CMC(CMC) - 2025 Q3 - Quarterly Results

Financial Highlights CMC reported Q3 FY2025 net earnings of $83.1 million, with sequential improvement driven by better North America steel margins and the exceeding targets of the TAG program Q3 FY2025 Key Financial Metrics | Metric | Q3 FY2025 | Q3 FY2024 | | :--- | :--- | :--- | | Net Sales | $2.0 billion | $2.1 billion | | Net Earnings | $83.1 million | $119.4 million | | Diluted EPS | $0.73 | $1.02 | | Adjusted Earnings | $84.4 million | $119.6 million | | Adjusted Diluted EPS | $0.74 | $1.02 | | Consolidated Core EBITDA | $204.1 million | $256.1 million | | Core EBITDA Margin | 10.1% | 12.3% | - Strategic initiatives and market conditions are key drivers: - The Transform, Advance, Grow ("TAG") program is gaining momentum and delivering EBITDA benefits ahead of schedule, with an expected annual run-rate to exceed $100 million[3][4] - Domestic construction markets remained resilient, with healthy shipment levels and a stable downstream backlog[3][4] - The company is confident in its performance for the remainder of the fiscal year, supported by its exposure to the growing U.S. public infrastructure market and structural trends like reshoring and energy transition[3][4] Business Segment Review The company's segments showed varied results, with North America improving, Emerging Businesses growing, and Europe returning to profitability North America Steel Group North America Steel Group's Adjusted EBITDA decreased year-over-year but improved sequentially due to increased shipments and rising margins North America Steel Group Performance (Q3 FY2025 vs Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $186.0 million | $246.3 million | -24.5% | | Adjusted EBITDA Margin | 11.9% | 14.7% | -280 bps | | Steel Products Metal Margin | $499 / ton | $538 / ton | -$39 / ton | - Demand remained solid, with finished steel shipments growing 1.6% year-over-year and 10.4% sequentially[8] - The pipeline for future construction projects is healthy, supported by robust bidding activity and stable downstream backlog volumes[8] Emerging Businesses Group (EBG) The Emerging Businesses Group reported strong results with net sales and Adjusted EBITDA growth, driven by Performance Reinforcing Steel demand Emerging Businesses Group Performance (Q3 FY2025 vs Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Net Sales | $197.5 million | $188.6 million | +4.7% | | Adjusted EBITDA | $40.9 million | $38.2 million | +7.0% | | Adjusted EBITDA Margin | 20.7% | 20.3% | +40 bps | - Profitability was driven by strong project-related shipments of Performance Reinforcing Steel[11] - Future market condition indicators, such as project quotes and new planning activity, remain at healthy levels[11] Europe Steel Group The Europe Steel Group achieved a significant turnaround, returning to profitability due to improved market conditions and cost control Europe Steel Group Performance (Q3 FY2025 vs Q3 FY2024) | Metric | Q3 FY2025 | Q3 FY2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $3.6 million | ($4.2 million) | N/A (Turnaround) | | Adjusted EBITDA Margin | 1.5% | (2.0%) | +350 bps | - Market conditions improved due to solid Polish economic conditions and reduced imports, leading to better supply-demand balance[12] - The average selling price increased by $51 per ton sequentially[12] Financial Condition and Liquidity The company maintained a strong balance sheet and liquidity, continuing capital returns via share repurchases and consistent dividends - Liquidity: As of May 31, 2025, cash and cash equivalents totaled $893.0 million, with over $1.7 billion in available liquidity[7] - Share Repurchases: Repurchased 1,113,014 shares for $50.4 million during the quarter, with $254.9 million remaining under current authorization[7] - Dividends: The board declared a quarterly dividend of $0.18 per share, marking the 243rd consecutive quarterly payment[8] Outlook Management expects Q4 FY2025 results to improve, driven by higher North America steel margins, strong Emerging Businesses, and improved European fundamentals - North America Steel Group: Adjusted EBITDA margin is expected to increase sequentially due to higher steel product margins over scrap[14][15] - Emerging Businesses Group: Financial results are expected to improve on both a sequential and year-over-year basis[14][15] - Europe Steel Group: Expected to receive a CO2 credit of approximately $28 million; excluding this, adjusted EBITDA is still projected to increase sequentially[14][15] - The long-term strategy focuses on enhancing margins and cash flow through the TAG program, value-accretive organic growth projects, and complementary acquisitions to capitalize on structural trends in the domestic construction market[15] Financial Statements (Unaudited) This section provides unaudited condensed consolidated financial statements, with nine-month results impacted by a significant litigation expense Condensed Consolidated Statements of Earnings (Loss) For Q3 FY2025, net earnings were $83.1 million on $2.02 billion net sales, with a nine-month net loss due to a $358.5 million litigation expense Q3 Statement of Earnings Summary (in thousands) | Account | Three Months Ended May 31, 2025 | Three Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net sales | $2,019,984 | $2,078,485 | | Earnings before income taxes | $109,512 | $160,307 | | Net earnings | $83,126 | $119,440 | | Diluted EPS | $0.73 | $1.02 | Nine-Month Statement of Earnings Summary (in thousands) | Account | Nine Months Ended May 31, 2025 | Nine Months Ended May 31, 2024 | | :--- | :--- | :--- | | Net sales | $5,683,962 | $5,929,823 | | Litigation expense | $358,496 | $0 | | Loss before income taxes | ($85,688) | $501,921 | | Net (loss) earnings | ($67,119) | $381,560 | Condensed Consolidated Balance Sheets As of May 31, 2025, the balance sheet shows total assets of $7.0 billion and total liabilities of $2.9 billion, impacted by a new $358.5 million litigation loss Balance Sheet Summary (in thousands) | Account | May 31, 2025 | August 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $892,998 | $857,922 | | Total current assets | $3,358,709 | $3,292,768 | | Total assets | $6,993,823 | $6,817,839 | | Total current liabilities | $1,175,416 | $834,850 | | Total liabilities | $2,896,061 | $2,517,815 | | Total stockholders' equity | $4,097,762 | $4,300,024 | Condensed Consolidated Statements of Cash Flows For the nine months ended May 31, 2025, net cash from operating activities decreased, with significant cash used for investing and financing activities Cash Flow Summary (Nine Months Ended, in thousands) | Category | May 31, 2025 | May 31, 2024 | | :--- | :--- | :--- | | Net cash flows from operating activities | $399,865 | $547,891 | | Net cash flows used by investing activities | ($262,621) | ($240,947) | | Net cash flows used by financing activities | ($102,978) | ($202,662) | | Increase in cash | $35,573 | $104,793 | Non-GAAP Financial Measures This section reconciles GAAP to non-GAAP measures, primarily adjusting for litigation-related expenses and provisions - The primary adjustment is a "Litigation expense" which represents a provision recorded related to the judgment in the Pacific Steel Group litigation and subsequent interest expense on the judgment amount[31] Reconciliation of Net Earnings to Core EBITDA (Q3 FY2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net earnings | $83,126 | | (+) Interest expense | $10,864 | | (+) Income tax expense | $26,386 | | (+) Depreciation and amortization | $72,376 | | Adjusted EBITDA | $193,537 | | (+) Non-cash equity compensation | $9,546 | | (-) Settlement of New Markets Tax Credit | ($2,786) | | (+) Litigation expense | $3,776 | | Core EBITDA | $204,073 | Reconciliation of Net Earnings to Adjusted Earnings (Q3 FY2025, in thousands) | Line Item | Amount | | :--- | :--- | | Net earnings | $83,126 | | (+) Total adjustments (pre-tax) | $1,775 | | (-) Related tax effects on adjustments | ($505) | | Adjusted earnings | $84,396 |