Commercial Metals Company Reports Record Third Quarter Fiscal 2021 Results
Commercial Metals Company announced financial results for its fiscal third quarter ended May 31, 2021. Earnings from continuing operations were $130.4 million, or $1.07 per diluted share, on net sales of $1.8 billion, compared to prior year earnings from continuing operations of $64.2 million, or $0.53 per diluted share, on net sales of $1.3 billion.
During the third quarter of fiscal 2021, the Company recorded a net after-tax benefit of $3.3 million, chiefly related to the sale of a small railway track reclamation business. Excluding this item, third quarter adjusted earnings from continuing operations were $127.1 million, or $1.04 per diluted share, compared to adjusted earnings from continuing operations of $70.4 million, or $0.59 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, commented, “CMC achieved exceptional results during the third quarter. Demand for our products was robust and our teams executed well, setting new production and shipment records at several of our facilities. We continued to tightly manage the operating factors within our control, and again reduced year-over-year production costs per ton. Our excellent third quarter performance is a testament to the operational flexibility and earnings power of the new, strategically transformed CMC, and I could not be more proud of our many accomplishments.”
Ms. Smith continued, “CMC set several operational and financial performance records at the segment as well as consolidated level, and we further enhanced our balance sheet and leverage positions, which are now the most attractive in CMC’s history. We are also continuing to build for the future: We made significant progress on key organic growth initiatives, including hot commissioning of our third rolling mill in Poland, the receipt of the air permit for our Arizona 2 mill, and the continuation of network optimization efforts. Future contributions from these key projects are expected to provide the next chapter of growth for our company, building on this quarter’s outstanding results.”
The Company’s liquidity position as of May 31, 2021 remained solid, with cash and cash equivalents of $443.1 million, and availability of $639.0 million under the Company’s credit and accounts receivable facilities.
On June 16, 2021, the board of directors declared a quarterly dividend of $0.12 per share of CMC common stock payable to stockholders of record on June 30, 2021. The dividend will be paid on July 14, 2021, and marks 227 consecutive quarterly dividend payments by the Company.
Business Segments – Fiscal Third Quarter 2021 Review
The North America segment generated record adjusted EBITDA of $207.3 million for the third quarter of fiscal 2021, an increase of 30% compared to $159.4 million in the prior year period. This improvement was driven by growth in demand and increased margins across multiple products lines, as well as solid management of controllable costs within our vertically integrated value chain. Costs were reduced by continued execution of CMC’s network optimization activities.
Shipment volumes of finished steel, which include steel products and downstream products, increased by 9% from the prior year third quarter. Demand for rebar from the mills remained good, growing year-over-year, supported by resilient construction activity. Shipments of merchant and other products increased by 37% from the prior year, driven by the broad reopening of the U.S. economy.
Margins over scrap cost on steel products increased $40 per ton from the prior year period, marking the first year-over-year increase in six quarters. On a sequential basis these margins rose $74 per ton. Market conditions were favorable for each of CMC’s key products, leading to mill volume growth of 17% and an increase of $170 per ton in average selling price compared to the third quarter of fiscal 2020. Margin over scrap cost on downstream products declined compared to a year ago, driven by higher scrap input costs and average pricing that was largely unchanged. Future pricing indicators for backlog were positive during the quarter, as average price levels for bids and new awards increased from the prior year quarter.
The Europe segment reported record adjusted EBITDA of $50.0 million for the third quarter of fiscal 2021, up 250% compared to adjusted EBITDA of $14.3 million for the prior year quarter. The improvement was driven by a significant expansion in margin over scrap as well as volume growth, as demand for steel products from both construction and industrial end markets remained strong during the quarter. Resilient construction activity supported a 16% increase in rebar shipments compared to a year ago, while the continuing manufacturing recovery in Poland and Central Europe drove 4% growth in volumes of merchant and other. Average selling price increased by $227 per ton compared to the prior year quarter, and $132 per ton sequentially.
Ms. Smith said, “Strong demand across multiple end-use markets should support robust shipment levels of finished steel during the fourth quarter in both North America and Europe. Construction activity is strong and the industrial sectors are growing in both the U.S. and Central Europe, as both regions continue to recover from the pandemic. We expect margins over scrap on steel products in North America and Europe to be relatively flat or up modestly from third quarter levels.”
“Increased willingness of downstream customers in our North America segment to contract new work and the stability of our construction backlog both point to continued demand strength. This view is supported by several widely monitored construction indicators that generally lead activity by nine to twelve months, which have improved significantly in 2021,” 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, related materials and services
through a network of facilities that includes seven electric arc furnace (“EAF”) mini mills, two EAF micro mills, a rerolling mill, steel fabrication and
processing plants, construction-related product warehouses, and metal recycling facilities in the U.S. and Poland.
Source: Commercial Metals Company