CMC Posts Strong Results, Sees Robust Demand Continuing

The company’s fiscal Q3 net earnings of $312.4 million on sales of $2.5 billion were notably stronger than the net income of $130.4 million on sales of $1.8 billion posted in the year-ago quarter.

EBITDA within the North American segment improved 83% over the prior year period to $379.4 million, driven by record margins on both steel products and raw materials. CMC says steel products have seen five consecutive quarters of year-on-year (YoY) margin expansion and raw material margins have growth for nine consecutive quarters.

Quarterly external shipments of raw materials in North America reached 353,000 tons – a 7.3% improvement from the prior quarter but a 4% YoY decline. Rebar shipments of 505,000 tons were up 24% on-quarter and just slightly higher YoY. Merchant bar shipments of 274,000 tons were up 12% on-quarter but down 5% on-year. Downstream product shipments rose 22% on-quarter but were down 2% YoY to 399,000 tons.

Smith says demand for finished steel products in North America was robust during the quarter with indicators pointing towards continued strength.

CMC’s European segment in Poland posted record adjusted EBITDA of $121 million – a 142% YoY improvement driven by significant expansions in shipment volumes and margins over scrap. The segment recently added a third rolling line, improving production flexibility and increasing volumes of rebar, merchant bar, and wire rod.

“We anticipate strong financial performance to continue in the fourth quarter. Robust demand for each of CMC’s major product lines is expected to persist, augmented by our growing downstream backlog and solid levels of new work entering the project pipeline,” Smith commented in CMC’s earnings results. “Margins over scrap in both North America and Europe should remain at levels near those of the third quarter, driven by favorable market conditions across our geographies.”

Smith said on the company’s earnings conference call that CMC sees no signs of a slowdown. “The key indicators that lead rebar consumption by 9-12 months remain not only positive, but robust,” she said.

The company expects the federal infrastructure package signed into law last year will begin to impact construction activity early next year, creating 1.5 million tons of incremental annual rebar demand within a domestic market of roughly 9 million tons, representing a 17% increase in consumption. With spending expected to ramp up over a five-year period, the timing matches very well with the anticipated startup of CMC’s Arizona 2 micro mill next year which will have an annual capacity of 500,000 tons of rebar and merchant bar.

Location selection for CMC’s fourth micro mill, which will be located in the Eastern US, is ongoing, and the company remains committed to the project, Smith noted on the call.

By Laura Miller, Laura@SteelMarketUpdate.com