Fourth quarter net earnings were a record for any quarter at $83.7 million on net sales of $1.7 billion. This compares with $47.4 million on net sales of $1.5 billion in the fourth quarter a year ago.
Stanley Rabin, CMC chairman, president and CEO, said, "We had thought that fiscal 2004 was a phenomenal year, only to be surpassed by an even more remarkable fiscal 2005. We continued to benefit in the fourth quarter from favorable market conditions for most of our businesses and achieved excellent performance in the domestic mills, domestic fabrication, recycling, and marketing & distribution segments. Meanwhile, results for our Polish steel manufacturing operation, CMC Zawiercie (CMCZ), exhibited improvement over the third quarter. Some of our markets were softer during the quarter, although still relatively strong, and they continued to gyrate. The ferrous scrap market was especially volatile, but on balance moved upward, notably toward the end of the quarter. Steel mill prices were following the upswing as the quarter ended."
"Within the (domestic mill) segment, quarterly adjusted operating profit for our steel minimills at $72.9 million was over 200 percent greater than a year earlier on the strength of continued high metal margins and higher shipments. With some customers still reducing inventories, planned outages reduced production levels below the third quarter of this year and the fourth quarter of last year thereby reducing our mill inventories. On a year-to-year basis, tonnage melted for the fourth quarter was down 4 percent to 502,000 tons and tonnage rolled was 462,000 tons, 13 percent lower than last year's fourth quarter. Shipments, conversely, increased 2 percent to 606,000 tons, although this included a higher proportion of billets than last year's quarter.
“Further, total mill shipments in August were a monthly record. Our quarterly average total mill selling price of $459 per ton was $4 per ton above last year's strong level on the strength of higher rebar prices. The average scrap purchase price fell by $28 per ton versus a year ago to $134 per ton. The metal margin at $291 per ton was $32 per ton greater than the fourth quarter of last year. Meanwhile, utility costs declined by 2.5 percent compared with the same period last year due to a decrease in usage, which more than offset higher electricity rates and natural gas prices. Supplies generally were lower in total cost compared with one year ago. Final determination of annual discretionary incentive plan compensation resulted in lower expense this quarter."
In the recycling division, Rabin noted the following: "The Recycling segment recorded its second best fourth quarter following last year's record fourth quarter on comparable net sales. The adjusted operating profit of $15.3 million was more than satisfactory, although 70 percent that of the previous year's exceptional quarter. Gross margins were 26 percent lower than last year. LIFO expense was negligible this quarter versus a pre-tax expense of $2.3 million the prior year. The ferrous scrap market was extraordinarily volatile during the quarter, with the net result being a moderate increase in price from the beginning to the end of the quarter. Nonferrous markets remained volatile as well, but our average selling prices for aluminum, copper, brass and stainless steel scrap did not vary as much during the quarter.
"Versus last year, the average ferrous scrap sales price for the quarter decreased by 29 percent to $139 per short ton while shipments fell 8 percent to 447 thousand short tons. The average nonferrous scrap sales price for the quarter was approximately 19 percent above a year ago while nonferrous shipments were 13 percent higher. Inventory turnover across the board remained extremely high. The total volume of domestic scrap processed, including all our domestic processing plants, equaled 812 thousand tons against 868 thousand tons last year."
Rabin concluded, "As we look forward to fiscal 2006 we are optimistic for the first quarter and year. We anticipate that the positive factors which have been driving our markets are sustainable and allow a continuation of healthy margins and volume for our goods and services, although we must be concerned about the dampening effect of inflationary pressures on the global economy, the decline in consumer confidence in the United States, and significantly increased energy costs for our operations. Still, the U.S. economy in particular has proven quite resilient and went into September 2005 with significant momentum in the manufacturing and construction sectors. Additionally, by the end of our fourth quarter it appeared that the issue of excess inventories in the steel supply chain had been worked through in most markets. The passage of the multi-year transportation bill in the United States during August 2005 was especially good news. However, increased availability of steel globally has had a softening effect on prices, mainly caused by apparent Chinese overproduction in certain product areas.