ramp-up of these important new additions to Nucor’s capabilities. We believe this validates both our strategies and the team’s consistent focus on execution. We are confident in these projects’ prospects to continue generating attractive returns with reduced volatility throughout the economic cycle. We again generated strong operating cash flow during the first quarter, enabling us to fund our capex and to post free cash flow of about $217 million for the period.
Financial strength continues to be a critical underpinning to our company’s ability to grow long-term earnings power. At the close of the first quarter, our cash, short-term investments, and restricted cash holdings totaled just under $3 billion. Total long-term debt was approximately $5.3 billion dollars. Gross debt as a percent of total capital was 31% while net debt represented only 13% of total capital. We generally seek to keep net debt to total capital within a range of 18% to 23%. We feel this is consistent with the strong investment-grade credit ratings that Nucor has strategically maintained through economic cycles over the years. At present of course, we are somewhat under-leveraged. This reflects our conservative approach in early 2020 when the economic outlook was more uncertain. We will continue to manage to this target capitalization and will adjust going forward by returning excess capital to our shareholders, just as we have in the past. We took some steps in that direction during the first quarter.
Cash return to shareholders was 45% of net income, or $425 million including the repurchase of 5.4 million shares at an average price slightly above $56 per share. And with the payment of our February quarterly dividend, Nucor has increased its base dividend for 48 consecutive years or every year since we first began paying dividends in 1973.
Our highest capital allocation priority remains investing in our businesses to ensure our continued growth in long-term profitability. We continue to estimate total capital spending for 2021 of approximately $2 billion. Approximately 80% of the 2021 capital spending is for improved product capabilities and cost savings projects. About half of the anticipated total 2021 capital spending is for our three remaining major projects. The expansion and modernization of the Gallatin Kentucky Sheet Mill, the Generation 3 flexible galvanizing line at the Hickman Arkansas Sheet Mill, and the greenfield Brandenburg, Kentucky plate mill.
Turning to the outlook for the second quarter of 2021, as Leon mentioned, we are optimistic. We see improving or stable market conditions for the vast majority of the end-use markets served by Nucor. At the same time, inventories throughout the supply chain remain lean. Earnings in the second quarter of 2021 are expected to again set a new record for the company. The primary driver for this increase is further margin expansion at our sheet and plate mills. Our first quarter record performance reinforces our confidence in the value being created by our strategic initiatives.
The opportunities ahead for the Nucor team are exciting. We have great determination to deliver increasing long-term value for our shareholders. Thank you for your interest in our company.
Operator, we are ready to begin Q&A.
Questions and Answers:
Operator
[Operator Instructions] We’ll take our first question from Carlos De Alba with Morgan Stanley. Please go ahead.
Carlos De Alba — Morgan Stanley — Analyst
Yes. Thank you very much, everyone. Congrats on the strong results. Maybe if you could — I don’t know Leon or Jim, can you please comment on how do you see the ramp-up of the plate mill? I know that its still a little bit away but it is quite important for the company. So with the strong demand that we may have — we may see from offshore wind turbines. How do you see a ramp-up of these of these mill, and the volume contribution in the coming in the coming quarter — in the coming years from 2003 onwards?
Leon J. Topalian — President and Chief Executive Officer
Okay, Carlos. Yes, thank you for the question, and we appreciate the congrats. We’re really proud of our team’s execution to continue to take care of our customer base and we’re incredibly excited about our facility in Kentucky, Brandenburg plate mill we believe ideally positions Nucor to be the strong market leader in plate in the largest plate consuming region in the United States. The team has done a phenomenal job there, but I’m gonna turn the rest of the question over to Al Behr, our EVP of plate products. He’ll give you a little more detail and background on the start-up, and and how the team has maintained its ramp-up in spite of the challenges of 2020 and into ’21. Al?
Al Behr — Executive Vice President Plate and Structural Products
Yes, thanks for the question, Carlos. Appreciate the opportunity to talk about that project. It’s on budget, it’s on track for a start-up in late 2022. So everything is going just exactly as we would plan. You mentioned the offshore wind market, that’s obviously something we’re watching very carefully, very excited about. As Leon mentioned, the positioning of Brandenburg within that market is truly ideal. There’s many things about the capability of that mill that generate competitive advantage for us. One of them is the width with the capability up to 14 feet. That’s an advantage within the offshore market as well as many others. The exceptional quality capabilities out of that mill created advantage for that market as well as the grade and chemistry range. It’s got an outstanding grade range and it’s really squarely aimed at the offshore wind market. So we are watching that very, very carefully. The timing of the mill coming up at the end of ’22 based on the information we have about planned projects, announced projects, permitted projects, all offshore wind is really just ideal. So very, very exciting project for us, we’re excited to get that running, appreciate your question about it and a chance to talk about it.
Carlos De Alba — Morgan Stanley — Analyst
Thank you, and could you comment maybe what is the production that you expect to see out of that mill in 2023?
Leon J. Topalian — President and Chief Executive Officer
Carlos what I would tell you is the ramp-up is, we expect to come out very quickly as that team navigates these challenges of commissioning. We expect ’23 to be a pretty strong year. I don’t want to quote numbers but I certainly think we’ll be approaching 75% to 80% of nameplate easily by the end of ’23.
Carlos De Alba — Morgan Stanley — Analyst
Perfect, thank you very much. Maybe I missed it, but what is the outlook for capex as in the coming years, particularly in 2020, second-half of this year, and ’22.
Leon J. Topalian — President and Chief Executive Officer
We’re going to spend about $2 billion this year. That’s what our internal projections say, roughly a $1 billion is going to be spent over the next three quarters. Our three big projects that are coming near completion, different phases of completion, The Gen 3 Galvanizing line at Hickman, the Gallatin expansion, and of course the Brandenburg plate mill. We’ve not made any comments about ’22 but with Gallatin essentially complete, and the cold mill at Hickman complete, it — unless we come up with some new projects is probably going to be lower than the $2 billion that we’re going to spend this year, but we’ve not actually put together a budget yet for the 2022 expansion. We’re a strong free cash flow company and so we’re going to have plenty of liquidity to invest in at least that much if we wanted to.
Carlos De Alba — Morgan Stanley — Analyst
All right. Excellent, thank you very much.
Leon J. Topalian — President and Chief Executive Officer
Thank you.
Operator
We’ll take our next question from Emily Cheng with Goldman Sachs. Please go ahead.
Emily Cheng — Goldman Sachs — Analyst
Good afternoon and thanks for taking my question today. My first one is just on what you’re seeing in the end-market demand from the construction segment in particular, and in particular the non-res segment. It sounds like your order books is still very full. Are you taking share from others? Is that a partial restocking of the supply chain or is it really true demand strength that we’re seeing there and if there is any particular segment outside of the warehousing component that you think could maybe be an surprise to the upside here? That’d be helpful.
Leon J. Topalian — President and Chief Executive Officer
Yes, I’ll kick us off Emily. Thank you for the question. Then maybe ask Chad Utermark, our EVP over Fabricated Construction Products to Vulcraft and Verco, and our building systems to answer as well. And so what I would tell you is approximately 46% of Nucor’s products move into the construction sector. As I mentioned in my opening comments, we’re really excited about our launch of the construction solutions team and what that team is doing is really positioning Nucor differently to better utilize the breadth and the capabilities of Nucor. We’re not about getting bigger in capacity, we are about enhanced capabilities to serve our customers. And by launching the construction solutions arm and the branding of products like AOS, it truly differentiates us in the marketplace. And so that value capture now and helping architects, engineers, fabricators, designers to recognize how to fully utilize the complement of Nucor’s offerings is really a unique strategic advantage.
As we think about the backlogs, the strength in the non-res construction market, all of those indicators that we track are very, very strong. But again as we think about how we leverage the breadth of that market, it’s something that we spend a great deal of time on. And again, I’m very proud of the construction solutions team, what MaryEmily and her team have done in that market. But Chad maybe just provide a little more color and back for up into the segments that you’re responsible for.
D. Chad Utermark — Executive Vice President Fabricated Construction Products
Yeah. Thanks, Leon. And thanks, Emily, for the question. As you know, we have many downstream businesses and they touch many aspects of the non-res construction market. As we’ve been mentioning for several quarters, we are really excited about the resiliency of the non-res construction market. As we look out forward, we believe non-res construction will remain solid through 2021 and into 2022. Our quoting activity has been and continues to be very robust.
Furthermore, most of our businesses have very strong backlogs and in some of our downstream businesses we have all-time record backlogs. As we move through Q2 and into the second half of the year, we do expect to see significant earnings from these businesses. You asked about specific markets and obviously warehouses, distribution centers, datacenters are driving this demand. But it’s really across almost all sectors we’re seeing solid demand.
ABI just came out and talked about residential, commercial industrial institution. So, the non-res industry is firing on almost all cylinders.
Emily Cheng — Goldman Sachs — Analyst
Great, that’s helpful color. And if I can follow up with one question. Across the steel industry globally including decarbonization is a big thing to look forward to. And we also saw one of your peers come out yesterday, with the net zero target for the longer term. I guess, clearly Nucor being an EAF operator in recycle has a big advantage here, but aside from the PPA that you’re signing, is there anything that we should be focused on from an ASP perspective that you’d highlight to come?
Leon J. Topalian — President and Chief Executive Officer
Yeah, absolutely, Emily. And as we’ve discussed in the past Nucor is a largest recycler. We’re committed to sustainability. We believe today, we’re one of the most sustainable steel makers on the planet. So the things like the PPA agreements that we’ve signed or just part of the steps that we’re going to continue to take to make sure we’re on the very leading edge of the cleanest, most sustainable steel making — steel makers in the world.
And so, in the coming months you’re going to see Nucor launching very open and public conversation about releasing our scope 1 and 2 emissions, as well as setting very clear targets for our improvements and the expectations we expect to see in the coming years. So again, stay tuned. That’s going to come out, again in the next few months where we’re going to highlight and make some very strong commitments to what we think is already best in class to become even better.
Emily Cheng — Goldman Sachs — Analyst
Great, looking forward. Thank you.
Leon J. Topalian — President and Chief Executive Officer
Thank you.
Operator
We’ll take our next question from Seth Ross. Excuse me, Seth Rosenfeld with Exane. Please go ahead.
Seth Rosenfeld — Exane BNP — Analyst
Good afternoon. Thanks for taking our questions today. I’ve got two separate questions, first on raw materials. And then secondly on working capital, please. The raw material segment obviously had really remarkable performance this past quarter. Can you walk us through the drivers of that either with regard to scrap recycling or the DRI business? And with increasing expectation for complete kind of tighter for longer prime scrap market. Can you give us an update on how your derive volumes are progressing any upside to that, looking forward? I’ll come back on working capital, please.
Leon J. Topalian — President and Chief Executive Officer
Okay. Yeah, I actually, I’ll turn this over to Doug Jellison. Let him begin and maybe chime in at the end, Doug?
Douglas J. Jellison — Executive Vice President responsible for The David J. Joseph Company and Logistics
Okay. Seth, thanks for the question. The team through the quarter did a great job of safely approaching what was a pretty challenging quarter as you saw the increase in demand, short-term weather challenges, transportation challenges. But we’ve spent a great deal of time preparing for these things and the proof within the execution in this quarter. Our recycling yards had a record volume quarter, our DRI had solid production. From a financial standpoint, there is a lag as the markets go up and our raw materials are based at the lower cost as we come in.
So, the first quarter will be our best performance. But we expect to see strong performance throughout the rest of the quarter. In terms of DRI, we — they have been performing well, we’ll expect them to continue to perform well. We do have some scheduled outages in May, in December. So, the volumes will be off a little bit, but those are planned and anticipated adjustments.
Leon J. Topalian — President and Chief Executive Officer
You had a question on working capital?
Seth Rosenfeld — Exane BNP — Analyst
Yes, please. I have a very significant investment in working capital in Q1, won’t be able to occur for your business. And can you walk us through what we might expect looking through Q2 and into the back half of the year? Do you think there is a need for further cyclical investment in working capital? Or have you been able to reset the value inventory for example [Indecipherable]? Thank you.
Leon J. Topalian — President and Chief Executive Officer
Yes. So, receivables were up a fairly large percentage and it was driven by a combination of volume, which was up 13.5% prices up by 21% and so we would think next quarter these volumes will be close to the same. And so, we’re going to just have a price driver. We will see some increased pricing. So how much receivables go up will depend on how much pricing goes up. We generally collect receivables in about 30 days. So, what’s outstanding on our balance sheet is roughly 30 days of sales to our outside customers, relative to inventory, our inventories were not in the neighborhood of 6%. Of course, the cost per ton went up significant amount because scrap and pig iron and DRI prices were being up as well. And so inventories are again likely not to go up in volume next quarter, I think you’re going to be relatively flat. And so if we see quite the same increase in inventories that we saw in the first quarter should be much smaller and receivables will be less too, but maybe closer to the same, just because we’re going to have another big increase in pricing in Q2 compared to Q1.
Seth Rosenfeld — Exane BNP — Analyst
Okay, thank you very much.
Operator
We’ll take our next question from Timna Tanners with Bank of America. Please go ahead.
Timna Tanners — Bank of America — Analyst
Yeah, hey guys, good afternoon, everyone.
Leon J. Topalian — President and Chief Executive Officer
Good afternoon, Timna.
Timna Tanners — Bank of America — Analyst
Hope you’re doing well. Wanted to probe a little bit more. The first quarter as expected sheet volumes up makes sense. But some of the long products, although they were better than your second to fourth quarter run rate were still below year-ago levels. So just wanted a little color on that? And, if we should expect that to go up going forward based on the comments just now, I kind of flatter volumes? So, kind of, wanted to get a little color on that? And then if I could on top of that. Can you comment on why utilization has seemed to barely budge in the industry, given the volume improvements and restarts that we hear about and customers clamoring for supply? And I’d really like to hear your take on that. Thanks.
Leon J. Topalian — President and Chief Executive Officer
Yeah, maybe I’ll try to start with the last, and I certainly can’t speak to our overall competitor utilization rates. But again, moving from roughly 85, 86 last quarter and then fourth quarter of 2020 to over 95% for this quarter, for us was a significant move and we saw much of that common in plate and sheet but also our structural mills, rebar mills moved significantly up in their utilization rates, we’re seeing incredibly strong backlogs at Nucor Yamato steel and Berkley beams. And so, the backlog side of the structural market.
And I’m not sure I fully understood the question you’re driving at structurally but that demand in the backlogs, they are not historic, but they are very, very strong. Probably the strongest since the last decade, anyway. So, as we see that moving forward that sector of those markets that they serve, we think will not only be robust but continue well into the year. Al, anything you’d add on, on the structural side?
Al Behr — Executive Vice President Plate and Structural Products
Yeah, just a couple of things. Timna, you picked up on it. Right. We were slowed up a little bit in first quarter. There’s a couple of things in the Beam Group. One was the winter storm that came through and impacted Texas and Arkansas that impacted our Arkansas beam mill to some extent. And the other thing was a project from fourth quarter that we highlighted, a significant modernization upgrade of that mill, that was tremendously successful, but it’s got such a broad product range that is stretched into January before we had fully shaken out the entire product cycle. So that mill today is running as efficiently as it ever had, that’s been a very successful upgrade. So to your point about Q2, now we expect Q2 run rates to be excellent. Leon made the point about backlogs, they’ve improved significantly even just in last couple of weeks and are at an all-time record, but the year-over-year number ticked down just a little bit as you pointed out and those are the reasons why.
Timna Tanners — Bank of America — Analyst
Okay, that’s super helpful. I wanted to ask another question if I could, just switching gears a bit on the green steel topics obviously as you said Nucor has always been green and that’s part of your whole history, but I just wanted to get a little bit of sense on the customers if — how many of your customers can you quantify that are actually clamoring for green steel? Is there a way to quantify that? And then on the renewable side, I know you mentioned 8 million for wind and I hear indeed that New Jersey is going to be the Saudi Arabia wind I guess…
Al Behr — Executive Vice President Plate and Structural Products
Yes.
Emily Cheng — Goldman Sachs — Analyst
So there is a lot of opportunity potentially there but is that 8 million tonnes over time? Is that over a couple of producers? Can you help us get a sense of that and solar and that opportunity? Thanks a lot.
Leon J. Topalian — President and Chief Executive Officer
Yes, I think there’s two shifts and MaryEmily if there’s stuff I missed on the solar side, please jump in. But as we think about the wind, there are right now two very meaningful large-scale offshore wind projects that are approved up and we’ll begin starting production of those in ’22, ’23. So as that ramps up, really we see the timeframe of 22 to 26, 27, 28, it’s kind of that build-out. So, yes, that 8 million tons will be over a period of several years, 3, 4, 5 years. We don’t know exactly what I do — what we do believe is with the president signing an executive order commissioning 30,000 megawatts of offshore power that’s going to drive an awful lot more activity behind these 2 projects. So we expect that to ramp up and that number could increase as we move forward, again with the start-up at Brandenburg in late ’22. It really has positioned incredibly well to capitalize and take full advantage of that opportunity in the marketplace. On the solar side, a little bit like we mentioned in the construction solutions team, and actually, I won’t steal MaryEmily’s thunder. Why don’t you just kind of share with Timna what we’re doing in that and how the solar go-to-market strategy is being run.
MaryEmily Slate — Executive Vice President of Commercial
Absolutely. Thank you for the question, Timna. Solar is absolutely a target market just like construction and we see that as a growth market. We’ll see growth over the next few years, especially with the administration change. And if you saw the announcement on a [Technical Issues] significant amount of the production off that mill will actually target the solar industry for torque tubes and it’s wonderfully positioned with the Gallatin Galvanizing line there, feeding that mill will make it such an efficient supply chain. So our expectation, just like construction solutions, we’ve got a group that’s working with those companies as they grow to provide solutions to make them get to market better and faster.
Leon J. Topalian — President and Chief Executive Officer
You know, Timna, maybe the last comment I’d make is, I appreciate that. We have been green. I’ve been part of our company now for 25 years. I can remember when I started with Nucor in Berkeley when we’re building it making decisions to put equipment in that wasn’t regulated, that wasn’t required by state or federal law. We did it because it was the right thing to do, but one of the things we’ve not done as good a job on is actually telling that story much more proactively, much more offensively-minded, and sharing our data much more openly. You’re going to see a significant step for Nucor to do that and again in the coming months this year to be very transparent, again not just verbally but through the commitment of sharing our full scope one and two emissions and how that impacts, because we believe we can stand up to anyone in the world and also helping the industry to say, hey, we’ve got to do better and we think we can.
Timna Tanners — Bank of America — Analyst
Okay. Thanks, guys.
Operator
We’ll take our next question from Andreas Bokkenheuser with UBS. Please go ahead.
Andreas Bokkenheuser — UBS Securities LLC — Analyst
Thank you very much. Just wanted to quickly follow up on the Seth’s question about the scrap market, especially on prime. I mean obviously sure you’ve seen kind of all the commentary out there, some people believing that it’s going to be a super tight prime market. And yes, yes producers are going to be high cost from here on it and so on so forth. I’m assuming I kind of know the answer to the question, but where do you come out on all of this in terms of the type prime market and potentially some supply release and related to that question as well from a technical point of view, do you have any ability to — let’s assume for a moment, it does become a very tight prime market, do you have the ability to load other feedstock into the furnaces like DRI or pig or anything like that kind of offset any tightness in prime prices going forward?
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
Yes, let me start in answering that, Andreas. The second part of your question about product mix, yes, we have flexibility. We use most of the prime scrap and substitutes which include pig iron, DRI, HPI. We use most of those products at the sheet mills. We can use some at the plate mill as well and some of the other mills, but its primarily consumed at the sheet mills and we’re already using those products and we think we’ve got the most flexible supply chain probably because a lot of our larger mills are on deepwater ports where they can via barge for other vessels receive shipments, not only from domestic suppliers, but from offshore suppliers very efficiently again because of our positioning of our locations being on the water so oftentimes. But yes, we mix — we change the mix of feedstocks based on what’s available and what the costs are on a fairly regular basis. And so that’s a part of our strategic business plan.
In terms of tightness in prime scrap markets long term, we saw this coming several years ago and that’s why we started building DRI plants. So we’ve got two DRI plans that help give us an option in our supply chain and when it makes sense to use more HPI, we max out the usage of what we can use in HPI. The follow-on question we often get is should we build more — I’m sorry, I said HPI, I meant DRI. Follow-up question we get is should we build more DRI plants, and our view right now is not today. If we have so much to you’re right that we keep prime scrap prices depressed, we’re helping our competitors with our capital investment. If the price for prime scrap is tight and we get an advantage that we can capture with profits at the direct plant then we have a competitive advantage against other mini mills that make sheet steel. And I would say that, look at our profits, let’s see what profits get published by integrated mills and then ask me if you really think that we have a cost disadvantage against integrated.
Andreas Bokkenheuser — UBS Securities LLC — Analyst
Right, right.
Leon J. Topalian — President and Chief Executive Officer
Andreas…
Al Behr — Executive Vice President Plate and Structural Products
Sorry, go ahead.
Leon J. Topalian — President and Chief Executive Officer
Yes, go ahead. No, no, no, please. I was just going to really reiterate that exact point Jim did. Let our results speak for themselves, and you can decide where the cost structure is in terms of our delivery and our performance.
Andreas Bokkenheuser — UBS Securities LLC — Analyst
Okay, that makes a lot of sense. I appreciate the answer. And maybe one follow-up question on the technical side. I mean is there, is there any way of saying how low you can go on prime consumption? I realize every furnace is different and so on so forth, but I mean can you go to 0% can go to 20%? Is there any way to kind of think about that going forward? Could you exclude Prime altogether if you wanted to?
David A. Sumoski — Chief Operating Officer
This is Dave Sumoski here. Certainly, the product mix is going to — that’s going to be very dependent. On the bar side, we can go with zero prime. We do go with zero in almost all cases. On the sheet side, we can vary that depending, but you probably going to still need to be in that 30% range, but we can move that around…
Leon J. Topalian — President and Chief Executive Officer
And we think it’s…
David A. Sumoski — Chief Operating Officer
Could you see that?
Leon J. Topalian — President and Chief Executive Officer
Yes, we can use substitutes to the — in the neighborhood of 50%, which with 30% prime gets you to 80% of prime against 20% of obsolete.
Andreas Bokkenheuser — UBS Securities LLC — Analyst
That’s very clear. I appreciate that. And then a final question just shifting gear as well. Obviously if steel prices continue to go up, any updated kind of thoughts on capital allocation, dividends, share buybacks, so on so forth versus your commentary during the fourth quarter?
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
Yes, I think we — if you listen to my comments, I talked about — for the first time we’ve actually published our targeted net debt capital range is being 18% to 22%. We’ve not published that in past. That was a new disclosure that hopefully folks picked up on and our net debt capital numbers like 13% right now. So we’re technically under-leveraged and so I would expect us to continue buying back stock. As the year progresses, we’re going to be very, very profitable for the balance of the year and that we’re going to have plenty of free cash flow and we don’t want to get further under leveraged.
Andreas Bokkenheuser — UBS Securities LLC — Analyst
That’s very clear. I appreciate all the answers. Thank you very much.
Leon J. Topalian — President and Chief Executive Officer
Thank you.
Operator
We’ll take our next question from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Thanks, good afternoon.
Leon J. Topalian — President and Chief Executive Officer
Good afternoon.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
A question just here on the intercompany eliminations, they were obviously sizable and I know that tends to move around, and with the inflation that we saw in third quarter that clearly was something that produced an outsized number. Jim, where do you expect that to shuffle as the year goes on? Did we see peak intercompany eliminations in Q1?
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
We did but hang if I find my cheat sheet, so I can give you more detailed colors. I do have a cheat sheet on that, bear with me. Okay.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Sure.
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
So total intercompany elims, corporate elims were $451 million, the pieces work intercompany profits was a $183 million that was a $175 million more than it was in last year’s first quarter. It was a $125 million more than it was in the fourth quarter of last year. So that was a big number and it’s going to be lower in the second quarter by fair amount. We’re not targeting a specific number but that’s going to come down.
Profit sharing, which is 10% of pre-tax profits with significant, it was a $123 million. We’re going to make more money, next quarter. So that’s going to go up. So based on your profit projection, you should put more money in that pool, other incentive comp that isn’t profit sharing related that it’s other incentive comp was up $50 million to $60 million and that’s probably going to be in the similar range, other than in the second quarter we grant stock compensation, RSU and, there is a $20 million to $30 million hit because of the timing of that, that just happened in the second quarter, so that will be extra.
Other corporate expenses were up about $40 million. I would expect that’s going to be flat with next quarter and interest expense was, I’m sorry it was $41 million and expect it to be the same next quarter. And interest expense was $37 million. I expect that to be about the same next quarter.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Okay. Thank you. Thank you, regarding that. And then as it relates to non-residential construction. Some of those leading indicators that you guys said are pointing to some growth in 9 to 12 months. You have the lagging indicator as well. Actually, there somewhat leading as well, the starts data got hit hard last year. There are clearly parts of the non-res market that are better, to your point deck and joist was up a lot but rebar fab was down a lot. So, I mean, help us just kind of put this put this together, a lot of mixed signals out there right now.
D. Chad Utermark — Executive Vice President Fabricated Construction Products
Yeah, Phil. This is Chad again and you are correct. We have a portfolio of downstream businesses that serve different markets and some are hotter, demand is stronger. But in general, across the businesses of joist and deck and building systems. I look at our backlogs and I listen to our customers that we are sitting on record, high level record backlogs through the rest of this year and already starting to look at next year. And so we are excited about the future in that segment of the business and I think as the company starts to reopen you’re already seeing people going out to eat more and wanting to go to concerts and things as more people get vaccinated. So, I think that commercial world that was so strong for so long will come back. I don’t know that it will come back to the levels we were seeing, but an infrastructure Phill, there is a lot of rhetoric around it. I don’t know that it will happen, but we expect it to, and I would hope that that would add fuel to the strength of this non-res market. So someone else can jump in.
Leon J. Topalian — President and Chief Executive Officer
Yeah, Phill. The the only other thing I’d add is, I think your comment is accurate, but it’s also relative. As you look at the restructuring Nucor has done over the last couple of years with our Fabricated Construction Products groups. Well, we don’t breakout the individual profitability of certain segments. I would just tell you that their profitability and what they’ve contributed to Nucor is the strongest it’s been maybe ever. So, they’re realizing some very strong returns in their businesses. And again, we expect that to continue.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Chad, a little bit more on rebar fab, we had a fabulous profitable quarter in rebar fab, the volumes have been down but that I think was more timing related. And could you speak to that a little bit, the strength in the rebar fab market as well? Or I’m sorry, do I need to, I pointed the first person, I forgot.
Daniel R. Needham — Executive Vice President Bar and Rebar Fabrication Products
I can certainly do that. Phil, this is Dan Needham. And I appreciate the question that you gave, but actually right now, we’re sitting on record backlogs for our rebar fabrication. So, the outlook in terms of demand and projects coming about is looking very good for us at this point.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Okay. I appreciate that. And then I about — if I remember 10 years ago, maybe, maybe even longer, could have been closer to 15 years ago, there was a big increase in usage of steel 2x4s and things of that nature, when lumber prices got high during the housing boom. Are you guys seeing any push back to steel in terms of some of this would, wood use back into some steel as lumber just goes astronomically higher, and I know wood had obviously taken some share in some applications over the last 5 or 6 years. But just curious in terms of some of those conversations with lumber being on amenable and a lot of cases in the short run.
David A. Sumoski — Chief Operating Officer
Hey Phil, this is Dave Sumoski again. I’ll start that one off. All commodities are going up in price. So, the cost to build buildings with both wood and steel would be rising. So, and it’s going to take some time to switchback. So, we haven’t seen any switchback yet, but we talk about of it a lot and trying to understand there some opportunities either way.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Thanks so much guys.
Leon J. Topalian — President and Chief Executive Officer
Thanks, Phil.
D. Chad Utermark — Executive Vice President Fabricated Construction Products
Hey Phil, one last comment I just want to make in the ABI, you see the numbers and obviously I think Leon mentioned those in the script, at a 55.6, one of the highest Index as we’ve seen since 07. But there is another marker that they published and it’s the pace of inquiries, and that number is almost 67 and that is the highest number they’ve seen since 1999. So just the amount of inquiries coming in, is a pretty strong signal to us that there is this pent-up demand to build things, and to expand across many different platforms. And the other certain markets that may be a little weaker little stronger, but overall, the view I see is pretty strong.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Chad, would that pace of inquiries also include the potential for people just asking for re-bids and re-quotes and obviously coming up, coming up lame with the fact that the market keeps running on them? Thanks.
D. Chad Utermark — Executive Vice President Fabricated Construction Products
I have to check, I think it could. It could, but again with our direct conversations with customers and we see cancellations on our backlogs and we’re just not seeing it at this point.
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
It is an architectural index, Architects don’t work for free and give quotes, steel companies give quotes all the time that don’t turn over, but architects don’t work for free. So if you’re getting inquiries. I think it’s not just people getting quotes.
Philip Gibbs — KeyBanc Capital Markets Inc. — Analyst
Thanks guys.
Leon J. Topalian — President and Chief Executive Officer
Thanks, Phil.
Operator
We’ll take our final question in the queue from David Gagliano with BMO Capital Markets. Please go ahead.
David Gagliano — BMO Capital Markets — Analyst
All right. Thanks for taking my questions. I just — I wanted to switch gears a little bit on the longer-term capital allocation thoughts. Obviously, the low hanging fruit from a restart perspective is kind of done now. The pipeline on the greenfield side is fairly well defined and getting to being to the point where it’s behind the industry in a certain respect. Obviously, Nucor over the last few years shifted to a much more aggressive growth profile, including steel making capacity. So my question really is considering the landscape everything you see out there, should we be thinking that Nucor will continue to add steel making capacity, meaningful steel making capacity like we’ve seen with Gallatin and Brandenburg? And if so when should we start hearing about that?
Leon J. Topalian — President and Chief Executive Officer
Yeah, David, thank you for the question. I’ll kick it off and Jim if there’s anything you want to add. Number one, we’re coming off a capital campaign over the last several years of over $4 billion. Our number one focus today is to safely and reliably bring back capacity online which culminates with the startup of Nucor Brandenburg in late 2022. So, our very short-term focus is to execute really well and return significant amounts of capital back to our shareholders.
At the same time, David, we’re a growth company, we’re not satisfied with the position where we’re at today. So, I, and our team, are challenged to think about where do we grow. I can tell you that we’re working hard to continue to invest in our downstream operations to position us well for the future. As I mentioned earlier, our investment strategy isn’t to get bigger by volume, it’s to add strategic capability and how we differentiate ourselves from our competition. By doing so, our investment in Hickman, Arkansas to be the only EAF producer anywhere to make a full Gen 3 product for the automotive industry is going to be a differentiator for Nucor.
So we’re going to continue to look hard on how we continue to grow for the long-term. Investment in Brandenburg isn’t a 1 or 2 year play. It’s a 30 or 40 or 50 year play. And so as we think about the opportunities before us. Again, it begins with executing really well in culminating in finishing the $4 billion sort of campaign we’ve been on, and then how do we think about growth and what does that need to include and I won’t get much more detail than other than to tell you we’re looking really hard in continuing how to position Nucor for the future.
James D. Frias — Chief Financial Officer, Treasurer & Executive Vice President
The only thing I’d add, Leon, is it’s going to dovetail with what MaryEmily talked about the idea that we have commercial strategies like serving renewables, like serving certain sectors in the marketplace, and so it’s going to be driven partly by where we see those opportunities to better serve customers and leverage into those markets with the portfolio that gives them more complete solutions than they can get anyplace else.
David Gagliano — BMO Capital Markets — Analyst
Okay, that’s helpful. In terms of just from a timing perspective, these are decent lead-time projects like I’m assuming. So, when would you or when should we expect to hear more from Nucor if there are some big greenfield projects in the works, when should we expect to hear more from Nucor?
Leon J. Topalian — President and Chief Executive Officer
Yes, look, I don’t want to get very specific, Dave. But what I would tell you is when we’re ready to announce those, you will, you’ll be the first to hear it. So as we — we’ve got to think through that strategy, all of our executives are challenged and committed to delivering growth in each of their respective areas. And so I’m excited about our future. I’m excited about the discipline we’ve maintained in executing our capital strategy and that’s going to continue as we move forward. So we’ll be very deliberate, but we’re not going to stay where we’re at. We’re not going to stand still. We will continue to grow.
David Gagliano — BMO Capital Markets — Analyst
Okay, thanks for the help.
Leon J. Topalian — President and Chief Executive Officer
Thank you, Dave.
Operator
[Operator Instructions] At this time, I’d like to turn the conference back to Leon Topalian for any additional or closing remarks.
Leon J. Topalian — President and Chief Executive Officer
Thank you. Before we sign off, let me just say that Nucor has been preparing for years to thrive in economic conditions, like the one we’re experiencing now. I want to again thank my Nucor team for all you do and the focus on keeping all of our facilities running safely and smoothly so that we can all benefit from the market opportunities available to us today. And thank you to our customers for the opportunity to serve you and your needs, both today and tomorrow. Through the challenges presented by the pandemic last year, we learned how resilient our company and business model are. We said repeatedly that we wouldn’t just come out of this crisis we would survive this crisis, we would thrive coming out and here we are. I want to thank everyone for your interest in our company. We truly appreciate the support from our shareholders, customers, suppliers, communities, and team. Thank you and have a great day.
Operator
[Operator Closing Remarks]