CMC Reports First Quarter Fiscal 2025 Results

Commercial Metals Company announced financial results for its fiscal first quarter ended November 30, 2024. First quarter net loss was ($175.7) million, or ($1.54) per diluted share, on net sales of $1.9 billion, compared to prior year period net earnings of $176.3 million, or $1.49 per diluted share, on net sales of $2.0 billion.

• First quarter net loss of ($175.7) million, or ($1.54) per diluted share including approximately $265.0 million litigation expense, net of estimated tax; adjusted earnings of $88.5 million, or $0.78 per diluted share
• Consolidated core EBITDA of $210.7 million in the first quarter; core EBITDA margin of 11.0%
• Late season construction activity drove year-over-year and sequential growth in North America finished steel shipment volumes; margins pressured by declines in average steel and downstream product pricing
• North America downstream backlog volumes stable on a year-over-year basis; pipeline of potential future projects remains strong
• Continued disciplined execution of strategic growth plan, including organic growth investments and operational and commercial excellence program (“TAG”), which are expected to provide financial benefits in fiscal 2025
• Generated $213.0 million of cash flow from operating activities in the first quarter, equal to 101% of consolidated core EBITDA; returned $71.0 million in cash to shareholders through dividends and share buybacks

During the first quarter of fiscal 2025, the Company recorded an estimated net after-tax charge of $265.0 million to reflect a verdict reached in litigation. Excluding this charge, first quarter adjusted earnings were $88.5 million, or $0.78 per diluted share, compared to adjusted earnings of $176.3 million, or $1.49 per diluted share, in the prior year period. “Adjusted EBITDA,” “core EBITDA,” “core EBITDA margin,” “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, “The CMC team executed well across multiple fronts during the first quarter, including a near-record safety performance and effective cost management across our operational footprint. Financial results continued to be hindered by economic uncertainty that has weighed on new construction activity, pressuring steel pricing and margins. We remain confident that this weaker demand environment will be temporary as we expect the underlying drivers across infrastructure, non-residential and residential end markets will provide multiyear support for our business. Our downstream bid levels and several key external indicators continue to evidence a robust pipeline of potential future projects that should translate into construction activity in the coming quarters.”

Mr. Matt added, “I am encouraged by the progress being made in the implementation of our operational and commercial excellence program – Transform, Advance, and Grow (TAG). This effort is a key component of our long-term strategic plan and is expected to drive value creation by helping CMC to achieve higher through-the-cycle margins and enhanced efficiencies across the organization. We are seeing strong early results from several recently launched TAG initiatives, which give me confidence that the program will begin to provide financial benefits in fiscal 2025.”

The Company’s balance sheet and liquidity position remained strong. As of November 30, 2024, cash and cash equivalents totaled $856.1 million, with available liquidity of nearly $1.7 billion. During the quarter, CMC repurchased 919,481 shares of common stock valued at $50.4 million in the aggregate. As of November 30, 2024, $353.4 million remained available under the current share repurchase authorization.

On January 2, 2025, the board of directors declared a quarterly dividend of $0.18 per share of CMC common stock payable to stockholders of record on January 16, 2025, representing an increase of approximately 13% on a year-over-year basis. The dividend to be paid on January 30, 2025, marks the 241^st consecutive quarterly payment by the Company.

Business Segments – Fiscal First Quarter 2025 Review

Demand for CMC’s products in North America was strong during the quarter, supported by late season construction activity across several geographical regions as job sites worked to make up for days lost to weather disruptions earlier in calendar 2024. Shipments of finished steel products increased by 4.4% relative to the prior year period. The construction pipeline of potential future projects remained healthy as indicated by CMC’s downstream bidding activity and the Dodge Momentum Index, which measures the value of projects entering the planning phase. Downstream backlog volumes were stable on a year-over-year basis. Shipments of merchant products (MBQ) grew compared to the first quarter of fiscal 2024 as our ability to serve West Coast customers from our Arizona 2 micro mill facility increased.

Adjusted EBITDA for the North America Steel Group decreased to $188.2 million in the first quarter of fiscal 2025 from $266.8 million in the prior year period. The earnings reduction was driven by lower margins over scrap costs on steel products and downstream products. The adjusted EBITDA margin for the North America Steel Group of 12.4% declined from 16.8% in the first quarter of fiscal 2024.

European market conditions in the first quarter were similar to recent periods. Long-steel consumption remained substantially below historical levels. The beneficial impact of improving Polish demand in certain end market applications and regional supply discipline has been largely offset by increased import flows from neighboring nations that have sought an outlet for product not consumed within their home markets. The Europe Steel Group reported adjusted EBITDA of $25.8 million, which includes a $44.1 million annual CO2 credit associated with a government program that extends to 2030. Excluding this credit, financial results deteriorated modestly compared to the prior two quarters due to metal margin compression driven by high import volumes. Within this difficult market environment, the Europe Steel Group has executed on an extensive cost management program that has meaningfully reduced controllable costs. Controllable costs per ton during the first quarter of 2025 declined from the prior year period, excluding energy credits and rebates, despite a nearly 9% reduction in shipment volumes.

Emerging Businesses Group first quarter net sales of $169.4 million decreased by 4.4% compared to the prior year period, while adjusted EBITDA for the segment of $22.7 million was down 26.6% a year-over-year basis. Results were negatively impacted by an increased sales mix of lower margin products and several large project delays within CMC’s Tensar division, which are now expected to commence later in fiscal 2025. Additionally, a slowing truck and trailer market has hampered earnings within CMC’s Impact Metals business. Strong project related shipments of performance reinforcing steel and healthy activity levels in our Construction Services business helped to offset some of this weakness. Indications of future market conditions remained encouraging during the quarter with pipeline measures such as project quotes and backlog at healthy levels. Adjusted EBITDA margin of 13.4% was down 400 basis points compared to the prior year period.

During the first quarter, a jury in California reached a verdict in a lawsuit filed by Pacific Steel Group against CMC and certain subsidiaries. Pacific Steel Group claimed, among other things, various restraints on trade by CMC. A trial on Pacific Steel Group’s claims concluded with a verdict and judgment in favor of Pacific Steel Group in the amount of $110 million, which was subsequently trebled as a matter of law. As a result of this judgment, a $350.0 million provision was recorded in the first quarter fiscal 2025 results. CMC is confident in how it conducts its business practices and is deeply disappointed in the outcome of the trial. CMC will be pursuing all reasonably available avenues to appeal the verdict and judgment.

Outlook

Mr. Matt said, “We expect consolidated financial results in our second quarter of fiscal 2025 to decline from the first quarter level. Finished steel shipments within the North America Steel Group are anticipated to follow normal seasonal trends, while adjusted EBITDA margin is expected to decrease sequentially on lower margins over scrap cost on steel and downstream products. Adjusted EBITDA for our Europe Steel Group should be in line with the prior year second quarter as stringent cost management efforts continue to offset a weak market environment. Financial results for the Emerging Businesses Group are anticipated to be impacted by normal seasonality.”

Mr. Matt concluded, “We are very encouraged by our recent conversations with customers and the optimism they have voiced about the coming quarters. Key indicators of the construction pipeline also point in a positive direction. Outside of construction, measures of both big and small business confidence have improved significantly over the last two months. The palpable shift in sentiment gives us confidence that current softness is transient and that we should soon enter a period of renewed strength in our core markets.”

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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