Credit: Shutterstock photoIn a move to boost its fabrication platform, Steel DynamicsSTLD has acquired certain steel decking facilities and net working capital of roughly $30 million from steel deck maker Consolidated Systems, Inc. for $45 million in cash.
The acquired assets include three decking facilities located in Memphis, TN, Phoenix, AZ, and Terrell, TX. These locations will allow expanded geographic reach into the southwestern and western markets. These assets, which produce standard and premium specialty deck profiles, accounted for more than 8% of the U.S. steel decking market last year.
The acquired assets will become a part of Steel Dynamic's fabrication operations through its fully-owned unit - New Millennium Building Systems, LLC ("NMBS"). Business and commercial integration with NMBS will start immediately. The transaction is anticipated to be accretive to the company's earnings and cash flow per share for 2015.
The acquisition is in sync with Steel Dynamics' strategy to expand its fabrication operations. Total sales from its fabrication operations shot up roughly 15% year over year to $154.5 million in the second quarter of 2015 while operating income touched record high of $27.7 million.
The decking assets buy is expected to further drive results from Steel Dynamics' fabrication business. The buyout is expected to expand NMBS's position as a leading provider of steel joist and decking products in North America.
Steel Dynamics' growth projects are expected to contribute to its earnings. The company's customer focus, along with market diversification and low-cost operating platforms, is capable of positioning it well for future growth opportunities.
Moreover, the company should gain from strength across automotive and construction markets. The acquisition of Severstal Columbus has also provided Steel Dynamics with an access to high-growth markets.
However, Steel Dynamics is exposed to weak steel market fundamentals. It remains affected by weak pricing, oversupply in the steel industry and high levels of imports.
Steel Dynamics currently sports a Zacks Rank #3 (Hold).
Stocks to Consider
Other companies in the basic materials space worth considering are NN Inc. NNBR , Global Brass and Copper Holdings, Inc. BRSS and NSK Ltd. NPSKY with all holding a Zacks Rank #2 (Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
