Commercial Metals Cos. sees earnings rise in 3Q

Irving, Texas-based Commercial Metals Co. has announced financial results for its third quarter, ended May 31, 2015. Net earnings for quarter were $56.7 million (49 cents per diluted share) on net sales of $1.5 billion. This compares to net earnings of $23.6 million (20 cents per diluted share) on net sales of $1.7 billion for the third quarter of 2014.

June 24, 2015, CMC’s board of directors declared a quarterly dividend of 12 cents per share for shareholders of record on July 9, 2015. The dividend will be paid July 23, 2015.

CMC’s earnings from continuing operations for the third quarter of fiscal 2015 were $67.1 million (58 cents per diluted share) compared with earnings from continuing operations of $24.5 million (21 cents per diluted share) for the third quarter of fiscal 2014.

“Fiscal third quarter adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) from continuing operations represents our highest adjusted EBITDA since the first quarter of fiscal 2009,” says Joe Alvarado, board chairman, president and CEO of CMC.

“Our domestic mills continued to benefit from expanding metal margins as a result of lower raw material prices when compared to one year ago,” he says. “Although shipments from a number of our locations in the Central and eastern regions of the U.S. were delayed as a result of record amounts of rainfall in Texas and the surrounding states in the latter part of our third quarter, we are confident in our expectation that U.S. construction activity will continue to improve during the summer months translating into strong activity levels within our domestic business.”

Alvarado continues, “As we enter our fiscal fourth quarter, our key market indicators point toward a strong finish to our fiscal 2015. The demand for our finished steel products in the U.S. and Poland remains high.”

He continues, “Additionally, unfavorable weather in May in the Central region of the U.S. resulted in certain construction projects being pushed out into our fiscal fourth quarter, which we expect should provide some upside to the fourth quarter’s results.

“Elevated levels of imports continue to pressure margins for our U.S. and Polish operations,” Alvarado continues. “Our international marketing and distribution segment also continues to be challenged by the strong U.S. dollar.”

CMC and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network that includes steel minimills, steel fabrication and processing plants, construction-related product warehouses, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.

Results for the company’s third quarter of 2015 included after-tax LIFO (last-in, first-out) income from continuing operations of $24.1 million (21 cents per diluted share) compared with after-tax LIFO income from continuing operations of $5.3 million (4 cents per diluted share) for the third quarter of fiscal 2014.

CMC’s adjusted operating profit was $126 million for the third quarter, which the company said was its highest adjusted operating profit since the first quarter of fiscal 2009. CMC’s operating profit from continuing operations for the third quarter of fiscal 2014 was $58.1 million. Adjusted EBITDA from continuing operations was $158.5 million for the third quarter of fiscal 2015 compared with adjusted EBITDA from continuing operations of $90.4 million for the third quarter of fiscal 2014.

CMC said its financial position as of May 31, 2015, was strong with cash and cash equivalents of $381 million and approximately $1 billion in total liquidity.

Pursuant to its share repurchase program that was approved in October 2014, CMC says it purchased approximately 139 thousand shares of its common stock for $2.2 million during its third fiscal quarter of 2015.

The company’s Americas recycling segment recorded losing $2 million for the third quarter of fiscal 2015 compared with the adjusted operating loss of $1.1 million it recorded for the third quarter of fiscal 2014. The third quarter of fiscal 2015 say ferrous volumes decline 23 percent on flat average ferrous metal margins compared with the corresponding period in fiscal 2014, CMC reports. Additionally, during the third quarter of fiscal 2015, average nonferrous selling prices declined 13 percent, which outweighed a decline in average nonferrous material cost and compressed average nonferrous metal margins by 16 percent, further contributing to the increase in adjusted operating loss compared with the third quarter of fiscal 2014.

CMC’s Americas mills segment recorded $84.2 million in adjusted operating profit for the third quarter of fiscal 2015 compared with $74.1 million for the corresponding period in the prior fiscal year. During the third quarter of fiscal 2015, the average cost of ferrous scrap consumed decreased $105 per short ton, which more than offset a $71 per short ton decrease in the average selling price and resulted in a 10 percent increase in average metal margin compared with the third quarter of fiscal 2014, the company says. Additionally, this segment benefited from a $13.9 million favorable change in pretax LIFO compared with the third quarter of fiscal 2014.

The company’s Americas fabrication segment recorded the adjusted operating profit of $22.9 million for the third quarter of fiscal 2015, representing its best fiscal quarter since the first quarter of fiscal 2009. This compares with adjusted operating profit of $1.2 million for the third quarter of fiscal 2014. The increase in adjusted operating profit for the third quarter of fiscal 2015 was partially because of an increase in the average composite selling price coupled with a 3 percent decrease in average composite material cost, which resulted in a 24 percent increase in average metal margin compared with the corresponding period in the prior fiscal year. Heavy rainfall during May 2015 delayed construction activity in the Central and eastern regions of the U.S. and pushed scheduled shipments into our fiscal 2015 fourth quarter. As a result, CMC says it expects to see an increase in this segment’s volumes, as these shipments will be fulfilled during the fourth quarter of fiscal 2015.

CMC’s international mill segment recorded the adjusted operating profit of $6.1 million for the third quarter of fiscal 2015 compared with the adjusted operating profit of $2 million for the corresponding period in fiscal 2014 and $0.8 million for the second quarter of fiscal 2015. Adjusted operating profit for the third quarter of fiscal 2015 increased as the company says it continued to realize the benefits from the commissioning of a new, state-of-the art electric arc furnace in the third quarter of fiscal 2014.

The company’s international marketing and distribution segment recorded adjusted operating profit of $37.7 million for the third quarter of fiscal 2015 compared with adjusted operating profit of $2 million for the same period in the prior fiscal year. The increase was attributed to an increase in volumes for one of CMC’s trading divisions headquartered in the U.S. Additionally, this segment recorded a $36.4 million net benefit as a result of a termination of a contract with a customer, partially offset by inventory write-downs, in the third quarter of fiscal 2015. Also, one of the company’s trading divisions headquartered in the U.S. benefited from a favorable change in pretax LIFO of $9 million compared with the corresponding period in fiscal 2014.

Net earnings for the nine months ended May 31, 2015, were $147.4 million ($1.25 per diluted share) on net sales of $4.6 billion compared with net earnings of $80.6 million (68 cents per diluted share) on net sales of $5 billion for the nine months ended May 31, 2014. CMC recorded after-tax LIFO income of $75.2 million (64 cents per diluted share) for the nine months ended May 31, 2015, compared with after-tax LIFO expense of $9.7 million (8 cents per diluted share) for the nine months ended May 31, 2014. Additionally, results for the nine months ended May 31, 2014, included an after-tax gain of $15.5 million (13 cents per diluted share) associated with the sale of CMC’s wholly owned copper tube manufacturing operation, Howell Metal Co. For the nine months ended May 31, 2015, adjusted operating profit was $292.3 million compared with $182.4 million for the nine months ended May 31, 2014. Adjusted EBITDA was $393.5 million for the nine months ended May 31, 2015, compared with $282.2 million for the nine months ended May 31, 2014.