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•Achieved record quarterly Earnings from Continuing Operations of $232.9 million, or $1.90 per diluted share, and record Core EBITDA of $326.8 million
•Both North America and Europe segments reported record Adjusted EBITDA
•Realized significant per ton sequential increase in downstream products’ average selling price from higher new contract pricing
•Continued advancement in CMC's growth strategy — Negotiated acquisition of Tensar Corporation; closed Rancho Cucamonga land sale and received gross proceeds of $313.0 million; and achieved meaningful financial contribution from the new rolling line in Europe
Commercial Metals Company (NYSE: CMC) today announced financial results for its fiscal first quarter ended November 30, 2021. Earnings from continuing operations were $232.9 million, or $1.90 per diluted share, on net sales of $2.0 billion, compared to prior year earnings from continuing operations of $63.9 million, or $0.53 per diluted share, on net sales of $1.4 billion.
During the first quarter of fiscal 2022, the Company recorded a net after-tax benefit of $33.7 million, primarily related to the capital loss on an international tax restructuring transaction. Excluding this benefit, first quarter adjusted earnings from continuing operations were $199.2 million, or $1.62 per diluted share, compared to adjusted earnings from continuing operations of $69.8 million, or $0.58 per diluted share, in the prior year period. "Adjusted EBITDA from continuing operations," "core EBITDA from continuing operations," "adjusted earnings from continuing operations" and "adjusted earnings from continuing operations per diluted share" are non-GAAP financial measures. Details, including a reconciliation of each such non-GAAP financial measure to the most directly comparable measure prepared and presented in accordance with GAAP, can be found in the financial tables that follow.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, said, "Our record first quarter results again demonstrate the earnings power created by our strategic transformation of CMC. The portfolio of assets we have built, together with the exceptional execution by our team members, enabled our Company to fully capitalize on a very strong market environment. Core EBITDA reached record levels for the third consecutive quarter, surpassing our previous record by 28% and totaled nearly $1.0 billion on a trailing 12-month basis. This performance makes clear the enhanced financial and operational capabilities of today's CMC, and I am extremely proud of the efforts by our team that have made this possible.”
Ms. Smith continued, "I am equally excited by CMC’s growth projects. Our new rolling line in Europe has significantly enhanced our operational and commercial flexibility, and is performing well above our expectations. We have made solid progress in site preparation and construction of our future Arizona 2 micro mill, and we anticipate its operational startup will coincide with strong incremental demand created by the recently passed Infrastructure Investment and Jobs Act. The new micro mill announced this morning, CMC’s fourth, will enhance our position in the Eastern U.S. and create meaningful synergies within the existing network of mills and downstream fabrication plants. Additionally, the agreement to acquire Tensar Corporation, a leading provider of innovative sub-grade reinforcement solutions, will significantly extend CMC's growth runway and create an unparalleled provider of reinforcement solutions to the domestic and international construction markets.”
The Company's liquidity position as of November 30, 2021 remained solid, with cash and cash equivalents of $415.1 million, and availability of $659.3 million under the Company's credit and accounts receivable facilities.
On January 6, 2022, the board of directors declared a quarterly dividend of $0.14 per share of CMC common stock payable to stockholders of record on January 20, 2022. The dividend to be paid on February 3, 2022 marks 229 consecutive quarterly payments by the Company, and represents a 17% increase from the dividend paid in February 2021.
Business Segments - Fiscal First Quarter 2022 Review
Demand conditions for CMC's finished steel products in North America remained robust during the quarter, with several key indicators pointing toward continued strength. Downstream bid volumes, a key indicator of the construction project pipeline, increased meaningfully from a year ago, while new contract awards and backlog also experienced growth. Demand from industrial end markets trended positively, with most end use applications increasing relative to the prior year.
The North America segment generated record adjusted EBITDA of $268.5 million for the first quarter of fiscal 2022, an increase of 73% compared to $155.6 million in the prior year period. This improvement was driven by increased margins for steel products and raw materials. The beneficial impact of increased margins was offset, to a modest extent, by a year-over-year increase in controllable costs per ton of finished steel shipped, which occurred largely from inflationary pressures for freight, energy, and steelmaking consumables.
Shipment volumes of finished steel, which include steel products and downstream products, followed typical seasonal patterns, and were essentially flat to the prior year first quarter volumes. Growth in CMC's construction backlog drove a year-over-year increase in downstream shipment volumes, marking the first such increase in eight quarters.
Margin over scrap cost on steel products increased by $202 per ton from the prior year period and $82 per ton compared to the prior quarter. Favorable market conditions lifted the average selling price by $364 per ton compared to the first quarter of fiscal 2021, against a $162 per ton increase in scrap costs. Margins over purchase cost on sales of raw materials increased significantly from a year ago, rising $96 per ton to $268 per ton, which compares to a long-term average of approximately $160 per ton. For downstream products, margins over scrap cost were essentially flat from the prior year period. Downstream margins were up on a sequential basis, as the average price of contracts in backlog increased throughout the quarter. Future pricing indicators on new work entering the backlog were again positive during the quarter, as average price levels for bids and new awards increased significantly from the prior year period.
The Europe segment reported record adjusted EBITDA of $79.8 million for the first quarter of fiscal 2022, up 452% compared to adjusted EBITDA of $14.5 million for the prior year quarter. The improvement was driven by a significant expansion in margin over scrap, as well as the receipt of a $15.5 million energy credit. Similar to North America, underlying demand for steel products remained robust, however, shipment volumes were impacted by scheduled maintenance during the quarter. Volumes of rebar decreased year-over-year due to a planned outage of the rebar line. Shipments of merchant and other were relatively unchanged from the prior year as sales of higher margin finished products from the new third rolling line replaced sales of semi-finished billets. Average selling price increased by $408 per ton compared to the prior year quarter, and $106 per ton sequentially. This drove significant increases in margin over scrap of $236 per ton and $120 per ton from the prior year and prior quarter, respectively.