CMC - Earnings call transcript Q1 2019 | Commercial Metals Company

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Operator

Hello, and welcome, everyone, to the first quarter fiscal 2019 earnings call for Commercial Metals Company. Today's call is being recorded. After the company's remarks, we will have a question-and-answer session and we'll have a few instructions at that time. I would like to remind all participants that, during the course of this conference call, the company will make statements that provide information other than historical information and will include expectations regarding economic conditions, effects of legislation, US steel import levels, US construction activity, demand for finished steel products, the company's future operations, the company's future results of operations, the ability to realize the anticipated benefits of our acquisition of certain rebar assets from Gerdau S.A., the investment in our new micro mill in Durant, Oklahoma, and capital spending. These and other similar statements are considered forward-looking and may involve speculation and are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. Factors company's certain on those Form risks described the the are conditions, that XX-K reflect company's in to the reports subject and Risk XX-Q. and statements subsequent beliefs report on current based but are latest quarterly These annual of Form on section uncertainties, including

date. differ prove information Except the offers that or these may assumptions, not to circumstances expectations or Although future these as management's clarify required All on actual any assurance based materially. amend in new been current does expectations changes and beliefs occurrence made no by of or otherwise. will to are of with law, update, statements connection events, assume are CMC and have correct, anticipated these or beliefs, only CMC this in statements or results statements events, obligation unanticipated as

such found to or numbers will made reconciliations be non-GAAP financial all references otherwise, or company's earnings to release and measures company's references year be quarter-end numbers for on Unless stated the are Some the can website. the presented in the of fiscal of and Barbara fiscal quarter. And to introductions, I ahead. Board, now, the company's Smith. Commercial Officer will Metals turn go year Company, Chief call Please over opening Executive remarks President the for or and Chairman Ms.

Barbara Smith

fiscal after to of second prepared the open of Mary in conclude joining Good Thank our Lindsey quarter which remarks new I to XXXX. call the everyone discussion the CMC’s we begin more and a first questions. then review highlights detail XXXX, you, cover for will the of to and will our information the for the outlook quarter. quarter morning first fiscal Gary. year for will call quarter’s will with results financial call I the happy with

the the rebar of and joined Before to of results, the that Gerdau was the a CMC assets the as part discussing new beginning welcome moment to would who I X,XXX November. acquisition completed approximately at take our recognize like of employees of

couple great working months, new a While shown it's our to have be been certainly employees only of at CMC. excitement

we or net As earnings earnings million quarter. impact diluted announced in fiscal share $X.XX $XX.X from our this and first of XXXX affected per operations of this continuing reported $X.X billion. of results the on release accounting quarter acquisition sales the related The adjustments our morning,

However, excluding operations the these were of underlying our strong. items results

of quarter financial that results Directors pleased full-year press the during described of as on I'm will be our the dividend share dividend. quarterly XXXth stockholders on XXXX. CMC paid XX, same common Excluding and January will per of operations a in This share. the rainfall this on the the occurred period represents that non-operational level rainfall reduced million approximately in highest from diluted our by legal shipments comparison Texas our increase in in our the per continuing We XX,XXX integration $X.XX impact adjusted details XX% fiscal tons. quarterly $X.XX first and to our in despite approximately declared many a The CMC’s markets. consecutive such were Further stock XXXX of of that, of to update. as costs Mary earnings Also, acquisition, estimate XX, cash certain release $XX.X X, January dividend costs, or record report market, of of noted Board represents This on for January by the XXXX. be record

In spend announcement increasing construction heightened non-residential business approximately operate. in with job in construction in with demand. jobs over prior-year. key of continue past creation calendar expand have including pace December. at in Polish market to decade, of estimates of market the new for seen upwards market, GDP that which past to grow market, continues manufacturers the fastest Now, The stock months, to markets continues rate the The the orders spending capacity and to X.X% rose a also labor solid our of the well we US November, the XXXX. X.X%, the the we the us, tight for coupled prompting with A perform in X.X% added meet seen to strong the should Despite we've to end remains estimates conditions. comparison Friday's approximately the being revised in manufacturers XXXX enjoy conditions with six Overall, in at continue support example, growth important public for also highest trends over I’ll cover to markets. XXX,XXX approximately economy to growth to some continued volatility in

XXXX strategic growth Third strong will attractive our and the and well-timed in past outlook, to the expect, was growth With initiatives our highest they market generate quarter confident, years. GDP been returns I'm investors. have XX

as of the and capacity, the Jersey, The as on southeast. annual we million fabricated provides Gerdau in Tennessee As markets the certain the as XX across a facilities in us mills as acquisition acquisition including of tons is shipments to transformational Northeast rebar adds based tons volumes. CMC of mills I on a mentioned X.X US. well the as approximately earlier, New approximately West acquisition shipment platform California, Florida, broader more as customers November such X, well XXX,XXX This serve closed fabrication for many and assets, it recent rebar efficiently Coast, melting of on

pull-through In which addition, the fits proven fabrication facilities vertically-integrated model. our provide business demand the

the for prior shareholders in The acquisition this will provide financing that come. will was time are that transaction attractive the recent attractive, rates transaction. the synergies we of confident price underlying in many increase long-term our expect facets being the and returns arranged through to We that

operations to administrative from exceed rate much operations allow the faster due most Over is We've and of we systems progress and some anticipated million. logistics cost quarter. a operating including number commercial originally and we realization practices, reduction sources integration were the a general as the and as the of synergies. work annual quicker expense do to for operational advanced that anticipate expect estimate the prepare procurement than initial of CMC to migrated different to realize months, other coming for will to our will second synergies optimization, systems systems to our run the This of well already able excellence during the of migrating our $XX opportunities,

second the very growth $X.X facility. tons, initiative EBITDA Oklahoma approximately The almost ramp-up new of XX,XXX production key is We our mill from this Durant, gone at shipped of this generating Mill. million in quarter volumes has The micro well.

the than production to product to facilities originally strategic the initiative production strong growth of due have by US once rebar returns which, of crew, first lead market as world customers. properly our has will also is margins. a been spooled where demand generating anticipated fabrication the the to elevated rebar to higher metal continuous third-party it in facility. produce now and We CMC own at hot increased in This completed well fourth to again offer and this hiring the trained, The the first process as a received once the unique continuous, is well

during start hot Arizona to fiscal progressing are the quarter producing fourth our continue in also ongoing facility and of expect at We to XXXX. mill to our invest we spooler is is second investing for rebar. our spooled material micro Construction this spooled produce future. well we where Construction at

the In production existing metric XXX,XXX goods its facility to allow Polish initial capacity by tons. at and rod expanding begun investment approximately product. our fully higher-margin activities and merchant expansion capacity addition, finished we've will utilize construction The continue into melt to facility the related its wire

Senior as With completed that We discussion end of an our President overview, Vice fiscal Financial be expect the Mary XXXX. Chief the now Lindsey, Officer. the turn to and by project I will to over

Mary Lindsey

Thank morning to you, Barbara. joining And call. us on good everyone the

quarter million per from of share operations per comparison diluted As first items. continuing of the acquisition quarter $X.XX other to continuing for $XX.X earnings XXXX Barbara from are the $XX.X or we first of mentioned, diluted related or share of XXXX. after-tax to and million reported earnings in the results quarter, non-operational in Included costs million the in $X.XX operations first $XX.X

diluted continuing these or $XX.X adjusted from per costs, were Excluding $X.XX earnings share. operations million

first XXXX Our approximately of quarter for quarter continuing XX% XXXX. were greater adjusted from of the than earnings our first operations

complete including the affect spend acquisition I the rules requirements In to these and summary, November will purchase by liability balance Gerdau closing acquisition. the to generated acquired than CMC purchasing the purchase party. Now, as rebar November market by though of majority million. will the that at primarily The operations. third closing. assets X seller. time cost a the these this and from accounting It’s will for date unrelated of fixed fabrication was which fabrication Technical were liability important all sheet related segment time cost opening an the contracts negotiated This is backlog more receive some contract the by acquired however, $XXX revalue before CMC understand, to market entered fabrication a X will large tons, CMC accounting the is and determined contracts, to into at acquired at discussing using liabilities XXX,XXX prices revenue mark-to-market of principles of

purchasing own is the primarily fabrication rebar segment our course, from Of mills.

is So, mill cost offset not and of portion to by the our large this does profits represent liability cash segment CMC. a

this fabrication real this segment essentially months, have on an final normally earnings amortized for costs, prices and acquired as much contracts these see is purposes, core operating levels, are liability been be cost they business case, classified amortization EBITDA shipped will can EBITDA EBITDA non-GAAP assuming to a X that, improve remain in not to the into fiscal do disclosure One for at income you pre-November added November material included our breakeven as over we As not this income. while back it under in in be fabrication as will so perspective, reserve the note segment, perform Therefore, release. amortization would our the we is fabrication coming the and expect from of to XXXX. of GAAP, X since rebar

million reserve XX, to first sheet $XX.X XXXX balance million reducing million backlog balance approximately quarter, today's from amortized the of income, release. liability sheet, fabrication into the acquired on $XXX.X was November as earnings the opening contract unfavorable $XXX.X in for the noted During

is excluding intercompany or require income technical approximately guidelines amortization profit results Again, assets $XX.X tons. XXX,XXX a benefit elimination include the effect shipments noted the operating corporate profit the any acquired facilities. $X.X shipments the on not the acquired the reduction this on intercompany which mills accounting from the to by the segment. generated unfavorable GAAP operations EBITDA previously, the contract reserve reflect fabrication in item. $X.X from does and technical of our by segments, of million, profit This of of non-cash the the Overall, The million generated acquired again intercompany of elimination adjustment adjustment. of operating was loss appears purchase from increasing In other million apparent to elimination income this addition, CMC

the core of reflected today, release XXXX operations for the to $XX.X million $XX.X was As XXXX. earnings issued quarter from in first million comparison earlier first for continuing of EBITDA quarter in the

from million. earlier, amortization include unfavorable loss of the this $XX.X as and the the does mentioned However, million contract intercompany not of reserve profit adjustment elimination benefit includes the $X.X

at quarter of XXXX. compared quarter the the year the Mills consistent XXXX. adjusted segment. first continued $XX $XX both of primarily recorded results million for of The stable by facility, adjusted same increase in in first comparison million segment this prior-year the from shipments during which the decreased with EBITDA in not segment XXXX, shipments and the first remain has fiscal the period the to the seasonal segment in increase acquired EBITDA in $XX.X first and were primarily segment the In the the did mills to have to of which our comparison first approximately shipments quarter the of which The from and acquired $XXX XXXX $XX.X the million of Recycling the our mill, was operations volume million EBITDA four prices the for XXXX non-ferrous fourth to adjusted of In prior the results from highest mills, adjusted the any Americas quarter the the the good ferrous recorded compared Oklahoma which relatively month $XX.X is segment, first per of well. from to this weather fiscal from typical started At for wet XXXX, the excluding tons quarter, EBITDA relatively from shipments for Volumes XXXX increase historically led the ownership. period. of the due in and not of for acquired an the volume new Looking remainder of quarter the quarter by quarter year shipped Oklahoma adjusted fiscal Americas of of had first and the Durant, locations shipment $XXX.X ton quarterly incremental EBITDA fiscal as has XXXX, holidays Americas margin since prior of XXXX. metal The was Mills increased volumes in the period. that prior-year earned by margins, metal the to in per quarter driven shipment reduced ton, this that from partial million contributed XXX,XXX

seen cost outages, XXXX, and including alloys, segment costs, quarter of compared adjusted in of the results quarter quarter. adjusted include from $X which as the to an of tons million as recorded have EBITDA facilities. on electrodes first first maintenance EBITDA increased costs of an We loss compared $X These labor XX,XXX prior-year of $XX acquired XXXX in Americas million manufacturing XX% the loss The million shipments period-over-period. Fabrication increases to EBITDA well increases for the

benefit mentioned this impacted which As segment contract wet bid very reserve. Volumes the quarter. being of construction the historically unfavorable first and not of the by this the during were weather activity, Overall, both on work amortization slowed include in shipments previously, remain booked. strong loss volumes affecting the does

from fabrication confidence quarters. good has to for legacy XX% in the assets rebar prior-year our increased Excluding in demand backlog, the giving acquired coming comparison the approximately the the backlog

first $XXX than As were in in contracts book first higher of materials prices this we quarter fiscal saw the shipped rise during ton during XXXX, throughout selling rebar to XXXX we work in prices. of quarter the XXXX. fiscal as higher Fabricated XXXX at booked continues segment selling the quarter approximately and per on

However, business, this, very reducing pressure Both unemployment, And Coast costs, low rebar primarily availability and placing rising ironworkers, put in activity costs has labor the together Construction continue costs margins. material efficiency. California in significantly. of to experienced West with pressure exceptionally placing raw grew busy. on is

done that the jobs completion months. significant been coming more in the are of be challenged and nearing Some have should

the despite prices strong but outage of in a including maintained quarter by billet supported to segment is of orders, from profitable the lowered half quarter pricing, in XXXX, EBITDA segment, overall mentioned mills. loss. for rolling to the from fiscal positive XXXX The Assuming of $XX contract well recycling approximately loss profits. the non-operational million in $XX.X as we we the other the the million adjusted loss a when our of fabrication outage overall net quarterly legacy results to to mix million. operations the second fabricated reserve, includes stable rebar This million. to amortization a business International The Current the second would would Cost mentioned combining EBITDA the and we to an planned and prices. of costs as the shipments for current the that fabrication rebar increased elimination. margins. costs I will segment of margin while consolidated which approximately on are – normalize outage the expect including elimination being that the highest at – increase that selling to fiscal of be profitable were second in We adjusted anticipate the will the $XX.X year. five-week that $XX.X Mills one rebar acquired if strong earn It the EBITDA will by vertical second only opportunistic that worth business comment $X.X million and our of segments current the in as during the earlier estimate Poland, quarter. of strong sector market This XXXX, from essentially recorded XXXX. model have, same intercompany which margin CMC period million by for of contracted and integration mill noting cost shipped demand as fiscal we intercompany result corporate work like the tons continues segment, operations be costs construction be reflects ever breakeven the $X.X earned despite the the the recorded fourth and prior The fabrication that maintenance this increased the first is product segment, includes increase of also ship that, previously,

mentioned, due hampered intercompany approximately facilities. to of $X.X from to the acquired construction related to legacy $X.X increase in levels elimination remaining the from previously profit As million is to CMC on at resulting our that wet that mills fabrication million The facilities, weather shipments activity. of is low shipment the inventory fabrication due

coming the this that expect over normalize will We months.

our to sheet balance and Turning liquidity.

approximately we of November of XXXX, credit receivable $XX.X million. our As and availability and XX, under cash totaled facilities $XXX.X and cash equivalents million accounts had

we the on prior months. facility, with quarter, which on funds drew working acquisition. to loan price in bonds that term credit and May noted $XXX together issued acquisition a During funded rising raised will contains a for the coming settled the the calculated rates interest be which by should and It cash the million the our hand true-up the in purchase capital be XXXX

expenditures for first of estimate were in costs to the spending range XXXX assets. million, quarter, million includes the $XX.X million. $XXX our $XXX be which We related capital the acquired to capital For that will fiscal

to cash statement by new GAAP, first amendment Poland of standard how which operating concludes are the future, accounting in you the flow for periods in cash both as the previous This programs The has to now investing be accounts operating flows. into the and return to the as programs reported receivable remarks. application rather activities on the generated shown in it flows. for sold which collections turn the guidance. of as covered of a the the my quarter filings, accounts was adopted receivable retrospective program certain standard, result reflected I’ll required a to collection prior accounts statement where the cash as requires by resulted activity all US such over X-K XXXX, to presented, the by of receivable US disclosed cash Barbara During changed fiscal which an the CMC In facilities, very much. of activities to cash the will outlook. new than been adoption Thank consolidated back

Barbara Smith

Mary. you, Thank

Our the shipment winter due conditions our holidays construction activity. quarter and is slowing quarter to typically second weather low

Polish construction felt outlook finished very goods quarter. the do our margins. for we anticipate the metal pricing, planned significant we supported with first as downward the occurred From current outlook pressures the some in perspective, slightly stable have well relatively on manufacturing fabrication planned stable which have not for confident continued most quarter. Poland the which by and a We large metal our From first US not inflationary outages during and quarter, but costs in second side, been seen strong as scrap bullish sentiment their However, XXXX. demand by our the should anticipate during significant during to margin operation, do our result remain cost the which backlogs, in relatively strong outage moving as companies from as ferrous we levels as

the we turn and that business. and about working backlog fabrication confident are are corner in anticipate We to the the through

As Mary per the period $XXX the being of approximately booked fabrication during quarter higher fiscal our than year. XXXX are first prior of during contracts mentioned, new ton same

some be very West the to the challenging continuing jobs second will quarter in Coast in are that nearing completion challenging. We which result have

of we see as to the segment fabrication the the older, second work rebar returning the current based during CMC lower-priced is on half shipped. year prices, legacy However, profitability

provide of acquired assets they their returns similar to that accretive month the seasonal pace we however, our similar did quarter. the expect ownership. for at newly second anticipate will the We first acquired for effects facilities

these at are believe we to the to operations excellence of the committed our from returns commitment center our integrating culture critical at on facilities. to to addition is In we also culture these the systems, service CMC of investments the Customer to this focusing transition we this customers make. is maximize and

of culture. our this that record and recognized embrace market-leading delivering track eager service believe to proven a customer new have are employees We

the for Before tremendous the closing opening migrations to their taken to the a I’d done CMC on in which employees efforts call system have thank the work take efforts and all like the date for to place. questions, integration acquisition, the moment

All customer providing the of done time, will we has level of And be Thank that to questions. this the this service has come now you. open expected call CMC. high at from while to been

Operator

[Operator Instructions].

comes Martin with question from Englert Please The ahead. Jefferies. go first

Martin Englert

everyone. Good Hi. morning,

Barbara Smith

Martin. morning, Good

Martin Englert

above on in And they quarter-on-quarter. prepared times and the touched and release in some back if step up flagged see the with coming electrodes you You on several ton, notably $XX you to and the of pressures cost Do you some coming per of conversion up down? out of expense this remarks, circling for of what this or Would And think, subsiding the quarter the here? Mills cost be were Americas overall costs the outage but call any of alloys, I year-on-year. to costs, you then kind maintenance conversion outage there. quarters maybe could did expect any costs

Barbara Smith

third that’s give she producers, outages it frankly the add with seasonally going shot. And time, outages About Yeah. historical, slower and our the alloys. first can. all occur was pressures were outages that normally it affecting of inflationary things any that that and any future electrodes a for like we exception in that Mary portion to quarters, the things I’ll periods, in the long of second quarter. the per the cost, forward, maintenance as and been a subside. which and is to to terms a signaling remainder and And if we’ve due steel be other may in wants And difference subsiding schedule of which should the would around quarter to try color,

Martin Englert

outages any for coming quarter the planned And other here? there

Barbara Smith

do. We

we preparation have conversion. want systems quarter. will down But we In will have time second work major as some and the other to South also this in And outage reheat outages. I reline take in quarter, had furnacing what for conversion, quite some A Nothing first outages. we in had the to point outages. of that Poland. several we as that in Carolina couple a have We Alabama out

So, will there. effect some be there

Martin Englert

impact Okay. maybe as anything or from far the estimates the as outage as as tons And on that no system far lost other conversion like that?

Barbara Smith

a have good estimate. don't I

adjustments. We’ll take I account, that probably think the just into Martin. seasonal

Martin Englert

That’s Sure. one I One helpful. if could. very last

the now was million? goal guess, likely On noted you your What believe be it there? exceed post synergy I would that I $XX targets, – would you revised,

Barbara Smith

more like of I appreciate. ownership can think as of a the assets, time little we’d you fully

certainly, First system to them be priority the not moved and the were. our finding into a was and It’s estimates we in the we quickly But, the come be disruption pay we operational just specifics. able new beyond to synergies of early up on holidays. quarters, are our early. carveout initial But day also that to we be all will our for what one and even days, really in revising to to more have customers opportunities then coming plenty our get and have on definitely employees benefits and as

Martin Englert

Okay, thanks color for the there. added

Barbara Smith

Martin. you, Thank

Operator

The go ahead. from Please Deutsche Terry comes with next Bank. Chris question

Christopher Terry

questions. year. of new a happy had couple And Mary. and I Barbara Hi,

where one thinking two-year Just $XXX we per month time trying about the think you out own Gerdau about about assets? per work EBITDA there, utilization performance, the versus the to EBITDA Thanks. I some just view? a on those maybe the ton one to margin in going $XXX see ton the How it’s know on acquisitions, of potential to opportunity per and the take to get get but and ton. conceptually calculating CMC’s think I on utilization we do XX% around

Barbara Smith

with of and a Yeah. your they're understated currently that's Thank utilization, estimate I where did XX% let walk see really, note of you, try you an And operating. in through me to And terms why. Chris. really

of it ownership. First partial all, of was month a

say, and carveout had on up you extremely, well, find. be that come is on went things And a system. but needless X to November extremely Second, operational there always we to it

And that so, that for impacted month of degree shipments quarter partial ownership. to this and a certain past

an November. month add customers there that reheat prior other finally, The I which Jacksonville, accelerated make to in in close protect then, order And believe base. the disruption we to was to have outage, is in the Gerdau that planned, any sure shipments to didn't a the was customer would outage, I of thing

our And, industry or but closer don't I capacity, rolling using know XX%. if by mill capacity at guess, So, rates, there the the final and but generally of disclose to don't a one than melt acquired capacity we is utilization was facilities. I it you're significant point. excess that estimates, couple melt average

Christopher Terry

maybe on so. Okay, And commentary your next lot I I or a talked falling in scrap of expectations, – there’s And a thanks. Thanks. guess, just guess month about you That's the end helpful. on What’s little next bit the specifics for you the demand just market? around more on bit scrap further out, little on Thanks. a can And of quarters if touch couple different markets the that. side.

Barbara Smith

Yeah.

are think Certainly, difficult to scrap prices that. it's There predict evolves. many seasonal I that that into factors where really there effects are see are play going. so and we’ll weather how winter

the on past there Chris? the prices. to question, market. predicting in to And production season, season, are scrap to up predictions evolves, as second scrap was find part way But busy your want already construction market. what busy Obviously, has make effect some to for because that the wouldn't its prices the it’s Sometimes I that me, experts harder forces season forgive a

Christopher Terry

of Just it demand see playing on could you’d markets, I any out? the said but some on that just picture give if the comments how into markets, if constructive specific you you know great. would overall end dig on specifics, end were be the you you broadly

Barbara Smith

prices terms December certainly and noted trade oil a and positive Well, that of my work in – of you creation to of our rate seeing nervousness unemployment best residential terms et there I indicator. very bid indication is is the we’re number and in of not is really And work in job housing, thank demand Yeah, of things cetera. booking. and around backlog it’s et the that that’s amount cetera, the be know know remarks amount us and our coming fabrication And a just you. I effects strong. we’re in that a to lot of of forward the

seasonal with of a is efforts amount high is customers. speaking, acquisition, of say going very that backlog And generally outreach especially I our going irrespective customers – on forward. demand the have the they new that's robust customers, fluctuations. of of closing Our see number bidding existing we still had and the and can also quite to good

Christopher Terry

you. great. Thank Okay,

Operator

ahead. The Goldman Please Korn Sachs. Matthew from next question comes go with

Matthew Korn

Hi. Good Good Mary. Barbara. morning, morning,

Barbara Smith

Matthew. Hi,

Matthew Korn

quarter. quick I had you up given bit I are the more What’s now Poland that expansion to want ship there's way? some to Does updates all meaningful of your the your going work one good. that work for – done? on. these outperformed little details. mill limit operational that the thoughts ask for then the quarter on on Seemed from the was Mary this you're very a ability And year-over-year any on that question, accounting next looked then, had in that a basis working

Barbara Smith

to expect call another Poland exceptional – it year. – I would We have

it as I've into is continue. GDP good If that moving you was value-add market US, record chain and from year, the growth a as repositioning indicated Poland, of demand, long-term look a strategy And that past on last that, at good perspective. experiencing calls, products. the was year to higher value expect really financial now And up we

to years is might more beginning was days. predict period is, was a a fell, significant might the XX-day of have seasonal like December And XX effects. customers Decembers, took in to normally, So, holidays. in seasonal holidays how thing one Tuesday, that course, factor effect our to But, the falling a And have be downtime Poland. snow quarter, have and levels the X unique to will their down it's prior normal difficult affect Poland. And weather as this And, I Christmas what extended that compared winter quarter in a over say way would of Poland prior through on with we shipments. lot been about

the of to expansion, terms going In operations. it's not impact

As early we provisions in the not periods. to we’re like And if But to situations stages. many where operations. be this, very this make have there some be accumulate down we disruptive do to inventory to in necessary expect

we’ll provide update. And so, as the project moves further forward,

Matthew Korn

Hi. Thanks.

it never where in as same in we Texas Poland. hope the seasonality Let’s the point is is reach

Barbara Smith

XXX-year We didn't levels. certainly forget rain record

Matthew Korn

True.

for the And should complex, piece move about if the understanding to $XX $XX I'm back if want see half of exclude actually and I'm the correct fabrication I $XX.X the add this you’re we from fabrication, adjusted the all add Is the if correctly you the to going year. I had just what full the the accounting and the whatever purchase Legacy, going benefits, in me to kind to negative quarter, think, that side. above Hearing $X million legacy a of sounds this the that, entire then for quarter, the if sure I though you remarks, I then think I This if way your Let on I – the report million that that past EBITDA, quarter only, legacy rest million. prepared make it out laid year, interpretation? breakeven. came a assets, think guided. that and [indiscernible], of million as is to remaining flat around you like to part you're the breakeven level. as it acquired year quarter the second for about see that ask going

Barbara Smith

shipments offset out but the piece will the It's of losses probably play Gerdau amortization use kind safe will similar expect hard assumption. breakeven in in indicated, to positive. a we down I will show level, year and continue a which to fairly be, million So, quarter, amortization. down the or such you And a fourth that it segment that quarter. exactly, the second $XX have as step to the legacy a will results, number let's expect the month sizable it in take the then, step you third talk by it that's and how to which end Then will can first. EBITDA and would you be being say

Matthew Korn

clarity. Got a Good on. the I’ll with lot it. follow-up Thanks for you’ll later luck.

Barbara Smith

you, Matthew. Thank

Operator

[Operator next comes Timna America Instructions]. The Merrill Tanners go Please with question of Bank ahead. from Lynch.

Timna Tanners

Hey, Good year. morning, Happy everyone. new thanks.

Barbara Smith

Happy new year, Timna.

Timna Tanners

the think those or some take it concrete of that investment it? wondering plans was the what up that extra have is any Is of what kind assets On just eke or out plans the Gerdau of under capacity I crank acquired, melt to mentioned an know additional [ph] the to kind discussion you if and acquisitions? you conditions about additional you I from

Barbara Smith

at discuss time, prepared this to Timna. plans not We’re specific

to that we investment, advantage share. in foremost, have to that advantage depend think, always would of obviously, from and extent it been sales, that plans now, right would some to billet billet sales excess the take I and we’re will strong order take opportunities. But, And melt. late. there's opportunistic the of the have upon of those we prepared don't specific market be there debottleneck demand. first And in shop Certainly, downstream melt

Timna Tanners

helpful. that’s Okay,

debottlenecking. you conference second the the market, tone call, cautious outlook then, Poland just a So, coming for is upbeat. a And really on more fiscal last my question on European much of bit XXXX. more the this sounds sounded call in strong off And the

missing if restrictions you rebar, you going, So, And mindset EU also, and if wondering something help thoughts you US? if given there? if I'm or where could have the Thanks. I'm Turkish any your understand the changed me maybe further just it's on

Barbara Smith

Yeah.

of outlook as Poland August expected Timna, think, very and come candidly. and they had our XXXX. We never outages. they various in go because we the to billet they the We knew year to are still Poland opportunistic. have I really were temper far coming trying as out We we sales and a expectations forecast quarter, fabulous

opportunistic their in actually of did little and quarter was which some ahead of billet the the increase quarter we to guidance that Poland really Kudos temper a we one take advantage to little in in came take terms and schedule. team under So, execution have our not belt, our year's of outage, strong Street. then of quite the it last sales. to results And that and to was and a bit now

which, up are date, also is might uncertain frankly, cognizant the and so, an coming safeguard And going measures Europe resolved we forward. how get very soon, we in here expiration that that were had

And so, that, increased such these their year. fabulous product They’ve on Demand Poland is really all out bit a And time. excellent returns. those facilities Having coming things generating last a expect still expanding nature Poland. nicely. repositioned have combined, They're very We’ve fully we year. of very good. caution another said of their fabulous having flexibility over bullish of tremendously mix to we’re kind by year very of we’re the little

of Turkey about anything a and hearing of terms thus removal we’re far, XX%. In not situation, the that second

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Timna Tanners

thank Okay, you.

Barbara Smith

Timna. you, Thank

Operator

to there time, appear Ms. questions. back I’ll call this remarks. At you turn closing the Smith, more no for

Barbara Smith

us weeks. Well, for Okay. with look in and to call during everyone, we joining forward you, our visits conference investor and the day. coming thank today's great you a speaking many on Have days of

Operator

call. This today's Commercial concludes Company Metals conference

You disconnect may now lines. your

Commercial Metals (CMC) 7 Jan 192019 Q1 Earnings call transcript