Commercial Metals Surpass 4th-Quarter Earnings and Revenue Expectations

On Oct. 15 before the market opened, Commercial Metals (NYSE:CMC) released its results for its fiscal 2020 fourth quarter, which ended Aug. 31.

By the numbers

The steel and metal manufacturer is based in Irving, Texas. It posted adjusted earnings per share of 79 cents in the fourth quarter, up roughly 4% on a year-over-year basis. Analysts had called for EPS of 60 cents. Revenue of $1.41 billion plunged 8.68% but surpassed the projected revenue by 1.78%.

Reflecting on the company's performance, President and CEO Barbara R. Smith commented the following:

"Fiscal 2020 was an exceptional year for CMC, and our strong results including enhanced earnings, increased cash flow, additional operational flexibility, and a more robust balance sheet demonstrate the value of CMC's purposeful strategic transformation completed over the last several years and our position as a leader in concrete reinforcement."

Performance

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In the North America division, the company's adjusted Ebitda of $174.2 million grew 14% in the fiscal fourth quarter, supported by robust cost performance at the mills. The company incurred low operation costs in the downstream locations as well, which contributed to the segment's quarterly growth.

Shipment volume of finished goods (including steel and downstream products), however, remained flat as compared to the prior three-month period. Moreover, the average selling price of steel products dropped $59 per ton as compared to the prior year quarter, partially negated by lower scrap costs.

In the Europe segment, adjusted Ebitda of $22.9 million was up from $22.7 million reported the year before. This was largely due to a $10.7 million carbon credit received in the reported quarter. Resilience in the Polish construction sector offset decreased shipment volumes.

Financials

At the end of the quarter, the company had cash and cash equivalents of $542.1 million, aided by strong cash inflow during the quarter. In addition, the company had $661.9 million available under its credit and accounts receivable facilities.

The basic materials company announced a quarterly dividend of 12 cents per share on Oct. 14, which will be payable on Nov. 13. This marks the 224th quarter of dividend payments.

Looking ahead

The company did not provide any financial forecast.

Looking ahead to the first quarter of fiscal 2021, the company said it would witness continued strength in the construction and infrastructure activity. Smith said:

"We anticipate margin headwinds in the first quarter within North America due to the recent rise in scrap costs mitigated, in part, by steel price increases that became effective during the quarter. The market for long products in Europe is expected to remain challenged due to elevated import levels. However, demand appears solid, driven by construction sector resilience, and rebounding Central European industrial production."

Disclosure: I do not hold any positions in the stocks mentioned.

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