CMC

Commercial Metals Company, which operates a steel mill in Columbia County, has announced financial results for its fiscal third quarter ended May 31.

Net earnings were $312.4 million, or $2.54 per diluted share, on net sales of $2.5 billion, compared to prior year period net earnings of $130.4 million, or $1.07 per diluted share, on net sales of $1.8 billion.

During the third quarter of fiscal 2022, the company recorded net after-tax costs of $7.8 million related to the acquisition of Tensar Corporation and an asset impairment. Excluding this expense, third quarter adjusted earnings were $320.2 million, or $2.61 per diluted share, compared to adjusted earnings of $127.1 million, or $1.04 per diluted share, in the prior year period.

Barbara R. Smith, chairman of the board, president and chief executive officer, said, "The third quarter was another remarkable financial result for our Company, underpinned by strong operational execution and robust market conditions across our key geographies. I am extremely proud of CMC's financial achievements during the quarter, especially in Europe. CMC employees in Poland have opened their homes and communities in a heartfelt grassroots effort to assist refugees fleeing the war in Ukraine. Amazingly, while responding to dire humanitarian needs, our team produced record quarterly adjusted EBITDA that nearly matched the best annual performance in the history of CMC's Europe segment."

Smith said, "In late April, we welcomed Tensar to the CMC organization. Seeing the early results of the teams working together has only further reinforced our confidence in the strategic merits of this transaction and the potential for meaningful commercial synergies. With the onboarding of Tensar, CMC has added a highly attractive new growth platform and is creating a valuable and unique portfolio of solutions for existing and new markets."

The company's balance sheet and liquidity position remained strong as of May 31, 2022. Cash and cash equivalents ended the quarter with a balance of $410.3 million, following a $550 million payment, net of cash acquired, to complete the purchase of Tensar. In addition, $624.3 million remained available under the Company's credit and accounts receivable facilities. CMC repurchased approximately one million shares of common stock during the quarter, returning $38.6 million of cash to shareholders. As of May 31, 2022, $294.4 million remained under the current share repurchase authorization.

Demand for CMC's finished steel products in North America was again robust during the quarter, with several key internal and external indicators pointing toward continued strength. Downstream bid volumes, a key indicator of the construction project pipeline, increased meaningfully from a year ago, resulting in the expansion of contract backlog levels. Demand from industrial end markets continued to trend positively, with most end use applications increasing compared to the prior year period.

The North America segment reported adjusted EBITDA of $379.4 million for the third quarter of fiscal 2022, an increase of 83% compared to $207.3 million in the prior year period. This improvement was driven by record margins on sales of both steel products and raw materials. Steel products have experienced five consecutive quarters of year-over-year margin expansion, while margins on raw material sales have grown for nine consecutive quarters. Controllable costs per ton of finished steel shipped were unchanged in comparison to the second fiscal quarter, but were up from the prior year period primarily as a result of higher per unit purchase costs for freight, energy and alloys.

Shipment volumes of finished steel, which include steel products and downstream products, followed typical seasonal patterns, and were essentially unchanged from the prior year period. The average selling price for steel products increased by $316 per ton compared to the third quarter of fiscal 2021, while the cost of scrap utilized rose $103 per ton. The result was a year-over-year increase of $213 per ton in margin over scrap. The average selling price for downstream products increased by $281 per ton from the prior year period and $75 per ton on a sequential basis. Future pricing indicators on new work entering the backlog remain positive, as average price levels for bids and new awards climbed significantly from the prior year period.

Smith said, "We anticipate strong financial performance to continue in the fourth quarter. Robust demand for each of CMC's major product lines is expected to persist, augmented by our growing downstream backlog and solid levels of new work entering the project pipeline. Margins over scrap in both North America and Europe should remain at levels near those of the third quarter, driven by favorable market conditions across our geographies."

"Looking into CMC's fiscal 2023, we see several factors that should support continued strength in construction markets. Firstly, as a result of the continued high levels of new bidding activity, we anticipate entering our new fiscal year with historically high levels of contract backlog. In addition, new project bid levels should remain strong based on the benefits of rising activity related to the recently enacted federal infrastructure bill, non-residential construction activity supported by follow-on investment in the wake of historically high new residential community formation in our home markets, and from the continuation of reshoring trends that have already resulted in significant new projects. The expected early calendar 2023 startup of our Arizona 2 micro mill will provide CMC with a greater flexibility to capitalize on these anticipated favorable demand conditions."

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