Commercial Metals Beats Q2 Expectations Despite Sales Dip, Gears Up For Solid Construction Season

Commercial Metals Company CMC reported second-quarter fiscal 2024 net sales decline of 8.4% year-over-year to $1.85 billion, beating the consensus of $1.80 billion.

Downstream contract awards surged to their highest level in almost two years in the quarter, indicating a robust pipeline poised for the forthcoming construction season.

The company reported that its North America and Europe Steel Groups made significant improvements in reducing controllable costs per ton of finished steel shipped year-over-year, positively impacting financial performance.

Adjusted EPS was $0.88, down from $1.44 a year ago, beating the consensus of $0.75.

The average selling price for steel products decreased to $905 per ton compared to $985 a year ago.

North America Steel Group’s cost of scrap utilized increased by $33 per ton, resulting in a year-over-year decrease in steel products margin over scrap of $113 per ton. 

Total adjusted EBITDA declined 33.6% Y/Y to $197.1 million, and the margin contracted by 404 bps to 10.7%.

As of February 29, 2024, cash and cash equivalents totaled $638.3 million, with available liquidity of ~$1.5 billion.

CMC’s net cash flows from operating activities for the first six months totaled $350.02 million compared to $558.91 million in 2023.

During the quarter, the company repurchased 945,205 shares valued at $47.9 million. As of February 29, 2024, CMC had $510.4 million remaining under the current share repurchase authorization.

Core EBITDA decreased to $224.37 million from $302.79 million a year ago; the margin contracted 286 bps to 12.1%.

Dividend: On March 20, CMC declared a quarterly dividend of $0.18 per share, representing an increase of ~13% from the prior dividend. The dividend is payable on April 10, 2024, to stockholders of record on April 1, 2024.

“Based on our current outlook for production mix and volume levels, the plant is anticipated to achieve EBITDA breakeven results by the end of the fiscal year. Site improvements at our Steel West Virginia micro mill are nearing completion. Initial equipment deliveries are scheduled for the spring and early summer, and we expect to remain on plan for a start-up in late calendar 2025,” commented Peter Matt, President and Chief Executive Officer.

“These projects, together with our recent acquisitions, position us to take advantage of favorable structural trends powering domestic construction, and are expected to drive strong future growth in earnings, cash flow, and shareholder value,” Matt concluded.

Price Action: CMC shares are trading higher by 1.57% at $56.89 on the last check Thursday.