Cancel OK

CMC Reports Third Quarter Fiscal 2024 Results

General News
CMC - Logo

Third quarter net earnings of $119.4 million, or $1.02 per diluted share

Consolidated core EBITDA of $256.1 million; core EBITDA margin of 12.3%

Solid seasonal demand and underlying market fundamentals in North America supported healthy shipment volumes and product margins

Stable North American downstream backlog volumes due to robust pipeline of new construction projects

Emerging Businesses Group adjusted EBITDA and adjusted EBITDA margin rebounded sharply, reflecting continued strong demand for our high margin construction solutions

Europe Steel Group achieved near breakeven results, continuing the trend of improving performance despite a challenging market backdrop

Commercial Metals Company announced financial results for its fiscal third quarter ended May 31, 2024. Net earnings were $119.4 million, or $1.02 per diluted share, on net sales of $2.1 billion, compared to prior year period net earnings of $234.0 million, or $1.98 per diluted share, on net sales of $2.3 billion.

“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, “Our business continued to generate strong financial results during the third quarter, with core EBITDA, core EBITDA margin, cash flows, and net earnings all at levels well above long-term averages. Each of these metrics also improved sequentially as we benefited from a healthy start to the 2024 construction season and solid operational performance across our footprint. Fundamentals remain good within our North American markets, supporting stable to modestly improving steel product margins, healthy shipment levels, and steady downstream backlog volumes. Encouragingly, we are realizing the impact of infrastructure activity on the demand for CMC’s early phase construction solutions, and expect the magnitude of this impact to grow over the next several years.”

Mr. Matt added, “Performance in our Europe Steel Group approached breakeven on an adjusted EBITDA basis during the third quarter. Market conditions were largely stable compared to the prior quarter, though we achieved slight increases in finished steel pricing and product margins. Our focus is on continuing to improve the profitability of this business, which we believe should see benefits from an emerging inflection in the Polish macroeconomic environment, evidenced by meaningfully lower inflation, faster GDP growth, improved residential construction activity, and increased government sponsored investment. Adjusted EBITDA and adjusted EBITDA margin in our Emerging Businesses Group returned to expected levels during the quarter, benefiting from seasonal improvement in construction activity and strong demand for our proprietary geogrid and performance reinforcing steel solutions.”

“We continued to advance the ramp up of our state-of-the-art Arizona 2 (AZ2) plant, which is the first micro mill in the world capable of producing both rebar and merchant bar quality (MBQ) product. A combination of supply discipline and improved seasonal demand has moved rebar markets in the Western U.S. into much better balance. Moreover, we have continued to progress our MBQ commissioning. At full production capability, AZ2 is designed to produce nearly 200 individual merchant bar SKUs, in addition to a wide range of rebar sizes. In West Virginia, foundations are nearly complete at the site of our fourth micro mill, and we continue to anticipate an operational start-up in late calendar 2025. We believe these projects, together with our recent acquisitions, position us to take advantage of favorable long-term structural trends in construction activity, and are expected to drive strong future growth in earnings, cash flow, and shareholder value,” Matt concluded.

The Company’s balance sheet and liquidity position remained strong. As of May 31, 2024, cash and cash equivalents totaled $698.3 million, with available liquidity of nearly $1.5 billion. During the quarter, CMC repurchased 931,281 shares of common stock valued at $51.8 million in the aggregate. As of May 31, 2024, $458.6 million remained available under the current share repurchase authorization.

On June 19, 2024, the board of directors declared a quarterly dividend of $0.18 per share of CMC common stock payable to stockholders of record on July 1, 2024, representing an increase of approximately 13% on a year-over-year basis. The dividend to be paid on July 10, 2024, marks the 239th consecutive quarterly payment by the Company.

Business Segments – Fiscal Third Quarter 2024 Review

Despite historically high levels of rain, North American demand for CMC’s products was good during the quarter, showing a typical seasonal uplift from the winter months into spring. North America Steel Group finished steel shipments, which include steel products and downstream products, increased 12.3% on a sequential basis but were down modestly compared to the prior year period. Rebar supply and demand were in balance at quarter end as stronger seasonal consumption reduced pockets of excess inventory that had developed within certain regions following disruptive second quarter weather. The construction pipeline remained historically strong, with a large number of potential projects entering the market, as new contract awards continued at a seasonally appropriate pace. Consequently, downstream backlog volumes were generally stable compared to the prior quarter. Demand from industrial end markets, which is important for merchant products, was in-line with the prior year’s third quarter.

Adjusted EBITDA for the North America Steel Group decreased to $246.3 million in the third quarter of fiscal 2024 from $367.6 million in the prior year period. The earnings reduction was driven by lower margins over scrap costs on steel and downstream products, partially offset by improvements in controllable cost performance. During the quarter CMC incurred $11.8 million in costs, net of depreciation, related to the commissioning of its Arizona 2 micro mill, compared to costs of $7.3 million during the prior year period. The adjusted EBITDA margin for the North America Steel Group of 14.7% was consistent with the year-to-date average of 15.5%.

Europe market conditions in the third quarter were similar sequentially, maintaining the marked improvement that emerged during the second quarter compared to late fiscal 2023 and early fiscal 2024. Long-steel consumption remained substantially below historical levels, but better demand in certain end market applications, regional supply discipline, and lower inventories across the supply chain improved steel pricing stability. The Europe Steel Group reported an adjusted EBITDA loss of $4.2 million, continuing the trend of improved financial performance. On a sequential basis, financial results benefited from higher margins over scrap, increased shipment volumes, and lower controllable costs per ton. Europe Steel Group’s average selling price increased $8 per ton from the second quarter of fiscal 2024, while scrap costs decreased by $5 per ton, leading to a $13 per ton margin expansion.

Emerging Businesses Group third quarter net sales of $188.6 million were unchanged from the prior year period and up 20.9% on a sequential basis. Adjusted EBITDA for the segment of $38.2 million was similarly unchanged on a year-over-year basis and was more than double the second quarter level. Sequential improvement in net sales and adjusted EBITDA were driven by seasonally higher construction activity and robust project specific shipments of geogrid solutions and Performance Reinforcing Steel. Sales mix contributed positively to sequential adjusted EBITDA growth, with a greater percentage of geogrid volumes composed of CMC’s highest margin proprietary offering. Demand conditions in the North American markets remained strong during the quarter and CMC experienced good levels of order entry for delivery in future periods. Adjusted EBITDA margin of 20.3% was flat compared to the prior year period.


Mr. Matt said, “We expect consolidated financial results in our fiscal fourth quarter to be consistent with third quarter levels. Finished steel shipments within the North America Steel Group are anticipated to be flat on a sequential basis, while adjusted EBITDA margin should remain relatively stable. Adjusted EBITDA for our Europe Steel Group is likely to continue the quarter-to-quarter improvement trend despite market conditions that are expected to remain challenging. Financial results for the Emerging Businesses Group should improve modestly, driven by steady underlying market fundamentals and a healthy order book.”

Mr. Matt added, “The spring and summer construction season is off to a good start, and we are seeing encouraging signs of increased infrastructure activity driving demand. We expect this momentum to build over the coming quarters, contributing to an already healthy demand backdrop in North America, which is being propelled by positive long-term structural trends in manufacturing, reshoring, energy transition, and energy security-related projects. Additionally, an inflection in interest rates has the potential to unlock pent-up demand in several construction sectors, including residential markets where a significant shortage of housing units exists. In Europe, the Polish macroeconomic environment is showing signs of improvement. Lower inflation and higher rates of economic growth should begin to bolster sentiment in the country and provide greater confidence to build and invest.”

For full results click here.

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