CMC(US:CMC)2025-06-23 16:02Financial Data and Key Metrics Changes - CMC reported net earnings of $83.1 million or $0.73 per diluted share on net sales of $2 billion, with adjusted earnings of $84.4 million or $0.74 per diluted share, down from $119.4 million and $1.20 per diluted share in the prior year period [8][30] - Consolidated core EBITDA was $204.1 million with a core EBITDA margin of 10.1%, compared to $256.1 million and 12.3% in the prior year period [30][32] - North American Steel Group generated adjusted EBITDA of $186 million, down 24% year-over-year, with an adjusted EBITDA margin of 11.9%, compared to 14.7% in the previous year [32][33] Business Line Data and Key Metrics Changes - North American Steel Group experienced a sequential improvement in steel product margins, exiting the quarter at a steel product metal margin of $518 per ton, which is $19 per ton higher than the quarter average [33][34] - Emerging Business Group net sales increased by 4.7% year-over-year to $197.5 million, with adjusted EBITDA rising by 7% to $40.9 million, driven by strong demand for proprietary products [35] - Europe Steel Group reported adjusted EBITDA of $3.6 million, an improvement from a loss of $4.2 million in the prior year, due to increased shipment volume and cost management efforts [36][37] Market Data and Key Metrics Changes - Finished steel shipments in North America increased by 3.2% year-over-year, while combined daily rebar shipments grew by approximately 1.3% [34] - The Dodge Momentum Index, a measure of construction planning activity, is near an all-time high, indicating robust construction pipeline activity [9] - Demand for infrastructure activity is strengthening, particularly in key Sunbelt states, which is expected to continue for at least the next couple of years [10][11] Company Strategy and Development Direction - CMC is executing a strategy aimed at enhancing financial profiles and driving value-accretive growth, focusing on operational excellence and organic growth [6][22] - The company anticipates achieving approximately $50 million of EBITDA benefit from its TAG program in fiscal year 2025, with a target of over $100 million in annual run rate EBITDA benefits when fully realized [24][25] - CMC is targeting attractive adjacencies in the early-stage construction market, with a focus on maintaining a net debt to EBITDA ratio below two times [28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term outlook, citing strong structural drivers for construction activity, including infrastructure investment and reshoring industrial capacity [11][12] - The company expects consolidated financial results in the fourth quarter to improve compared to the third quarter, with anticipated increases in finished steel shipments and adjusted EBITDA margins [44] - Management acknowledged the impact of economic uncertainty and elevated interest rates but remains confident in the resilience of primary end markets [10][11] Other Important Information - CMC's cash and cash equivalents totaled $893 million, with total liquidity exceeding $1.7 billion, providing flexibility for strategic growth projects and shareholder returns [38][39] - The company plans to invest between $425 million and $475 million in capital expenditures for fiscal year 2025, down from previous guidance due to delays in certain expenditures [40][41] - CMC returned approximately $71 million to shareholders during the third quarter, repurchasing about 1.1 million shares [42] Q&A Session Summary Question: What drove the lower steel product volumes in North America? - Management noted outages late in the quarter affected production, leading to lower inventories and higher costs, but expressed confidence in a strong fourth quarter [50][51] Question: Are rebar prices gaining traction? - Management indicated a focus on value over volume and is monitoring pricing dynamics closely, with a balanced approach to pricing strategies [54][56] Question: Update on Arizona Two's utilization rate? - Management reported good progress, expecting to exit the year at around 70% to 75% utilization, with a profit anticipated in the fourth quarter [62][63] Question: Confirmation on West Virginia mill ramp-up timing? - Management confirmed the ramp-up is planned for the first half of the year, with delays attributed to compliance with tax credit requirements, not market conditions [68][71] Question: Insights on inorganic growth opportunities? - Management highlighted a good pipeline of potential acquisitions, emphasizing discipline in evaluating opportunities and the importance of achieving synergies [80][84]