CMC Reports Third Quarter Earnings
06/27/2013 - Commercial Metals Co. said it experienced improvements over the second quarter of fiscal 2013 in all of its business segments except its Americas Mills segment.
Commercial Metals Company announced financial results for its third quarter ended 31 May 2013. Net earnings for the third quarter were US$19.0 million on net sales of US$1.8 billion. This compares to net earnings of US$40.7 million on net sales of US$2.0 billion for the three months ended 31 May 2012. Continuing operations for this year's third quarter included after-tax LIFO income of US$10.7 million, compared with after-tax LIFO expense of US$3.0 million for the third quarter of fiscal 2012. In addition, the quarter ended 31 May 2012 included an US$11.5 million research and development tax benefit. Adjusted operating profit was US$55.8 million for the third quarter of fiscal 2013, compared with adjusted operating profit of US$70.4 million for the prior year's third quarter. Adjusted EBITDA was US$89.3 million for the third quarter of fiscal 2013, compared with adjusted EBITDA of US$104.3 million for the prior year's third quarter.
On 20 May 2013, the company completed the public offering of US$330 million in aggregate principal amount of its 4.875% senior notes due 2023. Net proceeds of approximately US$325 million from the issuance and sale of these notes has been used to redeem the company's US$200 million of 5.625% notes due November 2013, of which approximately 30% was redeemed in May 2013 while the remaining 70% was redeemed on 19 June 2013. The remaining net proceeds will be used for general corporate purposes.
Joe Alvarado, chairman of the board, president, and CEO, commented, "Our results for the third quarter ended 31 May 2013 are generally consistent with our outlook from last quarter. We experienced improvements over the second quarter of fiscal 2013 in all of our business segments except our Americas Mills segment. Sequentially, shipments were up across the board consistent with seasonal trends. However, on a year over year basis, a modest improvement in rebar shipments was more than offset by weaker shipment levels of merchant and light structural products contributing to lower levels of profitability in our Americas Mills segment. We are pleased with the improved financial performance of our Americas Fabrication segment recording its best adjusted operating profit since the fourth quarter of fiscal 2009. Furthermore, the Americas Fabrication segment has reported positive adjusted operating profit for 4 of the last 5 quarters."
Business Segments
Our Americas Recycling segment recorded an adjusted operating profit of US$3.2 million for the third quarter of this fiscal year, compared with an adjusted operating profit of US$3.9 million in the prior year's third quarter. Ferrous selling prices declined 6% to US$331 per ton when compared to the third quarter of fiscal 2012. Additionally, ferrous and nonferrous margins were lower in this year's third quarter when compared to the prior year's third quarter. LIFO increased by US$7.7 million to LIFO income ofUS$4.7 million in the third quarter of fiscal 2013, from LIFO expense of US$3.0 million in the third quarter of fiscal 2012.
Our Americas Mills segment recorded an adjusted operating profit of US$47.5 million for this year's third quarter, compared with an adjusted operating profit of US$59.3 million in the prior year's third quarter. Billet shipments declined during the third quarter of fiscal 2013 compared to the same quarter in the prior year. However, our rebar shipments during this year's third quarter were up when compared to the same quarter in the prior year. In addition, during this year's third quarter, we experienced lower margins on our merchant products due to import pressure, although our rebar margins improved as compared to the prior year's third quarter. Conversion costs during the third quarter of fiscal 2013 improved 1% compared to the third quarter of fiscal 2012.
Our Americas Fabrication segment recorded an adjusted operating profit of US$13.5 million for this year's third quarter, compared with an adjusted operating profit of US$0.2 million for the prior year's third quarter. This operating improvement is mostly due to expanding margins on the heels of declining raw material input prices. Shipments declined 7% in this year's third quarter compared to the third quarter of fiscal 2012. LIFO increased US$5.1 million to LIFO income of US$3.7 million in the third quarter of fiscal 2013, from LIFO expense of US$1.4 million in the third quarter of fiscal 2012.
Our International Mill segment recorded an adjusted operating loss of US$3.8 million for the third quarter of this year, compared with an adjusted operating profit of US$1.3 million in the prior year's third quarter. Volumes declined 13%, or approximately 49 thousand tons, primarily related to our merchant and wire rod products. However, the adjusted operating loss for the third quarter of fiscal 2013 narrowed when compared to the second quarter of this fiscal year on better shipments and improving margins. The lack of meaningful market improvements across Europe continued to challenge this segment.
Our International Marketing and Distribution segment recorded an adjusted operating profit of US$7.7 million for this year's third quarter, compared with an adjusted operating profit of US$23.3 million in the prior year's third quarter. Decreased revenues and margins in our raw materials business and losses from our Australian operations adversely affected this segment's results. Construction markets in Australia continued to display weakness while the most recent Australian GDP growth is softening at a reported 2.2%. Overall weakness in the global markets we serve continued to negatively impact this segment's results.
Year to Date Results
Net earnings for the nine months ended 31 May 2013 were US$73.3 million on net sales of US$5.3 billion, compared with net earnings of US$177.3 million on net sales of US$6.0 billion for the nine months ended 31 May 2012. Continuing operations for the nine months ended 31 May 2013 included an after-tax gain of US$17.0 million associated with the sale of the company's 11% ownership interest in Trinecke Zelezarny, a.s., aCzech Republic joint-stock company. Continuing operations for the nine months ended 31 May 2012 included US$102.1 million in tax benefits related to ordinary worthless stock and bad debt deductions from the company's former investment in its Croatian subsidiary. The company recorded after-tax LIFO income of US$26.1 million for the nine months ended 31 May 2013, compared with after-tax LIFO income of US$11.3 million (US$0.10 per diluted share) for the nine months ended 31 May 2012. For the nine months ended 31 May 2013, adjusted operating profit was US$173.0 million, compared with US$154.6 million for the nine months ended 31 May 2012. Adjusted EBITDA was US$275.5 million, compared with US$255.1 million for the nine months ended 31 May 2012.
Outlook
Alvarado concluded, "Operationally, we anticipate results during our fiscal fourth quarter to be similar to our results for the quarter ended 31 May 2013. Non-residential construction in the U.S. is showing some regional improvement but still lacks signs of a broad-based recovery. Sequentially, our International Mill segment should continue to show progress as compared to this year's third quarter, mostly due to improved shipment volumes. With that, we expect recovery in the European markets will continue to lag behind the rest of the globe. Our International Marketing and Distribution segment will be challenged until the global markets in which we operate display sustained improvements."
