Commercial Metals Reports 3rd Quarter Results
06/22/2011 - Commercial Metals Co. reported net income of $36.2 million, or $0.31 per diluted share, on net sales of $2.1 billion for the quarter ended May 31, 2011. This compares with a net loss of $8.8 million, or $0.08 per diluted share, on net sales of $1.8 billion for last year's Q3.
Commercial Metals Co. reported net income of $36.2 million, or $0.31 per diluted share, on net sales of $2.1 billion for the quarter ended May 31, 2011. This compares with a net loss of $8.8 million, or $0.08 per diluted share, on net sales of $1.8 billion for the third quarter last year.
This year's third quarter included after-tax LIFO expense of $3.9 million, or $0.03 per diluted share, compared with expense of $22 million, or $0.20 per diluted share, in last year's third quarter.
Net loss for the nine months ended May 31, 2011, was $9.3 million, or $0.08 per diluted share, on net sales of $5.7 billion. For the same period last year, the company had a net loss of $213.3 million, or $1.88 per diluted share, on net sales of $4.5 billion. After-tax LIFO expense for the nine months was $43.8 million, or $0.38 per diluted share, compared with last year’s expense of $16 million, or $0.14 per diluted share.
Cash and short-term investments totaled $244 million as of May 31, 2011. There were no outstanding borrowings against the $400 million revolving credit line. Coverage ratio tests on our unused revolver and public debt were met.
Executive Comments – CMC Chairman and Chief Executive Officer Murray R. McClean said, "The economic improvements anticipated in last quarter's outlook manifested itself in a turnaround from both the third quarter of last year and the second quarter of this year. Four of our five operating segments achieved profitability, and the remaining segment reduced its losses year over year. Our backlogs continue to grow at higher pricing. With falling scrap prices at quarter end, LIFO expense netted to a relatively modest number for the quarter.
“Improved operating performance gave us the confidence to move forward with an important regional acquisition of G.A.M. Steel Pty. Ltd., a leading distributor and processor of long products and plate based in Melbourne, Australia. This operation enhances our existing steel service capabilities in Australia," McClean said.
President and Chief Operating Officer Joe Alvarado said, "An increase in demand plus a seasonal pick up supported higher finished goods pricing and better margins for the Americas Mills segment. Prices stabilized within a range as we moved through the quarter, reducing margin pressure on the Americas Fabrication segment as evidenced by the reduction in losses quarter over quarter.
“On the international front, stronger-than-expected GDP growth in Poland of 4.4% for the first quarter of calendar 2011 resulted in higher operating rates, improved margins, and improved profitability. Our technical teams continue to make progress in process improvements and cost reductions at CMC Sisak in Croatia, but the market for line pipe remains challenging," Alvarado added.
Americas Mills – Finished goods pricing outpaced ferrous scrap prices, resulting in expanded metal margins in the third quarter compared to both the second quarter of this year and the third quarter of last year. Mill conversion costs per ton were lower vs. the prior year on higher operating rates. The company noted that shipment volumes were the highest of any quarter in the last three years, driven by seasonal pickups and continued strength in certain regional markets.
The steel mills had an adjusted operating profit of $67.6 million compared to an adjusted operating profit of $12.8 million in the same quarter last year. The quarter had pre-tax LIFO income of $6.1 million compared to pre-tax LIFO expense of $21.7 million in last year's third quarter. The metal margin for the quarter was $320 per ton, up from the second quarter's margin of $289 per ton and last year's third quarter of $280 per ton.
The price of ferrous scrap consumed at the mills during the quarter increased $57 per ton compared to last year's quarter, and average selling prices increased $97 per ton. Sales volumes were 637,000 tons as compared to 606,000 tons in the second quarter and 588,000 tons in the prior year third quarter.
International Mills – The Polish economy grew at a GDP rate of 4.4% in the first quarter of calendar 2011. With very good domestic construction demand and a strong German merchant market, CMC Zawiercie (CMCZ) achieved its fifth consecutive quarterly adjusted operating profit. CMCZ had adjusted operating income of $22.6 million compared to income of $1.1 million in the third quarter of last year. Shipments totaled 425,000 tons compared to 363,000 tons in the prior year's third quarter.
The average selling price increased 30% to PLN 1,913 per ton compared to PLN 1,477 per ton for the same period last year on the strength of a better economy and an upgraded product line. The average metal margin per ton increased significantly to PLN 756 from PLN 481 in last year's third quarter.
Significant operational improvements at CMC Sisak resulted in an adjusted operating loss of $7.2 million compared to the prior year's loss of $12.0 million and to the second quarter's loss of $11.3 million.
Fourth Quarter Outlook – McClean concluded, "The fourth quarter is normally a seasonally slower period, and we would expect a similar trend in this quarter. While we expect it to be a profitable quarter, due to seasonality it will not be as strong as the third quarter. We remain focused on improving operational efficiency."
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 U.S. and in strategic international markets.
