CMC Reports First Quarter Fiscal 2024 Results

Commercial Metals Company announced financial results for its fiscal first quarter ended November 30, 2023. Net earnings were $176.3 million, or $1.49 per diluted share, on net sales of $2.0 billion, compared to prior year period net earnings of $261.8 million, or $2.20 per diluted share, on net sales of $2.2 billion.

• First quarter net earnings of $176.3 million, or $1.49 per diluted share
• Consolidated core EBITDA of $325.3 million; core EBITDA margin of 16.2%
• Generated cash flow from operating activities of $261.1 million and free cash flow of $194.1 million
• Continued healthy demand levels for North America Steel Group as finished steel volumes increased by 1.1% on a year-over-year basis
• Continued progress on strategic growth initiatives: Arizona 2 production increasing steadily and construction well underway at future Steel West Virginia site
• Segment reporting realigned to reflect the manner in which the business is managed and support strategic priorities and execution

During the first quarter of fiscal 2024, the Company recorded a net after-tax charge of $16.4 million related to commissioning efforts at the Arizona 2 micro mill. Excluding this item, first quarter adjusted earnings were $192.7 million, or $1.63 per diluted share, compared to adjusted earnings of $266.2 million, or $2.24 per diluted share, in the prior year period. “Adjusted EBITDA,” “core EBITDA,” “core EBITDA margin,” “free cash flow,” “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, “Our business again generated very strong financial results during the first quarter, with core EBITDA, core EBITDA margin, and cash flows continuing at historically strong levels. Performance in our North America Steel Group was supported by sustained healthy construction activity and near-record margins on our downstream products. While steel product margins experienced compression in the quarter, market developments indicate this trend should halt or reverse in the coming months. Our Europe Steel Group performed well against a market environment challenged by weaker demand and lower product margins. Encouragingly, selling prices and metal margins on long products began to improve midway through the quarter, and several green shoots have emerged that could bolster the Polish market in the quarters ahead.”

Mr. Matt added, “During the first quarter, we continued to invest and build for the future. Following its successful summer start-up, production levels at our new Arizona 2 micro mill improved throughout the quarter, and we expect these to steadily increase in the months ahead. Site improvements for our Steel West Virginia project should be completed shortly, clearing the way to begin pouring foundations. We have successfully integrated a number of our recent acquisitions which extend our operational and commercial capabilities and further our strategic position. All of these initiatives broaden our exposure to the favorable structural trends powering domestic construction, and are expected to drive strong future growth in earnings, cash flow, and shareholder value.”

“We recently changed our organizational structure and segment reporting to support our strategic priorities of driving higher through-the-cycle margins and growth. The decision to break out the Emerging Businesses Group was motivated by the desire to provide additional attention to this unique portfolio of solutions which we believe have the potential to maintain higher, more stable margins and an elevated rate of growth relative to our steel business,” Matt concluded.

The Company’s balance sheet and liquidity position remained strong. As of November 30, 2023, cash and cash equivalents totaled $704.6 million, with available liquidity in excess of $1.5 billion. During the quarter, CMC repurchased 621,643 shares of common stock valued at $28.4 million in the aggregate. As of November 30, 2023, $58.3 million remained available under the current share repurchase authorization.

On January 4, 2024, the board of directors declared a quarterly dividend of $0.16 per share of CMC common stock payable to stockholders of record on January 18, 2024. The dividend to be paid on February 1, 2024, marks the 237^th consecutive quarterly payment by the Company.

Business Segments – Fiscal First Quarter 2024 Review

Demand for CMC’s finished steel products in North America continued to be healthy during the quarter. Robust construction activity supported a 3% year-over-year increase in total North America Steel Group rebar shipments, a measure that includes rebar sold directly from mills as well as fabricated product shipped from CMC’s downstream facilities. The construction pipeline remained historically strong with high volumes of potential projects. However, lower new contract awards have driven a year-over-year reduction in the volume and value of CMC’s downstream backlog from the peak experienced last year. Demand from industrial end markets, which is important for merchant products, was mixed, with certain applications experiencing slower activity compared to the prior year quarter.

Adjusted EBITDA for the North America Steel Group decreased to $266.8 million in the first quarter of fiscal 2024 from $349.8 million in the prior year period, driven by lower margins over scrap costs on steel products and higher costs related to the operational start-up of the Company’s Arizona 2 micro mill. These factors more than offset benefits from increased steel product shipments and CMC’s ongoing cost reduction efforts. The adjusted EBITDA margin for the North America Steel Group of 16.8% compares to 21.0% in the prior year period.

North America Steel Group shipment volumes of finished steel, which include steel products and downstream products, increased 1.1% year-over-year. The average selling price for steel products decreased $128 per ton compared to the first quarter of fiscal 2023, while the cost of scrap utilized increased $18 per ton, resulting in a year-over-year decrease in steel products margin over scrap of $146 per ton. The average selling price for downstream products declined by $10 per ton from the prior year period.

Europe end market conditions remained challenging during the quarter, as Polish construction activity decelerated and industrial production across Central Europe remained muted. The Europe Steel Group reported adjusted EBITDA of $38.9 million, compared to adjusted EBITDA of $61.2 million in the prior year period. First quarter 2024 results include two energy cost rebates totaling approximately $66 million. Of these rebates, $27.7 million is related to an annual CO₂ credit under a government program that extends to 2030, and the remaining $38.6 million is structured as a reimbursement by the Polish government for elevated energy costs incurred during the European energy crisis. Adjusted EBITDA for the prior year period included $9.5 million related to the annual CO₂ program. The adjusted EBITDA margin for the Europe Steel Group of 17.3% compares to 15.8% in the prior year period.

Against this difficult market backdrop, Europe Steel Group’s average selling price decreased $159 per ton from the first quarter of the prior year, while scrap costs decreased by only $1 per ton, leading to metal margin compression. The decline in profitability, excluding energy rebates, was also impacted by a 27% decrease in shipment volumes compared to the prior year period, which reduced fixed cost leverage.

Emerging Businesses Group first quarter net sales of $177.2 million increased by 3.9% from the prior year period, driven largely by the addition of CMC Anchoring Systems. Demand conditions were generally positive during the quarter, with relative strength in North America and a weaker environment elsewhere. Construction activity in the United States drove solid demand for geogrid solutions, construction services, CMC Anchoring Systems, and performance reinforcing steels.

Adjusted EBITDA for the Emerging Businesses Group of $30.9 million during the first quarter was relatively flat compared to the prior year period. The adjusted EBITDA margin of 17.4% represented a decline of 100 basis points, as the positive impact from the addition of CMC Anchoring Systems and the benefit of improved adoption rates for proprietary geogrid solutions in North America were offset by weather delays in the Central U.S. and lower construction activity in Europe and the Middle East.

For full first 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