Commercial Metals Company Reports First Quarter Fiscal 2021 Results
Commercial Metals Company (“CMC” or the “Company”) announced financial results for its fiscal first quarter ended November 30, 2020. First quarter earnings from continuing operations were $63.9 million, or $0.53 per diluted share, on net sales of $1.4 billion, compared to prior year period earnings from continuing operations of $82.8 million, or $0.69 per diluted share, on net sales of $1.4 billion.
During the first quarter of fiscal 2021, CMC incurred net after-tax charges of $5.9 million for facility closure expenses and asset impairments primarily related to the decommissioning of the Company’s Steel California operations. The closure of these operations furthers CMC’s ongoing network optimization efforts, and is expected to provide cost benefits in future periods. Excluding these expenses, adjusted earnings from continuing operations for the three months ended November 30, 2020 were $69.8 million, or $0.58 per diluted share, as detailed in the non-GAAP reconciliation that follows, compared to adjusted earnings from continuing operations of $0.73 per diluted share for the three months ended November 30, 2019.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, “CMC delivered another quarter of solid performance, marking the seventh consecutive quarter of Core EBITDA near or above the $150 million mark. Our team achieved these strong results while navigating the unique challenges presented by the COVID-19 pandemic, and also continuing to execute CMC’s key strategic growth initiatives, which are already yielding significant benefits.”
Ms. Smith continued, “While we faced margin headwinds from rising raw material costs during the first quarter, we were able to offset much of the impact through operational execution that brought our controllable cost levels to multi-year lows. This performance is a testament to CMC’s drive to tightly manage factors within our control and to continue to realize earnings enhancement opportunities from our network optimization efforts.”
The Company’s liquidity position as of November 30, 2020 remained strong, with cash and cash equivalents of $465.2 million and availability under the Company’s credit and accounts receivable facilities of $678.7 million.
On January 7, 2021, the board of directors of CMC declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on January 21, 2021. The dividend will be paid on February 4, 2021, and marks 225 consecutive quarterly dividend payments.
Business Segments – Fiscal First Quarter 2021 Review
Our North America segment recorded adjusted EBITDA of $155.6 million for the first quarter of fiscal 2021, compared to adjusted EBITDA of $174.7 million for the prior year quarter. The reduction reflected lower margins over scrap cost for both steel and downstream products, the impact of which was partially offset by improved controllable costs at each stage of our vertically integrated value chain. Cost performance at the mills was particularly strong, achieving the lowest conversion cost per ton since before the early fiscal 2019 rebar asset acquisition.
Shipments of finished goods, which include steel and downstream products, were flat compared to the prior year. Volumes of rebar from the mills increased 2% from a year ago, driven by continued resilience in construction activity. Shipments of merchant and other products increased 12% compared to the prior year quarter, as our mills strategically focused on this market segment through expanded product offerings and service capabilities. Downstream product volumes declined year-over-year due to backlog contraction in select geographies, as well as weather related disruptions in the Gulf Coast.
Margins over scrap cost within our vertical chain declined from the first quarter of fiscal 2020, driven primarily by sharply higher scrap costs. The average selling price for steel products decreased by $14 per ton from a year ago against an increase in the cost of ferrous scrap utilized of $40 per ton. Downstream products margins also declined on lower average pricing and scrap cost pressure, but remained near historically high levels due to strong price levels in CMC’s committed backlog.
Our Europe segment recorded adjusted EBITDA of $14.5 million for the first quarter of fiscal 2021, compared to adjusted EBITDA of $11.4 million for the prior year quarter. The improvement reflects strong shipment levels and reduced controllable costs. These factors more than offset an $18 per ton reduction in margin over scrap compared to the prior year period. Volumes increased 17% year-over-year, with demand growing for each major product category. Rebar volumes continue to be supported by a resilient Polish construction sector, while shipments of merchant bar and wire rod benefited from an upturn in Central European manufacturing activity.
“We expect finished steel volumes for our North America and Europe operations to follow typical seasonal trends in the second quarter, which is historically our slowest quarter for both segments,” said Ms. Smith.
“Shipments of steel and downstream products should be supported by our construction backlog in North America. We are encouraged by recent trends in residential construction and industrial activity in both North America and Europe, which point toward continuing solid demand for merchant products. We anticipate margin headwinds will persist in North America during the second quarter in light of recent significant increases in domestic scrap costs. CMC has acted swiftly to commensurately adjust price levels on rebar and merchant mill products, but these increases have a timing lag relative to the changes in scrap cost levels.”
For the full results, click here.
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 including 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