Commercial Metals Company today announced financial results for its fiscal second quarter ended February 28, 2021. Earnings from continuing operations were $66.2 million on net sales of $1.5 billion, compared to prior year earnings from continuing operations of $63.6 million on net sales of $1.3 billion.
In a press release, the company said its North America segment generated adjusted EBITDA of $171.6 million for the second quarter of fiscal 2021, an increase of 12 percent compared to $152.8 million in the prior year period. The company said the improvement reflects solid management of controllable costs at each stage of its vertically integrated value chain. Cost performance at the mills was particularly strong, CMC said, driven by network efficiencies and lower costs for consumables. Earnings also benefited from expanded margins on sales of raw materials, as well as the impact of selling lower cost inventory within an environment of rising prices for steel products.
Shipment volumes of finished steel, which include steel products and downstream products, increased by 2 percent from the prior year quarter. Demand for rebar from the mills remained strong, growing year-over-year, supported by resilient construction activity, the company said. Single family residential construction within CMC's core geographies has increased significantly over the last year, which has opened additional selling opportunities for the company, and is a positive indicator of future infrastructure and non-residential spending in these areas. Shipments of merchant and other products increased by 13 percent from a year ago, driven by rising industrial activity and the construction of warehouses and metal buildings. Downstream products volumes declined 6 percent year-over-year due to a modest backlog contraction and weather-related job site disruptions in several regional markets.
Margins over scrap cost within the vertical chain declined from the second quarter of fiscal 2020, with compression in both steel products and downstream products, the company said. Average selling price for steel products increased $70 per ton year-over-year, which was more than offset by higher scrap costs. Steel products margins improved sequentially throughout the second quarter, and exited February at the highest level in nearly a year. Margin over scrap cost on downstream products declined compared to a year ago, driven by higher input costs and modestly lower pricing in CMC's committed backlog, which led to lower average selling prices.
As for an outlook, Barbara R. Smith, Chairman of the Board, President and Chief Executive Officer, said the company expects finished steel volumes in both North America and Europe to follow typical seasonal trends during the third quarter, which is historically strong given the start of the spring and summer construction seasons.
“Shipments of steel and downstream products in North America should be supported by our construction backlog, with steel products also benefiting from elevated residential construction spending, continued manufacturing recovery, and anticipated strong highway infrastructure activity,” Smith said. “We expect margins over scrap on steel products in both North America and Europe to increase sequentially following the realization of price adjustments made throughout the second quarter.”