CMC Reports Quarterly Earnings, Sees Continued Market Growth
10/31/2014 - As it reported its earnings for the quarter ended 31 August 2014, Commercial Metals Co. said that, while macroeconomic and geopolitical concerns remain, all indications suggest continued market growth in fiscal 2015.
Commercial Metals Co. announced financial results for its fourth quarter and year ended 31 August 2014. Net earnings attributable to CMC for the fourth quarter ended 31 August 2014 were US$34.9 million, or US$0.29 per diluted share, on net sales of US$1.9 billion. This compares to net earnings attributable to CMC of US$4.1 million, or US$0.03 per diluted share, on net sales of US$1.7 billion for the three months ended 31 August 2013. For the year ended 31 August 2014, net earnings attributable to CMC were US$115.6 million, or US$0.97 per diluted share, on net sales of US$7.0 billion. This compares to net earnings attributable to CMC of US$77.3 million, or US$0.66 per diluted share, on net sales of US$6.9 billion for the year ended 31 August 2013.
Results for the fourth quarter of fiscal 2014 included after-tax LIFO income from continuing operations of US$1.0 million (US$0.01 per diluted share), compared with after-tax LIFO income from continuing operations of US$10.3 million (US$0.09 per diluted share) for the fourth quarter of fiscal 2013. Adjusted operating profit from continuing operations was US$66.5 million for the fourth quarter of fiscal 2014, compared with adjusted operating profit from continuing operations of US$36.7 million for the fourth quarter of fiscal 2013. Adjusted operating profit for the fourth quarter of fiscal 2013 included asset impairment charges and a full valuation allowance of tax net operating losses related to our Australian operations of US$25.9 million. Adjusted EBITDA from continuing operations was US$102.4 million for the fourth quarter of fiscal 2014, compared with adjusted EBITDA from continuing operations of US$83.4 million for the fourth quarter of fiscal 2013.
Joe Alvarado, chairman of the Board, president, and CEO, commented, "We are pleased with the results of our fourth quarter of fiscal 2014. For the full year fiscal 2014, adjusted operating profit increased 18% over the prior period with modest topline growth of around 2%. During fiscal 2014, the U.S. economy showed positive signs of steady economic recovery. Non-residential construction spending was up 6% over the prior year, and the unemployment rate dropped 1% to an average of 6.6% for the twelve months ended 31 August 2014. Additionally, we continued to focus on improving and evaluating underperforming operations for their long-term viability. As a result of our on-going evaluations, in September 2014 we decided to exit our steel distribution business in Australia."
Business Segments - Fiscal Fourth Quarter 2014 Review
Our Americas Recycling segment recorded an adjusted operating loss of US$2.1 million for the fourth quarter of this fiscal year, compared with an adjusted operating loss of US$6.7 million in the prior year's fourth quarter. Ferrous and nonferrous shipments increased 2% and 6%, respectively, during the quarter, while average selling prices were stable when compared to the fourth quarter of fiscal 2013. This increase in net sales coupled with a 2% decrease in average material costs for both ferrous and nonferrous material resulted in the improvement in adjusted operating profit for the fourth quarter of fiscal 2014 compared to the fourth quarter of fiscal 2013.
Our Americas Mills segment recorded an adjusted operating profit of US$63.8 million for the fourth quarter of fiscal 2014, compared with an adjusted operating profit of US$58.4 million in the fourth quarter of fiscal 2013. The increase in adjusted operating profit for the fourth quarter of fiscal 2014 was due to a 12% increase in total shipments compared to the fourth quarter of fiscal 2013. This increase in total shipments was driven by a 9% increase in shipments of our higher margin finished products, including reinforcement bar ("rebar") and merchants, compared to the fourth quarter of fiscal 2013. In addition, compared to the fourth quarter of fiscal 2013, the average selling price of our finished products increased at a higher rate per short ton than the increase in our finished products' average material cost, resulting in a 5% improvement in average metal margin for the fourth quarter of fiscal 2014. The increase in shipments and improvement in average metal margin in the fourth quarter of fiscal 2014 were partially offset by a US$13.5 million unfavorable change in pre-tax LIFO, from pre-tax LIFO income of US$7.4 million in the fourth quarter of fiscal 2013 to pre-tax LIFO expense of US$6.1 million in the fourth quarter of fiscal 2014.
Our Americas Fabrication segment recorded an adjusted operating profit of US$8.1 million for the fourth quarter of fiscal 2014, compared with an adjusted operating profit of US$8.2 million in the fourth quarter of fiscal 2013. Total shipments in the fourth quarter of fiscal 2014 increased 17% compared to the fourth quarter of fiscal 2013; however, a US$5 per short ton decrease in average selling prices coupled with an increase in input cost resulted in an 8% decline in metal margin for the fourth quarter of fiscal 2014. This decline in metal margin in the fourth quarter of fiscal 2014 was partially offset by a US$3.1 million increase in pre-tax LIFO income, resulting in nearly flat adjusted operating profit compared to the fourth quarter of fiscal 2013. This segment entered fiscal 2015 with a stronger backlog when compared to one year ago.
Our International Mill segment recorded an adjusted operating profit of US$5.0 million for the fourth quarter of fiscal 2014, compared with an adjusted operating profit of US$8.0 million in the prior year's fourth quarter. Average selling prices increased US$14 per short ton and outpaced a 1% increase in average material cost; however, an 11% decrease in total shipments for the fourth quarter of fiscal 2014 drove the US$3.0 million decline in adjusted operating profit compared to the fourth quarter of fiscal 2013.
Our International Marketing and Distribution segment recorded an adjusted operating profit of US$13.2 million for the fourth quarter of fiscal 2014, compared with an adjusted operating loss of US$16.2 million in the prior year's fourth quarter. The US$29.4 million improvement in adjusted operating profit in the fourth quarter of fiscal 2014 was primarily the result of charges recorded in the fourth quarter of fiscal 2013 for goodwill and other asset impairments, as well as one-time exit costs to close unprofitable locations. Our marketing and distribution divisions headquartered in the United States reported improved results for the fourth quarter of fiscal 2014 when compared to the prior year's fourth quarter. However, our European trading division continued to suffer weakened results in response to the poor Eurozone market conditions.
Fiscal 2014 Full Year Review
Earnings from continuing operations for fiscal year 2014 were US$102.1 million, or US$0.86 per diluted share. For the year ended 31 August 2014, net cash flow from operating activities was US$136.9 million, and adjusted EBITDA from continuing operations was US$361.7 million. After-tax LIFO expense from continuing operations for fiscal 2014 was US$8.8 million (US$0.07 per diluted share), compared to after-tax LIFO income from continuing operations of US$34.4 million (US$0.29 per diluted share) in fiscal 2013. As of 31 August 2014, cash and short-term investments totaled US$434.9 million, an increase of 15% from the end of our 2013 fiscal year.
Earnings from discontinued operations for fiscal year 2014 were US$13.5 million, which primarily consisted of earnings related to the sale of our copper tube business in the first fiscal quarter of 2014.
Outlook
Alvarado concluded, "Heading into our fiscal year 2015, many of our key market indicators have shown strength in recent months. For example, the Architecture Billings Index (ABI) was 53.0 for the month of August, following 55.8 in July, which was the highest mark since 2007. The Eurozone economy is growing gradually, with rising construction activity. While macroeconomic and geopolitical concerns remain, all indications suggest continued market growth in fiscal 2015."
Results for the fourth quarter of fiscal 2014 included after-tax LIFO income from continuing operations of US$1.0 million (US$0.01 per diluted share), compared with after-tax LIFO income from continuing operations of US$10.3 million (US$0.09 per diluted share) for the fourth quarter of fiscal 2013. Adjusted operating profit from continuing operations was US$66.5 million for the fourth quarter of fiscal 2014, compared with adjusted operating profit from continuing operations of US$36.7 million for the fourth quarter of fiscal 2013. Adjusted operating profit for the fourth quarter of fiscal 2013 included asset impairment charges and a full valuation allowance of tax net operating losses related to our Australian operations of US$25.9 million. Adjusted EBITDA from continuing operations was US$102.4 million for the fourth quarter of fiscal 2014, compared with adjusted EBITDA from continuing operations of US$83.4 million for the fourth quarter of fiscal 2013.
Joe Alvarado, chairman of the Board, president, and CEO, commented, "We are pleased with the results of our fourth quarter of fiscal 2014. For the full year fiscal 2014, adjusted operating profit increased 18% over the prior period with modest topline growth of around 2%. During fiscal 2014, the U.S. economy showed positive signs of steady economic recovery. Non-residential construction spending was up 6% over the prior year, and the unemployment rate dropped 1% to an average of 6.6% for the twelve months ended 31 August 2014. Additionally, we continued to focus on improving and evaluating underperforming operations for their long-term viability. As a result of our on-going evaluations, in September 2014 we decided to exit our steel distribution business in Australia."
Business Segments - Fiscal Fourth Quarter 2014 Review
Our Americas Recycling segment recorded an adjusted operating loss of US$2.1 million for the fourth quarter of this fiscal year, compared with an adjusted operating loss of US$6.7 million in the prior year's fourth quarter. Ferrous and nonferrous shipments increased 2% and 6%, respectively, during the quarter, while average selling prices were stable when compared to the fourth quarter of fiscal 2013. This increase in net sales coupled with a 2% decrease in average material costs for both ferrous and nonferrous material resulted in the improvement in adjusted operating profit for the fourth quarter of fiscal 2014 compared to the fourth quarter of fiscal 2013.
Our Americas Mills segment recorded an adjusted operating profit of US$63.8 million for the fourth quarter of fiscal 2014, compared with an adjusted operating profit of US$58.4 million in the fourth quarter of fiscal 2013. The increase in adjusted operating profit for the fourth quarter of fiscal 2014 was due to a 12% increase in total shipments compared to the fourth quarter of fiscal 2013. This increase in total shipments was driven by a 9% increase in shipments of our higher margin finished products, including reinforcement bar ("rebar") and merchants, compared to the fourth quarter of fiscal 2013. In addition, compared to the fourth quarter of fiscal 2013, the average selling price of our finished products increased at a higher rate per short ton than the increase in our finished products' average material cost, resulting in a 5% improvement in average metal margin for the fourth quarter of fiscal 2014. The increase in shipments and improvement in average metal margin in the fourth quarter of fiscal 2014 were partially offset by a US$13.5 million unfavorable change in pre-tax LIFO, from pre-tax LIFO income of US$7.4 million in the fourth quarter of fiscal 2013 to pre-tax LIFO expense of US$6.1 million in the fourth quarter of fiscal 2014.
Our Americas Fabrication segment recorded an adjusted operating profit of US$8.1 million for the fourth quarter of fiscal 2014, compared with an adjusted operating profit of US$8.2 million in the fourth quarter of fiscal 2013. Total shipments in the fourth quarter of fiscal 2014 increased 17% compared to the fourth quarter of fiscal 2013; however, a US$5 per short ton decrease in average selling prices coupled with an increase in input cost resulted in an 8% decline in metal margin for the fourth quarter of fiscal 2014. This decline in metal margin in the fourth quarter of fiscal 2014 was partially offset by a US$3.1 million increase in pre-tax LIFO income, resulting in nearly flat adjusted operating profit compared to the fourth quarter of fiscal 2013. This segment entered fiscal 2015 with a stronger backlog when compared to one year ago.
Our International Mill segment recorded an adjusted operating profit of US$5.0 million for the fourth quarter of fiscal 2014, compared with an adjusted operating profit of US$8.0 million in the prior year's fourth quarter. Average selling prices increased US$14 per short ton and outpaced a 1% increase in average material cost; however, an 11% decrease in total shipments for the fourth quarter of fiscal 2014 drove the US$3.0 million decline in adjusted operating profit compared to the fourth quarter of fiscal 2013.
Our International Marketing and Distribution segment recorded an adjusted operating profit of US$13.2 million for the fourth quarter of fiscal 2014, compared with an adjusted operating loss of US$16.2 million in the prior year's fourth quarter. The US$29.4 million improvement in adjusted operating profit in the fourth quarter of fiscal 2014 was primarily the result of charges recorded in the fourth quarter of fiscal 2013 for goodwill and other asset impairments, as well as one-time exit costs to close unprofitable locations. Our marketing and distribution divisions headquartered in the United States reported improved results for the fourth quarter of fiscal 2014 when compared to the prior year's fourth quarter. However, our European trading division continued to suffer weakened results in response to the poor Eurozone market conditions.
Fiscal 2014 Full Year Review
Earnings from continuing operations for fiscal year 2014 were US$102.1 million, or US$0.86 per diluted share. For the year ended 31 August 2014, net cash flow from operating activities was US$136.9 million, and adjusted EBITDA from continuing operations was US$361.7 million. After-tax LIFO expense from continuing operations for fiscal 2014 was US$8.8 million (US$0.07 per diluted share), compared to after-tax LIFO income from continuing operations of US$34.4 million (US$0.29 per diluted share) in fiscal 2013. As of 31 August 2014, cash and short-term investments totaled US$434.9 million, an increase of 15% from the end of our 2013 fiscal year.
Earnings from discontinued operations for fiscal year 2014 were US$13.5 million, which primarily consisted of earnings related to the sale of our copper tube business in the first fiscal quarter of 2014.
Outlook
Alvarado concluded, "Heading into our fiscal year 2015, many of our key market indicators have shown strength in recent months. For example, the Architecture Billings Index (ABI) was 53.0 for the month of August, following 55.8 in July, which was the highest mark since 2007. The Eurozone economy is growing gradually, with rising construction activity. While macroeconomic and geopolitical concerns remain, all indications suggest continued market growth in fiscal 2015."
