CMC Reports Strong Results
01/06/2015 - Commercial Metals Co. (CMC) announced financial results for its first quarter ended 30 November 2014.
Net earnings attributable to CMC for the first quarter ended 30 November 2014 were US$36.3 million, or US$0.30 per diluted share, on net sales of US$1.7 billion. This compares to net earnings attributable to CMC of US$45.9 million, or US$0.39 per diluted share, on net sales ofUS$1.6 billion for the three months ended 30 November 2013. 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.
During the first quarter of fiscal 2015, the company decided to exit and sell its steel distribution business in Australia. As a result, this business has been presented as a discontinued operation for all periods presented.
Earnings from continuing operations were US$38.3 million (US$0.32 per diluted share) for the first quarter of fiscal 2015, compared with earnings from continuing operations of US$33.7 million(US$0.29 per diluted share) for the first quarter of fiscal 2014.
Results for the first quarter of fiscal 2015 included after-tax LIFO income from continuing operations of US$4.0 million (US$0.03 per diluted share), compared with after-tax LIFO expense from continuing operations of US$2.8 million (US$0.02 per diluted share) for the first quarter of fiscal 2014. Adjusted operating profit from continuing operations was US$73.3 million for the first quarter of fiscal 2015, compared with adjusted operating profit from continuing operations of US$68.7 million for the first quarter of fiscal 2014 and US$68.8 million for the fourth quarter of fiscal 2014, an improvement over both comparative quarterly periods. Adjusted EBITDA from continuing operations was US$106.4 million for the first quarter of fiscal 2015, compared with adjusted EBITDA from continuing operations of US$102.3 million for the first quarter of fiscal 2014.
The company's financial position at 30 November 2014 remained strong with cash and cash equivalents of US$326.1 million and approximately US$1.0 billion in total liquidity. As part of our share repurchase program that was approved in late October 2014, we purchased 560,493 shares of our common stock for US$9.3 million during the first quarter of fiscal 2015.
Joe Alvarado, chairman of the board, president, and CEO, commented, "The results for our fiscal first quarter were strong with adjusted operating profit from continuing operations improving by 7% over both the sequential quarter and the same quarterly period one year ago. We achieved these results despite declining scrap prices, a three week planned outage at our mini-mill in Poland and fewer shipping days during the first quarter of fiscal 2015 compared to the fourth quarter of fiscal 2014."
Business Segments
Our Americas Recycling segment recorded adjusted operating loss of US$1.1 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$0.8 million for the first quarter of fiscal 2014. The decline in adjusted operating profit for the first three months of fiscal 2015 was attributed to a 2% decrease in ferrous shipments and a US$1 per short ton decrease in the average ferrous metal margin compared to the same period in the prior fiscal year. Nonferrous shipments increased 5%; however, a decline in average nonferrous selling prices more than offset a decline in average nonferrous material costs, which added additional pressure to average nonferrous metal margins compared to the first quarter of fiscal 2014. Furthermore, in the first quarter of fiscal 2014, this segment benefited from a pre-tax gain on real estate and facility relocation benefits of US$3.7 million. In contrast, a favorable change in pre-tax LIFO of US$3.2 million was recorded for the first quarter of fiscal 2015 compared to the first quarter of the prior fiscal year.
Our Americas Mills segment recorded adjusted operating profit of US$75.4 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$65.8 million for the same period in the prior fiscal year. The improvement in adjusted operating profit for the first quarter of fiscal 2015 was primarily due to a 7% increase in total shipments and a 4% per short ton increase in the average selling price on stable average costs of ferrous scrap consumed compared to the first quarter of fiscal 2014. Overall shipments of our higher priced finished products, including rebar and merchant, increased approximately 34,000 tons while our lower priced billet shipments increased approximately 15,000 tons.
Our Americas Fabrication segment recorded adjusted operating loss of US$3.0 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$2.2 million for the first quarter of fiscal 2014. Adjusted operating profit was impacted by an average metal margin compression of US$14 per short ton related to our rebar product as rising mill material prices in the first quarter of fiscal 2015 outpaced the rate of rising fabrication selling prices compared to the same period in the prior fiscal year. Additionally, conversion costs for our rebar product increased US$8 per short ton. Partially offsetting these items was a favorable change in pre-tax LIFO of US$2.9 million for the first quarter of fiscal 2015 compared to the first quarter of the prior fiscal year.
Our International Mill segment recorded adjusted operating profit of US$4.2 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$15.3 million for the same period in the prior fiscal year. Adjusted operating profit in the first quarter of fiscal 2015 was impacted by a decline in shipments coupled with an average metal margin compression of 7% compared to the first quarter of fiscal 2014. Shipments declined during the first three months of fiscal 2015 due to sluggish demand in central Europe and a three week planned maintenance outage at our Polish mini-mill.
Our International Marketing and Distribution segment recorded adjusted operating profit ofUS$18.3 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$2.0 million for the same period in the prior fiscal year. The improvement in adjusted operating profit was primarily attributed to an increase in the average metal margins and a US$3.6 million favorable change in pre-tax LIFO for our trading divisions headquartered in the U.S. In addition, our western European and Asian operations reported a strong increase in shipments for the first quarter of fiscal 2015 compared to the same period in fiscal 2014.
Outlook
Alvarado concluded, "We are encouraged by the continued improvement in the U.S. economy with job growth and rising wages. U.S. manufacturing activity expanded for the eighteenth consecutive month in November 2014 and U.S. non-residential construction spending increased during the first three months of our fiscal 2015. In November, the Architecture Billings Index (ABI), a leading indicator of construction activity, reported the seventh consecutive month greater than 50 at 50.9.
Our second fiscal quarter has historically been slower as a result of a seasonal downturn in construction activity due to the holidays and the onset of winter weather. Consistent with prior years, we plan to take advantage of the slower business activity with planned outages for routine maintenance and equipment upgrades."
Commercial Metals Co. and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel mini-mills, steel fabrication and processing plants, construction-related product warehouses, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.
During the first quarter of fiscal 2015, the company decided to exit and sell its steel distribution business in Australia. As a result, this business has been presented as a discontinued operation for all periods presented.
Earnings from continuing operations were US$38.3 million (US$0.32 per diluted share) for the first quarter of fiscal 2015, compared with earnings from continuing operations of US$33.7 million(US$0.29 per diluted share) for the first quarter of fiscal 2014.
Results for the first quarter of fiscal 2015 included after-tax LIFO income from continuing operations of US$4.0 million (US$0.03 per diluted share), compared with after-tax LIFO expense from continuing operations of US$2.8 million (US$0.02 per diluted share) for the first quarter of fiscal 2014. Adjusted operating profit from continuing operations was US$73.3 million for the first quarter of fiscal 2015, compared with adjusted operating profit from continuing operations of US$68.7 million for the first quarter of fiscal 2014 and US$68.8 million for the fourth quarter of fiscal 2014, an improvement over both comparative quarterly periods. Adjusted EBITDA from continuing operations was US$106.4 million for the first quarter of fiscal 2015, compared with adjusted EBITDA from continuing operations of US$102.3 million for the first quarter of fiscal 2014.
The company's financial position at 30 November 2014 remained strong with cash and cash equivalents of US$326.1 million and approximately US$1.0 billion in total liquidity. As part of our share repurchase program that was approved in late October 2014, we purchased 560,493 shares of our common stock for US$9.3 million during the first quarter of fiscal 2015.
Joe Alvarado, chairman of the board, president, and CEO, commented, "The results for our fiscal first quarter were strong with adjusted operating profit from continuing operations improving by 7% over both the sequential quarter and the same quarterly period one year ago. We achieved these results despite declining scrap prices, a three week planned outage at our mini-mill in Poland and fewer shipping days during the first quarter of fiscal 2015 compared to the fourth quarter of fiscal 2014."
Business Segments
Our Americas Recycling segment recorded adjusted operating loss of US$1.1 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$0.8 million for the first quarter of fiscal 2014. The decline in adjusted operating profit for the first three months of fiscal 2015 was attributed to a 2% decrease in ferrous shipments and a US$1 per short ton decrease in the average ferrous metal margin compared to the same period in the prior fiscal year. Nonferrous shipments increased 5%; however, a decline in average nonferrous selling prices more than offset a decline in average nonferrous material costs, which added additional pressure to average nonferrous metal margins compared to the first quarter of fiscal 2014. Furthermore, in the first quarter of fiscal 2014, this segment benefited from a pre-tax gain on real estate and facility relocation benefits of US$3.7 million. In contrast, a favorable change in pre-tax LIFO of US$3.2 million was recorded for the first quarter of fiscal 2015 compared to the first quarter of the prior fiscal year.
Our Americas Mills segment recorded adjusted operating profit of US$75.4 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$65.8 million for the same period in the prior fiscal year. The improvement in adjusted operating profit for the first quarter of fiscal 2015 was primarily due to a 7% increase in total shipments and a 4% per short ton increase in the average selling price on stable average costs of ferrous scrap consumed compared to the first quarter of fiscal 2014. Overall shipments of our higher priced finished products, including rebar and merchant, increased approximately 34,000 tons while our lower priced billet shipments increased approximately 15,000 tons.
Our Americas Fabrication segment recorded adjusted operating loss of US$3.0 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$2.2 million for the first quarter of fiscal 2014. Adjusted operating profit was impacted by an average metal margin compression of US$14 per short ton related to our rebar product as rising mill material prices in the first quarter of fiscal 2015 outpaced the rate of rising fabrication selling prices compared to the same period in the prior fiscal year. Additionally, conversion costs for our rebar product increased US$8 per short ton. Partially offsetting these items was a favorable change in pre-tax LIFO of US$2.9 million for the first quarter of fiscal 2015 compared to the first quarter of the prior fiscal year.
Our International Mill segment recorded adjusted operating profit of US$4.2 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$15.3 million for the same period in the prior fiscal year. Adjusted operating profit in the first quarter of fiscal 2015 was impacted by a decline in shipments coupled with an average metal margin compression of 7% compared to the first quarter of fiscal 2014. Shipments declined during the first three months of fiscal 2015 due to sluggish demand in central Europe and a three week planned maintenance outage at our Polish mini-mill.
Our International Marketing and Distribution segment recorded adjusted operating profit ofUS$18.3 million for the first quarter of fiscal 2015 compared to adjusted operating profit of US$2.0 million for the same period in the prior fiscal year. The improvement in adjusted operating profit was primarily attributed to an increase in the average metal margins and a US$3.6 million favorable change in pre-tax LIFO for our trading divisions headquartered in the U.S. In addition, our western European and Asian operations reported a strong increase in shipments for the first quarter of fiscal 2015 compared to the same period in fiscal 2014.
Outlook
Alvarado concluded, "We are encouraged by the continued improvement in the U.S. economy with job growth and rising wages. U.S. manufacturing activity expanded for the eighteenth consecutive month in November 2014 and U.S. non-residential construction spending increased during the first three months of our fiscal 2015. In November, the Architecture Billings Index (ABI), a leading indicator of construction activity, reported the seventh consecutive month greater than 50 at 50.9.
Our second fiscal quarter has historically been slower as a result of a seasonal downturn in construction activity due to the holidays and the onset of winter weather. Consistent with prior years, we plan to take advantage of the slower business activity with planned outages for routine maintenance and equipment upgrades."
Commercial Metals Co. and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel mini-mills, steel fabrication and processing plants, construction-related product warehouses, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.
