CMC Calls Third-Quarter Performance “Outstanding”

CMC’s Americas Recycling segment recorded its highest level of profitability since Q3 FY 2011. Adjusted operating profit was $14.4 million as the result of strong volumes and rising prices in both ferrous and nonferrous markets. Compared to third-quarter 2017, ferrous prices increased 21 percent and non-ferrous 15 percent, said CFO Mary Lindsey.

The Americas Mill segment recorded a $20 million year-over-year gain in adjusted operating profit, reporting $70.4 million for the third quarter. Shipment volume was up 12 percent from a year ago and metal margins increased by $29 per ton.

The Americas Fabrication segment reported an adjusted operating loss of $16.1 million compared to a profit of $1.8 million in Q3 2017. Rising rebar prices resulted in margin compression as the segment worked its way through fixed price backlogs of contract work. Bidding for new rebar fabrication jobs remains strong and the average price for new contracts has grown about $100 per ton. Significant growth in backlogs gives CMC confidence for continued demand. During the quarter, CMC completed the sale of its structural fabrication business.

The acquisition of Gerdau’s U.S rebar operations is continuing regulatory proceedings, and CMC expects final approval by the end of 2018.

During the earnings call, Smith said the Section 232 tariff is not impacting fabrication in the same way it is impacting mills. Availability of rebar is good with some imports flowing in to fill any gaps. Raw material prices are a significant driver to rebar prices, and currently fabricators are competing for work just as they have historically.

Smith says she has not seen any tariff exclusion requests on rebar that she expects to be granted. CMC is monitoring the requests and submitting responses as they come along.

Commerce recently reported rebar imports of 186,000 tons at an average value of $534 per ton. Smith noted “that value does not reflect import selling price in the market.” It does not include the 25 percent tariff or existing AD/CVD duties, ocean freight costs, U.S. transportation costs or distribution profits. “All of which should be considered when thinking about the actual price of imports,” said Smith.

The Poland segment reported adjusted operating profit of $24.4 million in Q3 compared to $13 million in Q3 2017. Shipment volumes decreased during the quarter as rebar imports to Poland picked up. EU safeguard measures will likely deter some of the unfairly priced products aimed at European markets, said Smith.

CMC is looking forward to the administration revisiting infrastructure spending. The immigration bill currently under consideration in Congress includes some funding for the border wall, which would generate demand for some steel products, said Smith. “My personal view is not a question of if—it is a question of when,” said Smith. In the absence of action in Washington, she expects business and states will fill the void in infrastructure refurbishment spending.

Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network of facilities that includes four electric arc furnace minimills, two EAF micro mills, a rerolling mill, steel fabrication and processing plants, construction-related product warehouses, and metal recycling facilities in the United States and Poland.