Commercial Metals Company (CMC) announced financial results for its fiscal first quarter ended November 30, 2019. First quarter earnings from continuing operations were $82.8 million, or $0.69 per diluted share, on net sales of $1.4 billion, compared to prior year period earnings from continuing operations of $19.4 million, or $0.16 per diluted share, on net sales of $1.3 billion. Net sales increased eight percent on a year-over-year basis driven by the company’s growth strategy and strong fundamentals in its core markets.
As a result of ongoing network optimization efforts, a decision was made to cease melting operations at their Rancho Cucamonga, California facility, which resulted in a net after tax charge of $5.0 million. Excluding these expenses, adjusted earnings from continuing operations were $87.8 million, or $0.73 per diluted share, as detailed in the non-GAAP reconciliation on page 12. This represents a 109 percent increase compared to adjusted earnings from continuing operations of $0.35 per diluted share for the three months ended November 30, 2018.
Barbara R. Smith, chairman of the board, president and chief executive officer, commented, “The first quarter marked the best financial performance from our strategically repositioned portfolio of operations. This milestone reflects the continued health of the U.S. non-residential construction sector, which contributed to strong performances in our Americas Mills and Fabrication segments. We believe the metal margin performance seen over recent quarters highlights the stability of CMC’s rebar and long product offerings compared to the broader steel market.”
The company’s liquidity position as of November 30, 2019 remained strong, with cash and cash equivalents of $224.8 million and availability under the Company’s credit and accounts receivable facilities of $659.9 million.
On January 2, 2020, the board of directors of CMC declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on January 15, 2020. The dividend was paid on January 30, 2020, and marks 221 consecutive quarterly dividend payments.
CMC’s Americas Recycling segment recorded adjusted EBITDA of $3.4 million for the first quarter of fiscal 2020 compared to adjusted EBITDA of $15.4 million for the prior year quarter. The decrease reflected a challenging price environment in which average ferrous prices decreased by 33 percent on a year-over-year basis. Low prices also reduced material flows during the quarter.
Their Americas Mills segment recorded adjusted EBITDA of $155.0 million for the first quarter of fiscal 2020, an increase of 36 percent compared to adjusted EBITDA of $113.9 million for the first quarter of fiscal 2019. Volumes increased 42 percent compared to the prior year period, primarily due to additional production from acquired facilities. Metal margins expanded $10 per ton year-over-year, as a reduction in scrap costs more than offset a $71 per ton decline in average selling prices. Results in the first quarter also benefited from the achievement of our lowest conversion costs since the November 5, 2018 acquisition.
Their International Mill segment in Poland recorded adjusted EBITDA of $11.4 million for the first quarter of fiscal 2020, compared to adjusted EBITDA of $32.8 million for the comparable prior year quarter. Safeguard trade measures have thus far been ineffective in deterring a surge of imported product into Europe, resulting in a compression of metal margins during the quarter. Shipment volumes declined on a year-over-year basis, primarily due to the absence of opportunistic billets sales that were made during the first quarter of fiscal 2019. Conditions within the Polish construction sector remain healthy and demand for rebar continues to be strong. Despite lower shipment volumes during the quarter, our Polish operations successfully reduced conversion costs compared to the year-ago period.
“We expect construction and infrastructure demand to remain resilient,” said Smith. “Customer sentiment and our own fabrication backlog both point to a strong outlook for activity, though our second quarter will be impacted by typical seasonality related to holidays and winter weather conditions affecting construction activity.”
“We anticipate metal margin will remain above the historical cycle average, but will experience a decline from first quarter levels. We expect our progress in optimizing our expanded domestic mill network during the first quarter will yield benefits going forward. We anticipate fabrication will remain profitable, while recycling should see some benefit from the recent rebound in ferrous scrap prices. We expect challenges to remain for our Polish operations until the current overhang of imports to the European Union unwinds.”
Published in the February 2020 Edition
