Commercial Metals' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Commercial Metals (CMC)

Q2 2012 Earnings Call

March 28, 2012 9:00 am ET


Joseph Alvarado - Chief Executive Officer, President and Member of The Board of Directors

Barbara R. Smith - Chief Financial Officer and Senior Vice President


Kuni M. Chen - CRT Capital Group LLC, Research Division

Luke Folta - Jefferies & Company, Inc., Research Division

Michael F. Gambardella - JP Morgan Chase & Co, Research Division

Evan L. Kurtz - Morgan Stanley, Research Division

Timna Tanners - BofA Merrill Lynch, Research Division

Brent Thielman - D.A. Davidson & Co., Research Division

Timothy P. Hayes - Davenport & Company, LLC, Research Division

Joe Krawczak

Charles A. Bradford - Bradford Research, Inc.

Philip Gibbs - KeyBanc Capital Markets Inc., Research Division

Michelle Applebaum - Steel Market Intelligence Inc

Unknown Analyst

Luke McFarlane - Macquarie Research

Aldo J. Mazzaferro - Macquarie Research



Hello, and welcome, everyone, to today's Commercial Metals Company Second Quarter Fiscal 2012 Earnings Call. As always, today's call is being recorded. [Operator Instructions] I would like to remind all participants that during the course of this conference call, the company will make statements that will provide information other than historical information and will include statements concerning the company's future prospects, revenues, expenses or profits.

These statements are forward-looking statements and may involve speculation and are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These risks and uncertainties are described in CMC's latest 10-Q and 10-K available on both the company's and the SEC's website.

Forward-looking statements are made based on management's current expectations and assumptions, and CMC offers no assurance that actual outcomes and results will be as indicated in any forward-looking statements. Except as required by law, CMC does not undertake any obligation to update, amend or clarify any forward-looking statements as a result of future events, new information or otherwise.

Some numbers presented during this call will be non-GAAP financial measures. Reconciliations of such non-GAAP financial measures to their GAAP equivalents may be found in the company's press release.

For now, the opening remarks and introductions, I would now turn the call over to the President and CEO of Commercial Metals Company, Mr. Joe Alvarado.

Joseph Alvarado

Good morning, everyone. Thank you for joining us to discuss CMC's second quarter fiscal 2012 results. I will begin with some second quarter highlights and an update on the progress we are making on a number of important initiatives we discussed with you last quarter. Barbara will then provide the financial details on the quarter, and I will close with some comments on our outlook for the third quarter of fiscal 2012. And after that, we will open the call to questions.

As noted in our press release this morning, we reported net sales of $2 billion for our fiscal 2012 second quarter ended February 29, 2012, an increase of 10% from the second quarter 2011 sales of $1.8 billion. We also reported net earnings of $28.9 million or $0.25 per share in this year's second quarter compared to a net loss of $46.2 million or $0.40 per share for last year's second quarter, an improvement of $75.1 million in net earnings performance.

Barbara will walk you through all the details in a moment, including the impact of discontinued operations.

In addition to substantially improved earnings in the quarter, we generated $95 million of EBIT -- of adjusted EBITDA, which also represents a significant improvement from a year ago.

I'm also pleased to announce and to report that our Board of Directors approved our quarterly dividend of $0.12 per share, marking the 190th consecutive quarter of dividends to shareholders.

Though the second fiscal quarter is historically our slowest quarter, we achieved our second highest quarterly adjusted operating profit since the first quarter of fiscal 2009, the start of the current economic recession. Our domestic mill and fabrication selling prices for the second quarter were higher than the prior 2 quarters, and our Americas Mills metal margin continued to increase. Most of our segments had higher volumes than last year's second quarter. We continue to be encouraged as our domestic backlogs have grown in the past 2 quarters.

Our Americas Mills and our International Marketing and Distribution segments led our improved profitability, with the International Mill and Americas Recycling contributing profitably despite some challenges in their markets. All this is to the credit of our operations and business management team.

Our Americas Mills segment had another strong quarter of profitability with adjusted operating profit of $54.4 million compared to last year's second quarter of $10.9 million. Tons shipped, average sales prices and metal margins all improved when compared to the same quarter a year ago and this year's first fiscal quarter. This profitability was achieved in spite of planned outages at certain mills for installation of environmental upgrades and general maintenance.

Our mills operated at roughly 77% of capacity compared to 73% in the second quarter of last year. Also, our new Arizona mill achieved another quarter of profitability.

Our International Marketing and Distribution segment had near record profits with an adjusted operating profit of $26.6 million as compared to $12.4 million in last year's second quarter. The raw materials operating group within this segment was the largest contributor to the increased profitability.

Our domestic steel import business, Asian operations and Australian operations, including our recent acquisition in Australia, were all profitable in the quarter.

Our International Mills segment, consisting primarily of our Polish operations, achieved an adjusted quarterly operating profit of $6.6 million compared to $4 million in last year's second quarter. This improved profitability was achieved even though severe winter weather slowed construction in Central Europe.

Read the rest of this transcript for free on