CMC stays profitable, but earnings down

Irving, Texas-based CMC has reported net earnings of $119.4 million in the third quarter of its 2024 fiscal year. The steelmaking, metals recycling and construction products firm also has reported $2.1 billion in sales for the quarter, which ran from March 1 to May 31.

Compared with the same quarter last year, CMC’s sales were down 8.7 percent from $2.3 billion and its net earnings were down 48 percent from the $234 million it netted from March through May of 2023.

“Our business continued to generate strong financial results during the third quarter,” CMC President and CEO Peter Matt says. “We benefited from a healthy start to the 2024 construction season and [a] solid operational performance across our footprint.

"Fundamentals remain good within our North American markets, supporting stable to modestly improving steel product margins, healthy shipment levels and steady downstream backlog volumes. Encouragingly, we are realizing the impact of infrastructure activity on the demand for CMC’s early phase construction solutions, and expect the magnitude of this impact to grow over the next several years.”

On the steelmaking front, Matt says, “We continued to advance the ramp up of our state-of-the-art Arizona 2 (AZ2) plant, which is the first micro mill in the world capable of producing both rebar and merchant bar quality (MBQ) product.”

Regarding the steel industry landscape in the United States, he adds, “A combination of supply discipline and improved seasonal demand has moved rebar markets in the western U.S. into much better balance.”

The company’s next major recycled-content electric arc furnace (EAF) investment is being made in West Virginia. The company says foundations are nearly complete at the site of its fourth micromill and its continues to anticipate an operational startup in late 2025.

"We believe these projects, together with our recent acquisitions, position us to take advantage of favorable long-term structural trends in construction activity, and are expected to drive strong future growth in earnings, cash flow and shareholder value," Matt says.

While most of CMC’s assets are in the United States, Matt says regarding the CMC mill in Poland, “Market conditions were largely stable compared to the prior quarter, though we achieved slight increases in finished steel pricing and product margins. Our focus is on continuing to improve the profitability of this business, which we believe should see benefits from an emerging inflection in the Polish macroeconomic environment, evidenced by meaningfully lower inflation, faster GDP growth, improved residential construction activity and increased government sponsored investment.”

In the “Raw Materials” line item of its third quarter balance sheet, which includes ferrous and nonferrous scrap, CMC reports shipping 371,000 tons externally. That figure is down 9.3 percent from the 409,000 tons shipped one year earlier but up by 6.9 percent compared with the 347,000 tons shipped the prior quarter.

CMC mills paid an average of $389 per ton for ferrous scrap in its most recent quarter, down from $394 the prior quarter and down by $38 per ton from the $427 it was paying a year earlier.

Regarding prospects for the current CMC fiscal year fourth quarter, which runs from June 1 to Aug. 31, Matt says, “We expect consolidated financial results in our fiscal fourth quarter to be consistent with third quarter levels. Finished steel shipments within the North America Steel Group are anticipated to be flat on a sequential basis.

“The spring and summer construction season is off to a good start, and we are seeing encouraging signs of increased infrastructure activity driving demand. We expect this momentum to build over the coming quarters, contributing to an already healthy demand backdrop in North America, which is being propelled by positive long-term structural trends in manufacturing, reshoring, energy transition and energy security-related projects. Additionally, an inflection in interest rates has the potential to unlock pent-up demand in several construction sectors, including residential markets where a significant shortage of housing units exists.”