Commercial Metals Reports for Quarter

Commercial Metals Co. reported net earnings of $16.4 million on net sales of $643 million for the quarter ended May 31, the best third quarter in history. This compares with net earnings of $10.7 million on net sales of $622 million for the third quarter last year. Cash flows from operations for the third quarter were $26 million compared with $29 million for the same period last year.

Net earnings for the nine months ended May 31, were $31.8 million on net sales of $1.8 billion. For the same period last year net earnings were $10.2 million on net sales of $1.8 billion. Cash flows provided from operations for the nine-month period were $77 million compared with $63 million last year.

Stanley Rabin, CMC chairman, president and CEO, said, "This quarter again demonstrated the benefits of a well-executed diversification strategy in what can at best be characterized as demanding market conditions. The sale of substantially all the assets of SMI-Owen (our heavy structural fabrication operation) contributed $3.4 million or $0.23 cents per diluted share to net earnings.

"The Manufacturing segment's operating profit was 23 percent above last year's third quarter propelled by record profits from our CMC Steel Group. Net sales increased slightly to $348 million. Our better results stemmed from increased production and shipments at the steel minimills, which significantly offset lower unit margins, plus a continued important contribution from downstream operations as well as the sale of SMI-Owen. Our composite selling price was 9 percent lower than a year ago. Operating profit from our copper tube business, while solid, was below last year's third quarter."

Rabin added, "Operating profit for our steel minimills rose 28 percent compared with a year ago despite abysmal selling prices and was well above the second quarter. Tonnage melted was up 21 percent to 565,000 tons, while tonnage rolled was 556,000 tons, 22 percent above last year's third quarter. Shipments increased 17 percent to 612,000 tons on a year-to-year basis and were 22 percent higher than the second quarter. Conversely, our average total mill selling price was $14 per ton below last year's already very low level and the average selling price for finished goods was down by a similar amount to $273/ton. The realized increase in our steel product prices is lagging that of steel scrap prices and thus caused a near-term squeeze in mill product margin. The average scrap purchase cost rose by $11 per ton. On the other hand, utility costs decreased by $568 thousand compared with the third quarter last year.

"Excluding the SMI-Owen gain, operating profit in our steel fabrication and related businesses decreased compared with last year's strong third quarter. Prices and volumes were mostly lower because of the slowdown in commercial construction. Rebar fabrication, concrete-related products and the steel post plants maintained their relatively good performance, although combined profits were lower than the prior year. Despite reduced operating costs and shop efficiencies, results for steel joist and cellular beam manufacturing were not as good due to considerably lower prices and shipments. Structural steel fabrication was about breakeven. Shipments from our fab plants totalled 248,000 tons, 3 percent less than the prior year's third quarter but 6 percent more than the second quarter."

"The Recycling segment recorded its highest operating profit since the third quarter of FY 2000 -- mainly a result of the improved ferrous scrap market -- on 3 percent higher net sales dollars. This compared favorably with a small operating profit in the year ago quarter. Profitability rose substantially over the second quarter as well. Gross margins were significantly above last year. In general, both domestic and international demand for scrap displayed a better tone. Ferrous prices increased as the quarter progressed. Nonferrous markets essentially went sideways. Versus last year, the average ferrous scrap sales price increased by $13 per ton to $86 per ton and shipments climbed 12 percent to 385,000 tons. The average nonferrous scrap sales price for the quarter was approximately 4 percent below a year ago while nonferrous shipments were a tad higher. Both ferrous and nonferrous prices were higher than the second quarter of this year. The total volume of scrap processed, including our CMC Steel Group processing plants, equaled 667,000 tons against 580,000 tons last year."