"We currently expect to see a modest reduction in earnings exclusive of one–time charges for the third quarter of 2012. Continued slow domestic growth, coupled with continued or worsening global economic uncertainty may both become increasing negative factors. The construction market continues to be very challenging.
—
Nucor Corporation’s Second Quarter Earnings Release
That seems to be the theme for earnings season. Anyone who knows the steel industry knows two things. First, steel is highly leveraged to economic activity and the manufacturing industry. Second, Nucor is one of the more flexible companies in the industry and they run a very tight ship. Consider this passage from Ken Iverson’s autobiography Plain Talk: Lessons from a Business Maverick:
When Nucor acquired a bearing products plant about ten years ago, the first thing we did was sell off the limousine, the second was to get rid of the executive parking spaces. All it took was a little black paint.
Or this story about the productivity gains from one of their plants:
Last year, Tim calculated that we were spending about $1.5mm annually to lubricate and maintain a series of supporting screws under the Nucor-Yamato rolling line. He noted that shims (tapered pieces of metal) would require no lubrication, and that they might work even better than the screws designed into the equipment by the manufacturer. Turned out to be a pretty smart suggestion. It cut our downtime significantly and is saving us more than a million dollars a year in maintenance costs.
So, when a company like that is telling you they are starting to see a slowdown in business, and increasing concern about burdensome regulation, it might just mean that business is slowing and that regulation is getting burdensome.
