US, Texas-based Commercial Metals Company Tuesday reported a net loss of US$8.8 million for the quarter ended May 31, 2010. This compares with a net loss of US$13.1 million for the third quarter last year.
Net loss for the nine months ended May 31, 2010 was US$213.3 million. For the same period last year, net earnings were $13.6 million.
CMC Chairman, President and Chief Executive Officer Murray R. McClean said, "Market psychology turned positive at the beginning of the quarter. With the spring construction season underway, coupled with early indicators of some economic recovery, finished goods pricing first increased then stabilized by the end of the quarter. This was welcomed news to our customers who gained a measure of confidence to re-enter the market. Active end markets continue to be heavily weighted towards public works while the private sector remains weak. Internationally, by mid-quarter, metal margins in Poland expanded beyond breakeven points. CMC Sisak (Croatia) successfully started its new steelmaking furnace. The Marketing and Distribution segment did well in most major markets, and our raw materials division was particularly strong."
Speaking of the Americas market, McClean said, "The segment had an adjusted operating profit of US$15.8 million, its first substantial profit in seven quarters. The operating loss in the third quarter of last year was US$6.7 million. Domestic demand was up on the strength of the spring construction season. Better weather increased scrap flows. Margin improvement was derived mainly from better ferrous volumes and prices. The average ferrous scrap sales price for the third quarter was US$303 per short ton, a 108 percent increase over the prior year third quarter. Average nonferrous scrap pricing was US$2,892 per short ton, up 86 percent from the prior year. Shipments of ferrous scrap totaled 671 thousand tons, an increase of 81 percent from the third quarter of last year. Nonferrous scrap shipments totaled 61 thousand tons, 22 percent higher than last year. We exported 11 percent of our ferrous scrap tonnage and 36 percent of our nonferrous scrap tonnage during the quarter."
Switching gears to Americas mills, he notes "Our steel mills had an adjusted operating profit of US$11.5 million compared to an adjusted operating profit of US$39.2 million in the same quarter last year. Our micro mill, CMC Steel Arizona, continued its successful ramp up by melting, rolling, and shipping over 51 thousand tons during the quarter.
When asked about Americas fabrication, McClean added, "Though overshadowed by an operating loss for the quarter, there were some positives for our Americas Fabrication segment. With relatively stable steel pricing, margin compression eased minimizing the need for accruing potential contractual losses. Backlogs built as customers gained confidence in pricing as well as the usual spring construction season boost. Public works remained the most active end-use market; commercial and industrial markets continue to be plagued by high unemployment, illiquidity, high vacancy rates, and suboptimal manufacturing utilization. The segment reported an adjusted operating loss of US$24.5 million compared to last year's third quarter adjusted operating income of US$21.8 million The composite average fab selling price (excluding stock and buyouts and the joist and deck discontinued operations) was US$768 per ton, 21 percent below last year's third quarter price.
"Our joist and deck operations, previously reported in our Americas Fabrication segment, are now reported as discontinued operations as the Company has made the decision to exit the business. It had an adjusted operating profit of US$4.0 million as operations are winding down at each location. We have an active divestiture program to sell each of the locations."
Looking to overseas operations, McClean commented, "Our International Mills segment had its lowest adjusted quarterly operating loss in almost two years as the Polish economy remained positive and our Croatian operation completed its furnace renovation. Our metal margins expanded as Polish ferrous scrap prices fell, and finished goods pricing strengthened as construction markets thawed. By quarter end, we had produced 6 thousand tons of steel in our new furnace at CMC Sisak and significantly increased our backlog."
McClean continued, "Our International Marketing and Distribution segment remained profitable in the third quarter as it has for each of the quarters in this fiscal year. Our global presence and ability to source and sell in niche markets allowed us to profit despite an uneven world economic recovery. General price recovery has minimized the need for contract or inventory loss charges. Each of our major geographic marketing operations was profitable. The segment achieved adjusted operating profit of US$30.9 million compared to a loss in last year's third quarter of US$16.6 million, a period where the segment was still fighting contractual noncompliance issues. Our steel import operation is on LIFO; for the quarter it had pre-tax LIFO income of US$7.9 million compared to pre-tax LIFO income of US$6.6 million in last year's third quarter."
Concluded McClean, "We remain financially strong. We anticipate our fourth quarter to be better than our third quarter, mainly due to seasonal factors. However, global economies remain fragile, with any further fallout due to the public debt problems of Greece and other countries within the euro zone likely to slow global growth. Scrap and steel prices have declined in major international markets since mid-May. While this correction was anticipated, any further significant declines could impact future results. The nonresidential construction market in the US should continue to be relatively good in the public sector; however, the private sector is likely to remain weak. We believe we will be moderately profitable in our fourth quarter."