[Beginning of Cramer's verbatim comments for this segment...]

Jim:         Alright, I have got heroes… I have got companies that I like… I got execs that I like… I play favorites… it is true… my favorites are people who make us money… my lack of favorites are people who lose us money… today, Nucor (NUE), the largest steel maker in America by production reported a better than expected second quarter… it is looking more, frankly, as I dig down… like a riddle wrapped into a mystery inside an enigma… Nucor beat on earnings… delivering a .43 cents loss, while the street was expecting a much larger loss… and its revenues came in about $130m above what the street was expecting… with total shipments up 11%… compared to the previous quarter, we call that the linked quarter.

Now, on the one hand Nucor said that it expects the third quarter to be better than the second… so far I am smiling… and although the company also indicated that it is still working thru its high cost pig iron…that is raw cost that it has in inventory… usually Nucor uses much cheaper scrap… less expensive… with continued improvement in orders it could work thru that pig iron more quickly… which would mean a real boost for earnings… its gross margins would go up because its raw costs would go down.

Utilization rates were on the rise over the quarter… with the monthly utilization rate up from 38% in April to 54% in June… and Dan DiMicco, the CEO, said that July has gotten better… yeah, Dan DiMicco, I have got to tell you something… if he tells me that we are near the bottom in the steel market… I think we are there… now he did say in June, a late June conference, that he thought we were there… now when the best in the business tells you that we are nearing a bottom or we are at a bottom… then you have to buy his stock on any decline.

But let me give you the other side… the company seemed very cautious about whether the current uptick in steel prices and shipments represent real demand… or just that classic kind of restocking… they run out of steel, they go order some steel, and then when they run out of that, they keep… it never creates good sales, and higher prices… he said that the recover could take at least three years… so if steel has bottomed… it could very well stay there for a while… in other words, instead of having a U recovery… we have just an L… the big question for the whole industry is whether the new demand will stick… and if Nucor is concerned that it might not be real… then I have to be concerned too.

I think that Nucor is the best American manufacturing company…. perhaps save Caterpillar Inc. (CAT)… but lately I have taken a Katy Perry "Hot n’ Cold" approach to the stock… I think that it is a buy and a super strong buy on a pullback below $40... when it drops low enough and becomes an accidentally high yielder… but now I have got to make sure that Nucor (NUE) does not have a hot n’ cold view of itself and the steel industry… Nucor’s results suggest steel has bottomed… with increased demand strengthening the industry… what I want to know is if that demand is real and it will stick… and there is no one that can answer these questions better than one of our greatest guests… Dan DiMicco, Nucor’s fabulous CEO, and a good friend of the show… Mr. DiMicco, welcome back to Mad Money.

Dan:    My pleasure Jim, thanks for having me.

Jim:    I have got to tell you, because I am a close reader of your conference calls and try to interpret everything that you say… I felt great, and then I felt bad, and then I felt great… you have got to tell it to us… you know that you did that… you knew you said just enough negative to make us feel like even the utilization rates are going up and you have two price increases for important lines… that we should not get excited, should we?

Dan:    Well, Jim, the key issue here is the economy overall and we have got a long slow recovery in front of us. And so, we cannot ignore that. Certainly things have gotten better for the steel industry. The demand situation is one where in reality up to this point, real demand, that means in use demand has not improved a whole heck of a lot since the end of last year. But what has gotten better is the customer base. Both OEM (Original Equipment Manufacturers) and distribution centers have got inventories down to 1983 levels. And what that means is, what we call apparent demand. Which is what our customers are actually ordering from us at. As opposed to what their customers are ordering from them at. That apparent demand now has gotten to the level of real demand. So they are no longer taking out of inventory, they are buying all of their needs based upon real customer demand from us. As opposed to part from us and part from inventory.

Jim:    You put thru two price increases because of what you described?

Dan:    Yes.

Jim:    Even though we are in a terrible environment, you are able to put thru price increases?

Dan:    Yes, we have and we have seen some raw material increases take place recently. So we have been able to get price increases through. But as we talked about in our call today, utilization rates for our mills in June were in the mid 50’s. And we have not seen things that low in our entire history.

Jim:    Well, you had a 38 in the month of April but yes, this quarter… now, there is a great conundrum for me… and it is not just how good you guys are… but I am going to bring up a chart that I know that you sent me… first, before I show it is a chart about job losses… and US recessions… I have to marvel, everybody that I have seen… every CEO that has come on… how did they make their numbers?… they fired people… tell people what you did to beat your numbers…. how many people did you fire?

Dan:    We do not fire, we do not lay people off in the company. We never have. And we have not laid anybody off, any of our Nucor (NUE) employees off, in this great recession that we have had so far. And we have no plans to. What we do is build loyalty, trust, and ownership in the company goals in our teammates over the years. Over the long term. We have always been a long term focus company. Which means that you work together thru good times and in bad. And you do not tell people that they are important to you when things are good, and then tell them to get lost when things are tough. So our people have responded tremendously by finding unique ways to cut costs and cut costs in a serious matter. If you take a look at our operating costs, they are down dramatically for the quarter. And that is going to stay. That is not going to go away. And we will see even more coming up in the third and fourth quarter. So our employees have rewarded us by using their innovation, using teamwork, to keep us in the game. To help our customers get a better quality product. More timely delivery. And so it is a two way street.

Jim:    But Dan, isn’t the American way… let’s show the job loss recession chart that Dan sent us… isn’t the American way to fire people and have a government that does not really provide jobs to take the slack?

Dan:    Well, I would like to think that that is not the American way. Certainly there is rational for companies acting the way they do. Nucor has never shared that rational. We have been long term focused, there is too much short termed thinking that goes on in this world. But some of that is in part due to the management, and some is in part due to unions. As you know, Nucor does not have a union at Nucor Corporation proper. And so, we have always had this attitude that we are in this together. We are going to share the pain and share the gain. Right from the top to the bottom. We are all in it. My pay gets hit big time, when everybody else’s is getting hit. And I do well when everybody is doing well. The job slide that you have up there is very disturbing. And I appreciate you putting that up there. And today the Wall Street Journal even had an article showing a very similar, if not identical slide, and series of slides. And what it is telling us is that this is the worst job loss recession that we have seen in our lifetimes, number one. Number two, look at the trends. Look at the slopes. From every successive recession from the 70’s to 2001, the slopes have gotten flatter and flatter on the recovery. That is what is known as an increasing jobless recovery. And the last one, you go out 40 months and we still have not got back to that job creation. Look at where we are today. Look at that lower curve. And if we have the same flat job creation response that we have seen in each successive recession, this is going to be a long slow recovery. We are not talking about 7 million jobs being lost. That is going to happen when the numbers come out tomorrow. We are talking about this thing showing job losses showing cumulatively that could be as much as 10 million jobs. And then, that does not take into account all of those people who have given up looking for work. Or, like our employees are working part time.

Jim:    You are absolutely right… I am amazed that you were able to do these numbers without having to lay off people… but I know the take away from all of the CEO’s that I see all day, which is they made their numbers by firing people… and now they are going to keep firing people as things stabilize… cause it obviously makes the bottom line look better… although it really does not help the long term situation of our country… Dan, I have got to run… congratulation on your great numbers… and for bringing public those figures… because that is what America has to recognize… that this recovery is not going to be an instant snap back… not without employment growing… thank you Dan DiMicco, form Nucor

Dan:    Thank you, Jim

 

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Jim's Comments After the Interview:     Dan DiMicco conference calls are a joy… if you go to listen to one… and I know a lot of people do not like to do it… I urge you to go and listen to his calls… straight talk, not politics… but what would be great for America… and what is great for Nucor (NUE)’s share holders… I reiterate… this is the best manufacturing company in America… other than maybe Caterpillar Inc. (CAT).
 

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