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CMC reports record Q4 earnings

The company says it achieved the best commercial performance since its foundation in its fiscal fourth quarter.

October 18, 2021

Commercial Metals Co. (CMC), a metals recycler based in Irving, Texas, reports strong financial results for its fiscal fourth quarter, which ended Aug. 31. CEO Barbara R. Smith says this is the most commercial success the company has seen in its history.

“CMC’s performance during fiscal 2021 was exceptional,” Smith says in the news release about its fourth-quarter financial results. “Our financial results once again demonstrate CMC’s significantly enhanced earnings capabilities following several years of methodical strategic transformation.” 

According to CMC, earnings from continuing operations were $152.3 million, or $1.24 per diluted share, on net sales of $2 billion. For the full year, earnings from continuing operations were $412.9 million, or $3.38 per diluted share, compared with $278.3 million, or $2.31 per diluted share in the prior year.

During the fourth quarter, the company’s North America segment generated record adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $212 million for the fourth quarter of fiscal 2021, an increase of 22 percent compared with $174.2 million in the prior-year period. The company says the improvement was driven by increased margins across multiple product lines, coupled with higher shipments of steel products and raw materials.  

During a conference call held Oct. 14 to discuss the company’s Q4 results, Smith also noted that construction for the company’s new micromill in Arizona is on schedule. Dubbed Arizona Two, the $300 million micromill is expected to be operational by 2023. Contractors recently completed the facility’s earthwork and are pouring foundations and beginning vertical construction.

Smith said this plant will be the first micromill in the world capable of producing merchant bar, as well as rebar. It will also be the first in North America capable of connecting directly to an on-site renewable energy source.

“We made meaningful progress at the future Arizona Two micromill site in North America,” Smith says in the news release. “In addition, on Sept. 29, we reached an agreement to sell our Rancho Cucamonga site for an expected $300 million, which will be reinvested directly into Arizona Two.”

So far, the company has spent about $150 million on Arizona Two’s construction, Paul Lawrence, the company’s vice president of finance, said during the conference call.

Also during the conference call, Smith mentioned that other steelmakers, such as Cleveland-Cliffs and Nucor’s David J. Joseph Co., are consolidating and acquiring scrap firms as a way to secure prime grades. She said, “We don’t over the long run … see as much pressure on the obsolete scrap side. On a global basis, we do see a country like China continuing to develop their scrap industry and their scrap reservoir. So, scrap is still a fragmented market. There’s still opportunity for consolidation. We look at those opportunities based upon our need and our regional mill footprint. We’re pretty disciplined as it relates to scrap acquisitions."

She continued, “We’ve done a few, if you go back and look at our track record. So, I think there’s definitely more interest in securing prime grades at this stage.”

For its European segment, the company reported record adjusted EBITDA of $67.7 million for the fourth quarter of fiscal 2021, up 195 percent compared with adjusted EBITDA of $22.9 million for the prior-year quarter. The improvement was driven by a significant expansion in margin over scrap and volume growth, as demand for steel products from the construction and industrial end markets was solid during the quarter. 

Smith says the company’s liquidity position as of Aug. 31 remained solid, with cash and cash equivalents of $497.7 million, and availability of $668.2 million under the company’s credit and accounts receivable facilities.

The board of directors recently announced a quarterly dividend of 14 cents per share of CMC common stock payable to stockholders of record on Oct. 27. The company says this represents a 17 percent increase over the previous dividend. The dividend will be paid Nov. 10 and marks 228 consecutive quarterly dividend payments.

“In the first quarter of fiscal 2022, we expect finished steel volumes to follow typical seasonal patterns, which have historically declined modestly from our fourth-quarter levels,” Smith says in the news release. “We expect first-quarter margins to remain consistent with the historically high levels earned in the fourth quarter."