Commercial Metals Company Reports Record Second Quarter Fiscal 2022 Results

Commercial Metals Company today announced financial results for its fiscal second quarter ended February 28, 2022. Earnings from continuing operations were $383.3 million, or $3.12 per diluted share, on net sales of $2.0 billion, compared to prior year period earnings from continuing operations of $66.2 million, or $0.54 per diluted share, on net sales of $1.5 billion.

During the second quarter of fiscal 2022, the Company recorded a net after-tax benefit of $195.8 million related to the gain recorded on the $313.0 million sale of its Southern California real estate, which was partially offset by costs associated with the opportunistic debt financings completed during the quarter. Excluding this benefit, second quarter adjusted earnings from continuing operations were $187.6 million, or $1.53 per diluted share, compared to adjusted earnings from continuing operations of $79.8 million, or $0.66 per diluted share, in the prior year period. “Adjusted EBITDA from continuing operations,” “core EBITDA from continuing operations,” “adjusted earnings from continuing operations” and “adjusted earnings from continuing operations 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.

Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, said, “Outstanding operational execution, combined with strong end-market demand, produced the second-best financial performance in CMC’s 107-year history, behind only the previous quarter. I am extremely proud of CMC’s entire team as they continue to optimize our business, improve efficiency and deliver the high-quality service our customers have come to expect, while also advancing CMC’s strategic vision. During the last twelve months, CMC generated core EBITDA from continuing operations of more than $1.1 billion, a clear demonstration of the earnings power created by the strategic actions taken in past years that have enabled us to take full advantage of current market conditions.”

Ms. Smith continued, “We look forward to building on CMC’s already world-class assets and operating platform with the addition of Tensar Corporation and the commissioning of our energy efficient rebar and merchant bar-capable Arizona 2 micro mill project. This growth, together with our recently announced micro mill in the Eastern U.S., represents the next chapter in CMC’s compelling story, which we expect will propel our organization to an even higher level of through-the-cycle earnings and return on capital.”

Augmented by proceeds from the Southern California real estate sale and the opportunistic debt financing during the quarter, the Company’s cash and cash equivalents as of February 28, 2022 grew to $846.6 million. In addition, $684.9 million remained available under the Company’s credit and accounts receivable facilities. This liquidity will be partially used to fund the acquisition of Tensar Corporation when the transaction closes.

On March 16, 2022, the board of directors declared a quarterly dividend of $0.14 per share of CMC common stock payable to stockholders of record on March 30, 2022. The dividend to be paid on April 13, 2022 marks 230 consecutive quarterly payments by the Company, and represents a 17% increase from the dividend paid in April 2021.

Business Segments – Fiscal Second Quarter 2022 Review

Demand conditions for CMC’s finished steel products in North America were again robust during the quarter, with several key internal and external indicators pointing toward continued strength. Downstream bid volumes, a key indicator of the construction project pipeline, increased meaningfully from a year ago, while contract backlog also experienced growth. Demand from industrial end markets continued to trend positively, with most end use applications increasing compared to the prior year period.

The North America segment reported adjusted EBITDA of $535.5 million for the second quarter of fiscal 2022. Excluding a $273.3 million gain related to the sale of Southern California real estate, the segment generated adjusted EBITDA of $262.1 million for the quarter, an increase of 53% compared to $171.6 million in the prior year period. This improvement was driven by record margins on sales of both steel products and raw materials. Steel products have experienced four consecutive quarters of year-over-year margin expansion, while margins on raw material sales have grown for eight consecutive quarters. Controllable costs per ton of finished steel shipped increased in comparison to the first fiscal quarter primarily as a result of scheduled routine maintenance, which reduced production levels, as well as the impact of higher per unit purchase costs for freight and alloys.

Shipment volumes of finished steel, which include steel products and downstream products, followed typical seasonal patterns, but decreased approximately 10% from the prior year second quarter. The decline reflects the unusually strong steel product shipments that occurred during the prior year quarter. In addition, shipments this year were influenced by widespread weather challenges during the quarter, contributing to the year-over-year decline in volumes.

The average selling price for steel products increased by $346 per ton compared to the second quarter of fiscal 2021, while the cost of scrap utilized rose $92 per ton. The result was a year-over-year increase in margin over scrap of $254 per ton. The average selling price for downstream products increased by nearly $240 per ton from the prior year period and $77 per ton on a sequential basis. Future pricing indicators on new work entering the backlog remain positive, as average price levels for bids and new awards climbed significantly from the prior year period.

The Europe segment reported record adjusted EBITDA of $81.1 million for the second quarter of fiscal 2022, up 404% compared to adjusted EBITDA of $16.1 million for the prior year quarter. The improvement was driven by a significant expansion in margin over scrap and the addition of CMC Poland’s third rolling line, as well as the absence of a major maintenance program that occurred in the prior year period. Similar to North America, underlying demand for steel products remained robust. Volumes of rebar, merchant bar, and wire rod each increased on a year-over-year basis, assisted by the new rolling line, which has improved production flexibility and the mill’s ability to capitalize on favorable market conditions. Average selling price increased by $319 per ton compared to the prior year quarter, driving a significant increase in margin over scrap of $203 per ton.

Outlook

Ms. Smith said, “We continue to anticipate strong fiscal year 2022 financial and operational performance. Current robust demand for each of CMC’s major product lines is expected to persist throughout the upcoming spring and summer construction season, underpinned by our growing downstream backlog as well as solid levels of new work entering the project pipeline. The war in Ukraine raises significant geopolitical and economic risks that we are monitoring closely. To date, CMC has not experienced any disruptions to our operations, workforce, or end-market demand.”

“Shipment volumes of finished steel products have historically increased from second quarter levels, driven by seasonal factors, and we expect shipments during the third quarter of fiscal 2022 to follow these trends. We anticipate strong third quarter financial results, with margins remaining at high levels,” Ms. Smith added.

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About Commercial Metals Company

Commercial Metals Company and its subsidiaries manufacture, recycle and fabricate steel and metal products and provide related materials and services through a network of facilities that includes seven electric arc furnace (“EAF”) mini mills, two EAF micro mills, one rerolling mill, steel fabrication and processing plants, construction-related product warehouses and metal recycling facilities in the United States and Poland.

Source: Commercial Metals Company