On June 18 before the market opened, Commercial Metals (CMC, Financial) released its results for the fiscal 2020 third quarter ended May 31.
By the numbers
The steel and metal manufacturer based in Irving, Texas posted adjusted earnings of 59 cents per share in the third quarter, down roughly 12% on a year-over-year basis. Analysts called for earnings of 37 cents per share. Revenue of $1.34 billion plunged 16.5% but surpassed the projected revenue of $1.25 billion.
Reflecting on the company’s performance, President and CEO Barbara R. Smith commented the following:
"In the face of unprecedented global uncertainty, we concentrated our focus on the elements of our business within our direct control. Because of these efforts, CMC achieved sequential earnings growth while increasing our market share in many products, continuing to reduce our operating costs, and further strengthening our balance sheet. Our success during the quarter underscores several of CMC's best qualities – a robust business model, focus on providing best-in-class customer service, and commitment to our employees."
In the reported quarter, the company incurred $6.2 million after tax associated with plant closures and asset impairments.
Segment performance
In the Americas Recycling segment, the company registered an adjusted Ebitda loss of $1.7 million in the fiscal third quarter. Last year, the Ebitda was a positive $12.3 million. The decline was primarily driven by lower shipments coupled with falling average selling prices. Shifting gears, the drastic fall in demand from the third party mill customers adversely affected volumes.
Adjusted Ebitda of $133.2 million represented a16% drop over the past year in the Americas Mills division. Volume fell only 4% in spite of the coronavirus pandemic thanks to resilient construction activity during the quarter. Metals margins dropped as much as $19 per ton as compared to the year-ago quarter owing to decreasing average selling prices, which was partly negated by lower scrap costs.
In the Americas Fabrication segment, adjusted Ebitda stood at $31.9 million, which exceeded the $23.3 million adjusted Ebitda loss reported last year. The growth reflected higher selling price margins over rebar cost. The segment’s overall performance in the quarter also improved due to the positive impact of the fixed price contract backlog of the company’s fabrication business.
Financials
At the end of the quarter, the company had cash and cash equivalents of $462.1 million. In addition, the company had $600 million available under its credit and accounts receivable facilities.
The basic materials company announced a quarterly dividend of 12 cents per share on June 16, which will be payable on July 6.
Guidance
The company did not provide any financial forecast. Looking ahead to the fourth quarter, the company said it would witness continued strength in the construction and infrastructure activity. Smith continued:
"Our finished product volumes are supported by strong fabrication backlogs, which stood near record-high levels at May 31. Customers' sentiment about their own summer construction workloads is also encouraging. CMC's net debt-to-Ebitda ratio of 1.2x and substantial cash and equivalents on hand give us great confidence in our ability to withstand these challenging times, and provide us with significant flexibility in our capital allocation decisions."
Disclosure: I do not hold any positions in the stocks mentioned.
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