Commercial Metals Co. Reports Second Quarter Earnings, Provides Outlook
03/28/2013 - As it announced its financial results for its second quarter ended 28 February 2013, Commercial Metals Company said the 54.9 reading in the Architecture Billings Index (ABI) in February — the highest reading in over five and half years — will eventually translate into increased domand for its domestic operations, whil continued weakness in most global markets will negatively burden its international segments.
Commercial Metals Company announced financial results for its second quarter ended 28 February 2013. Net earnings for the second quarter were US$4.6 million on net sales of US$1.7 billion. This compares to net earnings of US$28.9 million on net sales of US$2.0 billion for the three months ended 29 February 2012. Continuing operations for this year's second quarter included after-tax LIFO income of US$0.2 million, compared with after-tax LIFO expense of US$1.3 million for the second quarter of fiscal 2012. Adjusted operating profit was US$26.7 million for the second quarter of fiscal 2013, compared with adjusted operating profit of US$63.1 million for the prior year's second quarter. Adjusted EBITDA was US$60.1 million for the second quarter of fiscal 2013, compared with adjusted EBITDA of US$95.3 million for the prior year's second quarter.
Joe Alvarado, chairman of the board, president, and CEO, commented, "As anticipated, we experienced the normal seasonal effects of the winter and holiday months as well as the ongoing economic challenges in certain overseas markets. Despite economic weakness, particularly in international markets, we are pleased to report a sixth consecutive quarter of profitability."
Business Segments
The Americas Recycling segment recorded an adjusted operating profit of US$2.2 million for the second quarter of this fiscal year, compared with an adjusted operating profit of US$6.4 million in the prior year's second quarter. Ferrous selling prices declined 7% to US$336 per ton when compared to the second quarter of fiscal 2012. Additionally, ferrous and nonferrous margins were lower in this year's second quarter when compared to the prior year's second quarter. LIFO expense decreased by US$3.6 million to US$1.0 million in the second quarter of fiscal 2013, from US$4.6 million in the second quarter of fiscal 2012.
The Americas Mills segment recorded an adjusted operating profit of US$48.8 million for this year's second quarter, compared with an adjusted operating profit of US$54.4 million in the prior year's second quarter. Shipping volumes declined for merchant and billet products when compared to the prior year's second quarter. However, rebar shipments continued to strengthen when compared to the prior year. In addition, CMC experienced lower margins on merchant products during the quarter due to import pressure, although rebar margins improved as compared to the prior year's second quarter.
The Americas Fabrication segment recorded an adjusted operating loss of US$3.8 million for this year's second quarter, compared with an adjusted operating loss of US$10.0 million for the prior year's second quarter. The operating improvement compared with the prior year's second quarter is mostly due to improvements in both shipping volumes and transactional prices. LIFO income decreased US$2.9 million to US$0.5 million in the second quarter of fiscal 2013, from US$3.4 million in the second quarter of fiscal 2012.
The International Mill segment recorded an adjusted operating loss of US$4.2 million for the second quarter of this year, compared with an adjusted operating profit of US$6.6 million in the prior year's second quarter. Volumes declined 16%, or 54 thousand tons, primarily related to merchant and wire rod products. The results continue to reflect the ongoing challenges in the Eurozone.
The International Marketing and Distribution segment recorded an adjusted operating profit of US$3.9 million for this year's second quarter, compared with an adjusted operating profit of US$26.6 million in the prior year's second quarter. Decreased revenues and margins in the raw materials business and in the Australian operations adversely affected this segment's results. The segment continued to suffer from weakness in most of the markets we serve globally.
Year to Date Results
Net earnings attributable to CMC for the six months ended 28 February 2013 were US$54.3 million on net sales of US$3.5 billion, compared with net earnings attributable to CMC of US$136.6 million on net sales of US$3.9 billion for the six months ended 29 February 2012. Continuing operations for the six months ended 28 February 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., a Czech Republic joint-stock company. Continuing operations for the six months ended 29 February 2012 included US$102.1 million in tax benefits related to ordinary worthless stock and bad debt deductions from the investment in the company's former Croatian subsidiary. The company recorded after-tax LIFO income of US$15.4 million for the six months ended 28February 2013, compared with after-tax LIFO income of US$14.3 million for the six months ended 29 February 2012. For the six months ended 28 February 2013, adjusted operating profit was US$117.3 million, compared with US$84.2 million for the six months ended 29 February 2012. Adjusted EBITDA was US$186.2 million, compared with US$150.8 million for the six months ended 29 February 2012.
Outlook
Alvarado concluded, "Our third quarter historically yields better results as the construction season begins to ramp up. The American Institute of Architects reported an Architecture Billings Index (ABI) of 54.9 in February 2013, the highest level in over five and a half years. We believe that the ABI level will eventually translate into increased demand for our domestic operations. Our International Mill segment anticipates a modest improvement in results over the second quarter of 2013 due to seasonal volume improvements. Although German manufacturing is showing signs of life, we do not anticipate any appreciable improvements in the Eurozone over the near term. We believe that continued weakness in most global markets in which we participate will continue to negatively burden our International Marketing and Distribution segment."
Commercial Metals Company and its 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.
