CMC - Earnings call transcript Q3 2019 | Commercial Metals Company

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Operator

Hello, and welcome everyone to the Third 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 to provide information other than historical information and will include expectations regarding economic conditions, effects of legislation, U.S. steel import levels, U.S. acquisition finished results the to investment of anticipated of for the future realize in demand assets capital benefits future rebar spending. mill company's operations, our Oklahoma our activity, new steel S.A., in company's products, operations, the from micro construction Gerdau certain Durant, the and of the ability

XX-Q. are on current these that the These to conditions expectations. the on differ reports subject uncertainties, and to are involve including section Form speculation and Factors that and other but and company's the in to subject reflect similar statements results described XX-K statements certain annual and These are report quarterly could uncertainties company's Form considered materially risks are actual from forward-looking latest and of those may based cause subsequent Risk risks beliefs on

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

fiscal measures fiscal reconciliations otherwise, earnings to such to for stated year company's and financial or made numbers found non-GAAP site. be on or quarter. are release company's year will the in references or references be presented the numbers company's the Some all quarter-end Unless can Web

Officer Chairman to President Chief Barbara and the turn for Company, opening now, remarks And Metals Commercial Board, would introductions, I of of Smith. Ms. the over call the and Executive

Barbara Smith

call you, results review CMC's the Good of and the joining to afternoon thank for Jamie. third fiscal for quarter XXXX. you Thank

I for financial with prepared open to which will will call in quarter more the begin Mary of a after and questions. of quarter fiscal discussion outlook the highlights fourth detail information will XXXX, remarks our then with the call the cover quarter. will conclude the third I for Lindsey we our

our $X.XX $XX.X release share third from diluted fiscal reported sales on earnings or of million continuing $X.X net As this morning, earnings per operations quarter billion. announced in we XXXX of

the million our earnings certain of Excluding impact share. adjusted diluted continuing integration from were $X.XX costs, operations per or $XX.X

share in press Board our Also of for of cash from represents quarterly stockholders stock dividend will common X, noted consecutive the paid The on XX, a record dividend. as on per July XXXth XXXX. Directors XXXX. yesterday, of release dividend be of This declared CMC $X.XX July quarterly CMC's

since Great actions These I'm in have profits results company. proud are generated delivered growth the our actions of as involving for results the CMC over a as stakeholders. These the team all of years Recession. best segments and These that revenue actions quarter. of allow the attractive results this will also series financial transformative for our continued culmination returns several CMC a past well of for

our fiscal of accomplishments XXXX. and year months It's year-to-date through worth key reviewing quarter nine this

performance. exceeding micro continuing For ramp the to fiscal revenue of to billion. operations share. and quarter, at earnings up complete per original the capacity Adjusted XX% the of XXXX, expectations nine Oklahoma third from our $X.XX months $X.X in Through increased XX% newest Durant, is increased mill of

widespread a rebar has gained of acceptance. hot product, customer introduction The differentiated spooled

Durant, our are fiscal two rebar Oklahoma. our capability continuous-continuous micro commissioned second third a first in operate in in existing facilities quarter, Mesa, adding we the During the Arizona the These to mill at the fashion. world spooled spooler to

volatility broader in more its upgrade our their results. financial as value allows a market to cost to earnings. produce are in capabilities lower is base to products Expanding us highest our Poland history. second and offerings Poland result yielding serve in investments on added pace as the reduces to produce Our well great industrial

four the rebar XX reported our completed cost serve needs. improving capacity annual our customers acquisition facilities ahead the geographic fabrication we mill progressing that recently XX%, with original in expected. mills presence More ability has increasing schedule in and approximately and by to expanding of synergies been well million our We of our our the U.S. previously integration U.S., XX

that a I'm actions implemented by run estimated year on pleased to the have synergies we fiscal rate achieve that basis will report end.

run taking conditions. synergies commercial market synergies under additional confirm $XX can we annual approximately to rate the addition, today's In total million

The third transformational quarter the acquisition. results financial are this now expected of benefits reflecting

to timely fashion intent a Subsequent stated debt balance reduce made improve outstanding transaction on our order leverage to the to of Following loans. end to finance $XX acquisition, quarter the the we the to in the payment repay a million June portion our term a of we XX, in ratios.

have of years several on taken in All these return steps in the resulted invested capital. past over an our improvement

a providing We generate to invested return committed results capital. returns XX% quarter shareholders. third to attractive Our on remain annualized would our if

I'd has X% construction markets approximately Now, U.S. in to trends and spend increased we non-residential cover to conditions comparison like the operate. which in some year. in last

confidence construction as market will the strength that we the continue certain indicators. monitor have We leading of

number strong. construction Our leading fiscal be third continue us is gives activity which activity fabrication that business. will of to confidence in We projects [building][ph] during best did our quarter, record indicator a our

positive ongoing supported The as also Index. convey Through at such the continued Architectural their indicators May by XX.X strength outlook customers, continued is our and a ABI was activity. indicating with construction they Billing respective growth supported in dialogue in the by backlogs

business XXX activity, Small the highest businesses indicating May of economy XX% these On expand. to a is U.S. This since with recorded XXXX. in Index now good macro time before level, is a of U.S. was a good the Optimism level Business small barometer the and

unemployment In rates addition continue low. historically the at inflation be low U.S. and levels to relatively remains

of European the multi-year grew period economy. past We in Financial activity the over first our EU in strength XXXX. through X.X% budget XX the and includes tackle to remain funding Poland's now aiming XXXX the is and EU's the to quarter Funds GDP Europe, Polish Structural the to current has euro compared for of XXXX. from to to spend in allocations for months. development confident Turning grown outlook X.X% the continued quarter This previous expected impact the for billion infrastructure Investment help XX stimulus Poland of XXXX

that the Chief With on Mary Vice provide the I'll some for and to as Officer an more the now discussion turn President to over overview, Lindsey, comments Senior quarter. results Financial

Mary Lindsey

to us afternoon good and Barbara call. you, joining on the everyone Thank

the $X.XX per in per earnings the continuing third from share Barbara continuing million from quarter, earnings million operations $XX.X of we of $XX.X diluted share quarter or compared mentioned As diluted $X.XX to for reported or XXXX. third of operations

Third $X.X after to the million XXXX Gerdau tax include quarter results costs acquisition. of related

$X.XX and million of $XX.X second assets Excluding these from into earnings from further is improved full adjusted these quarter. our have owned we acquired EBITDA the per operations This share. continuing operations this integration we diluted produced costs, Gerdau the quarter were or assets

and not the of In from facilities of loss to acquired loss contracts mills, XXX,XXX-ton lower on XXX,XXX on This EBITDA margins include million shipped. had an improved million costs tons. EBITDA metal unfavorable unfavorable of the amortization of business shipments date generated productivity conversion $XX.X income of amortization The does $XX.X better the increased This quarter. contributed operating acquired reflection of the reflects believe of entered X, million current as it take into in prior account through November XXXX. earnings into closing that $XX.X We a contracts $XX.X contract the of would the cycle million. to fabrication

than six the accounting The to coming had this $X.X balance we liability fabrication be remaining acquired is the over integration quickly anticipated million purchase This is is reducing amortized The for effort months. costs quarter. contracts to of established integration $XX more planned million. proceeding to nine

of majority the acquisition our fiscal year. the results has cost integration the be We expect completed been accretive the Overall, by to-date. of to the end to

turning our results. Now to overall

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

benefit However, does established the acquired this million of liability include contracts. the the as amortization the for mentioned fabrication from earlier, $XX.X not

previous by XX% from resulting the fabrication As spring demand our increased construction season segment the commenced quarter. shipments

segment rebar shipments increased mill similar by percentage. Our a

the construction and As remained very in Barbara margins. spend mentioned, growth metal positive conditions continued supported by market strong

third EBITDA third Ferrous year. quarter results of prices XXXX million the the declined compared of $XX.X segment the last quarter the two adjusted but same quarter months. the Americas adjusted for XXXX. increased of of The to $XX.X segment beginning in recycling EBITDA to million period of the following reported for in Turning in third

have respectively prices relatively per compared Ferrous non-ferrous $XX time XX% from while last and the has remained declined year, declined to prices Overall stable. X% previous to volume quarter. ton this

refines turnover our to Importantly, segment that buying as purity despite declines, investment allowing solid in levels practices, better technology the margins. we generate EBITDA the a result achieve disciplined of to separation higher inventory continue and recent price rapid us non-ferrous in

to recorded segment EBITDA of for from the EBITDA the quarter shipped XXXX. adjusted XXX,XXX the acquired year Shipment $XXX.X XXXX third The to of last million tons of driven quarter third compared compared million adjusted mill quarter for third increased by Americas primarily of the volumes $XX.X of the locations.

mill our product range experienced the in volatility broader the prices than steel in long selling The quarter. third less market

second $XX quarter. increased last $XX year. prices this the margins than compared per per ton As higher metal to Current decreased, scrap metal ton margins time are

adjusted the The Conversion million an by EBITDA utilization to our recorded quarter. the improved third quarter of of compared segment adjusted across of $X.X X% million year second in all in Americas as the quarter rates mills. to compared costs an of prior loss $XX.X loss decreased fabrication EBITDA XXXX

from construction benefit results the segment from As loss a loss reserve. spring of EBITDA tons contract include as season. facilities XXX,XXX impacted amortization acquired mentioned positively not the earlier, this these in does Volumes on and $XX.X of entered the we were million include unfavorable shipments the

our in the of in favorable previous behind a improvement third a the quarter. a quarter in lower more in Furthermore, booked prices us, transactional resulted in increase environment. selling with backlog improvement work resulted price began This compared the quarter. and million EBITDA substantial volume much improvement in shipping to pricing This $XX.X price third we

per the of encouraged profitable cost. over at further nine booked as year are today's work and first is new We this averaging is months in $XXXX ton

on businesses our confident and positive follow the to quarters that generate prices. will based in quarter expect our the pre-acquisition rebar today's acquired in are results We fabrication coming fourth locations

to the exports in adjusted the Mill $X declined increased place the per to This recorded slightly $XX.X or the flood million steel redirected had the compressed to due across prior quarter prior by Europe. demand. year into EU. XX% increased to steel tons import third International Despite that U.S. compared EU put safeguard a from measures steel. Turkish The were which year. been protect comparison resulted market in imported were of majority the the segment margins entering XXXX. of margin of to Metal of driven Volume ton The pressures rebar XX,XXX for EBITDA

year-to-date exceeds in second However, achieve and track its is to previous highest year volume on year the full Poland profitability history.

period the segment I would in comment Other and million decreased from on same The XXXX. $X.X and approximately to also costs. integration results million quarter by this this acquisition related of the Costs of include $X.X Corporate like segment.

to balance and our liquidity. Turning sheet

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

reduced quarter, levels continue We balance strong activities. flows reduced generated environment. million pricing During stable by assuming capital We and outstanding the working we our $XXX in will of from operating receivable $XX facilities a million. cash expect accounts cash the

to by million ease debt. addition sheet the debt reduce long-term the In the quarters, scheduled to since to third of quarter continued quarter, $X further debt million level. plan made our of In coming in we $XX we end the the repaying balance payment have the

you year, range For will that the first be estimate XXXX We $XXX capital million. this nine the million, were of expenditures includes to acquired capital our much. months capital remarks. assets. concludes spending Thank my $XXX related improvements of the to million for This in fiscal $XX.X which very

back it to over outlook. turn for Barbara the now I'll

Barbara Smith

Mary. you, Thank

We finish all fiscal season our expect continued construction a of year strength our strong in to markets. the with

our which the As backlog. I supported mentioned healthy by earlier U.S., customer Poland and both bullish is sentiment internal in is very

of balance relatively fiscal margins the expect to and remain for We strong year. place stable in the metal

are older price backlog fixed confident show will much have substantial As anticipate quarters. our during and also through segment improvement of Mary that the mentioned we cycled we the fabrication coming fabrication

have continued market to solutions and our coupled employees of facets the strategic innovative plan. of bring strong customers approach believe to many our and leading our Our have business service team our We for customer positioned company position our with executed investments successfully success.

this to will now we open questions. At time, the call

Operator

Sachs. Instructions] And ahead your from question our from today Matthew [Operator first comes Korn question. Please Goldman go with

Unidentified Analyst

are the on timeline for million? full you $XX target? elaborate Hi. achieving This you million Matthew How is synergy achieve the [Hunter] Korn. [ph] and what's new the Can $XX synergies on the to incremental

Barbara Smith

Yes.

what really as supply we additional due of As on to the appreciate based access I indicated it we when diligence synergies, you we doing our can agreements. very commercial our commercial estimate were term synergies was original agreements would and and little had is

after place, And quantify so commercial with to confirm those commercial combined we the have transaction since place having to and closing the that organization additional us information and approach in time of and in our synergies. putting available able been our

said in run I million including $XX expect rate end fiscal as of million original that And script synergies to the and is by the year. my of this $XX total be we at

Unidentified Analyst

market that in the is forward? with Section of in seen XXX changes Great. Thank going the how extra removal you And think the you the you. market Turkey? to Have going XX% any on impact removal tariffs the do

Barbara Smith

the Well, well existing the we're as duty duties. on in place the additional XX%. is know that anti-dumping XX% an I callers remind CVD monitoring that's [indiscernible] any And in XX% of the there case would as of it duties top remaining of I or carefully.

So we create that with really playing continues more monitoring seen dumping field, that are had and we deterrent a today of continues where to to of are be the level but most that we as pricing. import a U.S. line the in think the offers good to previously

seeing point influx in activity not a we're So, at big time. this of

Unidentified Analyst

Great. and on it. congratulations the Got quarter. you Thank

Barbara Smith

Thank you, Hunter.

Operator

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

Chris Terry

taking my Hi, Barbara questions. for Thanks Mary. and

and going when had there. still finalized you are Thanks. Gerdau the opportunities how fact and look at you there's And potentially you've previous are in Gerdau is is optimization think after different across the that on things sessions that that's radar? at What Is I MBQ just down something further around one the potentially still track opportunities calls First have? or the hinted sites. to analyst rebar

Barbara Smith

our conclude Thank and that I well we fact remarks the well, we integration And Chris. the Mary indicated synergy able getting going Yes. I as both timelines the very after years. the original you, in well the system within I as we're was two I our indicated exceptionally months first tracking of would say originally is the that three synergies. to were that earlier within on ahead said integration to key and number think

rate to pleased on the are in less by And achieve of than fiscal year basis those a we to positioned so year. we're this end synergies very that confirm that a run

to In planning work referring we underway it's optimization now of terms of yield our to the going forward, that that we to synergies. and are beginning as results to information and all -- expectation part that you're do have the that and full access do and is

Going forward, does. yes, it

work our footprint fabrication across no our us and larger to mix and geographies our product footprint, our does optimize and it across mills that Given give ongoing. opportunities is

plans confirm those. mix and other things presents certainly obviously synergy our optimization results terms that great product So on I acquisition we and full think as quite we'll of impact in XXXX optimistic a highlight with year the today of we're can

Chris Terry

And just Thanks other costs. relates Great. Barbara. question my conversion to then,

So were I previously you still is and further to they it opportunities mentioned X% in X% to think reduce costs? I X%, said those down you Thanks. XQ believe,

Mary Lindsey

Looking fourth we costs at are remain Chris, the relatively quarter. year, going into the conversion balance think as head for stable the to we

achieved to what far cost. we we've regard -- thus to conversion with think So I we're think I were planning

Chris Terry

That's Mary. Thanks Okay. all me. for

Barbara Smith

Thank you.

Mary Lindsey

Chris. you, Thank

Operator

go question. question with next Our Woodworth from your Curt Suisse. Credit from comes Please ahead

Curt Woodworth

Good congrats a and afternoon quarter. on Thanks. good

Barbara Smith

oafternoon, Curt. Good

Curt Woodworth

fab. on is question First

a XX quarters to historically last you've negative even profitability, think the to through nine of about XX. I margins think $XX I ton talked So eight but cycle

better to going like margins from much just get seems cycle through that the case it an opportunity supportive. and XXX forward would a trade there be hope have would fact we underway, I So, is which

talk So, I'm to segment variances? to just of in prior you can how backlog that today your profitability maybe expected of of terms sort looks wondering, relative

Mary Lindsey

know qualify we $XX past of but EBITDA in in And as volatility we net to ton that. at the not so fab is average. their can guidance, profitability, give crack EBITDA you more per also But appreciate forward a as versus of that through indicated $XX per specific income earnings. have give cycle I'll you Yes. but don't ton has EBITDA

So, past of we've the a And at it the that. suffering higher the period year than subsequent really actions. been be XXX through would peak here course unusual to

and and things et other how So, I going would say norms results a a the as to lot historical definitely to that. potentially of more know that good in attribute above how the to fab coming economy to guess quarters to business see XXX And you're the and such cetera. I much wouldn't a interesting out return

Curt Woodworth

you could products? years, meaningful have behavior you import seeing implications case on case fab start think from the of trade for do the trade are changed And out that any

Mary Lindsey

we're rebar, fab types as far of not products. products relate it case the So other aware, on does fabricated trade to steel is fabricated

it's to segment So I particular don't affect really. think our going

Curt Woodworth

Interesting.

that Okay. costs, in And year-on-year think other dramatically a from my of I increase numbers the increases pretty say side, conversion XX look follow mix-related? what's seen is color kind rub if what's talk it apart the on at that? you I question -- driving would we've or on year-on-year be you on but they Is just roughly conversion then, up all XX, can any some driving helpful? ton, electrode increase cost more scrap, on about know

Mary Lindsey

Yes.

mills to and increases do back our we wages match appropriate have did But as to rapidly able remember well were some alloys into more as have very we're efficiently as electro rising to if So period prices finally of cost of frankly levels. pleased first to labor have be integrated own. a certainly some we you year, and Gerdau the as last we total running which conversion of now all, our did the not we number also, then,

So kind now to input all other mills things cost a those into But contributed seen. the were as process. increasing all improved pricing, plateau that rates with utilization alloy conversion seeing kind and the them of pricing the costs and that out of as we're level of you've electro well

Curt Woodworth

much. very you Thank Great.

Mary Lindsey

Welcome.

Operator

our next question comes question. Leshock [Operator And KeyBanc. with Michael Instructions] your from from go Please

Michael Leshock

afternoon. Good Hey.

Barbara Smith

afternoon. Good

Michael Leshock

and fiscal that So, first call expected. XXX the you in just out little million than lower than to that quarters? looking [ph] was lighter lighter that anything at million] to was it prior guided for there quarter which a CapEx question Is led 'XX, [XXX here could you being

Barbara Smith

don't in with we one and very call would capital typically in I project particular just out. to think projects any soon Yes. get year We're sometimes that enough a there's get completed. prudent our started don't

So it's nothing unusual just...

Michael Leshock

expect you you then, And the was drove mentioned there shipments see the Did that in weather year called first wet demand fallout do the mills in quarter the you demand segment? in up continue half past. strong of in to the given that pace as in the that impacted scrap? by you pent at out the Okay. And shipments

Barbara Smith

work be we call not as maybe We're and were problematic quarter. across seeing everyone than third. of what experienced fourth the days strong the sunny we when continues -- saw and highlight a in equally more lot expecting this the quarter I weather has we is be there's as on country that going first are shipments to on. days Certainly to second and sunny to there probably would

third it's continued little quarter, But manageable. the weather impact more a in even been to just construction has

in as fourth said, the So, at I shipping strong quarter. would we good expect point quarter this a

Michael Leshock

in for economic then, lastly, your region? that seeing any outlook positive just impact either Arcelor its And you're idling or Poland despite negative environment Okay. in that solid the assets from

Barbara Smith

Europe markets products that Yes. Their we penetration. overall import has capacity and in think And seen excess affected increase serve, really there us. an is certainly Europe the I decision hasn't and in that

as really move a growth probably So, Poland, on their we Poland. mean reported strong and good we I But shipping a in it quarter in was economic part. our results good prudent backlogs, in had

of tend as well. than to we we that strong vacation again so, see normal the expect year the And August, month other holiday Poland finish you to say

Michael Leshock

All right. Thanks.

Operator

our go And from Deutsche Sean Bank. Wondrack with from your comes question. next ahead question Please

Sean Wondrack

quarter. nice A there. Hi,

Barbara Smith

Sean. you, Thank

Sean Wondrack

an quick about it. going I infrastructure any they're XXXX. you. to-date? that of questions XXXX reset of money if little a you in spent idea there's kind in going you it is much Poland, plan, plan away exactly you if mentioned could Do that been think forward basically Thank of the if about onward And I'd plan through the or place Couple how talk that has have goes what to appreciate actually

Barbara Smith

for might like are evenly need completed over particular here over Yes. stage what I would I build Poland guidance have And be plans the been spent of it those just as to what's current at know allocated. been renewal on of have expect And I it's time also they certainly infrastructure. said up we in always are numbers been XXXX the in spent head review. having any and direction but the or U.S. funding the don't it's of in out particular period to over to-day. certainly their XXXX gets and recently that that wouldn't activity I trickle this out programs that continuing If

Sean Wondrack

then, it's works? that to back if know of And going table expiring, reconsider the since do that of you and sort Okay. they're to how or come sort

Barbara Smith

Yes.

know review could I it do timing up renewal be period is is a the But As they'll exactly. future there I there think renewal said where of and period I know allocation. I period and the coming the when don't -- reassess renewal

Sean Wondrack

great. Thank you. Okay,

Operator

management time, any closing conference And to ladies further I'd turn back at no showing gentlemen, for call and over remarks. comments. this the like to

Barbara Smith

in Thank speaking look joining today's Investor visits you, coming conference of with Have a afternoon. We all weeks. us Jamie. many to during the Thank you for call. you on great forward our

Operator

attending. does call. and you conclude conference Ladies gentlemen, do thank that for We today's

lines. your disconnect now may You

Commercial Metals (CMC) 20 Jun 192019 Q3 Earnings call transcript