CMC Achieves Record Quarterly Earnings

CMC’s North American adjusted EBITDA of $107.3 million was the result of improved demand and increased margins across multiple product lines. Finished steel shipments increased 9% year-over-year. Good activity in construction during the quarter kept rebar demand strong. Merchant bar and other products leapt 37% from a year ago, driven by improved market conditions in the industrial market and lean inventories.

Smith noted that in the construction sector, project owners are more confident and willing to contract new work. New project opportunities have opened in both the private and public sectors as firms look to secure supply chains. E-commerce infrastructure is trending along with new investments due to the semiconductor shortage.

A population migration to the South, and CMC’s core markets, provides opportunities in residential construction as well as local infrastructure that supports community growth, said Smith. The lag between housing and supporting infrastructure is about 9-24 months. CMC is making significant inroads into the residential market, the company said.  

Proposals for a long-term infrastructure package are encouraging and will have meaningful spending levels no matter what plan is chosen, said Smith.

Mill volume jumped 17% and average selling price increased to $794 per ton compared to $625 per ton in Q3 2020. Margins over scrap cost on steel products rose $40 per from a year ago and $74 per ton sequentially. Lower margins occurred on downstream products year-over-year due to higher scrap input costs and essentially flat average selling price, the company reported.

The new rolling mill in Poland is in the early stages of commissioning and will add roughly 200,000 tons of additional capacity that will take advantage of CMC’s excess melt capacity. A strong rampup is expected with targeted production levels reached in early FY 2022. The economic recovery in Europe lagged the U.S., but construction activity is healthy and supporting strong rebar volume, said Smith. Residential construction is particularly robust. The company is optimistically keeping an eye on a vote Friday that will decide if the EU will extend safeguard measures.

The Arizona 2 micro mill in Mesa received its air permit, allowing construction to begin. The mill will be the first in the world able to produce both rebar and merchant bar. The mill has an onsite renewable energy source that will result in low cost and low environmental impact for long steel production, the company said.

CMC has been operating at high utilization rates but is not expecting any maintenance outages in the next few quarters.

CMC will be releasing its corporate sustainability report soon, laying out ambitious goals for science-based targets. “Good business and good environmental stewardship go hand-in-hand,” said Smith.

CMC expects a strong finish to FY 2021. In outlook remarks, Smith said: “Strong demand across multiple end-use markets should support robust shipment levels of finished steel during the fourth quarter in both North America and Europe. Construction activity is strong and the industrial sectors are growing in both the U.S. and Central Europe, as both regions continue to recover from the pandemic. We expect margins over scrap on steel products in North America and Europe to be relatively flat or up modestly from third-quarter levels.

“Increased willingness of downstream customers in our North America segment to contract new work and the stability of our construction backlog both point to continued demand strength,” Smith added. “This view is supported by several widely monitored construction indicators that generally lead activity by nine to 12 months, which have improved significantly in 2021.”

CMC and its subsidiaries manufacture, recycle and fabricate steel and metal products, related materials and services through a network including seven 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 U.S. and Poland.

SMU Note: Commercial Metals Company CEO Barbara Smith will be the mentor for this year’s recipient of the SMU NexGen Leadership Award.