CMC segment sees six-year quarterly high in Q1 of fiscal 2018

CMC segment sees six-year quarterly high in Q1 of fiscal 2018

CMC President and CEO Barbara Smith says its Americas Recycling segment had the highest quarterly results since 2012.

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January 8, 2018
Edited by Megan Workman

Commercial Metals Co. (CMC), Irving, Texas, has announced financial results for its fiscal 2018 first quarter ended Nov. 30, 2017, which show net earnings of $36.8 million, 31 cents per diluted share, on net sales of $1.2 billion.

CMC President and CEO Barbara Smith says in a press release announcing the financial results that the company’s Americas Recycling segment had the highest quarterly results since 2012. This was supported by rising nonferrous pricing and a continued strong demand for ferrous material, Smith reports.

She adds that the Polish operations recorded the highest quarterly profits since 2008.

The net earnings reported for Q1 of fiscal 2018 compare with net earnings of $6.3 million, or 5 cents per diluted share, on net sales of $1 billion for the first quarter of fiscal 2017. Earnings from continuing operations were $38.5 million for the first quarter of fiscal 2018 compared with $4.9 million for the same period of fiscal year 2017. For the three months ended Nov. 30, 2017, earnings from continuing operations included a net after-tax benefit of $1.8 million, or 2 cents per diluted share, related to the exit of the International Marketing and Distribution segment.

Because of the Aug. 31, 2017, sale of CMC Cometals, the results of this division have been reflected as discontinued operations for all reported periods, according to the company. CMC sold its Cometals division to the Traxys Group, a Luxembourg-based physical commodity trader and merchant in the metals and natural resources sectors. The business markets, distributes and processes metal, ores, concentrates, industrial minerals, ferroalloys, chemicals and industrial products worldwide.

CMC says its liquidity position at Nov. 30, 2017, remained strong, with cash and cash equivalents of $130.2 million and availability under the company’s credit and accounts receivables sales facilities of approximately $617.5 million.

CMC President and CEO Barbara Smith says, “We delivered strong financial results during our first fiscal quarter of 2018. In both the Americas Mills and International Mill segments, demand from the construction sector remained robust, which resulted in very good earnings. In fact, the Polish operations recorded the highest quarterly profits since 2008. The Americas Recycling segment also had the highest quarterly results since 2012, supported by rising nonferrous pricing and a continued strong demand for ferrous material.”

Jan. 2, 2018, the board of directors of CMC declared a quarterly dividend of 12 cents per share for shareholders of record Jan. 16, 2018. The dividend will be paid Jan. 31, 2018. This cash dividend reflects CMC’s 213th consecutive quarterly dividend.

The company’s Americas Recycling segment recorded adjusted operating profit of $9.9 million for the first quarter of fiscal 2018 compared with an adjusted operating loss of $5.1 million for the first quarter of fiscal 2017. The improvement in adjusted operating profit compared with the same period in fiscal 2017 was primarily the result of strong volumes and nonferrous prices, which rose during the quarter. Shipment volumes in comparison to the same period of the prior fiscal year increased by 44 percent as a result of higher domestic steel manufacturing utilization rates and the impact of the acquisition of yards completed during fiscal 2017.

CMC says its Americas Mills segment recorded adjusted operating profit of $40.8 million for the first quarter of fiscal 2018 compared with adjusted operating profit of $36.9 million for the corresponding period in fiscal 2017. 

“We had a strong shipping quarter as nonresidential construction activity remains high,” says CMC. “While metal margins were relatively flat in comparison to the same period in the prior fiscal year, they increased for the second consecutive fiscal quarter and were $14 per ton higher than the fourth quarter of fiscal 2017.”

Its Americas Fabrication segment recorded an adjusted operating loss of $4.8 million for the first quarter of fiscal 2018 compared with adjusted operating profit of $6.7 million for the first quarter of fiscal 2017.  The average selling price for the Americas Fabrication segment was similar to the same period of fiscal year 2017; however, raw material rebar prices have increased resulting in the losses suffered during the recent quarters. The company reports that it is experiencing strong bidding activity for fabrication work, “but strong competitive pressures and the availability of low-cost import material have not provided a market dynamic for the increased raw material costs to be passed on to customers in the form of increased selling prices.”

CMC’s International Mill segment in Poland recorded adjusted operating profit of $23.4 million for the first quarter of fiscal 2018 compared with adjusted operating profit of $10 million for the corresponding period in fiscal 2017. Shipments from this operation increased by approximately 27 percent in comparison to the same period of the prior fiscal year, supported by continued strength in construction activity in this market, which also has resulted in improved margins.

Smith says, “During our second quarter we normally experience lower shipment levels due to winter weather conditions impairing construction activity as well as a reduced number of shipping days. However, we see strength in the underlying market fundamentals supporting each of our segments as we enter calendar 2018. End markets in both nonresidential construction and original equipment manufacturers are forecasting growth, and we are seeing that reflected in our shipment volumes.”

“This is an exciting time for Commercial Metals Co.,” Smith continues. “We are pleased to report that commissioning activities at our new micromill in Durant, Oklahoma, are progressing very smoothly, and we look forward to the mill contributing to our results during the second half of fiscal 2018. In addition, [Jan. 2], we announced the signing of a definitive agreement to acquire certain U.S. rebar assets from Gerdau S.A., including four minimills and 33 rebar fabrication facilities. We believe this is an ideal strategic fit with CMC given our existing expertise in concrete reinforcing products and services. We see significant opportunity for cost synergies and value creation for our customers and shareholders.”

CMC and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including four electric arc furnace (EAF) minimills, an EAF micromill, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, metal recycling facilities and marketing and distribution offices in the United States and in several international markets.