Commercial Metals Company Reports Fourth Quarter and Full Year Fiscal 2020 Results
Commercial Metals Company (“CMC” or the “Company”) announced financial results for its fiscal fourth quarter and year ended August 31, 2020. Earnings from continuing operations were $67.8 million, or $0.56 per diluted share, in the fourth quarter, compared to $85.9 million, or $0.72 per diluted share, in the prior year period. For the full year, earnings from continuing operations were $278.3 million, or $2.31 per diluted share, compared to $198.8 million, or $1.67 per diluted share in the prior year.
During the fourth quarter of fiscal 2020, the Company incurred $27.5 million in net after-tax charges, the largest of which related to the post-closing working capital settlement associated with its fiscal 2019 rebar asset acquisition. In addition, the Company incurred non-cash charges in connection with facility closures, as it continued to optimize its operational footprint, as well as debt extinguishment costs related to the complete pay-down of CMC’s term loan facility. Excluding these and other, one-time expenses, fourth quarter adjusted earnings from continuing operations were $95.3 million, or $0.79 per diluted share, compared to adjusted earnings from continuing operations of $0.76 per diluted share in the prior year period. Details can be found in the non-GAAP reconciliation on page 12.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, “Fiscal 2020 was an exceptional year for CMC, and our strong results – including enhanced earnings, increased cash flow, additional operational flexibility, and a more robust balance sheet – demonstrate the value of CMC’s purposeful strategic transformation completed over the last several years and our position as a leader in concrete reinforcement.”
“The past year was also one of unprecedented challenges that altered the work and home life of each of our employees. I could not be prouder of the way the CMC team members responded, delivering a banner year for our Company despite the difficulties presented by the COVID-19 pandemic. Looking ahead, we continue to strategically build for the future. We expect our ongoing network optimization efforts will yield additional margin and working capital benefits, and our third rolling line in Poland to begin commissioning toward the end of this fiscal year. In addition, we recently announced the construction of a third micro mill, which will be the world’s first merchant product-capable micro mill upon its completion in fiscal 2023,” Smith added.
As a result of the strong free cash flow generated during the fourth quarter, the Company reduced its debt sequentially, while also improving its cash balance to $542.1 million at August 31, 2020. Compared to the prior year-end, CMC’s cash balance increased by $349.6 million, while total indebtedness was reduced by $161.0 million. Availability under the Company’s credit and accounts receivable programs was $661.9 million at August 31, 2020.
On October 14, 2020, the board of directors declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on October 29, 2020. The dividend will be paid on November 13, 2020, and marks 224 consecutive quarterly dividend payments by the Company.
Business Segments – Fiscal Fourth Quarter 2020 Review
Beginning with its fiscal fourth quarter 2020 results, CMC is reporting two operating segments: North America and Europe. North America comprises the former Americas Recycling, Americas Mills, and Americas Fabrication segments. Europe comprises the former International Mill segment, with no other changes. For additional details regarding changes to the operating segment reporting, please refer to the investor relations section of CMC’s website.
The North America segment generated adjusted EBITDA of $174.2 million for the fourth quarter of fiscal 2020, an increase of 14% compared to $152.5 million in the prior year period. The improvement reflects strong management of non-raw material costs at each stage of our vertically integrated value chain. Cost performance at the mills was particularly strong, with a meaningful portion of the improvement driven by the recent decision to curtail melting operations at Steel California and supply billets from lower cost plants. Lower operating costs at downstream locations also contributed to the improved performance.??
Shipment volumes of finished goods, which includes steel products and downstream products, were flat compared to the prior year quarter. Demand for rebar from the mills remained strong, growing year-over-year, supported by healthy construction backlogs across our customer base. As a result of gains in market share, shipments of merchant bar were flat compared to the prior year period, as underlying consumption declined across the industry. Downstream product volumes declined modestly year-over-year due largely to the impact of weather challenges in the Gulf Coast and Texas markets.
Margins over scrap cost within the vertical chain declined from the fourth quarter of fiscal 2019, due primarily to steel products. Average selling price for steel products decreased $59 per ton year-over-year, which was only partially offset by lower scrap costs. Margin over scrap cost on downstream products expanded modestly compared to a year ago, driven by lower input costs and stronger pricing in CMC’s committed backlog, which led to higher average selling prices.
The Europe segment reported adjusted EBITDA of $22.9 million for the fourth quarter of fiscal 2020, up slightly compared to adjusted EBITDA of $22.7 million for the prior year quarter. Results benefited from a $10.7 million carbon credit that was received during the quarter. While shipment volumes decreased modestly compared to the prior year quarter, they remain supported by resilience in the Polish construction sector. The Central European market for long products continues to be challenged by ongoing incursions of imported material, which led to a $39 per ton reduction in steel product margin over scrap compared to the prior year period.
“We expect finished steel volumes for our North America and Europe operations to follow typical seasonal trends in the first fiscal quarter, with some negative impact in North America due to storms in the Texas and Gulf Coast markets,” said Ms. Smith. “Shipments of steel and downstream products in the near-term should be supported by our solid construction backlog. We anticipate margin headwinds in the first quarter within North America due to the recent rise in scrap costs mitigated, in part, by steel price increases that became effective during the quarter. The market for long products in Europe is expected to remain challenged due to elevated import levels. However, demand appears solid, driven by construction sector resilience, and rebounding Central European industrial production.”
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About Commercial Metals Company
Commercial Metals Company and its subsidiaries manufacture, recycle and fabricate steel and metal products, related materials and services through a network of facilities that includes seven electric arc furnace (“EAF”) mini mills, two EAF micro mills, two rerolling mills, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland.
Source: Commercial Metals Company