CMC suffers losses in late 2024

Irving, Texas-based CMC is reporting a $175.7 million loss in the three-month period from September through November 2024, which represents the first quarter of its 2025 fiscal year.

The loss of $1.54 per diluted share is a sharp contrast from profits of $1.49 per diluted share, or $176.3 million, it enjoyed in the same period in 2023. A November legal verdict in California, recorded as a litigation expense on the company’s quarterly statement, was the primary reason for the setback.

CMC’s net sales dropped from $2.0 billion in late 2023 to $1.9 billion in late 2024, a 5 percent decline.

“Financial results continued to be hindered by economic uncertainty that has weighed on new construction activity, pressuring steel pricing and margins,” CMC President and CEO Peter Matt says.

In addition to operating recycled-content electric arc furnace (EAF) steel mills and offering steel and concrete building supplies, CMC also oversees a network of more than 40 metals recycling facilities.

The company announced in late 2023 the results of its recycling facilities and its American EAF mills would be included in its North America Steel Group business segment.

In that combined steelmaking and recycling segment, CMC's earnings before interest, taxes, depreciation and amortization (EBITDA) decreased to $188.2 million in the recently completed quarter, a drop of 29.4 percent from the $266.8 million earned one year earlier.

“The earnings reduction was driven by lower margins over scrap costs on steel products and downstream products,” CMC says. “The adjusted EBITDA [earnings before interest, taxes, depreciation and amortizaiton] margin for the North America Steel Group of 12.4 percent declined from 16.8 percent in the first quarter of fiscal 2024.”

The firm’s financial statement indicates it paid an average of $370 per ton for the ferrous scrap it melted in late 2024, up from $365 per ton in late 2023. Meanwhile, the company’s steel mill products sold for an average of $812 per ton in late 2024, down 9 percent from the $892 per ton average selling price in late 2023.

While the company’s mill buying price illustrates an essentially flat (+1.4 percent) recycled steel market, CMC’s overall raw materials selling price in late 2024 points to the rising value of the recycled nonferrous metals it also processes and resells.

In late 2023, the company’s combined ferrous and nonferrous raw materials fetched an average of $783 per ton when sold. However, in the September through November 2024 period that value rose 11.6 percent to an average $874 per ton selling price.

Also affecting the company’s balance sheet was a $110 million legal judgment in California (which was then tripled because of a law in that state) that went against CMC in November. The restraint-of-trade-related case was filed by steel rebar fabricator Pacific Steel Group. Although CMC plans to appeal the verdict, it also says, “As a result of this judgment, a $350 million provision was recorded in the first quarter fiscal 2025 results.”

CMC's Emerging Businesses Group, which consists largely of semifinished and finished construction products, had net sales of $169.4 million in late 2024, representing a decrease of 4.4 percent compared with one year earlier.

The company says a $44.1 million Polish government annual CO₂ credit was one of the few bright spots during the quarter for its Europe Steel Group. That group consists of a mill in Poland plus sales offices and recycling facilities in Poland and other European nations.

“Excluding this credit, financial results deteriorated modestly compared to the prior two quarters due to metal margin compression driven by high import volumes,” CMC says of its European segment. The business unit experienced a nearly 9 percent reduction in shipment volumes from late 2023 to late 2024.

“Within this difficult market environment, the Europe Steel Group has executed on an extensive cost management program that has meaningfully reduced controllable costs,” CMC says. “Controllable costs per ton during the first quarter of 2025 declined from the prior year period, excluding energy credits and rebates.”

Looking at its American market going forward, Matt says, “We remain confident that this weaker demand environment will be temporary as we expect the underlying drivers across infrastructure, nonresidential and residential end markets will provide multiyear support for our business.

“Our downstream bid levels and several key external indicators continue to evidence a robust pipeline of potential future projects that should translate into construction activity in the coming quarters."

That optimism may not translate into immediately better results though, according to Matt.

“We expect consolidated financial results in our second quarter of fiscal 2025 [Dec. 2024 through Feb. 2025] to decline from the first quarter level,” he says. “Finished steel shipments within the North America Steel Group are anticipated to follow normal seasonal trends, while adjusted EBITDA margin is expected to decrease sequentially on lower margins over scrap cost on steel and downstream products."

Concluding on an optimistic note, Matt says, “We are very encouraged by our recent conversations with customers and the optimism they have voiced about the coming quarters. Key indicators of the construction pipeline also point in a positive direction. Outside of construction, measures of both big and small business confidence have improved significantly over the last two months. The palpable shift in sentiment gives us confidence that current softness is transient and that we should soon enter a period of renewed strength in our core markets.”