- Core EBITDA: $1 billion for fiscal 2024, down from $1.4 billion in fiscal 2023.
- Core EBITDA Margin: 12% for fiscal 2024.
- Cash Flow from Operating Activities: $900 million for fiscal 2024.
- Shareholder Returns: $261.8 million returned through share repurchases and dividends in fiscal 2024, a 48% increase from fiscal 2023.
- Fourth Quarter Revenue: $2 billion.
- Fourth Quarter Net Earnings: $103.9 million or $0.90 per diluted share.
- Fourth Quarter Consolidated EBITDA: $227.1 million.
- Fourth Quarter Core EBITDA Margin: 11.4%.
- Return on Invested Capital: 10% trailing 12 months.
- North American Steel Group Adjusted EBITDA: $210.9 million for the fourth quarter.
- Europe Steel Group Adjusted EBITDA Loss: $3.6 million for the fourth quarter.
- Emerging Business Group Fourth Quarter Net Sales: $195.6 million.
- Emerging Business Group Fourth Quarter Adjusted EBITDA: $42.5 million.
- Cash and Cash Equivalents: $857.9 million as of August 31.
- Total Liquidity: Just under $1.7 billion.
- Fourth Quarter Cash from Operating Activities: $351.8 million.
- Capital Expenditures: $81.5 million for the fourth quarter.
- Net Debt to EBITDA Ratio: 0.3 times.
- Net Debt to Capitalization: 6%.
- Effective Tax Rate: 22.3% for the fourth quarter, 23.6% for the full year.
- Fiscal 2025 Capital Spending Outlook: $630 million to $680 million.
Release Date: October 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Commercial Metals Co (CMC, Financial) achieved record employee safety performance in fiscal 2024, marking the lowest incident rate in the company's history.
- Fiscal 2024 was one of the best financial years for CMC, with core EBITDA of $1 billion, which is 40% above any pre-pandemic year.
- CMC returned $261.8 million to shareholders through share repurchases and dividends, a 48% increase from fiscal 2023.
- Significant progress was made on strategic growth projects, including advancements at the Arizona 2 micro mill and the West Virginia site.
- The TAG initiative is expected to drive sustained margin enhancement and earnings growth, with financial benefits anticipated to start in fiscal 2025.
Negative Points
- Core EBITDA declined from $1.4 billion in fiscal 2023 to $1 billion in fiscal 2024, indicating a decrease in profitability.
- The North America Steel Group faced weaker market sentiment, negatively impacting long steel pricing and margins.
- The Europe Steel Group continued to face challenges with increased imports from neighboring countries, leading to near breakeven results.
- Uncertainty in the construction market due to interest rate fluctuations and the upcoming US Presidential election has led to hesitancy among project owners.
- The fiscal 2025 outlook anticipates a decline in financial results in the first quarter due to temporary softness in the construction industry.
Q & A Highlights
Q: Can you provide guidance on the emerging business group's performance, particularly in relation to higher margin products at Tensor?
A: Peter Matt, CEO: We expect the emerging business group's performance to be roughly similar year-over-year, primarily due to seasonal trends. This segment typically experiences strong Q3 and Q4 results, with more pronounced seasonality than other parts of our business.
Q: When will you be able to quantify the benefits of the TAG initiative, and are there any immediate benefits expected in 2025?
A: Peter Matt, CEO: We are excited about the TAG initiative, which is structured over three to four years. We expect contributions in 2025 but will refrain from sharing specific numbers at this early stage. We have over 150 initiatives, with some already in execution, and plan to update on progress periodically.
Q: Regarding the TAG initiative, are you targeting margins higher than the current environment, or maintaining current levels?
A: Peter Matt, CEO: Our goal is higher through-the-cycle margins, supported by industry consolidation and current trade environments. TAG will incrementally contribute to margins, helping us achieve higher levels or defend current margins, depending on market conditions.
Q: Can you provide more clarity on the current backlog value compared to last quarter?
A: Paul Lawrence, CFO: Backlog volumes remain comparable to the previous quarter and year-over-year. However, the value is lower due to competitive construction activity and reduced rebar material prices, impacting the backlog's overall value.
Q: What is the status of Arizona 2, and how do you view volumes in a softer construction market?
A: Peter Matt, CEO: Arizona 2 has faced challenges but is progressing. We aim for a full run rate of 500,000 tons annually. Despite current market softness, we expect construction demand to strengthen in the latter half of the year, and we will maintain disciplined supply.
Q: What are your options if Germany's economic recovery is delayed, affecting your Europe Steel Group?
A: Peter Matt, CEO: We are committed to our Europe Steel Group, which has historically contributed significantly. We expect Germany's recovery by late 2025 or 2026. Our team is focused on cost improvements, and we anticipate profitability will return quickly with economic recovery.
Q: Why have you downgraded the estimated impact of infrastructure on rebar demand?
A: Peter Matt, CEO: We've adjusted our estimates due to inflationary impacts on infrastructure spending, which could be 25-30%. Despite this, infrastructure spending remains significant, with 80% of funds yet to be spent, supporting long-term demand.
Q: Can you discuss the supply and demand dynamics in the US merchant bar market?
A: Peter Matt, CEO: Demand is good but not great, with low service center inventories. Recent price adjustments have impacted margins more than rebar. Despite current challenges, we remain confident in the merchant bar's ability to generate good returns.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
