CMC Reports Fourth Quarter and Full Year Fiscal 2023 Results

Commercial Metals Company (“CMC”) announced financial results for its fiscal fourth quarter ended August 31, 2023. Net earnings were $184.2 million, or $1.56 per diluted share, on net sales of $2.2 billion, compared to prior year period net earnings of $288.6 million, or $2.40 per diluted share, on net sales of $2.4 billion.

For the full year fiscal 2023, CMC reported net earnings of $859.8 million, or $7.25 per diluted share, on net sales of $8.8 billion compared to prior year net earnings of $1,217.3 million, or $9.95 per diluted share, on net sales of $8.9 billion.

During the fourth quarter of fiscal 2023, the Company recorded a net after-tax charge of $15.7 million, primarily related to commissioning efforts at the Arizona 2 micro mill. Excluding this item, fourth quarter adjusted earnings were $199.9 million, or $1.69 per diluted share, compared to adjusted earnings of $294.9 million, or $2.45 per diluted share, in the prior year period. “Adjusted EBITDA,” “core EBITDA,” “adjusted earnings” and “adjusted earnings per diluted share” are non-GAAP financial measures. Details, including a reconciliation of each such non-GAAP financial measure to the most directly comparable measure prepared and presented in accordance with GAAP, can be found in the financial tables that follow.

Peter Matt, President and Chief Executive Officer, said, “Fiscal 2023 marked another exceptional year for CMC with highlights including record employee safety performance, the second-best financial results in our Company’s 108-year history, and the achievement of several strategic growth milestones. These results were made possible by outstanding operational, commercial, and strategic execution by the CMC team. On behalf of our board of directors, employees, and shareholders, I also want to thank Barbara Smith for her outstanding leadership as Chief Executive Officer, which has transformed the Company and built a strong foundation for the future. I look forward to continuing the strong growth trajectory that she established.”

Mr. Matt added, “We generated strong core EBITDA in the fourth quarter, with performance benefiting from solid demand and attractive margin conditions within our North American markets supported by our ongoing efforts to reduce controllable costs. These tailwinds were partially offset by a challenging market environment within Europe, where weaker demand and compressed margins meaningfully impacted our results.

“During the fourth quarter, we continued our progress in investing and building for the future. CMC’s Arizona 2 micro mill started operations successfully in June and is making steady progress in ramping up production. Additionally, our Tensar platform achieved record profitability during the quarter, driven by strong customer acceptance of its latest proprietary geogrid solution; and we are making good progress integrating EDSCO Fasteners, a leading provider of anchoring solutions for the electrical transmission market that further expands our presence in the construction reinforcement market. Construction has commenced at our Steel West Virginia project, with key operations and leadership teams now on-site. Altogether, these strategic initiatives meaningfully broaden our exposure to the structural trends powering domestic construction, which we expect will lead to future growth in earnings, cash flow, and shareholder value,” Matt concluded.

The Company’s balance sheet and liquidity position remained strong. As of August 31, 2023, cash and cash equivalents totaled $592.3 million, with available liquidity of $1.6 billion. During the quarter, CMC repurchased 352,000 shares of common stock valued at $18.6 million. As of August 31, 2023, $86.7 million remained available under the current share repurchase authorization.

On October 10, 2023, the board of directors declared a quarterly dividend of $0.16 per share of CMC common stock payable to stockholders of record on October 26, 2023. The dividend to be paid on November 9, 2023, marks the 236^th consecutive quarterly payment by the Company.

Business Segments – Fiscal Fourth Quarter 2023 Review

Demand for CMC’s finished steel products in North America continued to be healthy during the quarter. Downstream new project bid volumes, a significant indicator of the construction project pipeline, improved from a year ago. However, lower new contract awards drove a modest year-over-year reduction in the volume and value of CMC’s downstream backlog. Demand from industrial end markets, which is important for merchant products, was mixed, with certain applications experiencing slower activity compared to past quarters.

Adjusted EBITDA for the North America segment slightly increased to $375.3 million in the fourth quarter of fiscal 2023 from $370.5 million in the prior year period. Financial results for the period mark the eleventh consecutive quarter of year-over-year growth in adjusted EBITDA, excluding the large gain on the sale of real estate recognized in the second quarter of fiscal 2022. The improvement was driven by expanded margins over scrap costs on downstream products, as well as ongoing cost reduction efforts. Controllable costs per ton of finished steel decreased compared to the prior year period, principally driven by lower input costs for key consumables and reduced freight rates which more than offset costs related to the operational start-up of Arizona 2 and a planned outage at CMC’s Steel Alabama merchant bar mill.

North America shipment volumes of finished steel, which include steel products and downstream products, increased 2% year-over-year. The average selling price for steel products decreased $172 per ton compared to the fourth quarter of fiscal 2022, while the cost of scrap utilized declined $49 per ton, resulting in a year-over-year decrease in steel products margin over scrap of $123 per ton. The average selling price for downstream products increased $81 per ton from the prior year period.

Europe end market conditions weakened during the quarter, as Polish construction activity decelerated and industrial production across Central Europe remained muted. Against this backdrop of tepid demand, average selling price decreased $206 per ton from the fourth quarter of the prior year, while scrap costs decreased by $37 per ton, leading to metal margin erosion. The Europe segment reported an adjusted EBITDA loss of $25.7 million for the fourth quarter of fiscal 2023, compared to adjusted EBITDA of $64.1 million in the prior year period. In addition to metal margin compression, the decline in profitability was also impacted by a 9% decrease in shipment volumes compared to the prior year period, which reduced fixed cost leverage. CMC reduced production by approximately 25% compared to the prior year period to align inventory with current demand conditions.

Outlook

Mr. Matt said, “We expect first quarter consolidated financial performance to remain strong by historical standards, but decline from the fourth quarter as a result of seasonally lower shipments, steel product margin compression in North America, and the continuation of challenging market conditions in Europe. During the first quarter, we anticipate that our Europe operations will receive approximately $60 million from two large government rebate programs. The first is an annual CO₂ credit estimated at $25 million, up from the $9.5 million received last year. The second is structured as a reimbursement by the Polish government for elevated energy costs incurred during the European energy crisis. Proceeds from this program are expected to be $35 million, and are calculated based on the magnitude of energy cost inflation in calendar year 2023 relative to the prior year baseline. These rebates are expected to drive a sequential improvement in Europe segment adjusted EBITDA.”

For the full fourth quarter results, click here.

About CMC

CMC is an innovative solutions provider helping build a stronger, safer, and more sustainable world. Through an extensive manufacturing network principally located in the United States and Central Europe, we offer products and technologies to meet the critical reinforcement needs of the global construction sector. CMC’s solutions support construction across a wide variety of applications, including infrastructure, non-residential, residential, industrial, and energy generation and transmission.

Source: Commercial Metals Company