Commercial Metals Co. reported earnings of $6.6 million on net sales of $566 million for the second quarter ended February 28. This compares with net earnings of $1.7 million on net sales of $578 million for the second quarter last year. This year's second quarter included net income of $1.63 million from another graphite electrode settlement, a net loss of $294,000 due to the shutdown of the Midland, Texas, shredder and a LIFO charge of $404,000.
Net earnings for the six months ended February 28 were $15.4 million on net sales of $1.1 billion. For the same time last year Commercial had a net loss of $571,000 on sales of $1.2 billion. Cash flow provided for the six-month period were $51 million compared with $34 million last year.
Stanley Rabin, CMC chairman, president and CEO, said, "Selling prices in our three business segments remained severely depressed virtually across the board. However, we were generally able to increase production and shipments above last year's second quarter. Raw material costs were flat to lower. We also benefited from the substantial decline in energy prices, which peaked during last year's second quarter.
"The manufacturing segment's operating profit was notably above last year's second quarter on account of considerably higher profits by the CMC Steel Group. Our better performance in steel resulted from increased output and shipments, which more than offset a lower composite selling price, plus a continued major contribution from downstream operations. Profits from our copper tube business, while solid, were below last year's strong quarter."
Rabin added, "Our steel minimills were meaningfully profitable compared with an operating loss a year ago. Tons melted were up one-third to 481,000 tons, while rolled tons were 476,000 tons, 35 percent above last year's second quarter. Shipments increased 20 percent to 501,000 tons on a year-to-year basis. Our average total mill selling price was $19 per ton below last year's already very low level, and the average selling price for finished goods was down by a like amount.
"The Recycling segment recorded a slight profit after providing for the shredder closure. This compared with an operating loss in the year ago quarter despite 14 percent lower sales dollars, and profitability improved substantially over the first quarter. Gross margins were below last year, but operating costs were down even more. Cash flows from operations were positive. The persistent, principal challenge was dismal markets. Inventory turnover remained very rapid. Versus last year, the average ferrous scrap sales price declined by $5 per ton to $71 per ton, whereas, shipments climbed 5 percent to 338,000 tons.
“The average nonferrous scrap sales price was approximately 14 percent lower than a year ago while nonferrous shipments were off 2 percent. However, both ferrous and nonferrous prices increased as the quarter progressed. The total volume of scrap processed, including our CMC Steel Group processing plants, equaled 583,000 tons against 540,000 tons last year."
Rabin added, "Operating profit for the Marketing and Trading segment was slightly less than last year's relatively weak second quarter on account of still further margin compression. Net sales declined 10 percent to $178 million, in large part because of a big reduction in volume due to the global recession, oversupply in most markets and intense competition from domestic suppliers in the respective markets.”
Rabin concluded, "Our outlook is that the second half of fiscal year 2002 should be significantly better than the first half, though not as strong as last year's near record level second half. The most heartening news is that the U.S. economy is showing increased signs of a recovery, although the rate and magnitude remain uncertain. It also appears that Europe has bottomed and Asia (excluding Japan) appears to be turning the corner.
“Customer inventory levels have been reduced. We expect our mill operating levels to rise further and prices to strengthen moderately, with scrap prices also somewhat higher. We anticipate that shipments to the construction industry will be higher despite the drop in private, nonresidential construction.
“We expect demand improvement from the manufacturing sector of the economy. Steel imports should decline from recent levels as a result of the trade action. We expect output and shipments at our fabrication operations to increase incrementally. Profits in copper tube manufacturing are likely to remain at recent levels.
“Recycling results should be better than the second quarter because the outlook for ferrous and nonferrous scrap markets is modestly better. In Marketing and Trading, order intake has shown some improvement and world markets are more hopeful, albeit weak and intensely competitive.”