CMC Reports Results, Provides Outlook for Current Quarter
01/07/2014 - Commercial Metals Co. announced financial results for its first quarter ended 30 November 2013 and provided an outlook for the seasonally-slower current quarter.
Net earnings for the first quarter were US$45.9 million, or US$0.39 per diluted share, on net sales of US$1.7 billion. This compares to net earnings of US$49.7 million, or US$0.42 per diluted share, on net sales of US$1.7 billion for the three months ended 30 November 2012.
Results for the first quarter of fiscal 2014 included an after-tax gain of US$15.5 million (US$0.13 per diluted share) associated with the sale of the company's wholly owned copper tube manufacturing operation, Howell Metal Co. Results for the first quarter of fiscal 2013 included an after-tax gain of US$17.0 million (US$0.14 per diluted share) associated with the sale of the company's 11% ownership investment in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. Net earnings for this year's first quarter included after-tax LIFO expense of US$2.8 million (US$0.02 per diluted share), compared with after-tax LIFO income of US$15.2 million (US$0.13 per diluted share) for the first quarter of fiscal 2013, an unfavorable change of US$18.0 million (US$0.15 per diluted share). Adjusted operating profit was US$90.0 million for the first quarter of fiscal 2014, compared with adjusted operating profit of US$90.6 million for the prior year's first quarter and US$37.1 million for the sequential quarter. Adjusted EBITDA was US$124.3 million for the first quarter of fiscal 2014, compared with adjusted EBITDA of US$126.2 million for the prior year's first quarter and US$84.5 million for the sequential quarter.
The company's financial position at 30 November 2013 remained strong with cash and cash equivalents of US$515.5 million and total liquidity of US$1.2 billion, compared with cash and cash equivalents of US$378.8 million and total liquidity of US$1.1 billion at 31 August 2013.
Joe Alvarado, chairman of the board, president, and CEO, commented, "Our results for the first quarter of US$0.39 per diluted share are a significant improvement over the fourth quarter ended 31 August 2013 of US$0.03 per diluted share. In addition, all five of our reporting segments were profitable and we continue to see improvement in the results of our International Mill segment. The sale of Howell Metal Co. demonstrates our continued focus on core competencies and strengthens our balance sheet."
First Quarter Fiscal 2014 versus First Quarter Fiscal 2013
The Americas Recycling segment recorded adjusted operating profit of US$0.8 million for the first quarter of this fiscal year, compared with adjusted operating profit of US$4.5 million in the prior year's first quarter. This segment's results were impacted by a US$4.9 million unfavorable change in pre-tax LIFO, from LIFO income of US$2.4 million in the first quarter of fiscal 2013 to LIFO expense of US$2.5 million in the first quarter of fiscal 2014. Although ferrous selling prices increased 1% to US$326 per ton during the first quarter of fiscal 2014, metal margins declined 7% and nonferrous selling prices and metal margins declined in the current quarter compared to the same quarter in fiscal 2013. Lower shipments and metal margins in the first quarter of fiscal 2014 were offset by a gain on sale of real estate and facility relocation reimbursements. Furthermore, on a sequential quarter basis, for both ferrous and nonferrous shipments, selling prices and metal margins improved.
The Americas Mills segment recorded adjusted operating profit of US$65.8 million for this year's first quarter, a significant improvement over the prior year's first quarter adjusted operating profit of US$51.6 million. Shipments of this segment's higher margin products, such as merchant and rebar, increased, while shipments of lower margin billets declined when compared to the first quarter of fiscal 2013. Furthermore, in the first quarter of fiscal 2013, we incurred approximately US$5.5 million of expenses associated with an outage at our South Carolina melt shop for the successful installation of a new electric arc furnace and related equipment.
The Americas Fabrication segment recorded adjusted operating profit of US$2.2 million for this year's first quarter, compared with adjusted operating profit of US$10.2 million for the prior year's first quarter. The decline in profitability is due to a US$9.0 million unfavorable change in pre-tax LIFO, from LIFO income of US$7.2 million in the first quarter of fiscal 2013 to LIFO expense in the first quarter of fiscal 2014 of US$1.8 million. Compared to the same quarter in the prior year, this segment noted improvements in its key commercial and operating metrics, including tons bid, tons booked and tons shipped as well as a slight increase in the backlog.
The International Mill segment recorded adjusted operating profit of US$15.3 million for this year's first quarter, compared with adjusted operating profit of US$0.9 million for the prior year's first quarter. Volumes increased 4% and metal margin increased nearly 12% for the quarter ended 30 November 2013 when compared to the same period a year ago. A modest improvement in the Polish and surrounding markets as well as the shift to higher margin merchant products contributed to the improved operating results. Volumes for this segment's merchant products increased by approximately forty-two thousand tons when compared to the prior year's first quarter.
The International Marketing and Distribution segment recorded adjusted operating profit of US$0.5 million for this year's first quarter, compared with adjusted operating profit of US$40.2 million for the prior year's first quarter. The decline in adjusted operating profit over the first quarter of fiscal 2013 is the result of a US$10.7 million unfavorable change in pre-tax LIFO, from LIFO income of US$8.8 million in the first quarter of fiscal 2013 to LIFO expense of US$1.9 million for the first quarter of fiscal 2014. Furthermore, results for the first quarter of fiscal 2013 included a pre-tax gain of US$26.1 million associated with the sale of the company's 11% ownership investment in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. Within this segment, our U.S.-based trading divisions posted solid results, offset by weakness in our European and Australian trading and distribution groups.
Outlook
Alvarado concluded, "We anticipate our second fiscal quarter to be seasonally slower as a result of holiday slowdowns and winter weather conditions, which reduce construction activities. However, many of the economic indicators we highlighted in our prior earnings release for the fiscal fourth quarter of 2013 remain encouraging. The Architecture Billings Index (ABI) in general is strong despite a dip to 49.8 for November 2013. Likewise, month over month U.S. GDP figures were revised upward for the third calendar quarter and total U.S. construction spending increased 0.8% in October 2013, driven mostly by non-residential construction. Economies in Australia and Europe showed modest improvements during the first quarter of fiscal 2014, but many projects have not yet translated to higher steel shipments. Similar to prior years, we will take advantage of the expected slower business activity during our second fiscal quarter to take planned outages for maintenance and to upgrade equipment."
Results for the first quarter of fiscal 2014 included an after-tax gain of US$15.5 million (US$0.13 per diluted share) associated with the sale of the company's wholly owned copper tube manufacturing operation, Howell Metal Co. Results for the first quarter of fiscal 2013 included an after-tax gain of US$17.0 million (US$0.14 per diluted share) associated with the sale of the company's 11% ownership investment in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. Net earnings for this year's first quarter included after-tax LIFO expense of US$2.8 million (US$0.02 per diluted share), compared with after-tax LIFO income of US$15.2 million (US$0.13 per diluted share) for the first quarter of fiscal 2013, an unfavorable change of US$18.0 million (US$0.15 per diluted share). Adjusted operating profit was US$90.0 million for the first quarter of fiscal 2014, compared with adjusted operating profit of US$90.6 million for the prior year's first quarter and US$37.1 million for the sequential quarter. Adjusted EBITDA was US$124.3 million for the first quarter of fiscal 2014, compared with adjusted EBITDA of US$126.2 million for the prior year's first quarter and US$84.5 million for the sequential quarter.
The company's financial position at 30 November 2013 remained strong with cash and cash equivalents of US$515.5 million and total liquidity of US$1.2 billion, compared with cash and cash equivalents of US$378.8 million and total liquidity of US$1.1 billion at 31 August 2013.
Joe Alvarado, chairman of the board, president, and CEO, commented, "Our results for the first quarter of US$0.39 per diluted share are a significant improvement over the fourth quarter ended 31 August 2013 of US$0.03 per diluted share. In addition, all five of our reporting segments were profitable and we continue to see improvement in the results of our International Mill segment. The sale of Howell Metal Co. demonstrates our continued focus on core competencies and strengthens our balance sheet."
First Quarter Fiscal 2014 versus First Quarter Fiscal 2013
The Americas Recycling segment recorded adjusted operating profit of US$0.8 million for the first quarter of this fiscal year, compared with adjusted operating profit of US$4.5 million in the prior year's first quarter. This segment's results were impacted by a US$4.9 million unfavorable change in pre-tax LIFO, from LIFO income of US$2.4 million in the first quarter of fiscal 2013 to LIFO expense of US$2.5 million in the first quarter of fiscal 2014. Although ferrous selling prices increased 1% to US$326 per ton during the first quarter of fiscal 2014, metal margins declined 7% and nonferrous selling prices and metal margins declined in the current quarter compared to the same quarter in fiscal 2013. Lower shipments and metal margins in the first quarter of fiscal 2014 were offset by a gain on sale of real estate and facility relocation reimbursements. Furthermore, on a sequential quarter basis, for both ferrous and nonferrous shipments, selling prices and metal margins improved.
The Americas Mills segment recorded adjusted operating profit of US$65.8 million for this year's first quarter, a significant improvement over the prior year's first quarter adjusted operating profit of US$51.6 million. Shipments of this segment's higher margin products, such as merchant and rebar, increased, while shipments of lower margin billets declined when compared to the first quarter of fiscal 2013. Furthermore, in the first quarter of fiscal 2013, we incurred approximately US$5.5 million of expenses associated with an outage at our South Carolina melt shop for the successful installation of a new electric arc furnace and related equipment.
The Americas Fabrication segment recorded adjusted operating profit of US$2.2 million for this year's first quarter, compared with adjusted operating profit of US$10.2 million for the prior year's first quarter. The decline in profitability is due to a US$9.0 million unfavorable change in pre-tax LIFO, from LIFO income of US$7.2 million in the first quarter of fiscal 2013 to LIFO expense in the first quarter of fiscal 2014 of US$1.8 million. Compared to the same quarter in the prior year, this segment noted improvements in its key commercial and operating metrics, including tons bid, tons booked and tons shipped as well as a slight increase in the backlog.
The International Mill segment recorded adjusted operating profit of US$15.3 million for this year's first quarter, compared with adjusted operating profit of US$0.9 million for the prior year's first quarter. Volumes increased 4% and metal margin increased nearly 12% for the quarter ended 30 November 2013 when compared to the same period a year ago. A modest improvement in the Polish and surrounding markets as well as the shift to higher margin merchant products contributed to the improved operating results. Volumes for this segment's merchant products increased by approximately forty-two thousand tons when compared to the prior year's first quarter.
The International Marketing and Distribution segment recorded adjusted operating profit of US$0.5 million for this year's first quarter, compared with adjusted operating profit of US$40.2 million for the prior year's first quarter. The decline in adjusted operating profit over the first quarter of fiscal 2013 is the result of a US$10.7 million unfavorable change in pre-tax LIFO, from LIFO income of US$8.8 million in the first quarter of fiscal 2013 to LIFO expense of US$1.9 million for the first quarter of fiscal 2014. Furthermore, results for the first quarter of fiscal 2013 included a pre-tax gain of US$26.1 million associated with the sale of the company's 11% ownership investment in Trinecke Zelezarny, a.s., a Czech Republic joint-stock company. Within this segment, our U.S.-based trading divisions posted solid results, offset by weakness in our European and Australian trading and distribution groups.
Outlook
Alvarado concluded, "We anticipate our second fiscal quarter to be seasonally slower as a result of holiday slowdowns and winter weather conditions, which reduce construction activities. However, many of the economic indicators we highlighted in our prior earnings release for the fiscal fourth quarter of 2013 remain encouraging. The Architecture Billings Index (ABI) in general is strong despite a dip to 49.8 for November 2013. Likewise, month over month U.S. GDP figures were revised upward for the third calendar quarter and total U.S. construction spending increased 0.8% in October 2013, driven mostly by non-residential construction. Economies in Australia and Europe showed modest improvements during the first quarter of fiscal 2014, but many projects have not yet translated to higher steel shipments. Similar to prior years, we will take advantage of the expected slower business activity during our second fiscal quarter to take planned outages for maintenance and to upgrade equipment."
