Reports related to this article:
Project(s): View 3 related projects in PECWeb
Plant(s): View 3 related plants in PECWeb
Released January 21, 2013 | SUGAR LAND
en
Researched by Industrial Info Resources (Sugar Land, Texas)--For the first quarter of 2013, Commercial Metals Company (NYSE:CMC) (Irving, Texas) experienced gains and losses. Net sales stood at $1.8 billion, which was a 10% decrease compared to the first quarter of 2012. According to executives from Commercial Metals, sales were down for a majority of the company's segments. Despite the decrease in sales, the company's operating segments achieved profitability for the third consecutive quarter.
During the first quarter of 2013, Commercial Metals generated $126.2 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). In the first quarter of 2012, Commercial Metal's EBITDA was $55.5 million. The company's liquidity is just more than $1 billion. According to Joseph Alvarado, chairman of the board, chief executive officer and president, "The increase in adjusted EBITDA reflects the turnaround in operating performance, including changes in our organization structure to improve operational focus, difficult but necessary restructuring actions taken over the course of the past 18 to 24 months, as well as shedding unproductive and noncore assets." He believed that the company's actions to adjust cost structure helped to improve the financial performance of the company.
Commercial Metals had $49.7 million in net income. Barbara Smith, chief financial officer and senior vice president, said that the company's quarterly net earnings from continuing operations before taxes improved significantly to $72 million from $29.7 million in 2012's first quarter.
Part of the reason the company had mixed results in the first quarter of this year is because an entire mill in South Carolina had to be replaced when a new furnace had to be constructed. "We recorded $5.5 million in expenses during the quarter as a result of reduced production and related planned projects," Smith explained. This impacted selling prices, which went down in the first quarter of 2013 to $669 per ton after being $707 per ton during the first quarter of 2012. Alvarado said that the project was completed on budget and it has improved the company's throughputs and productivity.
As part of its Metals & Minerals Industry coverage, Industrial Info has tracked a few major Commercial Metals maintenance projects in the U.S., which include a $4 million program at an 850,000-ton-per-year steel minimill in Cayce, South Carolina, and a $3 million program at a structural steel mill in Birmingham, Alabama. Both of these projects were completed in 2012. Industrial Info also is tracking a $6 million project in Seguin, Texas, for which Commercial Metals is performing economic evaluation for a structural steel minimill electric arc furnace revamp. This project is projected to be completed in the first half of 2015.
Segments
Both Alvarado and Smith commented on the financial results of specific segments within Commercial Metals. The America's Recycling segment was profitable in the first quarter of 2013, despite reduced volumes in the company's ferrous and nonferrous businesses, which were affected negatively by lower demand compared to the first quarter of 2012. This segment's adjusted operating profit was $4.5 million. Smith said that ferrous scrap sold for $322 per short ton during the first quarter, and this was an 8% decrease from the $351 per ton that was reported the same time last year. The America's Mills segment performed well in the third quarter. Adjusted operating profit for this segment was $52.5 million. However, this segment's profitability was not as great as the executives hoped because of the outage in South Carolina.
Alvarado mentioned that Commercial Metal's U.S. shipment volumes were "slightly higher than a year ago." However, shipments did decline from the fourth quarter of 2012. He also explained that the financial performance of the company's fabrication segment in the Americas improved. "Actions taken to restructure and refocus the fab business have now yielded three straight quarters of profitability," Alvarado said. This segment had a profit of $10.2 million in the first quarter of this year. This is the third consecutive quarter of positive results for the fabrication segment after a long stretch of 10 consecutive quarters of losses.
The International Mills segment has continued to be negatively impacted by "significant margin compression, driven by economic recession in Europe, along with continued import pressures in Poland." Alvarado explained. Although this segment did not experience gains, the International Marketing and Distribution segment benefited from the company's sale of a minority interest in the Trinecke mill. The operating results in the commercial metals raw materials business had a profit recovery in the third quarter of 2013 compared with last year's first quarter.
Recovery is in Sight
Alvarando believes there is "emerging recovery" in construction and markets of the domestic market. He said that the Architectural Billings Index has registered about 50 for four months in a row. This shows that there is an increasing trend in design activity, which is a "precursor to increased construction activity in the future," he explained. Alvarando also said that he was "cautiously optimistic" because of the prospect of increased construction activity. It could mean future booking activity for Commercial Metals.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
During the first quarter of 2013, Commercial Metals generated $126.2 million of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). In the first quarter of 2012, Commercial Metal's EBITDA was $55.5 million. The company's liquidity is just more than $1 billion. According to Joseph Alvarado, chairman of the board, chief executive officer and president, "The increase in adjusted EBITDA reflects the turnaround in operating performance, including changes in our organization structure to improve operational focus, difficult but necessary restructuring actions taken over the course of the past 18 to 24 months, as well as shedding unproductive and noncore assets." He believed that the company's actions to adjust cost structure helped to improve the financial performance of the company.
Commercial Metals had $49.7 million in net income. Barbara Smith, chief financial officer and senior vice president, said that the company's quarterly net earnings from continuing operations before taxes improved significantly to $72 million from $29.7 million in 2012's first quarter.
Part of the reason the company had mixed results in the first quarter of this year is because an entire mill in South Carolina had to be replaced when a new furnace had to be constructed. "We recorded $5.5 million in expenses during the quarter as a result of reduced production and related planned projects," Smith explained. This impacted selling prices, which went down in the first quarter of 2013 to $669 per ton after being $707 per ton during the first quarter of 2012. Alvarado said that the project was completed on budget and it has improved the company's throughputs and productivity.
As part of its Metals & Minerals Industry coverage, Industrial Info has tracked a few major Commercial Metals maintenance projects in the U.S., which include a $4 million program at an 850,000-ton-per-year steel minimill in Cayce, South Carolina, and a $3 million program at a structural steel mill in Birmingham, Alabama. Both of these projects were completed in 2012. Industrial Info also is tracking a $6 million project in Seguin, Texas, for which Commercial Metals is performing economic evaluation for a structural steel minimill electric arc furnace revamp. This project is projected to be completed in the first half of 2015.
Segments
Both Alvarado and Smith commented on the financial results of specific segments within Commercial Metals. The America's Recycling segment was profitable in the first quarter of 2013, despite reduced volumes in the company's ferrous and nonferrous businesses, which were affected negatively by lower demand compared to the first quarter of 2012. This segment's adjusted operating profit was $4.5 million. Smith said that ferrous scrap sold for $322 per short ton during the first quarter, and this was an 8% decrease from the $351 per ton that was reported the same time last year. The America's Mills segment performed well in the third quarter. Adjusted operating profit for this segment was $52.5 million. However, this segment's profitability was not as great as the executives hoped because of the outage in South Carolina.
Alvarado mentioned that Commercial Metal's U.S. shipment volumes were "slightly higher than a year ago." However, shipments did decline from the fourth quarter of 2012. He also explained that the financial performance of the company's fabrication segment in the Americas improved. "Actions taken to restructure and refocus the fab business have now yielded three straight quarters of profitability," Alvarado said. This segment had a profit of $10.2 million in the first quarter of this year. This is the third consecutive quarter of positive results for the fabrication segment after a long stretch of 10 consecutive quarters of losses.
The International Mills segment has continued to be negatively impacted by "significant margin compression, driven by economic recession in Europe, along with continued import pressures in Poland." Alvarado explained. Although this segment did not experience gains, the International Marketing and Distribution segment benefited from the company's sale of a minority interest in the Trinecke mill. The operating results in the commercial metals raw materials business had a profit recovery in the third quarter of 2013 compared with last year's first quarter.
Recovery is in Sight
Alvarando believes there is "emerging recovery" in construction and markets of the domestic market. He said that the Architectural Billings Index has registered about 50 for four months in a row. This shows that there is an increasing trend in design activity, which is a "precursor to increased construction activity in the future," he explained. Alvarando also said that he was "cautiously optimistic" because of the prospect of increased construction activity. It could mean future booking activity for Commercial Metals.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
