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Commercial Metals Company F3Q10 (Qtr End 05/31/10) Earnings Call Transcript

Commercial Metals Company F3Q10 (Qtr End 05/31/10) Earnings Call Transcript

Commercial Metals Company (CMC)

F3Q10 (Qtr End 05/31/10) Earnings Call Transcript

June 22, 2010 11:00 am ET


Murray McClean – Chairman, President and CEO

Bill Larson – SVP and CFO


Chris Brown – Bank of America/Merrill Lynch

Chris Olin – Cleveland Research

Brian Yu – Citi

Timna Tanners – UBS

Wayne Atwell – Casimir Capital

Sanil Daptardar – Sentinel Investments

William Florida – Advisory Research

Brent Thielman – D.A. Davidson

Leo Larkin – Standard & Poor’s



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Previous Statements by CMC
» Commercial Metals Company F2Q10 (Qtr End 02/28/10) Earnings Call Transcript
» Commercial Metals Company F2Q10 (Qtr End 11/30/09) Earnings Call Transcript
» Commercial Metals Company F4Q09 (Qtr End 08/31/2009) Earnings Call Transcript

Hello and welcome to today’s Commercial Metals Company’s third quarter 2010 earnings conference call. At this time all participants are in listen-only mode. After management’s remarks, we will conduct a question-and-answer session and instructions will follow at that time. Please be advised this call is being recorded today, June 22nd and your participation implies consent to our recording this call. If you do not agree to these terms, simply disconnect.

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Your host for today’s call is Mr. Murray McClean, Chairman, President and Chief Executive Officer of Commercial Metals Company. Mr. McClean, please begin your call.

Murray McClean

Good morning and welcome to CMC’s Third Quarter Fiscal 2010 Conference Call. With me is Bill Larson, our Chief Financial Officer. And as usual I’ll begin the call with an overview of the third quarter and then ask Bill to provide further details. Finally, I’ll comment on the outlook for our fourth quarter fiscal 2010, which ends on August the 31st.

In terms of an overview of the quarter, obviously, it was a much improved quarter. The spring construction season stimulated demand for scrap and steel products. Ferrous scrap prices peaked in March was stable in April before declining in May. Steel prices such as rebar merchants peaked in April and then started to decline in international markets during May. They were stable here in the U.S. during May.

Restocking occurred across the supply chain but was largely over by the end of May, particularly in international markets. The fallout from the Greek financial crisis impacted markets in Europe, in particular, Southern Europe towards the end of the quarter. As well, China’s deliberate action on slowing its economy in particular focusing on the spec [ph] of the real estate markets caused to pause in other Asian markets.

By segment, our recycling operation returned its best profit result in seven quarters based on high shipments, better prices and better margins. Our U.S. steel mill had a very good quarter with a rolling capacity utilization rate of 75% which was higher than the 68% that we had forecasted previously.

Our U.S. Fabrication operations had a loss mainly due to a low priced backlog when faced with rising steel prices. On a positive note, the backlog did expand during the quarter and at better prices, as steel prices rose with significant highway work including some stimulus project work being awarded.

Our international mills made a loss overall, however, Poland was profitable. And mill in Croatia suffered from a low price backlog and rising scrap prices as well as start-up costs for the new melt shop.

Our Marketing and Distribution Group had a very good quarter led by our raw materials division CMC Cometals. In addition, we did well in Australia, Asia and in the European markets.

I’ll now ask Bill to provide the details on the third quarter.

Bill Larson

Thank you, Murray. Good morning. Let me call to your attention the detailed Safe Harbor statement included in our press release and in our August 31, 2009 10-K that in summary says that in spite of management’s good faith, current opinions on various forward-looking matters circumstances can change and not everything that we think will happen always happens.

In addition, we’ve given guidance regarding our outlook for the fourth quarter of fiscal 2010 in our press release. Subsequent to this call, we will not be under any obligation to update our outlook. In accordance with Regulation G of the Securities and Exchange Commission, you are aware of non-GAAP financial measures.

Some of these have derived fairly straightforward from our financial statements or in common business use can be the subject to our discussions today and in our investor visits, but there are other items that may be outside of our ability for discussion. You may need to be patient with us if we defer comment. And I would direct you to our Web site, where there is additional information at

Well, the tide turned for us in our third quarter. It seems as if previous to March 1


all the news was bad or trending bad. During this quarter, news was generally good or trending good. Murray has noted some of these. I will mention some others.

I think we need to take all of this in context. No one is going to start doing their snoopy happy feet dance based on what transpired this quarter. In certain segments, signs of recovery are fairly clear. In others, it’s hard to read past the next month. It’s not terribly different than the French soccer team. You don’t know what’s going to happen if and when they take the field.

We’ve been positioning CMC over the last six quarters to take advantage of the uneven economic recovery, which is underway. This includes making the operational base consistent with the demand in the market. And let’s review some of those undertakings.

We exited the joist and deck business. We have absorbed $54 million of charges not counting normal operating results associated with this decision. We have an active divestiture program underway and expect to have substantial wrap up by August 31st.

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