CMC’s net earnings up for 2015 fiscal year, while net sales decline

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Irving, Texas-based Commercial Metals Co. (CMC) has announced financial results for its fiscal fourth quarter and year ended Aug, 31, 2015. Net earnings attributable to CMC for there year were $141.6 million, or $1.20 per diluted share, on net sales of $6 billion. This compares with net earnings attributable to CMC of $115.6 million, or 97 cents per diluted share, on net sales of $6.8 billion for the year ended Aug. 31, 2014.

Net loss attributable to CMC for the quarter ended Aug. 31, 2015, was $5.8 million, or 5 cents per share, on net sales of $1.4 billion. This compares with net earnings attributable to CMC of $34.9 million, or 29 cents per diluted share, on net sales of $1.8 billion for the quarter ended Aug. 31, 2014.

Results for the fourth quarter of fiscal 2015 included after-tax LIFO (last in, first out) expense from continuing operations of $23.7 million (20 cents per share) compared with after-tax LIFO income from continuing operations of $1 million (1 cent per diluted share) for the fourth quarter of fiscal 2014.

Additionally, the company says its results from continuing operations for the fiscal fourth quarter included after-tax charges related to goodwill impairment for its Americas recycling segment of $4.7 million (4 cents per share), costs associated with exiting its distribution operation in Cardiff, Wales, U.K., of $2.9 million (3 cents per share) and other charges, including inventory write-downs, severance cost and long-lived asset impairments totaling $4 million (3 cents per share). “The sum of these items negatively impacted our earnings from continuing operations for the fourth quarter of our fiscal year by a total of 30 cents per share,” CMC says in a news release.

Adjusted operating profit from continuing operations was $12.3 million for the fourth quarter of fiscal 2015 compared with adjusted operating profit from continuing operations of $68.8 million for the fourth quarter of fiscal 2014. Adjusted EBITDA (earnings before interest, taxes, deductions and amortization) from continuing operations was $54.6 million for the fourth quarter of fiscal 2015 compared with adjusted EBITDA from continuing operations of $104.4 million for the fourth quarter of fiscal 2014.

Joe Alvarado, chairman of the board, president and CEO of CMC, says, "For our fiscal year ended Aug. 31, 2015, we achieved adjusted EBITDA from continuing operations of $464.6 million, our best since fiscal 2008.

“In August, construction spending continued to rise for the eighth consecutive month, led by an increase in nonresidential construction spending year over year,” he adds.

“During the fourth quarter of fiscal 2015, we completed the sale of a majority of our Australian distribution business. Six of the locations were sold, three were shut down, while one remains held for sale,” Alvarado says.

He adds that for fiscal 2015, net cash flow from operating activities was $313.5 million.

On Oct. 28, 2015, the board of directors of CMC declared a quarterly dividend of 12 cents per share of CMC common stock for stockholders of record Nov. 11, 2015. The company says the dividend will be paid Nov. 25, 2015.

Looking more closely at its business segments, for the fourth quarter of fiscal 2015, CMC’s Americas recycling segment recorded an adjusted operating loss of $15.4 million compared with an adjusted operating loss of $2.1 million for the fourth quarter of fiscal 2014. During the fourth quarter of fiscal 2015, ferrous and nonferrous shipments decreased 22 percent and 14 percent, respectively, while the average ferrous metal margin was flat, and the average nonferrous metal margin contracted 20 percent relative to the fourth quarter of the 2014 fiscal year.

Furthermore, this segment recorded goodwill impairment charges of $7.3 million as a result of the CMC’s annual goodwill impairment analysis in the fourth quarter of fiscal 2015.

Additionally, for the fourth quarter of fiscal 2015, this segment recorded pretax LIFO expense of $1.5 million compared with pretax LIFO income of $0.3 million for the fourth quarter of the prior fiscal year.

CMC’s Americas mills segment recorded an adjusted operating profit of $46.2 million for the fourth quarter of fiscal 2015 compared with an adjusted operating profit of $63.8 million for the fourth quarter of fiscal 2014. The decrease in adjusted operating profit for the fourth quarter of fiscal 2015 was because of a 6 percent decrease in total shipments, which outpaced a 2 percent increase in average metal margin compared with the fourth quarter of fiscal 2014.

The decrease in total shipments was driven by a 38,000 short ton decrease in billet shipments and a 9,000 short ton decrease in shipments of its higher-margin finished products, including reinforcement bar ("rebar") and merchants compared to the fourth quarter of fiscal 2014.

Additionally, for the fourth quarter of fiscal 2015, this segment recorded pretax LIFO expense of $13.9 million compared with pretax LIFO expense of $6.1 million for the fourth quarter of the prior fiscal year.

The company’s Americas fabrication segment recorded an adjusted operating profit of $7.5 million for the fourth quarter of fiscal 2015 compared with an adjusted operating profit of $8.1 million for the fourth quarter of fiscal 2014. For the fourth quarter of fiscal 2015, total shipments increased 1percent, and the average composite metal margin expanded 23 percent compared with the fourth quarter of fiscal 2014.

Offsetting these improvements, for the fourth quarter of fiscal 2015, this segment recorded pretax LIFO expense of $11 million compared with pretax LIFO income of $3.8 million for the fourth quarter of fiscal 2014.

CMC’s international mill segment recorded an adjusted operating profit of $6.4 million for the fourth quarter of fiscal 2015 compared with an adjusted operating profit of $5 million in the 2014 fourth quarter. For the fourth quarter of fiscal 2015, the average selling price decreased $137 per short ton, while the average cost of ferrous scrap consumed decreased $85 per short ton, resulting in a 21 percent squeeze in average metal margin compared with the fourth quarter of fiscal 2014.

Additionally, during the fourth quarter of fiscal 2015, total shipments decreased 1 percent compared with the fourth quarter of the prior fiscal year. However, the decreases in average metal margin and total shipments were more than offset by an $8.3 million decline in utilities and repairs and maintenance expenses partially because of efficiencies gained from the commissioning of a new, state-of-the-art electric arc furnace in the third quarter of fiscal 2014.

For the fourth quarter of fiscal 2015, adjusted operating profit reflected an unfavorable foreign currency impact of approximately $2.2 million.

The company says its international marketing and distribution segment recorded an adjusted operating loss of $13.7 million for the fourth quarter of fiscal 2015 compared with an adjusted operating profit of $15.5 million in the fourth quarter of 2014. The $29.2 million decline in adjusted operating profit in the fourth quarter of fiscal 2015 was the result of an 18 percent decrease in volumes coupled with a 31 percent decrease in average margin compared with the fourth quarter of fiscal 2014, CMC says.

This segment's results continued to be pressured by the strong U.S. dollar, global steel overcapacity and weak oil and gas tubular demand.

Additionally, during the fourth quarter of fiscal 2015, CMC decided to exit its steel distribution operation in Cardiff, and this segment recorded an expense of approximately $4.5 million associated with this action.

Furthermore, for the fourth quarter of fiscal 2015, this segment recorded pretax LIFO expense of $10.1 million compared with pretax LIFO income of $3.5 million for the fourth quarter of the prior fiscal year.