CMC revenue rises with addition of Gerdau mills

CMC revenue rises with addition of Gerdau mills

Texas-based company reports 33 percent revenue gain in Q2 of fiscal 2019; recycling profits decline.


Irving, Texas-based Commercial Metals Co. (CMC) says revenue in the second quarter of its 2019 fiscal year rose by 33 percent, thanks to “various strategic growth initiatives and favorable market conditions.” The growth initiatives included the November 2018 acquisition of rebar-making steel mills in the United States from Brazil-based Gerdau S.A.

The company also has reported increased earnings for the quarter, which ended Feb. 28. CMC’s adjusted earnings rose 13 percent to $35 million in the quarter compared with $31 million in adjusted earnings in the second quarter of last year.

“Excluding nonrecurring integration-related costs and acquisition accounting inventory step-up charges related to the four steel mills and rebar fabrication assets purchased from Gerdau S.A., the acquired assets contributed revenue of $383.6 million and operating income of $32.9 million to the consolidated results of CMC in the second quarter of fiscal 2019,” states the company.

Barbara R. Smith, president, CEO and board chair of CMC, comments, “We are very encouraged by our progress of integrating the rebar assets we acquired from Gerdau last year. We continue to be highly confident they will provide the anticipated benefits and generate attractive returns for our stockholders.”

Regarding other factors that affected results, Smith remarks, “The quarter was impacted by typical seasonality and unprecedented rainfall levels in many of our markets, which impacted construction activity, resulting in lower shipments in the quarter.  I am pleased with the results of our ongoing operations and remain very optimistic about our growth in the second half of fiscal 2019.”

The company says its Americas Recycling segment recorded adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $10.1 million for the second quarter of fiscal 2019 compared with adjusted EBITDA of $17.2 million for the prior year’s second quarter.

CMC says this drop in recycling-related profits reflected “a decreasing ferrous and nonferrous scrap price environment.” Despite the recent price volatility, the company says it generated positive returns in the quarter thanks to what it calls a low operating cost structure, disciplined buying practices and efficient inventory turnover rates.

Looking ahead to the rest of the fiscal year, Smith says, “We are optimistic that the upcoming construction season will be strong both in the U.S. and Poland. The combination of a good mill margin environment, ongoing progress on executing cost reduction opportunities afforded by the acquisition, and completing some of the lower margin rebar fabrication backlog gives us confidence that we will deliver strong results for the balance of the fiscal year.”