Commercial Metals Company announced financial results for its fiscal second quarter ended February 28, 2019. For the three months ended February 28, 2019, earnings from continuing operations were $14.9 million on net sales of $1.4 billion, compared to earnings from continuing operations of $9.8 million on net sales of $1.1 billion for the prior year period. As a result of the execution of various strategic growth initiatives and favorable market conditions, the company's revenue increased 33 percent year-over-year.
Second quarter results included net after tax expenses of $20.0 million related to certain non-operational costs regarding the acquisition of rebar assets from Gerdau S.A., and adjustments related to the Tax Cuts and Jobs Act.
Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, said, "We are very encouraged by our progress of integrating the rebar assets we acquired from Gerdau last year. We continue to be highly confident they will provide the anticipated benefits and generate attractive returns for our stockholders. The quarter was impacted by typical seasonality and unprecedented rainfall levels in many of our markets, which impacted construction activity resulting in lower shipments in the quarter. I am pleased with the results of our ongoing operations and remain very optimistic about our growth in the second half of fiscal 2019."
The company’s Americas Recycling segment recorded adjusted EBITDA of $10.1 million for the second quarter of fiscal 2019, compared to adjusted EBITDA of $17.2 million for the prior year second quarter, reflecting a decreasing ferrous and nonferrous scrap price environment.
CMC’s Americas Mills segment recorded adjusted EBITDA of $112.4 million for the second quarter of fiscal 2019, an increase of 124 percent compared to adjusted EBITDA of $50.2 million for the second quarter of fiscal 2018.
In a press release, the company said total mill shipment volumes for the existing operations, excluding the incremental shipments from CMC’s new micro mill in Durant, OK, were down in comparison to the second quarter of fiscal 2018. The company said while demand from US non-residential and infrastructure construction activity remains strong, during the quarter, construction activity was impacted adversely by rainfall in many markets that far exceeded historical norms, resulting in lower shipment volumes.
CMC’s Americas Fabrication segment recorded an adjusted EBITDA loss of $49.6 million for the second quarter of fiscal 2019, compared to an adjusted EBITDA loss of $8.6 million for the second quarter of fiscal 2018. The company said average selling prices in the Americas Fabrication segment rose 6 percent compared to the second quarter of fiscal 2018, but were outpaced by steel input costs, which increased by 18 percent higher labor costs and losses recorded on specific contracts. The company added that rebar fabrication bidding activity remains strong.”
As for an outlook, Smith said, "The combination of a good mill margin environment, ongoing progress on executing cost reduction opportunities afforded by the acquisition, and completing some of the lower margin rebar fabrication backlog, gives us confidence that we will deliver strong results for the balance of the fiscal year."