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Nucor Corp (NYSE:NUE)
Q2 2020 Earnings Call
Jul 23, 2020, 2:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to Nucor's Corporation's Second Quarter of 2020 Earnings Conference Call. [Operator Instructions] Later we will conduct a question-and-answer session and instructions will be given at that time.

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 related to these forward-looking statements may be found in the Nucor's latest 10-K and subsequently filed 10-Qs, which are available on the SEC's Nucor's 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 now like to turn the call over to Mr. 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 thank you for joining us for our second quarter earnings call. As we continue to navigate the COVID-19 pandemic, we want to again thank the doctors, nurses, AMTS and other first responders for their efforts in this fight. I'd also like to thank our team, who have continued to serve our customers throughout this pandemic.

Joining me today on the call are the members of Nucor's executive team; including Jim Frias, our Chief Financial Officer; Al Behr, responsible for Plate and Structural Products; Craig Feldman, responsible for Raw Materials; Ray Napolitan, responsible for Engineered Bar Products, as well as Nucor's Digital Initiatives; MaryEmily Slate, responsible for Sheet and Tubular Products; Dave Sumoski, responsible for Bar, Rebar Fabrication, and Construction and Engineering Services; and Chad Utermark, responsible for Fabricated Construction Products.

Before going over our financial performance for the quarter, I want to congratulate our team on our safety performance. We began the year with a challenge to become the world's safest steel company and I couldn't be prouder of our efforts on the most important value we have as a company. While the current pandemic has challenged all of us it is also allowed our team to expand how we care for the safety, health and well-being of one another.

I want to take a moment to recognize Nucor Steel Arkansas and Nucor Castrip Arkansas for going more than one year without a recordable injury, an impressive accomplishment for one of our larger more complex steel mills. I'd also like to congratulate Nucor Steel Connecticut for going three years without a recordable injury. Congratulations to our team mates at these divisions. We look forward to replicating these results across more of our operations, so that this becomes the new normal at every location. Safety also means creating more diverse and inclusive company. With the events gripping our nation, we are committed to taking the necessary steps to ensure that every team member in our company feel safe, not just in how we produce our steel, but safe in every sense of the word. Safe and how we treat one another regardless of the color of our skin, our religious beliefs, age or sexual orientation or political views. Our culture is the foundation that has made Nucor the preeminent North American steel producer for over 50 years and we are committed to ensuring that our culture remains the hallmark of our success for the next 50.

Turning to second quarter financial performance. Earnings were better than we anticipated, due to our diversified product mix and strong position in non-res construction markets. We continue to see the benefits of our recent initiatives to improve the performance of our businesses that serve these markets, specifically in rebar fabrication and metal buildings. I want to thank those teammates for embracing the changes we have made in these business units.

During the quarter, we had very strong cash flow and increased our financial flexibility with the issuance of $1 billion of new notes. Jim Frias will discuss this more in detail in a few minutes. As we discussed on our last call, all of our domestic steel and steel product operations are considered to be an essential business and had stayed operating since the pandemic began. Our ability to continue operating along with proactive engagement with our customers has enabled us to grow our businesses with existing customers, as well as develop new customer relationships. We're also getting inquiries in conducting trials with customers, who are planning to reassure their manufacturing operations.

In the uncertain environment created by COVID-19 pandemic, our teams reliability and resilience is appreciated by our customers. I want to thank our teammates for their dedication and commitment to living our culture over these last few months, which is why we were able to exceed our customers' expectations. During the quarter, we were pleased to receive two awards from General Motors, for the second consecutive year Nucor has earned GM Supplier of the Year Award, we remain the only EAF based steelmaker to receive this prestigious award. We value the partnership we have built with GM and look forward to growing that partnership in the future. Congratulations to all of our teammates, who are successfully executing our strategy to grow our share in the automotive market.

In addition, Nucor Steel-Berkeley was recognized by GM for excellent quality and responsiveness and received the Supplier Quality Excellence Award, my congratulations and thanks to the entire Berkeley team for this outstanding achievement, we are very proud of your success.

Now I'd like to provide some updates on growth projects we recently commissioned. Progress continues at our Hickman specialty cold rolling mill. The mill is already producing 980 megapascal strength steel with just five passes through the mill versus 25 or more passes required to produce comparable material at a conventional reversing cold mill. Hickman is continuing to trial advanced high strength steels with both existing and potential customers.

The new galvanizing line at our Gallatin sheet mill is fully operational, and the team continues to focus on optimizing yield and productivity. The mill received IATF quality certification in May, and is working on qualifications relevant to other markets, including grain bins and cooling towers. Gallatin also received a new supply award from a major automotive OEM, and they continue to see strong performance in the solar market.

Our new Sedalia rebar micro mill in Missouri is already achieved positive EBITDA for June. We forecast that the mill will be bottom line profitable by September and will be capable of full production capacity early in the fourth quarter. The spooler commissioning has been completed and spooled product is being well received in the market, we are growing our number of active customers each month.

Our Kankakee, Illinois division has continued to commission equipment and starting to develop a wide range of products on our new MBQ mill there, we will start to ship orders to customers this quarter. While market conditions are difficult to forecast, we are optimistic that we will achieve positive cash flow from this project by the end of the year. We also continue to make progress on several projects that are currently under construction, including Frostproof Florida, rebar micro mill is on track for start-up in the fourth quarter. The Hickman generation 3 flex galvanizing line, the team progressed with building construction and installing equipment foundations during the quarter. We were targeting start up of the line there for the second half of next year.

Finally, with respect to the Gallatin modernization and expansion and the Brandenburg plate mill, we are green lighting each of these projects to move ahead at full speed. Our decision is guided by the incredible market opportunities these investments afford us, our strong operating cash flow and the adjustments we have been able to make across the company in response to the pandemic. We did receive our air permit for the Brandenburg plate mill and we have remained on track with our timeline there by continuing to push ahead on the engineering work for the project. Despite the significant challenges posed by COVID-19 pandemic, the 26,000 men and women of the Nucor team worked hard to maintain profitability during this challenging quarter. I'm especially proud of how our team is coming together and continues to live our culture.

With that I'd like to now turn it over to Jim Frias.

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Thanks, Leon. Our second quarter results demonstrate once again the strength and resilience of Nucor's business model with the Nucor team delivering better-than-expected earnings and robust cash from operations in a very challenging and uncertain environment.

Second quarter earnings of $0.36 per diluted share exceeded our guidance range of $0.10 to $0.15 per diluted share. Results for the month of June exceeded our forecast at several businesses, including our rebar and merchant bar mills, rebar fabrication, joist and deck, tubular products and at our sheet mills.

Cash provided by operating activities exceeded $1.1 billion for the quarter with working capital contraction on the inventory receivables and payables line items totaling $650 million. Working capital reductions generally provide a countercyclical benefit to Nucor in downturns, like the current one, enhancing our cash flow and liquidity. Scrap inventory has been an area of particular focus as the pandemic has unfolded. Today, we are much leaner in this area than we were at the pandemic's outset, and I think we will be able to use this experience to stay lean when growth resumes and prices rebound, reducing the asset base that we require to generate strong profitability.

Our cash provided by operating activities for the first half was $1.35 billion, our second best first half performance in terms of operating cash flow. It exceeded our year-to-date capital expenditures and cash dividends to shareholders by more than $300 million. During the second quarter, we took advantage of attractive market conditions and Nucor's strong credit profile to issue low coupon debt. $500 million of five year senior notes with a coupon rate of 2% and $500 million of 10-year senior notes with a coupon rate of 2.7%.

Concurrent with our capital raise Standard & Poor's and Moody's both reaffirmed their Nucor credit ratings of A minus and Baa1, respectively, while also maintaining their stable outlooks. We continue to hold the highest credit ratings of any steel producer headquartered in North America.

At the close of the second quarter, our cash in short-term investments totaled more than $3 billion more than double our cash in short-term investment position of about $1.4 billion at the end of the first quarter. Nucor's liquidity also includes our undrawn $1.5 billion unsecured revolving credit facility, which does not mature until April of 2023. Our next significant debt maturity is not until September of 2022, $600 million of unsecured notes with a coupon rate of 4.125%. The flexibility provided by Nucor's low cost operating model and financial strength has been and will continue to be a critical underpinning to our company's ability to grow long-term earnings power and reward our shareholders with attractive returns on capital.

On our April call, we reported that we had revised our full-year 2020 capital expenditures budget down to less than $1.5 billion, while that measure was taken to maximize our flexibility in light of a dramatically different economic outlook than we anticipated at the beginning of the year. We have not slowed any capital spending related to safety, operational reliability or environmental compliance. With respect to our most significant organic growth projects, the Brandenburg plate mill and the expansion and modernization of our Gallatin sheet mill.

As Leon has already indicated, we have decided to reaccelerate investments in each of them. We are taking this step after a thorough review of these projects and the compelling economic returns, as well as our cash flow performance. This will mean that capex in the second half will be approximately $250 million higher than it would have been otherwise. We now project our total capital spending for 2020 will be in the area of $1.7 billion.

Before I turn the call back over to Leon, let me provide a few comments about the outlook. Well the current environment is highly uncertain with sheet, plate and raw material markets remaining challenging. At this point we expect Nucor's third quarter earnings to be similar to our second quarter results. Our long products and downstream businesses continue to benefit from solid non-residential construction market conditions and our teammates continue to capitalize on Nucor's advantage cost position, flexible production capability and financial strength. Thank you for your interest in our company. Leon?

Leon J. Topalian -- President and Chief Executive Officer

Thanks, Jim. Before we take your questions. I just want to comment on a phrase I hear regularly getting back to normal. I've overheard this phrase over the last few months and I recognize that our team and folks in our communities, we're saying it to simply indicate they wish the pandemic was behind us. I wish that too for sure, but in the sense, I also reject this as an aspiration. You see at Nucor our goal, our aim and our focus isn't simply to return to pre-COVID operating levels.

When I think about getting back to normal in terms of safety, I don't ever want to go back to normal, I want to replicate the performance that I've shared earlier on Nucor Connecticut and Nucor Castrip trip and Nucor Hickman Arkansas, I want every operating division, the entire team to go without a single injury for an entire year, because then from there we can replicate that over and over. Our focus is to become the world's safest steel company is uncompromising. And also from a financial standpoint, I don't want to return to pre-COVID operating or performance levels. I wanted to continue to focus on the things that we've been able to do over the last five months, that will be a part of our business as we move forward.

We appreciate the valuable shareholder capital that you entrust us with every day and our goals and our aim and focus is to return in maximizing the profitability back to each of our shareholders and our team. And finally, we want to continue to strengthen the relationships that we've built with our customers over a long period of time. However, during this pandemic it has created unique ways for us to connect and develop those further and fuller, so that we continue to be the supplier of choice in meeting your needs. We appreciate the trust you put in our company in place with every order that you entrust us with. While it has been a challenging first half of the year, I truly believe Nucor will come out of this crisis, a stronger, more profitable and more inclusive company.

With that we'd now be happy to take your questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question today from Chris Terry with Deutsche Bank. Please go ahead.

Chris Terry -- Deutsche Bank -- Analyst

Hi, Leon and Jim, thanks for taking my questions. I had a couple, just wondered if you could comment, firstly on your expectation for the utilization rate for your mills in 3Q?

Leon J. Topalian -- President and Chief Executive Officer

Yes, Chris I appreciate that. And as we -- certainly, I won't forecast each of the groups, but I will tell you in general we would anticipate utilization rates to be improving as we go into Q3 and beyond.

Chris Terry -- Deutsche Bank -- Analyst

Okay. And then the capex plans, you've gone to $1.7 for 2020. Can you talk through the speed, cadence into '21, and maybe just the total for the '21, I think originally it was $2 billion and $2 billion for 2020 and 2021. Just wondered, if you could comment on the '21 picture. Thanks.

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes, it's too soon for us to predict our 2021 capital spending. But we're going to use the same discipline and making capital investments next year, because we don't expect the pandemic and pardon me for saying this, Leon from being completely behind us, back to your comments.

Leon J. Topalian -- President and Chief Executive Officer

We're always going to invest in safety and facility reliability no matter what the economic environment. We will move forward with our significant strategic investments, which include Brandenburg plate mill and the Gallatin sheet modernization and expansion. So we will selectively invest in projects with returns, whether the returns are so compelling that it shouldn't be deferred. But I would expect it to not reach $2 billion, but we'll update on that probably in January, because in February the Board of Directors for approval for that 2021 budget, and then we'll share that when we get to that earnings call in January '21.

Chris Terry -- Deutsche Bank -- Analyst

Okay and the last one from me, just if you could give an update on the DRI facilities?

Leon J. Topalian -- President and Chief Executive Officer

Sure, maybe I'll kick it off, and then I'll ask Craig Feldman over raw materials to provide some more detail. But as we look certainly there's been an awful lot of pressure, based on where iron ore pricing are. At the same time, I want to congratulate our NSLA team, who has worked incredibly hard through this pandemic, as well as the Nu-Iron team in Trinidad, who are now operating and had the -- a period of time where they were taken down by the Trinidadian government now are back up and running. But in particular NLSA, as you know we -- the reliability has not been what we have come to expect. And in the third quarter of last year, we took a 60-day downturn to improve the reliability that started back up in November of last year. And over the last nine months, I would tell you NSLAs, our DRI plant in Louisiana has won that the best liability levels we've ever seen, so we're very proud of those accomplishments. There is still more work to do and again the pressure on our results and our performance there because of iron ore pricing will probably be with us for some period of time. But Craig, do you want to provide some detail?

Craig A. Feldman -- Executive Vice President, Raw Materials

Sure. You hit a lot of the high points, so just a couple of things. I'd echo your appreciation and gratitude for the teams in both Louisiana and in Trinidad, done a remarkable job. And you're right after the second half shutdown of last year, the Louisiana plant is running incredibly well, in fact this week continuing today, we continue to set continuous operational records of 57 days today. So they've run incredibly reliable since the improvements we made last fall. We feel really good about that -- proud of that team, very appreciative.

The other point -- I guess the point in that 57 days is -- it may not be completely intuitive to everybody. But this is a 24/7 continuous operation, so that 57 days of uninterrupted production is quite a milestone. The the other thing I'd point out is relative to the DRI just how it fits in the overall raw material sourcing strategy, it's really gives us unique flexibility in the industry to really flex and shift between various metallics. Obviously pig iron, as well as DRI, as well as scrap. So really well positioned, and I would say that the unique flexibility is really unparalleled in the industry.

Leon J. Topalian -- President and Chief Executive Officer

Thank you, Craig.

Chris Terry -- Deutsche Bank -- Analyst

Thanks, Leon. That's it from me. Thank you.

Leon J. Topalian -- President and Chief Executive Officer

Thanks, Chris.

Operator

Thank you. We'll now hear now from Seth Rosenfeld with Exane BNP. Please go ahead.

Seth Rosenfeld -- Exane BNP Paribas -- Analyst

Good afternoon. Thank you for taking my questions today. If I may have one follow-up with regards to -- from the growth projects and want to move over to the outlook for the plate market. With regard to Gallatin and Brandenburg, can you just confirm the expected timeline for development and the ramp-up of these projects recognizing the recent delay. Obviously only one quarter in nature, but should we expect these to be going and roughly in line with prior targets or something that's slower?

And then secondly with regards to the US plate market outlook. Obviously, this has been one of the areas that's weighed on performance of late. And one of you can comment on whether or not there's any conditions emerging for some potential improvement into the second half of the year. Just looking at second quarter performance as well, it looks like your volumes fell much more sharply than your peer SSAB. Offering that your ASPs are much more stable than SSAB's. Can you just comment on the competitive dynamic between yourself and your largest competitor there? Thank you.

Leon J. Topalian -- President and Chief Executive Officer

Okay. Seth, I'll try to make sure we answer all of them, if I don't please remind me, because there is a few questions in there. But let me begin with your first question, which is the expected anticipated timeframes for start-ups at both Gallatin, as well as the Brandenburg plate mills -- plate mill. I would tell you at Brandenburg, despite slowing down the capex spend, the team has done a great job and what we didn't slowdown, Seth at this point was the engineering design work that was being done over the last few months. Our anticipation is that we would have no delay in the start-up of Brandenburg and expect there would be late fourth quarter of 2022 is still on track.

With respect to Gallatin, while it may be a couple of months delay, the team is going to work very hard to bring that again in sometime in mid next year I think is the target. And so it may be a couple of months delay on that. But we're still trying to work through that and figure out if we can make at that time. Still, but again, worst case scenario, it's a couple of months. I'll probably turn it over to Al here to add some more, we'll provide some more information regarding the overall plate market.

And well, I'm not to speak very directly to our competitors. As we think about these investments and think about the plate market in general, we shared about one-third of the market. What we've recognized and realized over time in about nine of the 13 markets that we serve Nucor is the market leader. We understand what that means and the opportunities that affords us. And so with Brandenburg coming online, it also provides widest, most diverse product mix offering of any plate mill in North America. So that on top of being located in the largest plate consuming region in the Midwest, it's going to afford us a freight advantage from our current mills that are supplying their market. So we're very excited about it.

And as Jim mentioned, we're going to be very deliberate in how we spend our capital maintaining our financial flexibility moving forward, but the normal cyclicality of the plate market are in general the steel market is something we've grown accustomed to and have lived in for 50 years. However, the black swan event of this pandemic has certainly given us some pause, but we believe we're at the trough of the market and things will begin to continue to improve as we enter Q3 and Q4.

Al, anything you'd like to add on the plate market in general?

Al Behr -- Executive Vice President, Plate and Structural Products

Yes, And I'd echo Leon, just your excitement -- our excitement about that project in Brandenburg and during our period of capital preservation we remain very busy. We've got a small team on the ground in Kentucky that's navigating our project and doing an outstanding job focusing on the less capital intensive parts of the project, so that when we move back to full throttle as we are today, we can take advantage and maintain our end of 2022 start-up. So we're on track, we're excited and we're headed toward that.

In terms of the plate market in general, our utilization was down in Q2 as you would expect, it was down largely with the market, that the market data for June is not yet published so we don't know industry statistics just yet, but our indicators say that we probably gave up a couple of points of share in Q2. We had gained share in Q1, a little weaker in Q2, largely due to a strategy to resist some of the price erosion we saw as the pandemic unfolded. So year-to-date, we're confident, we picked up some share in plate. When we talk about the outlook for second half, it's very cloudy as it is in a lot of our segments, but we see some recovery coming back in parts of energy, not overall, but power transmission show some bright spots. Parts of heavy equipment show perhaps some uptick. We do expect some restocking and some regular buying from service centers to occur over the second half. So we do expect some modest recovery in those utilization rates and some upward movement. But the further out we go, the harder it is to really predict what it looks like. Thanks, Leon.

Seth Rosenfeld -- Exane BNP Paribas -- Analyst

Thanks.

Leon J. Topalian -- President and Chief Executive Officer

Seth, did we cover your question there?

Seth Rosenfeld -- Exane BNP Paribas -- Analyst

Yes. Yes, that's great, thank you very much.

Leon J. Topalian -- President and Chief Executive Officer

Thank you.

Operator

Thank you. We'll hear next from Timna Tanners with Bank of America.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Hey, good afternoon guys.

Leon J. Topalian -- President and Chief Executive Officer

Good afternoon, Timna.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

I wanted to start out and just ask a little bit more about what you're seeing in the construction arena and knowing that you mentioned that it's been pretty steady. So I just wanted to square that with some of your other comments. So on the volume declines, would that be fully function of inventory destocking? And if that's the case, then I would expect maybe a restocking in which case I would expect more volumes into Q3, and you're expecting kind of steady results. So just trying to square those things. I was hoping you could provide a little more color.

Leon J. Topalian -- President and Chief Executive Officer

Yes, Well, Timna, I think the first part of your question was around -- on construction. And so look as we look at our numbers today that end market for us and in the construction market has shown incredible resiliency, and I really want to call out our partnership and the jobs, our teams have done in Vulcraft work and our decking group, our skyline business and piling and really the relationships built with our fabricators over a long period of time, that end market has held up incredibly well. And it's not to say -- and we hope things go well in Q3 and Q4. Our backlog for example, are almost 10% higher year-to-date than they were a year ago. I mean, last year, for our construction businesses in the decking and Vulcraft side was a record year. So our backlogs, our order rates, our shipment rates continue to be very encouraging.

At the same time, look we are watching all the metrics in terms of entry rates, all the billing indexes and looking out to, OK, does that mean a slowdown at the end of the year Q1. But again, as several have mentioned, it's a little too early to begin to predict what the uncertainty may look like. I would just tell you in the next two quarters, we anticipate that they'll remain pretty strong. So I don't think it's a destocking issue, I think inventory levels are relatively low and quite frankly, our distributors are very cautious about adding inventory right now, which is understandable. So I don't think that's the case.

And then what was the second half of your question, Timna?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

She was asking about the -- where volumes went down a little bit. And if maybe, I could [Foreign Speech] Leon. I would just say that first of all, we had some reduction in volumes at all of our steel mills. But the biggest reductions were in our engineered bar mills and our sheet mills. And the long-term story is excellent, we are gaining share in those places. Our share in '19 for sheet is greater than it was '18. It's greater in '20 in the first half it was in '19. But at the same time, we are heavily weighted, I mean, in both engineered bar and in sheet issue in both auto and in energy, oil and gas. And those markets took the biggest hit of all the markets we serve in the second quarter. I think for sheet, we're closing like 10% energy, 10% automotive.

So 20% of our sheet market went away, and similar probably level, maybe even greater, in a higher percentage of our market for engineered bar went away. But the good news is, relative to that is auto is coming back. So to the extent we're expecting things to be similar next quarter. Part of it is that we think that the volumes are going to pick up, but margins are compressed right now. So we're starting the quarter with lower margins than we started last quarter. So net-net, we think those things resulted in close to same performance, it's really a bit of a guessing game right now. Did that answer your question about why we're seeing flat performance when we see upside? And then to energy, some of our bigger customers in the tube space that make products at our sheet mills to serve the energy markets, they think by the end of the year, they're going to see pickups as well. So we're hopeful that's going to happen, but we're seeing it more clearly today in auto, we'll pickup in demand, both in engineered and bar and energy.

Craig A. Feldman -- Executive Vice President, Raw Materials

I'd make one comment year-over-year, we're up 8% in rebar and then 3% in MBQ. So on the construction -- on our construction product side, we're actually up this year.

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes, I was just talking about the sequential quarters. So we were down in all products, I think in Q2 versus Q1.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Yes. Okay, I mean, I'm looking at structural down pretty big and bars even year-over-year and quarter-over-quarter, and I think of those as construction, that's why I was asking. But I don't want to belabor it. And I did want to ask -- go ahead.

Craig A. Feldman -- Executive Vice President, Raw Materials

Most of the budget is down is in engineered bar, that's where the reduction is.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Got it. Okay, thanks. My other follow-up, which is to ask a little bit more about how we see the market shaping up in the second half, because clearly automotive is recurring. But at the same time several blast furnaces are restarting, and steel price has been slipping. And so it's a strange combination of more supply, but more demand and you say you're taking market share and the dynamics also taking market share. Just wondering how we see this playing out in the balance of the rest of the year with the growth in supply and demand and how that plays out? And if you could also comment on the lag effect on some of your sheet pricing for CRU contracts. is that still a factor? Thanks.

Leon J. Topalian -- President and Chief Executive Officer

Sure. I'll start this off, and then I'm going to ask MaryEmily Slate to jump in on -- in particular on the sheet side. And, look, Timna, the question you asked on the front end of that is something we're looking at every day. And supply demand ultimately -- is the ultimate economic driver of our business. And so as we think about the third quarter, moving into the end of the year, how are things going to shape out? Well, what we think is by August, we're going to see 13 or 14 blast furnaces come online, but we also saw something through this pandemic. But maybe I have not seen in my 25 years in this business, and that was a shedding of about 20 million tons of of supply come out of the market very, very quickly.

So where we sit today? We're forecasting similar around 10 million tons of restarts. So with 10 million tons still offline, most of that in the sheet arena -- flat-rolled arena or all of that in flat most of it in sheet. We anticipate that the projects that Nucor has as well as some of other markets expansions are going to be still well under the 10 million tons that I'm not sure ever restarts. And again, I don't want to predict that. What I would tell you the ultimate drivers, the low cost producer wins. And so Nucor's focus in taking care of our team from a safety perspective is also matched by ensuring that we remain a low cost position, so that we can continue to be the supplier of choice and grow our market share.

With regard to automotive though, the -- while we're not GM or Ford or BMW or Mercedes Tier 1, biggest supplier, we're working hard every day to be their best supplier. And so the things that, that team has done have really resulted in why we've been selected to have or been named the GM Supplier of the Year Award back to back years. So the -- even though autos will be down this year, and really probably for the next year in terms of pre-COVID levels. Our share of that opportunity is going to grow and we think by the end of the year we will surpass shipment levels of what we did in '19. MaryEmily, would like to make a few comments on the sheet market in particular the pricing.

MaryEmily Slate -- Executive Vice President, Sheet and Tubular Products

Thank you, Leon, and thank you for the question, Timna, about 70% of what we sell in the sheet market is contract time. So we still have about 30% of our book that's associated with spot pricing. And that 70% is divided between a lot of different metrics, so there will be some lag effect in pricing, but we also feel that with oil and gas, as well as it has been, which drives a lot of the hot-rolled price, we feel like we're at a bottom and there is an inflection point coming. So we will see some correction in this market.

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

Okay, thank you guys.

Leon J. Topalian -- President and Chief Executive Officer

Thanks, Timna.

Operator

Thank you. We'll hear next from David Gagliano with BMO Capital Markets.

David Gagliano -- BMO Capital Markets -- Analyst

Hi, thanks for taking my questions. First of all, I just want to ask the question about the second quarter results, actually. The 13 days before the end of the quarter, the guidance was -- now remember, it was $0.05 to $0.10 or $0.10 to $0.15 or something like that, it came in way better. I'm curious what changed in the last 13 days? It looks like on our numbers, the EBITDA came in over $100 million higher based on the guide that was 13 days before the end of the quarter. I'm trying to figure out what changed?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

You know, we're not proud of the fact that we're not the greatest forecasters in the world. We really aren't. And our business units more than doubled their forecast to June in terms of division contribution, which is an EBIT-number. So most of that beat happened on the steel side. And so I would just say that we're probably -- our divisions were probably a bit conservative in their expectations for June. And that's why we ended up missing high by such a large margin.

David Gagliano -- BMO Capital Markets -- Analyst

Okay, understood. It was just such a wide gap this quarter.

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes, we're a company with 27 million tons a year capacity, and we're making low numbers $0.15 a share, $0.30 a share. Those are low numbers relative to our capacity and so it's a big miss in terms of it, if you just look at the number, when you think about it on a per-ton basis, and we think about it in terms of our capacity to generate earnings, it's a small miss. So I agree with you, but just that won't carry on.

David Gagliano -- BMO Capital Markets -- Analyst

All right. Fair point there. Just on the follow-up a bit in terms of the prior questions, and on the comments around supply demand. Three months ago, there was a pause, obviously, in Gallatin and market has -- prices have weakened, obviously, don't make decisions. I know, that's the answer. We don't make decisions about 20-year investments in three month moves in pricing. I totally get that, but was there anything else that changed in the last few months that gave you so much confidence to bring Gallatin back on, and still shoot for mid-2021 start-up, when we do have all this capacity coming on, restarting all blast furnace as you mentioned 10 million tons plus other projects coming online. What changed in the last three months, specifically that prompted the quick turnaround?

Leon J. Topalian -- President and Chief Executive Officer

Yes, David, I'll start and maybe Jim can jump in. Because I want to make sure I articulate this point well. I would tell you it was less of a change in terms of -- there's no change in strategy. But I would tell you is, when we went into early March and shared on the call in April. Our view of what the COVID pandemic is going to mean, how deep it was going to hit, how long it might be with us. We certainly recognize it is a black swan event, gave us pause and what we wanted to do at that time was ensure we maintain the financial flexibility to do the things that we were committed to doing, like regarding our dividend, making sure that we could fund that -- fund our capital needs in terms of maintenance capex. And so really it was a pause to recognize this effect, but make no mistake, it never changed our focus and our thought process around those two projects being strategic long-term decisions that were the right for our team and for our shareholders moving forward. Jim, anything you want to add?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes, Dave. When we made the decision to slow spending down, it wasn't in isolation, we wanted to maximize liquidity in the second quarter, because of this unknown of what COVID is going to do to us. And so our strategy was to cancel non-essential projects, slow the big projects down, not stop and slowed down temporarily, but continue forward with a number of projects including the Frostproof micro mills so far down the path. And do those things to maximize liquidity in Q2, and we accomplish that, separate of the debt issuance, we increased our cash by $600 million in the second quarter. And so our free cash flow is extremely strong, and we wanted to demonstrate that we could have strong free cash flow for the year. And so now we have that confidence and we also have a better understanding of how we'er being impacted in the economy by COVID, things together are the underpinning for saying, let's go forward on those projects. So it was a combination of our results in terms of liquidity, as well as our understanding -- our better understanding of how much we're being impacted by COVID.

David Gagliano -- BMO Capital Markets -- Analyst

Okay, that's helpful, thanks. And then -- but specifically from a supply demand perspective. Your view that the Gallatin, specifically the Gallatin mill will be almost entirely going after market share?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Of course, it will. Long term -- sorry, so long term, our strategy is to grow our share in sheet. It's one of the places where we're a little underweighted relative to the market. We're a market leader in most of the places we compete. And Gallatin is 1.5 million tons, 1.4 million tons of incremental capacity that moves to something the needle a little bit. So certainly our goal is to gain share in sheet.

David Gagliano -- BMO Capital Markets -- Analyst

Right, OK. And then last question, so I'll turn it over. Just wanted to confirm the capex for the two projects. Is it still expecting total capex of Gallatin $650 million? And then also at the Kentucky plate, I think $1.4 billion are those numbers unchanged in total?

Leon J. Topalian -- President and Chief Executive Officer

Yes. The -- both the numbers at Gallatin, the Gallatin number has not unchanged. And I think we reported in our last call that, Jim did, it was $1.7 billion at Brandenburg plate mills has remained [Speech Overlap]

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes, we know that to increase in our call last quarter.

David Gagliano -- BMO Capital Markets -- Analyst

All right, looks $300 million. All right, thanks, appreciate it.

Leon J. Topalian -- President and Chief Executive Officer

Thank you, David.

Operator

Thank you. We'll hear next from Phil Gibbs with KeyBanc Capital Markets.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Hey, good afternoon.

Leon J. Topalian -- President and Chief Executive Officer

Good afternoon, Phil.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Just to piggyback off of what Dave just asked. It doesn't sound like there has been much spent to-date on Brandenburg. And then on Gallatin maybe a little bit relative to that $700 million. Is that right?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

You want the breakdown of what we spent on those projects so far this year? is that what you're asking for?

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Just to-date. Yes, I mean, not necessarily this year, but just how much have you spent in terms of where we are right now?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes, I have the outlook, but I don't have the history. I'm sorry, I don't have it on my fingertip, I'm sorry. Dave, give us what information is.

David A. Sumoski -- Executive Vice President Bar, Rebar Fabrication, and Construction Services

Yes, Brandenburg we spent $150 million before the pause. We'll spend about $245 million throughout the rest of the year now that you picked it back up. At Gallatin, we expect $220 million before the pause and we're going to spent another $160 million.

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Did you get that? Did you hear those numbers.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

I did, I did. Thank you.

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Okay.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

And then I know from last call your target on inventory for the year, I think you said you want to take out $1 billion of inventory. Is that still something that you think is achievable?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

We said we wanted to reduce the inventory significantly and we thought it could be up to $1 billion. We are scrapping inventory down by about 850,000 tons, and so I don't know if that itself is a $1 billion. I think it is. But we made a significant progress in scrap, in fact scrapping from, I think 3 million tons at the end of Q1 to somewhere around 1.3 tons at the end of Q2, maybe a little lower than that. Or 2.2 million, 2.2. million.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Okay, the D&A numbers look like they're coming in a bit higher than what we had forecasted. I mean this includes amortization, but I have almost $200 million a quarter for Q1 and Q2, is that something that should be repeated for the rest of the year?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes. I think that's going to be above right for the year. Our full-year forecast is 720 depreciation and just over 84 amortization.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Okay. Got it. And then on the side of the tax, the deferred tax benefits with these project timelines essentially intact, and I know that there were some benefits this year, next year and then in 2022. Maybe just remind us what those are? And how much maybe you received thus far?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Yes. We get it in terms of -- we get in two points. First of all, to the extent we're making money, we could offset those profits and not pay taxes. So how much we get this year, probably depends on how much we make. We think the benefit this year can be is going to be in the neighborhood of $200 million, and then some that will be NOLs, that we'll have to go through a process to get from the government. But this year's benefit, we think of as being $200 million and the cumulative benefit over three years is expected to be in the neighborhood of $700 million.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Jim, how much of that $200 million, you got so far this year?

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Well, look at income statement, everything that we've got is tax expense, we haven't had to pay.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Got it. Thanks everyone.

Leon J. Topalian -- President and Chief Executive Officer

Thank you.

Operator

Thank you. We'll take our next question from Andreas Bokkenheuser with UBS.

Andreas Bokkenheuser -- UBS -- Analyst

Thank you very much. Just a quick clarification, I think you kind of answered the question already, but there has been obviously a lot of talk about taking market share. And you guys have been doing that and you continue to do so. And we've seen you do so, as well before in the past in these kind of price trough markets. We're obviously seeing some of your competitors raising sheet prices now, which of course, you could do, but in doing so, of course, some of the integrators could restart capacity. So I guess the question is the focus on your second half strategy or maybe a 12-month strategy more on continuously taking market share, kind of, in line with what you've done in the past, in these kind of trough markets?

Leon J. Topalian -- President and Chief Executive Officer

Look at the end of the day, Andreas our focus is to serve our customers well, and make sure we're providing a differentiated value proposition. And so as we think about moving forward, our pricing decisions are going to remain independent what our competitors are doing. We will evaluate for ourselves where we believe the market is at and when -- and if it would be time to raise pricing. So as we move forward, we absolutely want to grow our market share. As I mentioned nine of the 13 markets we serve, we are market leaders. We are not market leaders today in plate, Brandenburg will help provide that differentiated value proposition where we would be. And also in sheet today we're somewhere in the 16%, 17% of the overall market range. We have an awful lot of opportunity to grow in that, as Jim commented, too, earlier. So again as we move forward like we do in every product group and have made pricing decisions, we will evaluate that independent of what our competitors are doing.

Andreas Bokkenheuser -- UBS -- Analyst

That's very clear. And then maybe as a follow-up for that. When we kind of look at Q3 and there has been some talk about expectations of scrap prices and then raw material prices, kind of, pulling back in August. So would you say that from a raw materials price environment point of view that the environment is supportive of margin expansion into the third quarter. All other things equal, I mean, keeping the price aside, but from raw material price point of view, but there should be some margin support there? Is that fair to say?

Leon J. Topalian -- President and Chief Executive Officer

Yes, look very fair question and obviously we track and follow that in the scrap market volatility over the last several months and certainly something we watch. Craig Feldman, over our raw materials. Craig, why don'y you comment to what you're seeing and how you look at the market over the next few months?

Craig A. Feldman -- Executive Vice President, Raw Materials

Sure. Yes, sure, Leon. Relatively stable I guess is our overall outlook. Yes, there's been some recent activity particularly export activity in China and Turkey, really driving things a little more active. But it's a fairly well balanced market from a supply demand standpoint, and I certainly wouldn't see any major moves in the near-term. I would hate to venture, I guess, much beyond the next 60 days or so. But I think our outlook is relatively stable. There could be modest moves in the short-term. Little bit of dislocation in certain regions. With some of the coastal or export activity, you could see some pricing pushed a little bit, but for the most part, we see the outlook stable.

Andreas Bokkenheuser -- UBS -- Analyst

All right, excellent. Thank you very much for taking my question. I appreciate it.

Leon J. Topalian -- President and Chief Executive Officer

Absolutely. Thanks, Andreas.

Operator

And we'll take our last follow-up question from Phil Gibbs with KeyBanc Capital Markets.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Thank you very much. The raw material side, I think there were a couple of pretty big outages in Q2. One at Louisiana, because of COVID and the one in Trinidad, because of COVID, but the results in the raw material segment were a lot better then I would have thought. You now have those operations back online, so I would have thought you would have gotten some better momentum in the third quarter relative to the second. So just curious in terms of how we see that interplay why it's down, why the second quarter was I guess so good. I mean, I think it was even probably better than the expectations that you have for yourselves.

Craig A. Feldman -- Executive Vice President, Raw Materials

Yes. Well, it's Craig. Yes, it definitely was better than we had expected, to the question earlier about the forecast. The real headwind has been and continues to be, as you well know, DRIs, I would say, stubbornly high -- higher raw prices. So that was a bit of a headwind. What really picked up -- the team at David Joseph's recycling operators has really done a nice job and really outperformed in the quarter, so that was a big pickup driving those results. And as you know, we don't release the individual unit results, but that was probably the biggest upside that we get just from the DJJ recycling operations in Q2. And certainly, going forward, I don't know that we're going to see much change in that iron ore pressure. We've talked about a number of times on these calls about the margin pressure. I think, that we'll continue to see and depending on where iron ore prices go, we expect to get some relief at the DRI operation, but your guess is as good mine as far as where iron ore prices go down the road.

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Thank you.

Leon J. Topalian -- President and Chief Executive Officer

Thank you, Phil.

Operator

Thank you. And that does conclude our question-and-answer session for today. I would like to turn the conference back over to Mr. Topalian for any additional or closing remarks.

Leon J. Topalian -- President and Chief Executive Officer

Before concluding our call today. I want to express our appreciation to our shareholders. We value your investment in our company and we take the obligation seriously that comes with it. We will treat your investment with great care. I also want to thank our customers. We're excited about the capabilities we are building to better serve you today and most importantly, for tomorrow. Thank you for the trust and confidence you place in the Nucor team each and every day to supply your needs. We look forward to building powerful partnerships to generate powerful results.

And to our Nucor team, thank you for what you're doing every day, and taking care of our customers and most importantly, thank you for doing it safely. We are committed to strengthening this core value and by doing so help to improve the safety of our Nucor family and our industry. I'm excited for Nucor's future and for all of us working together to expand beyond and take Nucor to new heights. Thank you to everyone on the call for your interest in Nucor and have a great day.

Operator

[Operator Closing Remarks]

Duration: 52 minutes

Call participants:

Leon J. Topalian -- President and Chief Executive Officer

James D. Frias -- Chief Financial Officer, Treasurer and Executive Vice President

Craig A. Feldman -- Executive Vice President, Raw Materials

Al Behr -- Executive Vice President, Plate and Structural Products

MaryEmily Slate -- Executive Vice President, Sheet and Tubular Products

David A. Sumoski -- Executive Vice President Bar, Rebar Fabrication, and Construction Services

Chris Terry -- Deutsche Bank -- Analyst

Seth Rosenfeld -- Exane BNP Paribas -- Analyst

Timna Tanners -- Bank of America Merrill Lynch -- Analyst

David Gagliano -- BMO Capital Markets -- Analyst

Phil Gibbs -- KeyBanc Capital Markets -- Analyst

Andreas Bokkenheuser -- UBS -- Analyst

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