CMC earnings down from previous year

Irving, Texas-based CMC has reported net earnings of $85.8 million, or 73 cents per diluted share, for its second quarter, which ended Feb. 29. That figure is down about 52 percent from the $179.8 million, or $1.51 per diluted share, it earned one year earlier.

CMC’s operating statistics indicate lower steel sales and less recycling activity compared with one year ago. In this year’s second quarter, CMC achieved net sales of $1.8 billion compared with $2.0 billion a year ago.

The company also attributes its reduced profitability in part to a net after-tax charge of $17.2 million related to commissioning efforts at its Arizona 2 micromill in Mesa, Arizona. Excluding that item, the company's second quarter adjusted earnings were $103.1 million, or 88 cents per diluted share.

“CMC generated historically strong financial results during the second quarter despite seasonal weakness and challenging weather conditions in several key geographies,” says Peter Matt, president and CEO of CMC, referring to weather that slowed construction activity for its steel end markets and scrap inflows.

“Core earnings before interest, taxes, depreciation and amortization (EBITDA) and core EBITDA margin remained well above long-term averages, demonstrating the ability to consistently generate higher margins in our business.

“We continued to see good fundamentals within our North American markets, highlighted by several encouraging developments during the quarter. Steel product margins over scrap exited the quarter on an upward trajectory, which provides a solid baseline for continued strong margins into the seasonally robust third and fourth quarters.”

Of the company’s construction and building products sector, Matt says, “New contract awards in our downstream business rebounded sharply, pointing to strength in the construction pipeline and driving a sequential quarter increase in project backlog volumes."

CMC continues to invest in recycled-content steelmaking. “In January, our new Arizona 2 plant became the first micro mill in the world to roll merchant bar quality [MBQ] product," Matt says. "Commissioning of MBQ continues to progress well, and we have successfully produced and sold several product varieties.

“Site improvements at our Steel West Virginia micromill are nearing completion. Initial equipment deliveries are scheduled for the spring and early summer, and we expect to remain on plan for a start-up in late 2025. These projects, together with our recent acquisitions, position us to take advantage of favorable structural trends powering domestic construction, and are expected to drive strong future growth in earnings, cash flow and shareholder value.”

In the three months from Dec. 1, 2023, to Feb. 29, 2024, CMC's average selling price for steel products decreased $80 per ton compared to one year ago, while the cost of scrap melted increased $33 per ton, resulting in a year-over-year decrease in steel products margin over scrap of $113 per ton.

Regarding scrap volumes in its most recently completed quarter, CMC reports shipping 347,000 tons of raw materials externally, down 7.2 percent from the 374,000 tons shipped out one year earlier.

“Finished steel shipments within our North America Steel Group are expected to follow a typical seasonal pattern during the third quarter while adjusted EBITDA margin should be largely stable on a sequential basis," Matt says of the rest of the year.

“We continue to expect robust spring and summer construction activity driven by increased infrastructure investments, which we anticipate will support an already strong demand backdrop in both the North America Steel Group and the Emerging Businesses Group.”