Irving, Texas-based steel manufacturing and recycling company Commercial Metals Company (CMC) reported Tuesday net income of $700,000 on net sales of $1.8 billion for the quarter ended November 30, 2010. This compares with a net loss of $31.2 million on net sales of $1.4 billion for the equivalent quarter last year.
The Americas Recycling segment had an adjusted operating profit of $8.2 million compared to the prior year's first quarter $1.2 million loss. The increase in profitability was volume related as purchase prices moved in line with sales pricing. Shredded ferrous scrap prices rose, fell, and recovered during the quarter, continuing the general upward trend in pricing that began in December 2009 and has kept benchmark pricing levels above $300 a ton for every month of calendar 2010. Export demand remained fairly constant with Turkish demand supplanting China; domestic mills appear to have underestimated steel demand, requiring more purchases late in the quarter as manufacturing activity in the US stabilized.
The mills ran at 72 percent of rolling capacity during the quarter, up from 63 percent in Q4 of last fiscal year. After a summer pause, from an earlier restocking, shipments from the backlog of highway work and other infrastructure projects increased. Also, while there is some demand in education, healthcare, and manufacturing, commercial work remains weak. The announcement of pending finished goods price increases based on rising ferrous scrap prices pulled demand forward into this quarter. Metal margins rose substantially from last year's first quarter. In the prior year, sales prices fell faster than scrap prices, and there was an unfavorable product mix of billets, neither of which repeated this year.
The steel mills had an adjusted operating profit of $29.1 million compared to an adjusted operating loss of $3.4 million in the same quarter last year as the segment absorbed $11.3 million in start-up costs at the micromill in Arizona. The metal margin for the quarter was $293 per ton, ahead of the prior year's metal margin of $241 per ton. The price of ferrous scrap consumed at the mills during the quarter increased $46 per ton compared to last year. Each of the mills was comparable or ahead of last year in tonnages melted, rolled, and shipped. Sales volumes were 572,000 net tons (nt) of which 90,000 nt were billets, compared with 498,000 nt in the first quarter of last year, including 117,000 nt of billets. Comparing first quarter to first quarter between years, tonnage melted was up 23 percent to 589,000 nt, and tonnage rolled increased 43 percent to 506,000 tons.
The segment's market conditions remained unfavorable for downstream operations. Commercial construction was weak, steel costs have risen, and recently announced steel price increases will drive margins down further in the short run. The Western region of the US remains the most problematic. Fabrication backlogs are building at higher prices, allowing CMC's integrated supply chain in recycling and mill operations to benefit. During the quarter, two non-core businesses were sold; the heavy forms rental business and the joist business at a $1.9 million net gain.