Commercial Metals Reports 3rd Quarter Loss
06/23/2010 - Commercial Metals Co. reported a net loss of $8.8 million, or $0.08 per diluted share, on net sales of $1.8 billion for the quarter ended May 31, 2010. This compares with a net loss of $13.1 million, or $0.12 per diluted share, on net sales of $1.3 billion for the same period last year.
Commercial Metals Co. reported a net loss of $8.8 million, or $0.08 per diluted share, on net sales of $1.8 billion for the quarter ended May 31, 2010. This compares with a net loss of $13.1 million, or $0.12 per diluted share, on net sales of $1.3 billion for the same period last year.
This year's third quarter included after-tax LIFO expense of $22 million, or $0.20 per diluted share, compared with income of $29 million, or $0.26 per diluted share, in last year's third quarter.
Net loss for the nine months ended May 31 was $213.3 million, or $1.88 per diluted share, on net sales of $4.5 billion. For the same period last year, net earnings were $13.6 million ($0.12 per diluted share) on net sales of $5.0 billion. After-tax LIFO expense was $16 million ($0.14 per diluted share) compared with income of $184 million ($1.64 per diluted share) last year.
"Market psychology turned positive at the beginning of the quarter. With the spring construction season underway, coupled with early indicators of some economic recovery, finished goods pricing first increased then stabilized by the end of the quarter,” said CMC Chairman, President, and Chief Executive Officer Murray R. McClean. “This was welcomed news to our customers who gained a measure of confidence to re-enter the market.
“Active end markets continue to be heavily weighted towards public works while the private sector remains weak. Internationally, by mid-quarter, metal margins in Poland expanded beyond breakeven points. CMC Sisak (Croatia) successfully started its new steelmaking furnace. The Marketing and Distribution segment did well in most major markets, and our raw materials division was particularly strong," McClean added.
Americas Mills — McClean said, "Higher finished goods pricing combined with declining ferrous scrap prices resulted in sequentially expanded metal margins in the third quarter of this year compared to the second quarter of this year, but still below the third quarter of last year. Volumes, particularly rebar, were the highest of any quarter this year as well as above the prior year third quarter, driven by seasonal pickups, continued strong public works, and some stimulus projects.”
The company’s mills ran at 75% of capacity, up from 58% in the second quarter.
"Our steel mills had an adjusted operating profit of $11.5 million compared to an adjusted operating profit of $39.2 million in the same quarter last year,” he continued. “The quarter had pre-tax LIFO expense of $20.5 million compared to pre-tax LIFO income of $17.3 million in last year's third quarter. Our metal margin for the quarter was $303 per ton, up from the second quarter's margin of $263 per ton, but still below last year's third quarter of $365 per ton.
“The price of ferrous scrap consumed at the mills during the quarter increased $129 per ton compared to last year, and average selling prices increased $67 per ton. Sales volumes were 588,000 tons, of which 69,000 tons were billets (compared with 37,000 tons of billets sold in the third quarter of last year). Comparing third quarter to third quarter between years, tonnage melted was up 46% to 579,000 tons and tonnage rolled increased 158,000 tons to 523,000 tons."
McClean also noted that the micro mill CMC Steel Arizona continued its successful ramp up by melting, rolling, and shipping more than 51,000 tons during the quarter. The company’s copper tube mill reported adjusted operating profit of $1.7 million (pre-tax LIFO expense of $2.4 million) compared to $2.9 million operating profit (pre-tax LIFO expense of $0.9 million) in last year's third quarter.
International Mills — According to McClean, the company’s International Mills segment had its lowest adjusted quarterly operating loss in almost two years as the Polish economy remained positive and the Croatian operation completed its furnace renovation. “By quarter end, we had produced 6000 tons of steel in our new furnace at CMC Sisak and significantly increased our backlog.
"CMC Zawiercie had adjusted operating income of $1.1 million compared to a loss of $11.9 million in the third quarter of last year. Shipments totaled 363,000 tons (69,000 tons of billets) compared to 328,000 tons (69,000 tons of billets) in the prior year's third quarter. Tons melted were 394,000 tons compared to 324,000 tons, and tons rolled were 295,000 tons compared to 253,000 tons.
Average selling prices increased 26% to PLN 1,477 per ton compared to PLN 1,172 per ton for the same period last year,” McClean continued. “The cost of scrap entering production increased 43%. The average metal margin per ton increased slightly to PLN 481 from PLN 477 in last year's third quarter. Results were positively impacted by our scrap operations and the reversal of significant contract reserves set up in prior periods and reversed as sales were delivered this quarter. By quarter end, we hot commissioned our new flexible rolling mill; with this new rolling mill and our existing long products and wire rod mills, as well as our rod block, we will be able to upgrade, expand, and tailor our product offerings."
"CMC Croatia's adjusted operating loss of $12.0 million compares to the prior year's loss of $8.5 million," McClean added. "During the quarter we melted 17,000 tons, rolled 14,000 tons, and shipped 16,000 tons."
Q4 Outlook — "We anticipate our fourth quarter to be better than our third quarter, mainly due to seasonal factors,” McClean said, adding that global economies remain fragile, “with any further fallout due to the public debt problems of Greece and other countries within the euro zone likely to slow global growth. Scrap and steel prices have declined in major international markets since mid-May. While this correction was anticipated, any further significant declines could impact future results.
“The nonresidential construction market in the U.S. should continue to be relatively good in the public sector; however, the private sector is likely to remain weak. We have had active interest in the purchase of our joist and deck operations and anticipate that most facilities will be under contract by the end of the quarter.
"In summary, we believe we will be moderately profitable in our fourth quarter," he concluded.
Commercial Metals Co. and 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.
