CMC reports sharp drop in Q4 income; CEO sees modest stabilization in US markets

Monday, 02 November 2009 21:42:10 (GMT+3)   |  
       

Irving, Texas-based steel producer, recycler, trader and fabricator Commercial Metals Company (CMC) on Friday reported net earnings of $7.2 million for its fiscal fourth quarter ended August 31, 2009, which is sharply down from the $63.5 million earned in the same quarter of last year.

During the quarter, net sales dropped to $1.5 billion, from $3.1 billion last year.
Net earnings for the year ended August 31, 2009 were $20.8 million on net sales of $6.8 billion. For the same period last year, net earnings were $232.0 million on net sales of $10.4 billion. The annual results included after-tax LIFO income of $208 million. This compares with after-tax LIFO expense of $209 million or $1.78 per diluted share last year.

Commenting on the fourth quarter and fiscal 2009 results, CMC Chairman, president and CEO Murray R. McClean said, "Although we saw increases in steel production and sales volumes in the fourth quarter compared to the third quarter, this was more due to restocking than any pick up in real demand. We remain concerned about continued sustainability of demand. The stimulus effect was negligible in the US. Internationally, China continued to benefit from an effective stimulus package and nearby Asian countries also improved. Steel volume increases in Poland were met by lower metal margins impacting profitability. Our tubular mill in Croatia continued to struggle with the downturn in energy markets as well as increased Chinese competition in nearby markets. Overall declines in inventory quantities and prices led to net LIFO income, but rising ferrous scrap prices resulted in some segments incurring expense. We continue to address exposures including unplanned inventory and unwarranted customer contractual noncompliance related to US steel imports. In late August, our micro minimill in Arizona successfully rolled its first rebar."

Commenting on the company's overall outlook, McClean stated, "Domestic market conditions appear to be stabilizing, but at very modest levels. US stimulus programs are likely to be effective from calendar 2010, but at a slow pace. Private nonresidential construction is likely to remain weak. We anticipate prices to trend moderately lower for our first fiscal quarter with shipments at slightly lower levels to fourth quarter fiscal 2009 given seasonal trends. Rebar imports should remain low."
Regarding the international outlook, McClean said that Asian markets continue to be the most encouraging, and though they are off the highs of July/August, they are likely to continue to improve. Australia's economic recovery is ahead of the US, and in Europe recovery is likely to be mixed. McClean expects Poland (where CMC operates three long product mills) to likely lead Central Eastern Europe with improving GDP growth.

Commercial Metals Company and its subsidiaries manufacture, recycle and market steel and metal products, related materials and services through a network including steel minimills, steel fabrication and processing plants, construction-related product warehouses, a copper tube mill, metal recycling facilities and marketing and distribution offices in the United States and in strategic international markets.


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