Commercial Metals Company Reports Record Earnings for Quarter, Year

Commercial Metals Co. reported net earnings of $132.0 million on net sales of $4.8 billion for the year ended August 31. This compares with net earnings of $18.9 million on net sales of $2.9 billion last year. Fourth quarter net earnings were a record $47.4 million on net sales of $1.5 billion. This compares with $10.7 million on net sales of $805 million in the fourth quarter a year ago.

Stanley Rabin, CMC chairman, president and CEO, said, "We continued to benefit in the quarter from the favorable supply/demand environment for most of our businesses. We continued to achieve outstanding performance in our Recycling and Domestic Mills segments. Meanwhile, we attained strong profitability in the Marketing and Distribution segment, and results for our Polish steel manufacturing operation, CMC Zawiercie, remained excellent. While markets generally remained strong during the fourth quarter, they also were very volatile. Part of the volatility appeared to stem from vacillating perceptions of China's economic growth rate and its decreased net imports for various materials and products."

Rabin added, "Our Domestic Mills segment set all-time annual records for tons melted, rolled and shipped. The segment's adjusted operating profit of $28.1 million for the fourth quarter was substantially higher than last year's fourth quarter. Within the segment, quarterly adjusted operating profit for our steel minimills at $25.3 million was about 250% greater than a year earlier on the strength of much improved selling prices and strong shipments, which more than offset the steep rise in steel scrap and other input costs. On a year-to-year basis, tonnage melted for the fourth quarter was up 1 percent to 524,000 tons; tonnage rolled was 533,000 tons, 3 percent above last year's fourth quarter; shipments decreased slightly to 595,000 tons because of lower billet sales. Fourth quarter production at the Texas mill was adversely affected by the previously reported transformer failure; purchased billets helped us meet customer demands. Our quarterly average total mill selling price was $166 per ton above last year's relatively low level and the average selling price for finished goods was up by $163 per ton to $460 per ton. Conversely, the average scrap purchase cost rose by $61 per ton versus a year ago. Additionally, utility costs increased by $1.5 million compared with the fourth quarter last year, costs for ferroalloys were much higher, and other supplies increased as well. On balance, though, our margins rose considerably; the metal spread at $293 per ton was $104 per ton greater than the fourth quarter of last year.”

According to Rabin, "The Recycling segment recorded another fantastic quarter, primarily a result of the vibrant ferrous scrap market on 74 percent higher net sales dollars. This compared most favorably with the quarter a year ago; adjusted operating profit increased fourfold to $21.9 million. Gross margins were significantly above last year while operating costs as a percent of sales declined 17 percent. Our markets were characterized by significant price volatility for our major commodities against a backdrop of continued overall strong demand for our products. Versus last year, the average ferrous scrap sales price for the quarter increased by 86 percent to $195 per ton, and shipments climbed 15 percent to 486,000 tons. The average nonferrous scrap sales price for the quarter was approximately 36 percent above a year ago while nonferrous shipments were 11% higher. Conversely, shipments of both ferrous and nonferrous were lower than the third quarter of fiscal 2004, while prices were 2 percent higher and 7 percent lower, respectively. The total volume of scrap processed, including all our processing plants, equaled 868,000 tons against 732,000 tons in last year's fourth quarter."

Rabin concluded, "As we look forward to fiscal 2005, we anticipate that the positive factors which have been driving our markets are sustainable and allow a continuation of healthy pricing and volume for our goods and services. Our outlook for the first quarter and year remains very positive, although we must be wary of the dampening effect of high petroleum prices as well as China's moderating impact on commodity prices. We expect some shift in profits with a higher proportion coming from the Fabrication segment, although ferrous scrap prices firmed again in recent weeks.“