CMC Sees Improvement in Metals, Recycling Markets

Commercial Metals Co. reported net earnings of $18.9 million, and net sales of $2.9 billion for the year ended August 31, 2003. This compares with net earnings of $40.5 million and net sales of $2.5 billion last year.

Fourth quarter net earnings were $10.7 million on net sales of $805 million. This compares with $9.0 million on nets sales of $682 million in the fourth quarter a year ago.

Stanley Rabin, CMC’s chairman, president and CEO, said, "It was an off-year, but our diversification enabled us to meet the challenge. The best news is that the fourth quarter of fiscal 2003 was the strongest quarter of the year, by far. Throughout much of the year many of our key markets -- particularly those for our Manufacturing segment -- remained under pressure, although we did see improvement as the year progressed. While public construction and institutional building held up relatively well, commercial construction in the United States was off sharply for the second consecutive year which continued to impact our downstream businesses as well as our mills. Additionally, business spending and the industrial side of the economy remained soft. Similarly, many of the global markets remained weak. There were exceptions for us, China and Australia being two notable examples. And during the second half of the fiscal year we began to see some pickup in demand. We also began to see some of the expected net benefit from the weaker U.S. dollar. Specifically, results in our Manufacturing segment were well below par; conversely, it was a banner year for our Recycling and Marketing and Distribution segments."

"All four geographic regions in our Recycling segment performed excellently," according to Rabin. "Net sales dollars for 2003 increased 17 percent to $441 million, led by a surge in steel scrap prices. Coupled with good cost controls, gross margins jumped 24 percent and operating profits nearly tripled last year to $15.2 million. Nonferrous markets improved moderately year over year. Versus last year, the average ferrous scrap sales price rose by $19 per short ton to $100 per short ton and shipments were 10 percent higher at 1.64 million short tons. The average nonferrous scrap sales price increased 8 percent compared with a year ago while nonferrous shipments declined 3 percent.

Operating profit for the fourth quarter was $4.7 million, featured by an average ferrous selling price of $105 per ton. Total volume of scrap processed, including our CMC Steel Group processing operations, equaled 2.81 million tons against 2.57 million tons last year."

"We expect fiscal 2004 to be significantly better than fiscal 2003, due both to internal measures that we have taken to reduce costs and increase productivity, as well as better economic conditions this fiscal year amid increasing signs of a recovery, most apparent for global manufacturing. We expect our first quarter to be comparable to the just concluded fourth quarter and substantially better than last year's first quarter. We anticipate FIFO net earnings approaching $9 to $10 million for the quarter. In the U.S. especially we are seeing increasing signs of the pickup in the manufacturing sector and pockets of improvement in construction, although office, lodging and industrial construction will be slower to recover. Additionally, capital goods orders are higher. Asia is relatively strong and Europe is showing signs of pulling out of its slump, albeit inconsistently."