CMC(US:CMC)2025-03-25 15:30Financial Performance - Net sales decreased by $93.9 million, or 5%, for the three months ended February 28, 2025, and decreased by $187.4 million, or 5%, for the six months ended February 28, 2025, compared to the corresponding periods [92]. - Net earnings for the three months ended February 28, 2025, were $25.5 million, down from $85.8 million in the corresponding period, while a net loss of $150.2 million was recorded for the six months ended February 28, 2025, compared to net earnings of $262.1 million in the prior period [93]. - The compression in steel and downstream products metal margins in the North America Steel Group segment significantly impacted net earnings for the three and six months ended February 28, 2025 [93]. - Net sales to external customers in the North America Steel Group segment decreased by 7% to $1,386.8 million for the three months ended February 28, 2025, and by 6% to $2,905.5 million for the six months ended February 28, 2025, compared to the corresponding periods [99]. - Adjusted EBITDA for the North America Steel Group was $128.8 million for the three months and $317.0 million for the six months ended February 28, 2025, down from $222.3 million and $489.1 million in the respective prior periods [100]. - In the Europe Steel Group, net sales to external customers increased by $5.5 million, or 3%, for the three months ended February 28, 2025, but decreased by $10.2 million, or 2%, for the six months ended February 28, 2025 [101]. - The Europe Steel Group experienced a 13% increase in steel products shipment volumes during the three months ended February 28, 2025, despite a $61 per ton decrease in average selling price [102]. - The Emerging Businesses Group reported net sales of $158.9 million for the three months ended February 28, 2025, showing a slight increase compared to $156.0 million in the prior year [103]. - Adjusted EBITDA for the Emerging Businesses Group increased by $5.6 million, or 31%, during the three months ended February 28, 2025, compared to the corresponding period [104]. Expenses and Costs - Selling, general and administrative expenses increased by $15.4 million during the six months ended February 28, 2025, primarily due to $12.1 million in incremental labor-related expenses and $5.4 million in additional legal expenses [94]. - Litigation expenses related to the Pacific Steel Group litigation amounted to $4.7 million and $354.7 million for the three and six months ended February 28, 2025, respectively [96]. - Corporate and Other segment reported an adjusted EBITDA loss of $34.9 million for the three months ended February 28, 2025, and a loss of $421.1 million for the six months, reflecting a significant increase due to litigation-related losses [105]. Tax and Financial Position - The effective income tax rate for the three months ended February 28, 2025, was 29.4%, compared to 26.6% in the corresponding period, while the rate for the six months remained relatively flat at 23.0% [97]. - As of February 28, 2025, the company had cash and cash equivalents of $758.4 million, indicating a strong liquidity position [110]. - Net cash flows from operating activities decreased to $245.5 million for the six months ended February 28, 2025, down from $350.0 million for the same period in 2024, primarily due to a decrease in net earnings and a $45.9 million decrease in cash used by operating assets and liabilities [119]. - Net cash flows used by investing activities increased to $175.1 million for the six months ended February 28, 2025, compared to $158.5 million in the prior year, driven by $43.7 million in incremental capital expenditures for the construction of the fourth micro mill [120]. - Net cash flows used by financing activities rose to $169.9 million for the six months ended February 28, 2025, from $147.8 million in the previous year, including a $22.1 million increase in treasury stock acquired under the share repurchase program [121]. - The company reported $354.7 million in litigation expenses for the six months ended February 28, 2025, related to ongoing legal matters, which were classified as current liabilities [124]. - As of February 28, 2025, the company had committed $35.4 million under stand-by letters of credit, with $1.0 million reducing availability under the Revolver [123]. Capital Expenditures and Growth Initiatives - The company anticipates capital spending between $550 million and $600 million for 2025, focusing on value-accretive growth and competitive cash returns to stockholders [113]. - The company repurchased $98.4 million of shares during the six months ended February 28, 2025, with remaining authorization to repurchase $305.3 million of shares [114]. - Incremental capital expenditures for the construction of the fourth micro mill were partially offset by $25.0 million of government assistance received [120]. - The third micro mill, located in Mesa, Arizona, was placed into service during the fourth quarter of 2023, with a production capacity approximately 40% greater than other micro mills [82]. - The planned fourth micro mill in Berkeley County, West Virginia, is expected to commence commissioning in late calendar 2025 [83]. - The Transform, Advance and Grow initiative aims to enhance operational value through sustained margin enhancement and greater capital efficiency [81]. - The company anticipates potential growth from acquisitions and strategic investments, although actual results may vary materially from expectations due to various risks [125]. Economic and Market Conditions - The company is monitoring macroeconomic trends, including the impact of tariffs and the Russian invasion of Ukraine, which has led to economic slowdowns and commodity price volatility [85][86]. - The company faces risks related to economic conditions, commodity pricing, and geopolitical factors that could impact future performance [126]. - The total gross foreign currency exchange contract commitments increased by $34.4 million, or 15%, as of February 28, 2025, compared to August 31, 2024, primarily due to forward contracts denominated in euro [129].