Steel Dynamics Inc., FCFF calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Net income attributable to Steel Dynamics, Inc.	3,214,066)	550,822)	671,103)	1,258,379)	812,741)
Net (income) loss attributable to noncontrolling interests	32,748)	20,006)	6,797)	(2,574)	(6,945)
Net noncash charges	724,135)	479,578)	421,847)	421,097)	213,365)
Changes in certain assets and liabilities	(1,766,813)	(63,374)	296,543)	(261,433)	(279,555)
Net cash provided by operating activities	2,204,136)	987,032)	1,396,290)	1,415,469)	739,606)
Cash paid for interest, net of tax¹	79,701)	90,277)	104,142)	96,126)	90,570)
Capitalized interest on construction in progress assets, net of tax²	38,936)	19,335)	4,257)	2,248)	1,137)
Purchases of property, plant and equipment	(1,006,239)	(1,198,055)	(451,945)	(239,390)	(164,935)
Free cash flow to the firm (FCFF)	1,316,534)	(101,411)	1,052,744)	1,274,453)	666,378)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

^{1, 2} See details »

Net Cash Provided by Operating Activities: The net cash provided by operating activities exhibited a generally upward trend over the observed periods. Starting from approximately $740 million in 2017, it nearly doubled by 2018 to around $1.42 billion, maintaining a similar level in 2019 with about $1.40 billion. However, a decline occurred in 2020, where the figure dropped to roughly $987 million. This reduction may reflect operational challenges during that year. Nonetheless, the cash flow rebounded strongly in 2021, reaching a new peak at approximately $2.20 billion, indicating a significant recovery and improvement in operational efficiency or profitability.
Free Cash Flow to the Firm (FCFF): The free cash flow to the firm generally mirrored the trend of net cash from operations, albeit with greater volatility. Initially, FCFF increased substantially from about $666 million in 2017 to approximately $1.27 billion in 2018. This was followed by a decline in 2019 to about $1.05 billion. A notable anomaly is observed in 2020, where FCFF turned negative at around -$101 million, suggesting that capital expenditures or other investments exceeded operating cash inflows significantly during that year. By 2021, FCFF recovered sharply to roughly $1.32 billion, surpassing the levels observed prior to the decline, indicating restoration of excess cash generation after covering investment needs.
Summary of Trends and Insights: There is a consistent pattern of increasing operating cash flows with a temporary setback in 2020, likely related to external factors impacting the company's operations and investment environment. The recovery in 2021 to record-high operating cash inflows and positive FCFF suggests strengthened operational performance and effective capital allocation. The negative FCFF in 2020 poses a notable exception that may warrant further investigation to understand the causes, such as increased capital expenditures, changes in working capital, or other strategic investments. Overall, the data indicates robust cash flow management with resilience and capacity for growth beyond temporary challenges.

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Steel Dynamics Inc., interest paid, net of tax calculation

US$ in thousands

12 months ended:	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Effective Income Tax Rate (EITR)
EITR¹	22.90%	19.10%	22.60%	22.50%	33.10%
Interest Paid, Net of Tax
Cash paid for interest, before tax	103,374)	111,591)	134,550)	124,034)	135,381)
Less: Cash paid for interest, tax²	23,673)	21,314)	30,408)	27,908)	44,811)
Cash paid for interest, net of tax	79,701)	90,277)	104,142)	96,126)	90,570)
Interest Costs Capitalized, Net of Tax
Capitalized interest on construction in progress assets, before tax	50,500)	23,900)	5,500)	2,900)	1,700)
Less: Capitalized interest on construction in progress assets, tax³	11,565)	4,565)	1,243)	653)	563)
Capitalized interest on construction in progress assets, net of tax	38,936)	19,335)	4,257)	2,248)	1,137)

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

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² 2021 Calculation
Cash paid for interest, tax = Cash paid for interest × EITR
= 103,374 × 22.90% = 23,673

³ 2021 Calculation
Capitalized interest on construction in progress assets, tax = Capitalized interest on construction in progress assets × EITR
= 50,500 × 22.90% = 11,565

Effective income tax rate (EITR): The effective income tax rate exhibited a downward trend from 33.1% in 2017 to 19.1% in 2020, reflecting a considerable reduction in tax expense relative to income. However, in 2021, the rate increased modestly to 22.9%, indicating a partial reversal of the previous decline. This pattern suggests changes in tax strategy, regulations, or earnings composition impacting the tax burden over the period.
Cash paid for interest, net of tax: Cash interest payments showed fluctuations over the five-year period, starting at $90,570 thousand in 2017 and increasing to a peak of $104,142 thousand in 2019. This was followed by a decline to $79,701 thousand in 2021. The peak in 2019 may indicate higher debt levels or rising interest rates, while the subsequent decrease could reflect debt reduction, refinancing, or lower interest costs.
Capitalized interest on construction in progress assets, net of tax: Capitalized interest demonstrated a substantial increase from $1,137 thousand in 2017 to $38,936 thousand in 2021. The growth was especially pronounced from 2019 onward, with a near ninefold increase between 2019 and 2021. This trend likely indicates escalating investment in construction projects or capital expenditure initiatives, with more interest costs being allocated to assets under construction rather than being expensed immediately.

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Steel Dynamics Inc., current EV/FCFF calculation, comparison to benchmarks

Selected Financial Data (US$ in thousands)
Enterprise value (EV)	18,879,145)
Free cash flow to the firm (FCFF)	1,316,534)
Valuation Ratio
EV/FCFF	14.34
Benchmarks
EV/FCFF, Competitors¹
Freeport-McMoRan Inc.	26.69
EV/FCFF, Industry
Materials	25.99

Based on: 10-K (reporting date: 2021-12-31).

¹ Click competitor name to see calculations.

If the company EV/FCFF is lower then the EV/FCFF of benchmark then company is relatively undervalued.
Otherwise, if the company EV/FCFF is higher then the EV/FCFF of benchmark then company is relatively overvalued.

Steel Dynamics Inc., historical EV/FCFF calculation, comparison to benchmarks

	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017
Selected Financial Data (US$ in thousands)
Enterprise value (EV)¹	15,168,019)	10,864,840)	6,678,596)	9,665,432)	12,412,536)
Free cash flow to the firm (FCFF)²	1,316,534)	(101,411)	1,052,744)	1,274,453)	666,378)
Valuation Ratio
EV/FCFF³	11.52	—	6.34	7.58	18.63
Benchmarks
EV/FCFF, Competitors⁴
Freeport-McMoRan Inc.	12.13	46.43	—	—	—
EV/FCFF, Industry
Materials	20.85	30.81	—	—	—

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

¹ See details »

² See details »

³ 2021 Calculation
EV/FCFF = EV ÷ FCFF
= 15,168,019 ÷ 1,316,534 = 11.52

⁴ Click competitor name to see calculations.

Enterprise Value (EV) Trend: The enterprise value shows notable fluctuation over the five-year period. It began at approximately $12.4 billion at the end of 2017, declined steadily to a low of about $6.7 billion by the end of 2019, then rebounded to reach approximately $15.2 billion by the end of 2021. This pattern indicates a significant decrease in market valuation up to 2019, followed by a strong recovery and growth in subsequent years.
Free Cash Flow to the Firm (FCFF) Trend: Free cash flow exhibited considerable variability. Starting at roughly $666 million at the end of 2017, it more than doubled to approximately $1.27 billion by 2018, then declined to about $1.05 billion in 2019. A sharp reversal occurred in 2020 with a negative cash flow of approximately $101 million, suggesting operational or investment challenges during that year. However, the firm recovered strongly in 2021, reporting a positive free cash flow exceeding $1.3 billion.
EV/FCFF Ratio Analysis: The EV/FCFF ratio decreased from a high of 18.63 in 2017 to a low of 6.34 in 2019, reflecting increased efficiency or improved valuation relative to cash flow during this period. There is missing data for 2020, likely due to the negative free cash flow which makes this ratio undefined or less meaningful. By the end of 2021, the ratio rose again to 11.52, indicating a higher valuation relative to cash flow compared to 2019, but still below the 2017 level. This suggests market confidence and valuation metrics were recovering, but with more moderate expectations relative to cash flow generation.
Overall Insights: The data reveals a period of volatility marked by declining enterprise value and fluctuating cash flows up to 2019, followed by sharp operational challenges in 2020. The subsequent recovery in 2021 is evident both in the substantial rise of enterprise value and the return to positive, strong free cash flow. The changes in the EV/FCFF ratio reflect shifts in market valuation relative to cash flow, highlighting investor sentiment and financial performance dynamics throughout the period.

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Steel Dynamics Inc. (NASDAQ:STLD)

Enterprise Value to FCFF (EV/FCFF)

Free Cash Flow to The Firm (FCFF)

Interest Paid, Net of Tax

Enterprise Value to FCFF Ratio, Current

Enterprise Value to FCFF Ratio, Historical