Commercial Metals Company Reports Second Quarter Fiscal 2021 Results
– Second quarter Earnings from Continuing Operations of $66.2 million, or $0.54 per diluted share
– Adjusted Earnings from Continuing Operations of $79.8 million, or $0.66 per diluted share
– Core EBITDA of $171.1 million, a second quarter record, up 18% year-over-year and 9% sequentially
– Continued strong controllable cost performance
– Achieved stable steel products metal margins despite a rapidly rising scrap cost environment
Commercial Metals Company (“CMC”) announced financial results for its fiscal second quarter ended February 28, 2021. Earnings from continuing operations were $66.2 million, or $0.54 per diluted share, on net sales of $1.5 billion, compared to prior year earnings from continuing operations of $63.6 million, or $0.53 per diluted share, on net sales of $1.3 billion.
During the second quarter of fiscal 2021, the Company incurred $13.5 million in net after-tax charges, chiefly from the previously announced refinancing of long-term debt as well as closure costs associated with the final decommissioning of CMC’s Steel California operations, partially offset by a gain on the sale of certain facilities. Excluding these items, second quarter adjusted earnings from continuing operations were $79.8 million, or $0.66 per diluted share, compared to adjusted earnings from continuing operations of $63.6 million, or $0.53 per diluted share, in the prior year period. Details can be found in the non-GAAP reconciliation that follows.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, commented, “I am extremely proud of our team’s continued hard work, which resulted in outstanding financial results highlighted by record second quarter Core EBITDA. This was achieved amidst a challenging environment of rising scrap costs and weather-related disruptions, demonstrating both the value of CMC’s vertically integrated structure and the agility of our commercial, operational, and support teams.”
Ms. Smith continued, “CMC’s second quarter results also highlight the benefits of managing the operating factors that are within our control, including leveraging opportunities to improve efficiency throughout our organization. From this solid foundation, CMC will further enhance our earnings capability in the coming quarters, as we continue to capitalize on benefits from ongoing network optimization efforts and ramp up our third rolling line in Poland this summer.”
The Company’s liquidity position as of February 28, 2021 remained strong, with cash and cash equivalents of $367.3 million and availability under the Company’s credit and accounts receivable facilities of $693.0 million.
On March 17, 2021, the board of directors declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on March 31, 2021. The dividend will be paid on April 14, 2021, and marks 226 consecutive quarterly dividend payments by the Company.
Business Segments – Fiscal Second Quarter 2021 Review
The North America segment generated adjusted EBITDA of $171.6 million for the second quarter of fiscal 2021, an increase of 12% compared to $152.8 million in the prior year period. This improvement reflects solid management of controllable costs at each stage of our vertically integrated value chain. Cost performance at the mills was particularly strong, driven by network efficiencies and lower costs for consumables. Earnings also benefited from expanded margins on sales of raw materials, as well as the impact of selling lower cost inventory within an environment of rising prices for steel products.
Shipment volumes of finished steel, which include steel products and downstream products, increased by 2% from the prior year quarter. Demand for rebar from the mills remained strong, growing year-over-year, supported by resilient construction activity. Single family residential construction within CMC’s core geographies has increased significantly over the last year, which has opened additional selling opportunities for the Company, and is a positive indicator of future infrastructure and non-residential spending in these areas. Shipments of merchant and other products increased by 13% from a year ago, driven by rising industrial activity and the construction of warehouses and metal buildings. Downstream products volumes declined 6% year-over-year due to a modest backlog contraction and weather-related job site disruptions in several regional markets.
Margins over scrap cost within the vertical chain declined from the second quarter of fiscal 2020, with compression in both steel products and downstream products. Average selling price for steel products increased $70 per ton year-over-year, which was more than offset by higher scrap costs. Steel products margins improved sequentially throughout the second quarter, and exited February at the highest level in nearly a year. Margin over scrap cost on downstream products declined compared to a year ago, driven by higher input costs and modestly lower pricing in CMC’s committed backlog, which led to lower average selling prices.
The Europe segment reported adjusted EBITDA of $16.1 million for the second quarter of fiscal 2021, up 20% compared to adjusted EBITDA of $13.5 million for the prior year quarter. The improvement was driven by a modest expansion in margin over scrap, as well as the impact of selling lower cost inventory within an environment of rising prices for steel products. Demand for steel products from both construction and industrial end markets remained healthy during the quarter. However, shipments declined by 7% year-over-year, due largely to the unusually high volumes that shipped during the second quarter of fiscal 2020. During the quarter, we shifted product mix to capitalize on opportunities with customers of merchant and other products. The reduction in rebar shipments from a year ago reflects the operations commercial agility, rather than any softening of market conditions.
“We expect finished steel volumes in both North America and Europe to follow typical seasonal trends during the third quarter, which is historically strong given the start of the spring and summer construction seasons,” said Ms. Smith.
“Shipments of steel and downstream products in North America should be supported by our construction backlog, with steel products also benefiting from elevated residential construction spending, continued manufacturing recovery, and anticipated strong highway infrastructure activity. Volumes in Europe are anticipated to remain healthy, driven by growing demand from construction and industrial end markets. We expect margins over scrap on steel products in both North America and Europe to increase sequentially following the realization of price adjustments made throughout the second quarter.”
For the full second quarter 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