CMC manages stronger profits on reduced scrap volumes

Irving, Texas-based electric arc furnace (EAF) steel producer and scrap yard operator Commercial Metals Co. (CMC) has announced earnings in its most recently completed financial quarter that are 12 percent higher than those of a year ago. The earnings increase was helped by slightly increased steel shipments and occurred despite a 5.4 reduction in scrap shipped from its yards.

The results for the company’s fiscal year 2023 first quarter, which ended Nov. 30, 2022, include net earnings of $261.8 million, up 12 percent compared with $232.9 million earned in the September-to-November 2021 time frame.

In dollar figures, the company’s net sales rose by nearly 10 percent in the quarter compared with one year ago from about $1.65 billion to nearly $1.82 billion. That bump-up occurred despite the company shipping 18,000 tons less scrap in late 2022 compared with the late 2021 time frame. On the steel products side, CMC shipped 5,000 more tons of rebar, merchant bar and other products in the autumn of 2022 compared with one year prior.

CMC says the average selling price for steel products increased by $44 per ton compared with the first quarter of fiscal 2022 while the cost of the scrap it melted declined by $103 per ton, “resulting in a year-over-year increase of $147 per ton in steel products margin over scrap.”

“In North America, we again benefited from strong demand, enabling us to achieve near-record quarterly segment adjusted EBITDA [earnings before interest, taxes, depreciation and amortization,” says CMC President and CEO Barbara R. Smith says. “Our Europe operations leveraged their excellent relative cost position to gain market share, shipping high volumes despite dynamic and uncertain market conditions. CMC’s fiscal first-quarter results provide another clear demonstration of how our ongoing strategic actions have positioned the company to perform well throughout the economic cycle, generating superior value for shareholders.”

Smith adds, “We continue to make solid progress on the strategic initiatives that are expected to drive CMC’s next phase of growth. Work at the Arizona 2 site remains on schedule, and we expect a spring 2023 startup. The commissioning of this exciting project is well-timed, as we anticipate construction activity related to the Infrastructure Investment and Jobs Act will begin ramping up during 2023. Additionally, last month CMC announced the location of our fourth micromill in Berkeley County, West Virginia. Once complete, we expect this investment will enhance our production flexibility and customer service capabilities, generate attractive returns, and improve our sustainable, through-the-cycle earnings and cash flows.”

Smith concludes, “Looking ahead, we anticipate good financial results in the second quarter compared to historical standards. Finished steel volumes in North America and Europe are expected to follow typical seasonal patterns, which have historically declined from our first quarter levels due to weather conditions and holidays. Additionally, volumes in Europe may be impacted by economic uncertainty. While we anticipate margins over scrap in both North America and Europe to remain elevated in relation to historical levels, we expect they will compress from first quarter levels.”