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Announcement of Periodic Review: Moody's announces completion of a periodic review of ratings of Commercial Metals Company
Global Credit Research - 27 Aug 2020
New York, August 27, 2020 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings of Commercial Metals Company and other ratings that are associated with the same analytical unit. The review was conducted through a portfolio review in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. The review did not involve a rating committee. Since 1 January 2019, Moody's practice has been to issue a press release following each periodic review to announce its completion.
This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Key rating considerations are summarized below.
Commercial Metals Company's (CMC) Ba1 Corporate Family Rating CFR) reflects the company's strong position in the rebar and merchant bar markets and diversity of operations with seven minimills and two micro mills in the United States as well as its presence in Europe through it minimill in Poland. Additionally, CMC operates steel fabrication facilities and ferrous and nonferrous scrap metal recycling facilities. CMC has recently announced the construction of a new micro mill to produce both merchant bar quality (MBQ) product and rebar, which will replace a higher cost rebar facility. The new facility will be technologically advanced allowing for emissions improvement and better energy efficiency.
The company is primarily exposed to the construction segment with approximately 37% of shipments to infrastructure, 32% to non-residential construction, 16% to residential construction and 15% to OEM and agricultural markets. Despite reduced shipments in the quarter ended May 31, 2020 due to market disruptions associated with the coronavirus, CMC's performance remained solid on the resiliency in its construction business and good performance in the downstream fabrication business. While bidding activity has slowed in recent months, CMC continues to maintain a strong backlog.
A further consideration is CMC's vertically integrated business model, which provides operational benefits and performance benefits in varying end market and price cycles. In its operations in the US, 60% of its recycled materials (scrap) is shipped to CMC's America Mills, which ships approximately 40% of its output to the fabrication segment.
CMC's solid liquidity profile, exemplified by its cash position of $462 million at May 31, 2020, availability under its $350 million revolving credit facility ($3 million in Letters of Credit issued) and favorable maturity profile are further support factors in the CFR.
This document summarizes Moody's view as of the publication date and will not be updated until the next periodic review announcement, which will incorporate material changes in credit circumstances (if any) during the intervening period.
The principal methodology used for this review was Steel Industry published in September 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
This announcement applies only to EU rated and EU endorsed ratings. Non EU rated and non EU endorsed ratings may be referenced above to the extent necessary, if they are part of the same analytical unit.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
Carol Cowan Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Glenn B. Eckert Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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