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Key Takeaways From Commercial Metal's 1st-Quarter Results

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·3 min read
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- By Mayank Marwah

On Jan. 11 before the market opened, Commercial Metals (NYSE:CMC) released its results for its fiscal 2021 first quarter, which ended Nov. 30.

By the numbers

The steel and metal manufacturer is based in Irving, Texas. It posted adjusted earnings per share of 58 cents in the first quarter, down from earnings of $0.73 per share reported a year ago. Analysts had called for EPS of 57 cents. Revenue of $1.39 billion surged roughly 1% and surpassed the projected revenue by 2.37%.


Reflecting on the company's performance, President and CEO Barbara R. Smith commented the following:


"While we faced margin headwinds from rising raw material costs during the first quarter, we were able to offset much of the impact through operational execution that brought our controllable cost levels to multi-year lows. This performance is a testament to CMC's drive to tightly manage factors within our control and to continue to realize earnings enhancement opportunities from our network optimization efforts."



Performance

In the North America division, the company's adjusted Ebitda of $155.6 million in the fiscal first quarter was down from $174.7 million recorded last year as margin over scrap cost declined for stream and downstream products, partially negated by robust cost performance at the mills. The company incurred low operation costs in the downstream locations as well. However, it did very little to support the division's overall quarterly performance.

Shipment volume of finished goods (including steel and downstream products) remained flat as compared to the prior three-month period. Moreover, the average selling price of steel products dropped $14 per ton as compared to the prior-year quarter. Margins declined for downstream products as well, resulting from lower average pricing and scrap cost pressure.

In the Europe segment, adjusted Ebitda of $14.5 million was up from $11.4 million reported the year before. This was largely due to robust shipment levels and lower controllable expenses in the reported quarter. Resilience in Polish construction also helped.

Financials

At the end of the quarter, the company had cash and cash equivalents of $465.2 million, aided by strong cash inflow during the quarter. In addition, the company had $678.7 million available under its credit and accounts receivable facilities.

The basic materials company announced a quarterly dividend of 12 cents per share on Jan. 7, which will be payable on Feb. 4. This marks the 225th quarter of dividend payments.

Looking forward

The company did not provide any financial forecast. Looking ahead to the second quarter of fiscal 2021, the company said it expects to witness continued strength in construction and infrastructure activity. Specifically, Smith said:


"Shipments of steel and downstream products should be supported by our construction backlog in North America. We are encouraged by recent trends in residential construction and industrial activity in both North America and Europe, which point toward continuing solid demand for merchant products. We anticipate margin headwinds will persist in North America during the second quarter in light of recent significant increases in domestic scrap costs. CMC has acted swiftly to commensurately adjust price levels on rebar and merchant mill products, but these increases have a timing lag relative to the changes in scrap cost levels."



Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.