CMC Reports 4th Quarter, Year-End Results
11/01/2010 - Commercial Metals Co. reported net earnings of $8.0 million on net sales of $1.8 billion for the fourth quarter and a net loss of $205.3 million on net sales of $6.3 billion for the year ended August 31, 2010.
Commercial Metals Co. reported net earnings of $8.0 million on net sales of $1.8 billion for the fourth quarter and a net loss of $205.3 million on net sales of $6.3 billion for the year ended August 31, 2010.
Fourth Quarter Results — The $8.0 million net earnings ($0.07 per diluted share) compares with net earnings of $7.2 million ($0.06 per diluted share) for the fourth quarter last year, while net sales of $1.8 billion compares with net sales of $1.4 billion for the year-ago fourth quarter.
Results included $23.4 million ($0.20 per share) of after-tax LIFO income compared with $24.4 million ($0.21 per share) of after-tax LIFO income in last year's fourth quarter. At quarter end, LIFO reserve totaled $230.3 million.
Full Year Results — The net loss of $205.3 million ($1.81 per diluted share) compares to net earnings of $20.8 million ($0.18 per diluted share) for the same period last year, while net sales of $6.3 billion compare to net sales of $6.4 billion for the previous year.
Results included after-tax LIFO income of $7.4 million ($0.07 per diluted share), which compares with after-tax LIFO income of $208.4 million ($1.83 per diluted share) last year.
Management Comments — "An expected seasonal uptick did lift operations in our fourth quarter, but it was absent of indicators of a sustainable economic recovery in the United States,” said CMC Chairman, President and CEO Murray R. McClean. “Major European economies, led by Germany, had more encouraging results. China was at an extreme, attempting to slow down booming growth. Ferrous scrap and finished goods pricing fell through the period, but netted overall higher metal margins; pricing movement was driven by international demand. Our geographic diversification and lower cost structure allowed four of our five segments to be profitable – Americas Fabrication continues to face difficult markets."
Americas Mills Segment — Regarding the company’s Americas Mills Segment, McClean said, "On the strength of higher sales prices, metal margins increased for the fourth consecutive quarter. For the first time this fiscal year, metal margins were higher than the comparable quarter last year. Excluding our new micromill in Arizona, volumes shipped were slightly ahead of last year's quarter. Public works continues to be the major end-use market. Our mills ran at 63% of capacity during the quarter.
"Our steel mills had an adjusted operating profit of $39.5 million compared to an adjusted operating profit of $28.0 million in the same quarter last year,” continued McClean. The quarter had pre-tax LIFO income of $8.8 million compared to pre-tax LIFO expense of $5.3 million in last year's quarter.”
The segment’s quarterly metal margin was $344 per ton, up from the previous quarter's margin of $303 per ton, and ahead of last year's fourth quarter of $302 per ton. The price of ferrous scrap consumed at the mills increased $31 per ton compared to last year, but the increase was mitigated by a $73/ton increase in average selling prices. Sales volumes were 549,000 tons (including CMC Steel Arizona) of which 65,000 tons were billets vs. 42,000 tons of billets sold in the year-ago fourth quarter.
“Comparing fourth quarter to fourth quarter between years, tonnage melted (including CMC Steel Arizona) was up 14% to 533 thousand tons and tonnage rolled increased 7% to 457 thousand tons," said McClean.
“Our micromill, CMC Steel Arizona, completed its first year of operations by melting, rolling, and shipping over 56 thousand tons during the quarter,” continued McClean. “For the fiscal year, our micromill melted 160 thousand tons, rolled 153 thousand tons and shipped 142 thousand tons. Our copper tube mill reported adjusted operating loss of $2.2 million (pre-tax LIFO income of $1.8 million) compared to $1.5 million adjusted operating profit (pre-tax LIFO expense of $3.4 million) in last year's fourth quarter.”
International Mills Segment — Regarding the company’s International Mills Segment, McClean said, "Safety remains paramount. Our mill in Poland achieved a significant milestone. For the second time CMCZ recorded over one million man hours without a recordable injury.
“Our International Mills segment broke into profitability for the first quarter in over two years as pricing trends strengthened in Poland and our mill in Croatia entered the final phase of its capital expenditure program,” continued McClean. He noted that metal margins were significantly higher in Poland vs. both the previous quarter and the year-ago fourth quarter. “Poland's GDP continued to grow at plus 3% and was positively affected by Germany's stronger economic results. CMC Croatia set records for production of blooms and pipes in August."
“CMC Zawiercie had adjusted operating income of $17.3 million compared to a loss of $4.1 million in the fourth quarter of last year,” McClean continued.
The International Mills segment’s shipments totaled 387,000 tons in the fourth quarter (including 66,000 tons of billets) compared to 398,000 tons (129,000 tons of billets) in the year-ago fourth quarter. Tons melted, 382,000 tons, compare to 412,000 tons in the year-ago quarter, and tons rolled were 310,000 tons compared to 281,000 tons last year.
Average selling prices for the segment increased 37% to PLN 1,584 per ton, which compares to PLN 1,157 per ton for the same period last year, while the cost of scrap entering production increased 32%. The average metal margin per ton increased to PLN 653 from PLN 481 in the previous quarter and PLN 451 in the year-ago fourth quarter. The company also commissioned the finishing end of its new flexible rolling mill.
“Though continuing a string of disappointing results, CMC Croatia's adjusted operating loss of $6.4 million for the quarter was, nonetheless, the lowest sustained this year,” added McClean. “During the quarter we melted 34 thousand tons (almost double our previous best), rolled 19 thousand tons, and shipped 20 thousand tons, a record.”
Outlook — "There is no clear catalyst for market improvement,” McClean concluded. “Overall market conditions prevailing in our fiscal 2010 fourth quarter continue into the first quarter of fiscal 2011, but we anticipate that some seasonal weakness will set in by the end of the quarter. Ferrous scrap prices should trend marginally higher; nonferrous pricing remains strong. Rebar pricing should remain relatively stable; metal margins may trend slightly lower.
“Volumes and margins in Poland should be fairly constant,” added McClean. “We are performing major maintenance in Croatia and, when combined with start-up costs of our new ladle metallurgical station, this will result in a loss. In summary, we anticipate the first quarter to be breakeven absent any consideration for LIFO.”
Commercial Metals Co. and subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel minimills, steel fabrication and processing plants, construction-related product warehouses, a copper tube mill, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.
