Nucor Corporation (NUE) Q2 2022 Earnings Call Transcript

Nucor Corporation  (NYSE: NUE) Q2 2022 earnings call dated Jul. 21, 2022

Corporate Participants:

Leon J. Topalian — President and Chief Executive Officer

Stephen D. Laxton — Chief Financial Officer, Treasurer and Executive Vice President

Al Behr — Executive Vice President Plate and Structural Products

K. Rex Query — Executive Vice President Sheet and Tubular Products

Douglas J. Jellison — Executive Vice President Raw Materials

D. Chad Utermark — Executive Vice President of New Markets and Innovation

Analysts:

Curt Woodworth — Credit Suisse Group AG — Analyst

Seth Rosenfeld — BNP Paribas Exane — Analyst

Carlos de Alba — Morgan Stanley — Analyst

Emily Cheng — The Goldman Sachs Group, Inc. — Analyst

Timna Tanners — Wolfe Research, LLC — Analyst

Michael Leshock — KeyBanc Capital Markets — Analyst

Presentation:

 

Operator

Good day, everyone, and welcome to the Nucor Corporation Second Quarter of 2022 Earnings Call. [Operator Instructions]

Certain statements made during this 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 they are based on reasonable assumptions, there can be no assurance that future events will not affect their accuracy. More information about the risks and uncertainties relating to those 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 website.

The forward-looking statements made in this conference call speak only as of 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 Leon Topalian, President and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Leon J. Topalian — President and Chief Executive Officer

Good afternoon, and welcome to our second quarter earnings call. Before we get to our second quarter results, I want to highlight some changes we’ve made to our executive leadership team. As we announced in May, MaryEmily Slate retired on June 11th. MaryEmily is a dedicated and an exceptional leader and we thank her for her more than 21 years with Nucor. Her impact on our teams across the enterprise contributed greatly to Nucor’s success and profitable growth. The Nucor team wishes the very best for you MaryEmily and your family, and you will always be a tremendously valued member of the Nucor family.

With MaryEmily’s retirement, Dan Needham has assumed the role of EVP of Commercial. John Hollatz was promoted to Executive Vice President of Bar, Engineered Bar and Rebar Fabrication. John is a proven leader. Over his 23 year Nucor career, he has served in our joist and deck, building systems and flat rolled businesses. We welcome John to the executive team. As part of this reorganization, Chad Utermark has been appointed to the newly created role of Executive Vice President of New Markets and Innovation. In this new role, Chad will focus on our continued growth into new markets and integrating new businesses into the core operations of Nucor.

Also, joining me today on the call are members of the Nucor’s executive team including, Dave Sumoski, our Chief Operating Officer; Steve Laxton, our Chief Financial Officer; Al Behr, responsible for Plate and Structural Products; Doug Jellison, responsible for Raw Materials and Logistics; Greg Murphy, responsible for Business Services and General Counsel; and Rex Query, responsible for Sheet and Tubular Products.

Our mission to become the world’s safest steel company is the greatest measure of our culture and our most important value. Halfway through the year, we are on pace to have our new safest year in history, which is coming off back to back to back record safety years. I want to thank each and every member of the Nucor family for your focus and dedication in ensuring every team member is safe.

Turning to our financial performance. We achieved a record second quarter earnings per share of $9.67 and record first half earnings of $17.30. This record performance was driven by strength across our diversified portfolio of businesses. Strong financial results were recorded by number of our businesses, including bar, plate, sheet, structural, joist, deck, buildings, tubular and our raw material operations. Since entering the steel business, we are focused on growing long-term earnings power and shareholder value. This month, we are celebrating 50 years since Nucor was listed on the New York Stock Exchange. During that time, we have led the transformation of the domestic steel industry and we are the envy of the world in terms of Nucor’s environmental footprint, safety performance and efficiency as well as profitability.

Nucor has grown revenues by more than 13% per year from $83 million when we were first listed on the Exchange in 1972 to last year’s record of $36.5 billion, even as the total size of the domestic industry is shrunk. We have also grown our workforce from 1,800 team members back in 1972 to more than 31,000 team members today, and in the process created a huge amount of shareholder value. $1,000 invested in Nucor when we were first listed would be worth over $1.6 million today. Our record first half results continue the history of delivering new highs in profitability and cash flow through successive, economic and steel market cycles, demonstrating the sustainability and adaptability of Nucor’s business model. We have world-class manufacturing talent and we are making the right investments to continue our track record of outperformance.

Several of our recently completed organic growth projects in our core steel-making business are already contributing to a record first half profitability and there is more to come as additional projects ramp up production or come online. For example, our Nucor Steel Gallatin modernization and expansion project is now fully operational, having completed the last of their project related outage work on June 6th. Our Brandenburg Kentucky plate mill is on schedule and on budget for a late 2022 production start with almost 400 team members on board. This is a game-changing mill in the U.S plate market that will firmly establish us as the market leader in plate. And in May, the state of West Virginia approved the air quality permit for our new sheet mill in Mason County. Groundbreaking for the project will happen later this year.

Also, during the second quarter, we completed our purchase of C.H.I. Overhead Doors and announced two acquisitions that will lead to the establishment of Nucor Towers & Structures, which will serve the utility, transportation, and telecommunication sectors. We are so excited to welcome our new team members into the Nucor family as we execute on our mission statement to Grow The Core, Expand Beyond, and Live Our Culture. These investments are excellent examples of what we look for and Expand Beyond businesses. They serve growing markets and leverage Nucor’s core manufacturing capabilities and are safety and team-focused, incentive-driven entrepreneurial culture. We look forward to rapidly scaling up their operations as we continue to broaden our portfolio of construction market solutions.

As we evaluate growth initiatives either in our core business or by expanding beyond, we focused on driving incremental value by leveraging our capabilities and existing positions of strength as we have done for the last 5.5 decades throughout our history.

Earlier, I mentioned the 50th anniversary of our New York Stock Exchange listing. Our July 12, 1972 news release announcing the listing gave our firm’s business description as quote, “The nation’s largest producer of steel joist.” And it mentioned that the Company also produces carbon and alloy steel. At that time, we just operated one steel mill which was Nucor Steel, Darlington. Nucor’s tremendous growth and profitability and market value over the past five decades has been fueled by our decision back then to expand upstream into steel making. The result is that today we were the leading North American manufacturer of a diverse array of steels and steel products providing essential solutions for construction, infrastructure, energy, transportation, automotive, capital goods and consumer durable market applications.

Today, Expand Beyond is a disciplined strategy for profitable growth and value creation. Just as our expansion into steel making was 50 years ago. With it, we are targeting a higher-growth sectors of the economy and leveraging Nucor’s core competency and efficient, variable cost-based manufacturing as well as our broad product portfolio and existing channels to market.

Turning to policy issues. I want to mention that we support swift passage of legislation to address semiconductor manufacturing and beneficial updates to our trade loss through legislation, known as Leveling the Playing Field Act 2.0. Congress must get this important bipartisan priority across the finish line. Since the COVID-19 pandemic first disrupted our lives more than two years ago, it has become clear that the U.S. need strong, resilient domestic supply chains for all sorts of critical materials such as semiconductors made by great American companies. Re-shoring semiconductor production here in America gives us a tremendous opportunity to unleash a manufacturing renaissance in the United States.

Also, last week, the U.S. International Trade Commission unanimously extended anti-dumping and countervailing duty orders for an additional five years on imports of corrosion-resistant steel from China, India, Italy, South Korea and Taiwan. While this is a positive development, unfairly traded imports remain a concern for our industry. The ITC is conducting several more five-year sunset reviews this year of key trad orders on flat rolled products. These orders are critical to market stability and industry performance and are an important part of our government trade enforcement toolkit. Nucor is working hard to ensure that they all remain in place.

Finally, today’s headlines are full of concerns regarding inflation, interest rate hikes, and whether we’ll experience a recession. While we are all aware of these factors, Nucor’s sustainable and flexible business model gives me great confidence in our ability to continue to grow and create value for our shareholders. Our team is focused on enhancing our capabilities not simply adding capacity and on delivering a differentiated value proposition for our customers by reliably and safely providing a broad offering of the most environmentally responsible steels and steel products found anywhere in the world.

Before I turn it over to Steve, I want to congratulate our 31,000 Nucor team members for a fantastic first half of the year. Thank you for your hard work and dedication, and commitment to delivering exceptional customer service. Let’s continue our progress towards delivering the safest, cleanest, and most profitable year in Nucor’s history.

Now, Steve Laxton will share additional details on our first half performance and our outlooks as we move forward into the second half of the year. Steve?

Stephen D. Laxton — Chief Financial Officer, Treasurer and Executive Vice President

Thank you, Leon. As Leon mentioned, this year’s second quarter was the best quarterly financial performance in our company’s history. The quarter’s earnings of $9.67 per diluted share exceeded our prior quarterly record of $7.97 per share by more than 20%. Operating profits were stronger than we anticipated for all three segments. I want to thank our 31,000 teammates for these fantastic results. Your dedication and efforts are what drive the efficiency of our manufacturing businesses, which enable us to reliably meet the strong demand we’re seeing across our broad array of products.

Comparing the second quarter of 2022 to the first quarter of 2021, all three segments generated higher earnings with pronounced outperformance in our steel product segment. That segment produced $1.1 billion in operating profits for the quarter. Our joist index business continue to be the largest contributor to the segment’s performance. While joist index shipments were down from the first quarter, higher prices more than offset the decline in volumes. Contributions from tubular products and metal buildings were aided by both higher volumes and higher pricing during the quarter. Overall, our steel product segment continues to benefit from strong non-residential construction demand. This segment’s earnings power and strong free cash flow characteristics continue to make key contributions to our overall performance.

In our steel mills segment, shipping volumes were up by 10%. Most of the increase was sheet and plate as we were able to take advantage of what we consider to be strong demand, leading to attractive pricing in those markets. Our metal margins decreased by about 5% from the first quarter’s $941 per ton to a still robust $895 per ton. Offsetting some of the benefits of the stronger metal margins we have been realizing over the past several quarters are some cost pressures from higher electricity and natural gas pricing. Our energy cost per ton of steel produced was up approximately 50% year-over-year. However, for some context, energy cost still represent approximately 6% of our overall cost per ton. Some of the changes in the energy commodity pricing seen in the marketplace overall, over the past year were mitigated by Nucor’s physical and financial hedges that we had in place.

Our raw material segment outperformed first quarter results on the back of the increasing selling prices for DRI and scrap. DRI benefited from elevated metallics pricing that we use to determine transaction values between segments.

Cash provided by operating activities during the quarter was $2.3 billion, enabling both continued investment to grow Nucor’s future earnings power and the return of approximately $900 million of our shareholders valuable capital via dividends and share repurchases. Our direct returns to shareholders for the quarter was 37% of earnings, year-to-date it is 43%.

Our capital allocation priorities remain unchanged. Our highest priority is deployment of capital in our businesses to create long-term value. We also remain committed to our regular quarterly dividend, something Nucor has paid and grown consistently over the last half-century. And importantly, we remain committed to additional direct returns to shareholders in times with strong performance, with an overall payout ratio of at least 40% of net earnings.

During the five years ending in 2021, we returned approximately 56% of Nucor’s net earnings to shareholders. We remain confident that with the capital we retain and deploy, we are building a more resilient, more profitable and more cash-generative Nucor. During the second quarter, Nucor funded $520 million in capital expenditures and $3.1 billion in acquisitions. Between this past December and this year-end, we expect to have completed three major organic growth projects that will substantially enhance the competitive position of our steel mills segment. The first, Hickman’s Gen 3 galv line was completed this past December, the second, Gallatin’s modernization and expansion was completed in June, and the third, our new state-of-the-art plate mill in Brandenburg, Kentucky is anticipated to start at the end of the year.

We expect these investments to generate at least $370 million of combined annual EBITDA once fully ramped up at mid-cycle performance in considerably more and robust market conditions, like the ones we’re seeing now. Nucor has an additional $3.6 billion of approved and in-process organic growth investments that will be completed by 2025. The largest of these is our West Virginia sheet mill. Once these five projects are fully ramped up, we anticipate they will contribute a further $700 million in run rate EBITDA in normal market conditions.

As you are also aware, we closed on C.H.I. Overhead Doors in June, and with the acquisition of Summit Utility Structures and Sovereign Steel Manufacturing, we’ve established Nucor Towers & Structures. We expect these businesses along with other new capabilities we’ve acquired such as insulated metal panels and warehouse solutions contribute as much $600 million of incremental EBITDA annually in future years.

Turning to the balance sheet briefly. As of the end of June, Nucor had debt to capital of 29% and ample liquidity for $2.5 billion of cash, short-term holdings and restricted cash holdings and an undrawn $1.75 billion in revolving credit facility. In May, we felt it was prudent to enhance liquidity and raised $500 million of senior notes with a three-year maturity and a coupon of 3.95% and $500 million of senior notes with five-year maturity and a coupon of 4.3%.

Turning to the outlook for the third quarter of 2022. While we recognize there is considerable economic uncertainty right now, demand appears stable and resilient across our key end-use markets. Prices in the steel segment has softened due to import pressures coupled with overall commodity pricing declines globally. For the third quarter, we expect lower earnings from our steel mill segment relative to Q2 and we expect continued strength in steel products and raw materials with performance roughly in line with the second quarter.

For the year, we expect earnings per share will establish a new annual record for Nucor. And thinking about the longer term, with balance sheet strength and product diversity, this is unparalleled in our industry. Coupled with our highly variable and adaptive business model, we remain confident that Nucor is well positioned to deliver on our commitments to our team, our customers, and our shareholders over time.

Thank you for your interest in Nucor. Operator, we’re now ready to take questions.

Questions and Answers:

 

Operator

Thank you. [Operator Instructions] And we’ll first hear from Curt Woodworth of Credit Suisse. Please go ahead.

Curt Woodworth — Credit Suisse Group AG — Analyst

Yeah. Hey, good afternoon, Leon and team, and congrats on the exceptional quarter. First question is just with respect to the plate and structural markets. You noticed somewhat soft utilization rates for those verticals this year yet pricing pulling up extremely well and basically close to record metal spread today. So just wondering if you could talk to kind of what you’re seeing in those markets and maybe long products more broadly. And then how you think about plate volumes in the ’23 with respect to ramping Brandenburg? Thank you.

Leon J. Topalian — President and Chief Executive Officer

Yeah absolutely. Curt, thank you. And now we are incredibly proud of our team in achieving an incredible quarter, an incredible first half of the year at over $17 per diluted share. It’s just a tremendous outcome. And again, something that we and the entire executive team could not be more proud of the 30,000 men and women who make up the Nucor family. Specifically to your question on structural and plate, I’ll Al Behr, our EVP of Plate and Structural touch on that. I’ll just say from a very high level before I turn it to Al, that one of the unique opportunities that we have particularly in structural is the market share position that we have. We are the leading structural manufacturer in the United States. And it’s something that we’ve talked about many times and shared with you and other analysts that through the cycle, we have seen incredible performance in that sector with Nucor-Yamato, Nucor-Berkeley Beams reporting incredible returns and profitability out of those mill. Even with some — at the time depressed utilization rates in the high 60s, low 70s. Over the last couple of years, that’s improved market delivery in ’21 peaked at upper [Technical Issues] 90s. So that business segment for us continues to operate. And Al, I won’t steal all your thunder but we couldn’t be more excited about the shift in what’s moving in plate in the — see what’s coming online of our plate mill in Brandenburg. But why don’t you just touch on that a little bit and ensure are — where we’re at with Brandenburg as well.

Al Behr — Executive Vice President Plate and Structural Products

Yeah. Thanks, thanks, Curt. Thanks, Leon. As Leon said, I’d just echo in the structural side, I’ll start there first. We typically run at utilizations, there is 60%, 70% and hold that leadership position and Q2 we saw much of the same. So, our utilization may have ticked down just slightly and structural side and I’d say that’s just not chasing the cheap tons. Truck and railcar availability remains a bit challenged and probably slowed up a few tons but our market share position remains strong our utilization remains right what we’d expected and we remain really excited about the opportunities in structural as we talk to fabricators and we talk to the, what I call the consumptive demand part of the market, the folks that are buying our steel and making something out of it is still really strong. And we’re excited about the rest of this year and we’re excited, frankly, about 2020 group.

But with regard to plate, I would say, we’ve made several changes and how we market that product, how we take it to market, how we price it and how we load our order books, and we’re really pleased with what that has brought to the market in terms of the rationality of pricing and much less volatility in the pricing and — but supply and demand still governs the price of that. We publish a price but the market determines what it really is and it itself quite strong. Our utilization in Q2 was improved from Q1, our order book improved. When we talk about project work from bridges, from infrastructure, which we expect to mainly hit in 2023 but is starting to strengthen even today. Again, fabricators are a big part of that plate business, they remain strong with strong backlogs.

So service centers is a big product segment. They remain a bit cautious with their buys. The sentiment around that part of the market is perhaps, I would say more pessimistic than what the reality is, but again the consumptive side, really, really strong. And you asked about 2023, I would just say we would expect continued robust markets, non-residential construction has been one of our most resilient markets across the enterprise, and we would expect that continues in 2023. I mentioned infrastructure is starting to produce better strength, energy including renewables has been a strong markets. When we talk about the build-up to the start of Brandenburg by the end of this year in the markets, it will start to serve and open up for us in renewables like offshore wind and some — even specialty pipe work. It’s very exciting. I mean we stand as the only mill in North America, the only mill in the Western hemisphere that can serve that market that’s currently served by foreign steel mostly blast furnace steel. This will be the cleanest offshore-powered steel that exist in the world and we stand in a perfect position to serve that market.

So pretty excited about it. Our team has done a wonderful job there, navigating the challenges that our project has faced over a couple of years and we sit ready for a start-up by the end of the year, we hope to strike an arc. As a matter of fact, in the hot side even yet in the next literally day or two. So, very excited, very proud of that team. I appreciate your question. Thanks.

Curt Woodworth — Credit Suisse Group AG — Analyst

Great. And maybe just as a quick follow-up. With respect to Gallatin, can you just give us an update on progress there and what your commercial expectations are for volumes in the fourth quarter? Thank you. Best of luck.

Leon J. Topalian — President and Chief Executive Officer

Yeah. Thanks, Curt. I’ll ask Rex Query, our EVP of Sheet and Tubular to give an update on Gallatin.

K. Rex Query — Executive Vice President Sheet and Tubular Products

Yeah. Curt, thank you for the question. Quick summary, all our primary steel-making equipment has been purchased. We’ve awarded are significant portions of civil and concrete work.

Leon J. Topalian — President and Chief Executive Officer

Set back, yeah.

K. Rex Query — Executive Vice President Sheet and Tubular Products

Oh, I’m sorry. I’m going to, sorry, Curt, just talking about the West Virginia, which I’ll hold that for a moment and share that here, perhaps a little late of the question or a follow-up. But for Gallatin, completed our second quarter outage, all equipment has been commissioned at this point. We’re already expanded — have expanded our slab width beyond original capabilities, so we’re beyond 68 inches now. That — the new equipment, we’re capable of 73.5 inches and we’ll be ramping up here third quarter — by fourth quarter, we expect to be at nameplate capacity. And as you may recall, original stated capacity for that mill about 1.6 million tons. The expansion will add about 1.4 million tons, so we’ll be right at 3 million ton mark and capable of producing at nameplate capacity during the fourth quarter.

Our ramp up also in what we produce will be determined also by what’s going on in the marketplace. So, I do want to state that and we’ll gauge that by the demand in the marketplace. So thanks for the question.

Curt Woodworth — Credit Suisse Group AG — Analyst

Thank you.

Operator

And next we’ll hear from Seth Rosenfeld of BNP Paribas.

Seth Rosenfeld — BNP Paribas Exane — Analyst

Good afternoon. Thanks for taking our questions. I’ve got two points on the raw material strategy, please. First, with regard to pig iron from the mills perspective. Obviously, when you spoke here a few months ago, you emphasize a strategy to derisk pig iron supply for the full year. What does that mean for your cost of inventory today? Were you ultimately forced to lock in some high price deliveries that makes for the arriving even though spot has declined sharply?

And then secondly, from the raw material side, I think your guidance includes higher DRI price realizations in Q3. Can you explain what would drive that given the weaker scrap and pig iron prices that we’re seeing in the spot market Q-over-Q? Thank you.

Leon J. Topalian — President and Chief Executive Officer

Yeah. Seth, thanks for the question. I’ll ask, Doug Jellison, our EVP of Raw Materials and Logistics really to provide some background and how that flow-through impact of the DRI pricing into the mills works and explain to us in a little more detail. Doug?

Douglas J. Jellison — Executive Vice President Raw Materials

Sure, Leon. Thanks. Thanks for the question, Seth. First thing I want to acknowledge the great work at the mills in our raw materials group has done over the last six months, tremendous flexibility in execution to react to the changes in the supply chain. No stops in production, we’ve cut our pig used by about 50% which also has led to a reduction in greenhouse gas emissions, and it’s really been a key part of supporting our record earnings. So a big shout out to the team and a thank you.

You’re asking about pig iron, as I mentioned our reliance on pig is half of this year of what it was last year. There is no overhang or buildup of pig, there is the normal flow of pig prices as we purchased pig, deliveries lead times working through inventory. So we see a little bit probably leveling the pig prices through the third quarter, declining into the fourth quarter.

As far as the DRI, just our DRI transfer price monthly, we want the transfer price to reflect the market price into the steel mills, so that will reflect in those segment reportings. And as a result of that we see a stable input costs to DRI with a still elevated pig price and transfer price in the third quarter and then dropping pretty significantly into the fourth quarter.

Seth Rosenfeld — BNP Paribas Exane — Analyst

That’s great. Thank you very much.

Leon J. Topalian — President and Chief Executive Officer

Thanks, Seth.

Operator

Next, we’ll hear from Carlos de Alba of Morgan Stanley.

Carlos de Alba — Morgan Stanley — Analyst

Yeah. Thank you very much. Good afternoon. Just maybe just exploring a little bit more the outlook for the steel product business. The guidance seems to suggest that it should be rapidly in line with the second quarter, but you — could you comment a little bit more, what — where you see the main changes was the composition of this basically stable operating results? Is it prices offsetting, sorry, volumes offsetting prices, the other way around? How do you see margins? Any color would be helpful.

And then if I may squeeze another one. Is it possible to get an update on how you see capex for the remainder of the year maybe freight — first look at 2023 and how do you see working capital evolving in the coming quarters? Thank you.

Leon J. Topalian — President and Chief Executive Officer

Okay. Carlos, let me start off with our steel products business and it’s a good question in terms of how that breaks out because there are segments within the products group that will continue to have record-setting pace and performance. And as a group, though and in its entirety of the steel, joist and deck buildings, different segments that are contained in our steel products group had a record quarter in this past quarter, and in fact, their performance in the quarter was stronger financially than the entire year of 2021. So a $1.1 billion of net earnings for our products group, they are setting an incredibly high bar and really operating on all cylinders. Chad Utermark, who was over our — EVP of our Products Group and now moving into New Markets. Chad, why don’t you just kind of break through a little bit of that split and how that’s working, what’s our forecasting into Q3 and Q4? And then Steve, if you would on the capex.

D. Chad Utermark — Executive Vice President of New Markets and Innovation

Thanks, Leon. Yeah, similar to what we had in the script, we expect Q3 earnings to be very similar to the record-breaking results that we had in Q2, so just a big shout out to all of our downstream product groups. As Leon mentioned, we have multiple businesses from joist and deck, rebar fab, steel piling, racking, tubing, insulated panel, grading so that group continues to perform well. There are indicators that we have come off the highs in some of these businesses as far as backlogs. But I want to remind you how strong those highs work, and in some of our businesses, our backlogs are still at record levels. But most of all, our downstream businesses have current backlog levels that are 30% to 50% higher than the average backlog we had in 2015 to 2019 period, prior to the pandemic. So we still see that non-res construction space that is the driver for these businesses, as Al mentioned earlier, to be a very strong.

What can you expect going forward even out past third quarter and into the future, what I would say is, you should expect higher highs and higher lows and here’s why. Number one, we’ve been making some changes in our businesses over the years, and we’ve talked about some of those, for restructuring some of our business to bringing on a construction solutions team, even alignment within our groups to better more effective commercial practices and expectation that drive higher EBITDA margins. And we’re not done. Bottom line, in some of our business is downstream. We needed to get better, we made progress and I’m proud of where the team is at and where we’re headed.

In addition to that, we’re bringing on these new businesses in Expand Beyond. So you should expect good results from businesses like our insulated metal panel business as we grow that and as we drive efficiencies through that. Steel racking, steel towers, and obviously the overhead steel doors with the acquisition of C.H.I. All these should positively impact our profitability as we fully utilize and integrate these products into our construction solutions portfolio. So I guess if you can’t hear my excitement, I’ll reiterate again, I’m excited about the future of our downstream businesses.

Leon J. Topalian — President and Chief Executive Officer

Hey, Chad. One thing I’ll add and just maybe a further point, Carlos, to share some of this. We get some questions, we obviously got some questions over the last weeks, months, you know what, why are you so optimistic in the face of inflation and interest rates. I mean, if we just look for example at the warehousing space, forecast by Dodge for 2023 is down about 19% but, as Chad mentioned, and I think it’s an incredibly important part, our industry has shifted and it shifted substantially through reconciliation, through consolidation, and through trade. And as a result, you are seeing higher highs and higher lows, but equally that drop in 19% for 2023 is 60% higher than what we saw our previous record year which was 2018 prior to 2021, so it’s 60% higher than what we did in 2018. So in terms of the volumes, yes, it’s coming off 19%, but the overall market is still incredibly strong and there is a lot to be optimistic about in that space.

Now, the other piece of that. When we look at Nucor Buildings Group, the Nucor Buildings Group does roughly about 10,000 buildings annually, just our Nucor Buildings Group. Every one of those buildings have somewhere between 4 and 12 to 15 doors on every building. Well now with C.H.I., it is an incredible marriage as they continue to grow their commercial and to time with that dealer network with those businesses. And then you think about the rest of the warehousing space with companies like Amazon, the Gigafactory, the chip factories and hopefully we’ll see that past year in Washington DC in a chip sacked and that instead of package support it to build an onshore and reassure American manufacturing. But that is an incredible structuring solution piece.

So having C.H.I. now in the portfolio continues to differentiate new quarters, a one-stop differentiated supplier that can take care of all of the needs. And that’s how we’re thinking about it as we move forward in the types of businesses Chad will be responsible for in the Expand Beyond category. So — and thank you Chad. Steve, you want to touch on sort of our capex for the balance of the year and how we are looking? Thank you.

Stephen D. Laxton — Chief Financial Officer, Treasurer and Executive Vice President

Absolutely. Hey, Carlos. How are you doing? This is Steve. You asked about capital through the remainder of the year. And we have guided to a little more than $2 billion on this year and so I’ll give you that same outlook from where we sit today. We spent about $1 billion so far, so you can back into roughly $1 billion in the second half of the year. And you’d ask about working capital. Our working capital is obviously going to vary where you believe steel pricing is going to go across our system and I’ll let you take a best guess at that. You probably know better than we do.

Carlos de Alba — Morgan Stanley — Analyst

All right. Excellent. Well, thank you very much and good luck.

Leon J. Topalian — President and Chief Executive Officer

Thank you.

Operator

Next, we’ll hear from Emily Cheng of Goldman Sachs.

Emily Cheng — The Goldman Sachs Group, Inc. — Analyst

Good afternoon, Leon and Steve. My first question is just around infrastructure package that should start to really accelerate in 2023. But how much early demand are you seeing that — from that materialize this year? And perhaps what are the categories that are taking some of the early wins there?

Leon J. Topalian — President and Chief Executive Officer

Yeah. Thanks, Emily. And look, I would tell you that right now, there’s a lot of dialog going on but we’re not seeing any real movement in terms of material orders. We really think that will start in earnest in early ’23 and really begin to progress throughout the year 2023. So, while our teams, our divisions’ businesses are ramping up and in at the ready, I think we’re still about six months out from really seeing that that move through our company.

Emily Cheng — The Goldman Sachs Group, Inc. — Analyst

Great. That makes sense. And then my follow-up is just on the steel mill side. We’ve certainly been seeing a little bit more of a buyer strike type of activity from — on the customers end as it relates to sort of hot-rolled but how are market participants acting now? Is there any sort of renewed or early signs of renewed appetite to reengage here?

Leon J. Topalian — President and Chief Executive Officer

Yeah. Look, I think so. And again, if we look at our most recent order books, sheet strong, we’re seeing some — again the word resiliency is the right word across the non-res construction businesses, and you know well now and in Nucor, that’s 50% of our overall mix is into the construction sector. So us providing again a complete solution really is a differentiated value proposition. But yes, we are seeing, but again stable demand and growing, in some cases, but it’s certainly not without looking as well as some of the headwinds that are coming from a economy standpoint in the marketplace of interest rates and inflation. It’s in supply change and some of those constraints. While there was a real the driving demand factors in our businesses, for the most part remains very healthy. Again, automotive is a good example.

If we could solve the ship shortage today, I think we’re going to crest well over 17 million units sold. And while that’s the forecast so, it’s easy to say that, I truly believe that. I think the underlying demand, the consumable spending appetite in this country still remains fairly high. And so, again, there is some things I think that will begin to loosen up and break loose in the back half of this year and well into ’23 that will help in addition of the infrastructure, like getting bit more caught up on the ships. And as Al mentioned, the offshore wind and what we saw President Biden recently announced an executive orders yesterday, that will continue to position Nucor well — position Nucor’s plate group in particularly Brandenburg. It is an incredible value-add opportunity for our customers.

Emily Cheng — The Goldman Sachs Group, Inc. — Analyst

Thanks, Leon. I appreciate the color.

Leon J. Topalian — President and Chief Executive Officer

Thanks, Emily.

Operator

[Operator Instructions] We’ll now hear from Timna Tanners of Wolfe Research.

Timna Tanners — Wolfe Research, LLC — Analyst

Hi, good afternoon, guys.

Leon J. Topalian — President and Chief Executive Officer

Good afternoon, Timna.

Timna Tanners — Wolfe Research, LLC — Analyst

I wanted to ask two questions, one was to kind of probe what was discussed earlier on Gallatin a little bit more and the other was to ask about follow-up to the garage door acquisition. So with regard to Gallatin, if I look at your sheet tons, you’re running run rate less than a year ago levels. And I know you made the comment that you tailor it to production — to, I’m sorry, the tailor production to demand levels. But how much of Gallatin was in the second quarter? And assuming demand allows, should we be seeing that 1.4, half of that flow through fully in the second half of the year? Just trying to square that with the volumes being lower year-over-year.

And then the C.H.I. acquisition question, I just wanted to follow up. I know you said that you were looking to store up maybe more overhead garage stores to kind of get more critical mass like you did with the tubular, structural tubing in the past. So just wondering if you have any updated comments there. Thanks a lot.

Leon J. Topalian — President and Chief Executive Officer

Yeah. Let me start with the back half and then Rex, I’ll turn it over to you and we got I think good questions on the Gallatin front of what we’ve seen today would be very little through in the cycle of the overall volume, but I’ll let Rex touch more on that. Regarding the C.H.I. acquisition, look, in our minds, we acquired the very best company out there in that space period, bar none. So our opportunity really isn’t too to move or look for other large garage door companies. We are roughly operating at about 60% total utilization with C.H.I. today, we have a lot of room to grow and most of that 60% is concentrated sort of that mid-USA levels. The further out towards the coast you get, the market shares drop off a little bit. So you have an opportunity or we have an opportunity to really grow that business with what we have today.

Now, there may be some things that we’re looking at that I can’t get into that would be very, very small, that might be complementary, but we are edge or in the C.H.I. basket couldn’t be more excited about Dave Bangert and his leadership team, the entire C.H.I. team in welcoming them to the Nucor family in what they’re doing in that business segment. We’re proud of them already. We’re proud of the Nucor team members and the growth that they’re going to bring in the coming years is something incredibly exciting for us. Rex, you want to touch on the Gallatin question?

K. Rex Query — Executive Vice President Sheet and Tubular Products

Yeah. I’ll speak first — we’ll speak about the first half of the year. We had some outages with Gallatin as we’re installing this equipment. So if you look as a group, if you took the first half of the year, we’re running at a utilization above the 80% mark as a group. With the outages, we were a little bit under that, a Gallatin, but we augmented that with other sheet mills in our group. So that was how we handled that, took our customers through supply from other mills. So now that the outages has complete equipments installed, our run rate will ramp up and we’re putting the equipment through its pace. And so we’re doing a full thickness slab now and the new slab 130 millimeter. But as we start to put the mill through its paces, will go wider and wider, that will happen during the third quarter. And again, we’ll have the capability, we absolutely expect in the fourth quarter to run at really nameplate capacity. So you would look right at that 3 million ton run rate annualized. But will gauge that to what the markets doing off of that.

Leon J. Topalian — President and Chief Executive Officer

Timna, where we sit, maybe a little more color. It probably be in the several hundred thousand ton range based on what we see today that we would produce between now and the end of the year and from the new expansion part of Gallatin.

K. Rex Query — Executive Vice President Sheet and Tubular Products

Correct.

Timna Tanners — Wolfe Research, LLC — Analyst

Okay. Super. Thanks very much, guys. I appreciate the color.

Leon J. Topalian — President and Chief Executive Officer

Thank you.

Operator

Next, we’ll hear from Michael Leshock of KeyBanc Capital Markets.

Michael Leshock — KeyBanc Capital Markets — Analyst

Hey, good afternoon. I wanted to follow up on your M&A commentary. It sounds like the C.H.I. side will be mostly organic growth from here. But do you see other opportunities to make downstream acquisitions, then how deep is your pipeline of potential targets right now?

Leon J. Topalian — President and Chief Executive Officer

Yeah, Mike. Thank you for the question. When I took over in January of 2020, our eight-word mission statement is alive and well and that’s Grow our Core, Expand Beyond and Live Our Culture. And so the Live The Culture piece is easy, it’s delivering on compromising results in every area of our business and doing that while maintaining the safety, health and well-being of our team. The core is just that the West Virginia mill, the Lexington micromill, the expansions in Hickman and the new increases across and Kankakee and other core assets that we have. This Expand Beyond piece over the last 2.5 years driven really by Steve Laxton before he became CFO and Alex Hoffman is really about finding those companies that provide a differentiated value proposition and moving us short of that one standard deviation outside of the normal and traditional steel making lane that having direct fuel adjacency. But like C.H.I. offer you some insulation from the traditional cyclicality of steel making, Hannibal Industries is in doing that, Cornerstone in the insulated metal, panel building business is doing that.

The other side of it in the other filter that we look for is how do we continue to provide sweeping solutions in construction, in energy, in automotive, so that when our commercial teams go and meet with the architects, engineers, owners, PCs, they can say we’ve got the entire solution for you, you don’t have to worry about doors or joist and deck grading or anything else. We are one-stop-shop and can solve the entity and the entirety of their steel needs.

So the pipeline is rich. I think it will get richer as we move forward and for every downturn, Nucor’s gotten stronger and continue to invest that — our cash flow position, the profits we’re generating today for Nucor in an ideal position to continue to be very deliberate and very strategic with long-term goals to enhance our shareholder value.

Michael Leshock — KeyBanc Capital Markets — Analyst

Got it. Thank you.

Leon J. Topalian — President and Chief Executive Officer

Hey, Michael, thank you.

Operator

At this time, there are no further questions. I will turn the call back over to Leon for any additional or closing comments.

Leon J. Topalian — President and Chief Executive Officer

I just like to congratulate our entire team again for a record first half of the year. Thank you for delivering on our mission and making ’22 the safest, cleanest and most profitable year in our history. Thank you to our customers and thank you for the trust that you placed in each and every one of our Nucor teams for your business. We will continue to work hard to earn that business well into the future. And finally, thank you to our shareholders for the trusted capital that you placed in our hands. We continue to want to be great stewards and great shepherds to return that valuable shareholder capital. Thank you for your interest in our company. Have a great day. [Operator Closing Remarks]