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Nucor Sells Wire Products Facility

Zacks Equity Research

Steel giant Nucor Corporation (NUE) announced that the company will divest its Wire Products facility in New Salem, Pennsylvania, to an affiliate of Wire Mesh Corporation. Nucor stated that the asset disposition was made taking into account the long-term position and earnings potential of the facility.

Post-sale, Nucor will continue to produce wire and wire mesh products at its Utah, Connecticut facility as well as its Laurel LEC Operations in Canada.

Wire Mesh Corporation is a family owned U.S. Corporation that produces high quality wielded wire products. Its product line includes top quality products like standard mesh, structurally engineered welded wire reinforcing, PC strand, bright basic wire and pencil rod.

Last month, Nucor released its financial results for the second quarter of 2012. The company reported adjusted (excluding special items) earnings of 43 cents per share in the second quarter of 2012, missing the Zacks Consensus Estimate of 47 cents.

A sticky situation in Europe forced Nucor to incur an impairment charge of $30 million associated with its Duferdofin Nucor S.r.l. joint venture as utilization rates continued to remain depressed and fell behind budgeted levels through the first half of the year. The adjusted earnings exclude cost associated with Skyline Steel buyout and a one-time gain.

Profit (as reported) dropped a substantial 63% year over year to $112.3 million or 35 cents a share from $299.8 million 94 cents reported a year ago. The effect of oversupply in the industry and a gloomy European market was clearly evident in Nucor’s bottom line performance in the quarter.

Even though shipments to outside customers increased 6% year over year to 5,925,000 tons, a 6% fall in average sales price constrained Nucor’s revenues. As a result, consolidated net sales dipped to $5.10 billion in the quarter from $5.11 billion in the same period last year, but managed to brush past the Zacks Consensus Estimate of $5.07 billion.

The company, which competes with Commercial Metals Co. (CMC) and United States Steel Corp. (X), maintains a Zacks #3 Rank, which translates into a short-term (1 to 3 months) Hold rating. We currently have a long-term Neutral recommendation on the shares of Nucor.

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