
Irving, Texas-based Commercial Metals Co. (CMC) has announced financial results for its fiscal fourth quarter and year ended Aug. 31, 2017, which show an increase in net sales but a decrease in earnings compared with fiscal 2016.
For the three months ended Aug. 31, 2017, the loss from continuing operations was $32.7 million, or 28 cents per diluted share, on net sales of $1.3 billion compared with a loss from continuing operations of $2.1 million, or 2 cents per diluted share, on net sales of $1.1 billion for the three months ended Aug. 31, 2016. For the fiscal year ended Aug. 31, 2017, earnings from continuing operations were $32.6 million, or 27 cents per diluted share, on net sales of $4.6 billion. This compares with earnings from continuing operations of $57.9 million, or 50 cents per diluted share, on net sales of $4.2 billion for fiscal 2016.
Included in the loss from continuing operations for the three months ended Aug. 31, 2017, were net after-tax costs associated with the refinancing activities completed in the fourth quarter of $11.6 million, or 10 cents per diluted share, costs associated with the exit of the International Marketing and Distribution segment of $23.2 million, or 20 cents per diluted share, and severance costs of $5.3 million, or 5 cents per diluted share. Included in the results for the three months ended Aug. 31, 2016, were impairment charges on long-lived assets of $24.3 million, or 21 cents per diluted share.
Because of the sale of CMC Cometals, which was completed Aug. 31, 2017, the results of this division have been reflected as discontinued operations in all reported periods, CMC says. Included in the earnings from discontinued operations for the three months ended Aug. 31, 2017, is an after-tax loss on the sale of the CMC Cometals division of $4.5 million, or 4 cents per diluted share.
As of Aug. 31, 2017, cash and cash equivalents were $252.6 million and available credit and accounts receivable facilities were $490.6 million. Because of the refinancing of notes due in 2017 and 2018 during the most recent fiscal quarter, CMC says it has reduced its long-term debt by approximately $240 million since May 31, 2017, and has no significant debt maturities for the next five years. The company also is positioned to have reduced cash interest costs going forward in excess of $25 million per year.
CMC President and CEO Barbara Smith says, “The company took action during fiscal 2017 to reallocate capital to our core manufacturing operations and improve our financial profile. The refinancing activities have strengthened our balance sheet to provide lower debt service cost and extend our debt maturity profile. We made good progress regarding our decision to exit the International Marketing and Distribution segment in order to focus our resources on the attractive long product markets in the U.S. and Poland. The Polish operations are taking full advantage of the new furnace and caster investments to produce more and higher value merchant product, and, in the U.S., we look forward to the commissioning of our new micro mill in Durant, Oklahoma, which is scheduled to begin in our fiscal second quarter of 2018.”
Oct. 24, 2017, the board of directors of CMC declared a quarterly dividend of 12 cents per share of CMC common stock for stockholders of record as of Nov. 8, 2017. The dividend will be paid Nov. 22, 2017.
CMC says its Americas Recycling segment recorded adjusted operating profit of $2.9 million for the fourth quarter of fiscal 2017 compared with adjusted operating loss of $45.1 million for the fourth quarter of fiscal 2016. The loss in the fourth quarter of fiscal 2016 was largely because of a $38.9 million pretax impairment charge related to long-lived assets in our Americas Recycling segment. Shipments increased 37 percent in comparison to the same period of the prior year as flows through the yards remained strong and as a result of the seven recycling yards that were acquired earlier in fiscal 2017.
CMC’s Americas Mills segment recorded adjusted operating profit of $29.8 million for the fourth quarter of fiscal 2017 compared with an adjusted operating profit of $45 million for the fourth quarter of fiscal 2016. Despite strong long-steel demand which resulted in an 8 percent increase in shipments compared with the same period of the prior year, cost pressures squeezed margins during the quarter, CMC says.
The company’s Americas Fabrication segment recorded an adjusted operating loss of $4.9 million for the fourth quarter of fiscal 2017 compared with adjusted operating profit of $9.6 million for the fourth quarter of fiscal 2016. The decrease in adjusted operating profit for the fourth quarter of fiscal 2017 was because of a competitive fabrication market. CMC says this has resulted in newly awarded contracts being at lower selling prices than in the prior year despite also incurring higher steel input costs.
Its International Mill segment recorded adjusted operating profit of $14.6 million for the fourth quarter of fiscal 2017 compared with adjusted operating profit of $18.7 million for the fourth quarter of fiscal 2016. Despite the quarterly results being lower than the prior year, CMC says shipped volumes were 16 percent higher compared with the same period of the prior year while producing strong earnings throughout fiscal 2017. A strong construction market in conjunction with an expansion of higher margin merchant volumes were the main contributor to the results.
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“Our outlook is somewhat different when we think about our U.S. operations compared to our Polish operations,” says Smith.
“Our outlook for demand from the U.S. nonresidential construction market remains quite positive in spite of a lack of movement on infrastructure stimulus. However, market conditions remain very challenging as a result of raw material price changes and escalating input costs,” she continues. “Metal margins remain under pressure due to the ongoing influx of dumped and subsidized imports. We saw a temporary pause in rebar imports after the announcement of the Section 232 review into the effect of imports on national security. However, recent data indicates another surge in rebar imports is on its way. We believe that no action taken by the current administration to address these unfair trade practices is likely to result in imports returning to their previous high levels, negatively impacting the industry’s operating results or potentially even imperiling the long-term viability of the U.S. steel industry.”
Smith adds, “Poland, however, provides a welcome contrast to the U.S. market. Poland and the E.U. have implemented trade measures necessary to provide a level playing field. This, coupled with the fact that there is good support and financial funding for infrastructure development provides a good demand outlook for our Polish operations.”
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