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01/09 23:50
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call indicates strong financial performance with positive surprises from recent acquisitions and no unexpected negatives. The market can absorb new supply, and initiatives like TAG and scrap sorting are expected to improve margins. Despite typical seasonal declines, the outlook remains optimistic with substantial demand and strategic investments. While guidance on D&A was unclear, overall sentiment is positive with expected EBITDA growth and improved margins, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
Net Earnings $177.3 million or $1.58 per diluted share, compared to a net loss of $175.7 million in the prior year period. Adjusted earnings were $206.2 million or $1.84 per diluted share, up from $86.9 million or $0.76 per diluted share in the prior year period. The increase was driven by higher margin over scrap costs, improved operational performance, and contributions from TAG initiatives.
Consolidated Core EBITDA $316.9 million, a 52% increase from $208.7 million in the prior year period. This growth was attributed to higher margin over scrap costs, operational improvements, and TAG initiatives.
North American Steel Group Adjusted EBITDA $293.9 million, a 58% increase from the prior year period, with an EBITDA margin of 17.7% compared to 12.3% in the prior year. The improvement was driven by higher margin over scrap costs, operational performance at Arizona 2, and TAG initiatives.
Construction Solutions Group Net Sales $198.3 million, a 17% increase year-over-year. Adjusted EBITDA was $39.6 million, a 75% increase year-over-year, driven by strong results from Tensar, CMC Construction Services, and improved performance at CMC Impact Metals.
Europe Steel Group Adjusted EBITDA $10.9 million, down from $25.8 million in the prior year period. The decline was due to a lower CO2 credit, but excluding this, adjusted EBITDA improved year-over-year due to stronger shipping volumes and higher metal margins.
Cash, Cash Equivalents, and Restricted Cash $3 billion as of November 30, 2026, including $2 billion in proceeds from a senior notes offering. Net leverage stands at approximately 2.5x using combined adjusted EBITDA for legacy CMC and newly acquired Precast business.
TAG initiative: Efforts including scrap optimization initiatives launched in fiscal 2025 contributed to metal margin expansion. The program is now rolled out across all domestic mills, using less scrap per tonne of steel produced and utilizing lower-cost scrap blends.
Precast platform: CMC closed acquisitions of CP&P and Foley Products, creating one of the largest precast concrete businesses in the U.S. This platform broadens CMC's commercial portfolio and enhances financial profile.
Construction Solutions Group: Renamed from Emerging Businesses Group, reflecting its focus on high-margin solutions for the construction market. Achieved record first quarter adjusted EBITDA.
North America market: Healthy, stable demand for major products with well-balanced supply landscape. Substantial pent-up demand in nonresidential markets supported by $3 trillion of corporate investments announced in 2025.
Europe market: Demand remained resilient in Poland, but margins were impacted by import flows. The Carbon Border Adjustment Mechanism (CBAM) is expected to increase import costs and support market prices.
Operational efficiencies: TAG program initiatives in fiscal 2025 delivered $50 million of EBITDA. Fiscal 2026 focuses on operational initiatives across all business lines, targeting $150 million annualized run rate EBITDA benefit by year-end.
Cost management: Tensar team improved production reliability and managed costs effectively, ensuring product availability and optimized margins.
Strategic growth plan: Focus on transforming CMC into a stronger organization with higher margins, earnings, and returns on capital. Includes leveraging unique capabilities for specialized projects like LNG infrastructure.
Commercial excellence: Initiatives to improve margin capture, enforce pricing premiums, and segment customer base for better value realization.
Economic Conditions: Potential adverse effects of economic conditions, including market slowdowns and seasonal volume trends, which could impact demand and financial performance.
Regulatory Hurdles: Uncertainty surrounding the final rulings of the International Trade Commission (ITC) on rebar trade cases and the potential impact of the European Union's Carbon Border Adjustment Mechanism (CBAM) on pricing and imports.
Supply Chain Disruptions: Challenges in maintaining production reliability and managing costs, particularly in the context of planned maintenance outages and the integration of newly acquired businesses.
Competitive Pressures: Pressure from imports in Europe, which negatively impacted average price and margin levels, and the need to maintain competitive pricing and margins in North America.
Strategic Execution Risks: Risks associated with the integration of recent acquisitions (CP&P and Foley Products) and achieving the anticipated synergies and financial benefits.
Financial Risks: Increased leverage following acquisitions, with net leverage standing at approximately 2.5x, and the need to prioritize deleveraging to meet financial targets.
Consolidated Core EBITDA: Expected to decline modestly in Q2 FY2026 due to normal market slowdown, partially offset by contributions from recently acquired precast businesses.
North America Steel Group Adjusted EBITDA: Anticipated to be lower sequentially in Q2 FY2026 due to seasonal volume trends and planned maintenance outages, with stable steel product metal margins.
Construction Solutions Group Financial Results: Expected to improve in Q2 FY2026 due to contributions from the Precast business, despite seasonal weakness in other divisions.
Europe Steel Group Adjusted EBITDA: Expected to be approximately breakeven in Q2 FY2026, with margin growth potential later in FY2026 as the carbon border adjustment mechanism takes full effect.
Precast Businesses Contribution: Projected to add $165 million to $175 million of EBITDA from approximately 8.5 months of ownership in FY2026.
Fiscal 2026 Capital Spending: Anticipated to be approximately $625 million, including $300 million for Steel West Virginia micro mill construction and $25 million for precast businesses.
Long-Term Market Dynamics: Expected to benefit from U.S. infrastructure investment, reshoring industrial capacity, energy generation growth, AI infrastructure build-out, and housing shortage solutions.
TAG Program: Aiming for an annualized run rate EBITDA benefit of $150 million by the end of FY2026 through operational, commercial, and SG&A initiatives.
Share Repurchase: Additionally, we have reduced our share repurchases during this period of leverage reduction to amounts approximating our annual share issuance under our compensation programs.
The earnings call indicates strong financial performance with positive surprises from recent acquisitions and no unexpected negatives. The market can absorb new supply, and initiatives like TAG and scrap sorting are expected to improve margins. Despite typical seasonal declines, the outlook remains optimistic with substantial demand and strategic investments. While guidance on D&A was unclear, overall sentiment is positive with expected EBITDA growth and improved margins, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
The earnings call summary suggests a mixed outlook. While there are strong financial metrics and optimistic guidance for certain segments, concerns about margin improvements, seasonal challenges, and cautious capital allocation impact sentiment. The Q&A section reveals uncertainties in margin improvements and vague management responses, which temper positive aspects. The lack of clear guidance on some issues and the focus on debt reduction over immediate shareholder returns contribute to a neutral sentiment. Without market cap data, a more precise prediction is difficult, but overall, the sentiment is balanced.
The earnings call presents mixed signals. The company has shown improvements in certain areas such as Emerging Business Group's performance and Europe Steel Group's turnaround. However, challenges persist with declining margins in North America and delays in the West Virginia mill. The Q&A revealed concerns about operational challenges and market uncertainties, particularly in pricing and inorganic growth. Despite positive long-term demand expectations and share repurchases, the lack of strong near-term catalysts and mixed financial performance suggest a neutral outlook.
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