Q3 2025 Commercial Metals Co Earnings Call
[music].
Operator: © BF-WATCH TV 2021 © The Ultimate Parody Site! Hello and welcome everyone to the Fiscal 2025 3rd Quarter Earnings Call for CMC.
Hello, and welcome everyone to the fiscal 'twenty twenty-five third quarter earnings call for C. M C.
Operator: Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer, and Paul Lawrence, Senior Vice President and Chief Financial Officer.
Speaker Change: Joining me on today's call are Peter Matt Cmc's, President and Chief Executive Officer, and Paul Lawrence Senior Vice President and Chief Financial Officer, today's materials, including the press release and supplemental slides that accompany this call can be found on C. M sees investor Relations website.
Operator: Today's materials, including the press release and supplemental slides that accompany this call, can be found on CMC's Investor Relations website. Today's call is being recorded. After the company's remarks, we will have a question and answer session and we'll have a few instructions at that time.
Today's call is being recorded after the company's remarks, we will have a question and answer session and we'll have a few instructions at that time.
Operator: I would like to remind all participants that today's discussion contains forward-looking statements including with respect to economic conditions, effects of legislation and trade actions, U.S. steel import levels, construction activity, demand for finished steel products, the expected capabilities, benefits, costs, and timeline for construction of new facilities, the company's operations, the company's strategic growth plan and its anticipated benefits, legal proceedings, the company's future results of operations, financial measures, and capital spending. These statements reflect the company's beliefs based on current conditions, but are subject to risks and uncertainty.
Speaker Change: I would like to remind all participants that today's discussion contains forward looking statements, including with respect to economic conditions effects of legislation and trade actions U S. Steel import levels of construction activity demand for finished steel products, the expected capabilities benefits cost and timeline for construction of new facilities.
Speaker Change: The company's operations, the company's strategic growth plan and its anticipated benefits legal proceedings, the company's future results of operations financial measures and capital spending.
Speaker Change: These statements reflect the company's beliefs based on current conditions, but are subject to risks and uncertainties.
Operator: The company's earnings release, most recent annual report on Form 10-K, and other filings with the U.S. Securities and Exchange Commission contain additional information concerning factors that could cause actual results to differ materially from those projected in forward-looking statements. Except as required by law, CMC does not assume any obligation to update, amend, or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release, supplemental slide presentation, or on the company's website.
Speaker Change: The company's earnings release, most recent annual report on Form 10-K, and other filings with the U S Securities and Exchange Commission contained and for additional information concerning factors that could cause actual results to differ materially from those projected in forward looking statements.
Speaker Change: Except as required by law CMC does not assume any obligation to update amend or clarify. These statements. Some numbers presented will be non-GAAP financial measures and reconciliations for such numbers can be found in the company's earnings release supplemental slide presentation or on the company's website.
Operator: Unless stated otherwise, all references made to year or quarter end are references to the company's fiscal year or fiscal quarter.
Speaker Change: I stated otherwise all references made to year or quarter end are references to the company's fiscal year or fiscal quarter.
Peter Matt: And now for opening remarks and introductions, I will turn the call over to Peter. Good morning, everyone, and thank you for joining CMC's third-quarter earnings conference call. Before jumping directly into a discussion of the quarter, I would like to take a moment to zoom out and offer some broader insights regarding where we see our company today, where we envision taking CMC in the future. and importantly, why we believe CMC offers a compelling investment. Today, CMC is a leader in most of the markets in which we supported by our exposure to attractive and growing geography. strong customer relationships, and exceptional operational capability.
Speaker Change: And now for opening remarks, and introductions I will turn the call over to Peter.
Speaker Change: Good morning, everyone and thank you for joining Cmc's third quarter earnings Conference call.
Speaker Change: Before jumping directly into a discussion of the quarter I would like to take a moment to zoom out and offer some broader insights regarding where we see our company today, where we envision taking CMC in the future.
Speaker Change: And importantly, why we believe CMC offers a compelling investment thesis.
Speaker Change: Today CMC as a leader in most of the markets in which we compete supported by our exposure to attractive and growing geographies strong customer relationships and exceptional operational capabilities. Additionally, our core domestic long steel markets are.
Peter Matt: Additionally, our core domestic long steel markets are benefiting from industry consolidation and favorable trade policy, which we believe will underpin structurally enhanced margins through the cycle. On the demand side, we expect powerful tailwinds from long-term secular trends that will drive construction investment for years to come.
Speaker Change: Fitting from industry consolidation and favorable trade policy, which we believe will underpin structurally enhance margins through the cycle.
Speaker Change: On the demand side, we expect powerful tailwind from long term secular trends that will drive construction investment for years to come.
Peter Matt: From this position of competitive strength and attractive end market exposure, we are now moving forward with the execution of a game-changing strategy. intended to meaningfully and permanently enhance CMC's financial profile and turbocharge value accretive growth. We are aiming to deliver higher, more stable margins and cash flows through the cycle, as well as a step change in returns on capital. I believe the strategic action CMC is taking and the course we are traveling provides a compelling opportunity for our investors. Successful execution of our strategy should result in margin and cash flow levels well above what we think are currently priced into our share.
Speaker Change: This position of competitive strength and attractive end market exposure. We are now moving forward with the execution of a game changing strategy.
Speaker Change: Intended to meaningfully and permanently enhance <unk> financial profile and turbocharge value accretive growth.
Speaker Change: We are aiming to deliver higher more stable margins and cash flows through the cycle as well as a step change in returns on capital I believe the strategic actions CMC is taking and of course, we are traveling provides a compelling opportunity for our investors.
Speaker Change: Faisel execution of our strategy should result in margin and cash flow levels well above what we think are currently priced into our shares.
Peter Matt: Now, let's jump into our third quarter results. CMC reported net earnings of $83.1 million, or $0.73 per diluted share, on net sales of $2 billion. The result included $1.3 million of after-tax charges, which Paul will take you through in more detail. Excluding these items, adjusted earnings were $84.4 million or $0.74 per diluted share. We generated consolidated core EBITDA of $204.1 million and a core EBITDA margin of 10.1%, both of which improved meaningfully on a sequential basis.
Speaker Change: Now, let's jump into our third quarter results.
Speaker Change: CMC reported net earnings of $83 1 million or <unk> 73 cents per diluted share on net sales up 2 billion.
Speaker Change: The result included $1 3 million of after tax charges, which Paul will take you through in more detail.
Speaker Change: Excluding these items adjusted earnings were $84 4 million or 74 cents per diluted share.
Speaker Change: We generated consolidated core EBITDA of $204 1 million and a core EBITDA margin of 10, 1% both of which improved meaningfully on a sequential basis.
Peter Matt: We believe that the second quarter of fiscal 2025 marked a trough and expect business conditions for each segment will continue to improve from those levels. Turning now to CMC's markets in North America, the construction and industrial activity that drive consumption of our products was resilient during the quarter, which resulted in year-over-year growth of finished steel ships. Despite concerns regarding tariffs and related economic uncertainty, we experienced an encouraging degree of stability across each of our key internal leading indicators, including project bids, new awards, and backlog volume. Downstream bid volumes, our best gauge of the construction pipeline, remained robust during the quarter and pointed to the continued accumulation of substantial amounts of pent-up demand across several non-residential end markets, which we believe should be unlocked by reduced economic uncertainty and lower interest rates.
Speaker Change: We believe that the second quarter of fiscal 2025 marked a trough and expect business conditions for each segment will continue to improve from those levels.
Speaker Change: Turning now to Cmc's markets in North America, the construction and industrial activity that drive consumption of our products was resilient during the quarter, which resulted in year over year growth of finished steel shipments.
Speaker Change: Despite concerns regarding tariffs and related economic uncertainty, we experienced an encouraging degree of stability across each of our key internal leading indicators, including project bids New awards and backlog volumes.
Speaker Change: Downstream bid volumes are best gauge of the construction pipeline remained robust during the quarter and pointed to the continued accumulation of substantial amount of pent up demand across several nonresidential end markets, which we believe should be unlocked by.
Speaker Change: Joost economic uncertainty.
Peter Matt: This observation is supported by on-the-ground activity and by the Dodge Momentum Index, which sits near an all-time high and reflects improving planning activity in a broad range of non-residential structures. We believe there are also signals indicating pent-up demand exists in the residential segment where despite uncertainty, higher rates, and new household formation below expectations, single-family starts have been sustained at a rate above pre-COVID level. Unlike the hesitation we are observing within certain areas of the non-residential and residential market segments, demand from infrastructure activity is strengthening, particularly across our key Sunbelt states. Remember, not only is this segment the single largest consumer of rebar, but it is also far less sensitive to economic concerns and the level of interest rates.
Speaker Change: Lower interest rates.
Speaker Change: This observation is supported by on the ground activity and by the Dodge momentum index, which sits near an all time high and reflects improving planning activity in a broad range of nonresidential structures. We believe there are also signals, indicating pent up demand.
Speaker Change: Exist in the residential segment, where despite uncertainty higher rates and new household formation below expectations single family starts have been sustained at a rate above pre COVID-19 levels.
Speaker Change: Unlike the hesitation, we are absorbing within certain areas of the nonresidential and residential market segments.
Speaker Change: <unk> from infrastructure activity is strengthening particularly across our key sunbelt states remember not only is this segment the single largest consumer of rebar, but it is also far less sensitive to economic concerns and the level of interest rates, we expect growth in EMS.
Peter Matt: We expect growth in infrastructure activity to continue for at least the next couple of years.
Speaker Change: Structural activity to continue for at least the next couple of years.
Peter Matt: When taking stock of the current situation, there is little doubt that the impact of economic uncertainty and elevated interest rates are hanging over our markets. But I would note two things. One, tariffs are just the latest flavor of uncertainty that the industry has had to manage through. And two, we have been living in a high interest rate environment for more than two and a half years. Despite these factors, rebar consumption remains at an historically strong level of within 5 percent to 6 percent of the post-GFC period. This trend highlights the attractive resilience of our primary end markets as well as the upside potential for demand if certain impediments are removed.
Speaker Change: And taking stock of the current situation, there's little doubt that the impact of economic X or uncertainty and elevated interest rates are hanging over our markets, but I would note two things one tariffs are just the latest flavor of uncertainty that the industry has had to manage through and.
Speaker Change: Two we have been living in a high interest rate environment for more than two and a half years. Despite these factors rebar consumption remains at a historically strong level of within 5% to 6% of the post Dfc peak.
Speaker Change: This trend highlights the attractive resilience of our primary end markets as well as the upside potential for demand if certain impediments are removed.
Peter Matt: Looking beyond the near-term environment, we continue to expect strong structural drivers to support construction activity over a multi-year period. These trends include investment in our nation's infrastructure, reshoring industrial capacity, growth in energy generation and transmission, the build-out of AI infrastructure, as well as addressing a U.S. housing shortage of 2 to 4 million units. As noted on slide 8 of the supplemental presentation, over $1.6 trillion of corporate investments across AI, manufacturing, shipping and logistics, and energy have been announced in calendar 2025. Commencement of even a handful of the related megaprojects could provide a meaningful catalyst for rebar consumption in the months or quarters ahead.
Speaker Change: Looking beyond the near term environment, we continue to expect strong structural drivers to support construction activity over a multi year period. These trends include investment in our nation's infrastructure reassuring industrial capacity growth in energy generation and transmission the bill.
Speaker Change: <unk> out of AI infrastructure as well as addressing a U S housing shortage up two to 4 million units as noted on slide eight of the supplemental presentation over 1.6 trillion of corporate investments across AI manufacturing shipping and logistics and energy had.
Speaker Change: Been announced in calendar 2025.
Speaker Change: Commencement of even a handful of the related mega projects could provide a meaningful catalyst for rebar consumption in the months or quarters ahead.
Peter Matt: Moving on to profitability, we experienced a good sequential recovery in North American steel product metal margins during the quarter. Long steel pricing rebounded earlier in the calendar year on the back of a rising scrap market and we have been able to maintain these higher levels even as scrap pricing declined significantly in April and May. We exited the quarter at a much higher margin level than we entered, and given good seasonal demand and a favorable trade backdrop, we expect to further expand margins through the fourth quarter.
Speaker Change: Moving on to profitability, we experienced a good sequential recovery in North American steel product metal margins during the quarter long steel pricing rebounded earlier in the calendar year the back of a rising scrap market and we have been able to maintain these higher levels even.
Speaker Change: Scrap pricing declined significantly in April and May.
Speaker Change: We exited the quarter at a much higher margin level than we entered and giving good seasonal demand and a favorable trade backdrop, we expect to further expand margins through the fourth quarter.
Peter Matt: Before I move on to our other segments, I would like to briefly address the potential impact of tariffs on our business in North America. On the supply side, we are benefiting from a reduced level of steel imports into the domestic market as a result of the elimination of previous Section 232 exemptions and, subsequent to the quarter end, an increase of the effective levy rate to 50%. While we do not know how long these policies will remain in effect, they should support steel pricing for their duration.
Speaker Change: Before I move onto our other segments I would like to briefly address the potential impact of tariffs on our business in North America.
Speaker Change: On the supply side, we are benefiting from a reduced level of steel imports into the domestic market as a result of the elimination of previous section 232 exemptions and subsequent to the quarter and an increase in the effective levy rate to 50%.
Speaker Change: While we do not know how long these policies will remain in effect they should support steel pricing for their duration on the demand side, we would separate the effect of the tariffs into near term observed impacts and longer term expected impacts in the near term as already mentioned.
Peter Matt: On the demand side, we would separate the effect of the tariffs into near-term observed impacts and longer-term expected impacts. In the near term, as already mentioned, there is increased uncertainty causing delays in some projects not under contract.
Speaker Change: There is increased uncertainty, causing delays in some projects not under contract.
Peter Matt: From a longer-term perspective, we see tariffs as a single component of a broader program that includes changes to tax, regulatory, energy, and trade policy aimed at stimulating domestic investment, which could meaningfully benefit construction activities. With regards to operating costs, we anticipate the impact of tariffs to be modest as we source primarily from domestic suppliers. The impact on capital costs should also be monitored.
Speaker Change: From a longer term perspective, we see tariffs as a single component of a broader program that includes changes to tax regulatory energy and trade policy aimed at stimulating domestic investment, which could meaningfully benefit construction activity.
Speaker Change: With regards to operating costs, we anticipate the impact of tariffs to be modest as we source primarily from domestic suppliers the.
Peter Matt: In the case of Steel West Virginia, our largest capital project, almost all of the imported equipment is already in the U.S.
Speaker Change: The impact on capital costs should also be modest in.
Speaker Change: In the case of steel West, Virginia, our largest capital project almost all of the imported equipment is already in the U S. I.
Peter Matt: I want to publicly thank our very capable procurement team for all of their efforts over the last two and a half months. They were able to quickly digest and analyze each tariff twist and turn. providing management with a clear understanding of the implications.
Speaker Change: I want to publicly thank our very capable procurement team for all of their efforts over the last two and a half months.
Speaker Change: We're able to quickly digest and analyze each tariff twist and turn pre.
Speaker Change: Providing management with a clear understanding of the implications.
Peter Matt: While on the topic of trade, you may have already seen that an important trade case was filed with the U.S. International Trade Commission two weeks ago by a coalition of domestic rebar producers. The petition alleges exporters located in Algeria, Bulgaria, Egypt and Vietnam are guilty of dumping material into the U.S. market and should be subject to corrective duties ranging from 25 percent to over 160 percent.
Speaker Change: While on the topic of trade you may have already seen that an important trade case was filed with the U S. International Trade Commission two weeks ago by a coalition of domestic rebar producers. The petition alleges exporters' located in Algeria, Bulgaria, Egypt and Vietnam are.
Speaker Change: Guilty of dumping material into the U S market and should be subject to corrective duties ranging from 25% to over 160% pre.
Peter Matt: Preliminary rulings on the countervailing and anti-dumping complaints are due August 28th and November 11th respectively.
Speaker Change: Preliminary rulings on the countervailing and antidumping complaints are due August 28, and November 11th respectively.
Peter Matt: Business conditions for our Emerging Businesses Group are similar to those of our North America Steel Group, given a high degree of market overlap. During the quarter, we continue to see good levels of pipeline activity in the U.S., demonstrated by healthy quoting rates and reports that engineers remain busy planning and designing projects.
Speaker Change: Business conditions for our emerging businesses group are similar to those of our North America Steel group, given a high degree of market overlap.
Speaker Change: During the quarter, we continued to see good levels of pipeline activity in the U S demonstrated by healthy quoting rates and reports that engineers remain busy planning and designing projects.
Peter Matt: That being said, we are seeing some hesitation among project owners to award new contracts and have experienced select project start delays. Again, similar to our North America Steel Group, this is not a new dynamic. One attractive element of the EBG segment is the fact that our solutions are currently underpenetrated in the market, which provides significant opportunities for growth as we drive product adoption in addition to market expansion. In our key proprietary products, we are winning share through a strong value proposition while maintaining solid margins. During the quarter, shipments increased on a year-over-year basis for each of our primary proprietary offerings, including our Interax Geogrid, Galvabar, PROMEX, and Cryosteel reinforcing solutions, as well as CMC anchoring systems. This is a strong indication that customers see the clear benefits these products bring to the job site.
Speaker Change: That being said we are seeing some hesitation among project owners to award new contracts and have experienced select project start delays.
Speaker Change: Again, similar to our North America Steel group. This is not a new dynamic.
Speaker Change: One attractive element of the <unk> segment is the fact that our solutions are currently underpenetrated in the market, which provides significant opportunities for growth as we drive product adoption. In addition to market expansion and our key proprietary products, we are winning <unk>.
Speaker Change: Share through a strong value proposition, while maintaining solid margins.
Speaker Change: During the quarter shipments increased on a year over year basis for each of our primary proprietary offerings, including our interacts Geo grid Galba bar Pro Max and Cryo steel reinforcing solutions as well as CMC anchoring systems.
Speaker Change: This is a strong indication that customers see the clear benefits these products bring to the job site.
Peter Matt: For example, our latest geogrid solution is able to reduce construction cost, duration, and labor usage as well as CO2 emissions while extending the life of the asset being constructed. Our performance-reinforcing steels make construction in difficult environments possible and are used where standard materials will fail. The lineup we offer reaches a broad spectrum of critical applications and generally features greater versatility and lower cost than competing products.
Speaker Change: For example, our latest Geo grid solution is able to reduce construction cost duration and labor usage as well as C. O two emissions, while extending the life of the asset being constructed our performance reinforcing steel made construction in difficult environments possible and are used.
Speaker Change: We're standard materials will fail.
Speaker Change: Our lineup we offer reaches a broad spectrum of critical applications and generally features greater versatility.
Peter Matt: We remain confident that the combination of further product adoption and attractive end market exposures positions our Emerging Businesses Group to achieve a consistent organic growth rate in the mid-single digits and EBITDA margins in the high-10s.
Speaker Change: And lower cost than competing products.
Speaker Change: We remain confident that the combination of further product adoption and attractive end market exposure exposures positions, our emerging businesses group to achieve a consistent organic growth rate in the mid single digits and EBITDA margins in the high teens.
Peter Matt: Shifting gears to our Europe Steel Group, conditions continue to improve at a moderate pace compared to recent periods, largely as a function of reduced import flows of long steel products and growing demand from construction and marketing. Better balance in the steel market provided space for our team to increase shipments to the highest level in nearly two years and capitalize on expanded metal margins. compared to the December low, metal margins in May were over $40 per ton higher, a clear demonstration of improved business conditions. We believe margins should hold their recent gains in the months ahead.
Speaker Change: Shifting gears to our Europe steel group conditions continued to improve at a moderate pace compared to recent periods largely as a function of reduced import flows of long steel products and growing demand from from construction end markets.
Speaker Change: Better balance in the steel market provided space for our team to increased shipments to the highest level in nearly two years and capitalize on expanded metal margins compared to the December low metal margins in may where over $40 per ton higher a clear demonstration.
Speaker Change: <unk> of improved business conditions.
Speaker Change: We believe margin should hold their recent gains in the months ahead.
Peter Matt: This view incorporates some pickup in import activity which has begun to occur for certain products.
Speaker Change: This view incorporates some pickup in import activity, which has begun to occur for certain products.
Peter Matt: Next, I would like to provide an update on the execution of CMC's strategic plan. As we have stated previously, the goal of our strategy is to drive meaningful and permanent improvements to margins, cash flows, and returns, while reducing the volatility of our business. We are pursuing this objective along three paths, excellence in all we do, value accretive organic growth, and capability enhancing inorganic growth. Each path represents significant opportunity for CMC, and the successful execution of all three will be game-changing in terms of the returns we generate on investment, the size of our company, and ultimately, the value we create for our investors.
Speaker Change: Next I would like to provide an update.
Speaker Change: The execution of CMC strategic plan.
Speaker Change: As we have stated previously the goal of our strategy is to drive meaningful and permanent improvements to margins cash flows and returns while reducing the volatility of our business. We are pursuing this objective along three past excellence in all we do value.
Speaker Change: Accretive organic growth and capability enhancing inorganic growth.
Speaker Change: Each path represents significant opportunity for CMC and the successful execution of all three will be game changing in terms of the returns we generate on investment the size of our company and ultimately the value we create for our investors.
Peter Matt: taking each strategic effort in turn. I'll start with excellence in all we do. We have discussed this publicly as our Transform, Advance, and Grow, or TAG, program. to drive operational and commercial But it is more than that. Being excellent also means investing in our people to ensure CMC has the world-class team needed to execute all facets of our strategy and excel on a day-to-day basis. Focusing in on TAG, I am pleased with the early success we have achieved during the first three quarters of exercise. Benefits have exceeded our targets, and we are confident in the program's potential to drive notable improvement to CMC's financial metrics.
Speaker Change: Taking each strategic effort in turn.
Speaker Change: I'll start with excellence in all we do we have discussed this publicly as our transform advance and grow or tag program.
Speaker Change: To drive operational and commercial excellence, but it is more than that being excellent also means investing in our people to ensure CMC has the world class team needed to execute all facets of our strategy and excel on a day to day basis.
Speaker Change: Focusing in on tag I am pleased with the early success, we have achieved during the first three quarters of execution benefits have exceeded our targets and we are confident in the program's potential to drive notable improvement to Cmc's financial metrics as outlined on slide six we expect our <unk>.
Peter Matt: As outlined on slide 6, we expect our TAG efforts to yield approximately $50 million of EBITDA benefit in fiscal year 2025 relative to a fiscal year 2024 baseline. Looking ahead, we believe that initiatives we are now executing against will provide annual run rate EBITDA benefits of over $100 million when fully realized. These numbers are impactful, but do not capture the full scope of TAG benefits we have planned. We are just getting started and will share more information and update our financial targets as the program progresses. These TAG initiatives should help support higher EBITDA and through-the-cycle margins for our business with only modest amounts of incremental capital.
Speaker Change: <unk> efforts to yield approximately $50 million of EBITDA benefit in fiscal year 2025 relative to a fiscal year 2024 baseline.
Speaker Change: Looking ahead, we believe that initiatives. We are now executing against will provide annual run rate EBITDA benefits of over 100 million when fully realized these numbers are impactful, but do not capture the full scope of tax benefits. We have planned we are just getting started and we'll share more.
Speaker Change: More information and update our financial targets as the program progresses.
Speaker Change: This tag initiatives should help support higher EBITDA and through the cycle margins for our business with only modest amounts of incremental capital.
Peter Matt: Our next strategic path to discuss is value accretive organic growth, which should represent a meaningful source of new earnings and cash flow over the next several years, particularly as our Arizona 2 and Steel West Virginia Mill investments reach full operation. We remain confident in the long-term success of both micro-mill projects and expect a combined incremental EBITDA contribution of over $150 million compared to current levels. I would note that capital expenditures for both facilities are reflected in our capital base, which has hindered CMC's return on invested capital over the last several quarters. Achieving targeted run rate profitability for these two investments would improve our ROIC by approximately 150 basis points, all else equal.
Speaker Change: Our next strategic path to discuss is value accretive organic growth, which should represent a meaningful source of new earnings and cash flow over the next several years, particularly as our Arizona, two and steel West Virginia Mill investments reach full operations we.
Speaker Change: We remain confident in the long term success of both micro mill projects and expect a combined incremental EBITDA contribution of over $150 million compared to current levels.
Speaker Change: I'd note that capital expenditures for both facilities are reflected in our capital base, which has hindered cmc's return on invested capital over the last several quarters achieving targeted run rate profitability for these two investments would improve our ROIC by approximately 150 basis.
Peter Matt: Importantly, we anticipate the completion of our Steel West Virginia micromill will conclude CMC's investments in new steelmaking capacity. With West Virginia in our footprint, CMC will operate a highly flexible manufacturing network featuring excellent geographical and product coverage and have no need of additional production capabilities for the foreseeable future. This best-in-class network is highly cash-generative and allows us to invest for growth in other attractive areas of the business.
Speaker Change: Points all else equal.
Speaker Change: Importantly, we anticipate the completion of our steel West Virginia Micro mill will conclude cmc's investments and new steelmaking capacity.
Speaker Change: With West, Virginia, and our footprint CMC will operate a highly flexible manufacturing network featuring excellent geographical and product coverage and have no need of additional production capabilities for the foreseeable future.
Speaker Change: This best in class network is highly cash generative and allows us to invest for growth in other attractive areas of the business beyond our mills, we are making investments to meet customer demand and strengthen our core offerings by growing our capabilities and more specialized.
Peter Matt: Beyond our mills, we are making investments to meet customer demand and strengthen our core offerings by growing our capabilities in more specialized solutions, particularly within our EBG segment. These undertakings include the expansion of CMC's post-tension cable production, adding a second GalvaBar coating line, and increasing geogrid manufacturing capacity. These investments, and others like them, require significantly less capital than our traditional steel business, but generate high returns on capital and strong cash flow. We are making good progress on these projects and expect each of them to be placed into service over the next 18 months.
Speaker Change: <unk>, particularly within our <unk> segment. These undertakings include the expansion of Cmc's post tension cable production, adding a second galba bar coding line and increasing geo grid manufacturing capacity.
Speaker Change: These investments and others like them require significantly less capital than our traditional steel business, but generate high returns on capital and strong cash flows we are making good progress on these projects and expect each of them to be placed into service over the next 18 months.
Peter Matt: On the inorganic front, we remain interested in entering attractive adjacencies for our business where we believe we have an opportunity to offer immediate value given CMC's current customer knowledge, market positioning, operational capabilities, and the ability to win. We are targeting segments of the $150 billion early stage construction market that touch the types of projects we are already servicing and feature higher, more stable margins. We anticipate these adjacent markets will also benefit from the megatrends that are expected to drive construction activity for years to come.
Speaker Change: On the inorganic front, we remain interested in entering attractive adjacencies for our business, where we believe we have an opportunity to offer immediate value given cmc's current customer knowledge market positioning operational capabilities and the ability to win.
Speaker Change: We are targeting segments of the 150 billion early stage construction market that touch the types of projects, we are already servicing and feature higher more stable margins.
Speaker Change: We anticipate these adjacent markets will also benefit from the Megatrends that are expected to drive construction activity for years to come.
Peter Matt: To give you a better understanding of the types of assets we would consider, I'd like to share some high-level criteria we are using to evaluate inorganic opportunities. First, we won't stress the balance sheet, and we'll maintain a net debt-to-EBITDA ratio below two times. The ideal target is likely within a valuation range of $500 million to $750 million, which is appropriately sized from an integration, financial, and risk perspective. We want to establish a scalable business platform that offers increasing synergies as it grows. And it should have a high degree of geographical overlap with CMC's existing operations.
Speaker Change: To give you a better understanding of the types of assets, we would consider I'd like to share. Some high level criteria. We are using to evaluate inorganic opportunities first we want to stress the balance sheet and we'll maintain a net debt to EBITDA ratio below two times.
Speaker Change: The ideal target is likely within a valuation range of $500 million to $750 million, which is appropriately sized from an integration financial and risk perspective.
Speaker Change: We want to establish a scalable business platform that offers increasing synergies as it grows and it should have a high degree of geographic geographical overlap.
Peter Matt: Financially, we are looking for businesses with EBITDA margins above 20% and free cash flow conversion above current CMC level. Targets fitting this criteria exist in attractive markets, and we will continue to prudently evaluate each opportunity.
Speaker Change: With <unk> existing operations.
Speaker Change: Actually we are looking for businesses with EBITDA margins above, 20% and free cash flow conversion above current CMC levels.
Speaker Change: Targets fitting this criteria exist in attractive markets and we will continue to prudently evaluate each opportunity with that I will turn it over to Paul.
Paul Lawrence: With that, I will turn it over to Paul. Thank you, Peter, and good morning to everyone on the call. As noted earlier, we reported fiscal third quarter 2025 net earnings of 83.1 million or 73 cents per diluted share compared to net earnings of 119.4 million and net earnings per diluted share of $1.02 in the prior year period. Excluding estimated net after-tax charges of approximately $1.3 million, adjusted earnings for the quarter totaled $84.4 million, or $0.74 per diluted share, compared to $119.6 million, or $1.02 per diluted share, respectively, in the prior year period. These adjustments consisted of a $3.8 million pre-tax expense for interest on the judgment amount associated with the previously disclosed Pacific Steel Group litigation, as well as a benefit from the settlement of a new market tax credit transaction.
Paul Lawrence: Thank you Peter and good morning to everyone on the call as.
Paul Lawrence: As noted earlier, we reported fiscal third quarter 2025, net earnings of $83 1 million or <unk> 73 per diluted share compared to net earnings of $119 4 million.
Paul Lawrence: And net earnings per diluted share of $1 <unk> in the prior year period.
Paul Lawrence: Excluding estimated net after tax charges of approximately $1 3 million adjusted earnings for the quarter totaled $84 4 million or <unk> 74 cents per diluted share compared to $119 6 million or $1 two per diluted share respectively.
Paul Lawrence: Late in the prior year period.
Paul Lawrence: These adjustments consisted of a $3 8 million pre tax expense for interest on the judgment amount associated with the previously disclosed specific steel group litigation as well as a benefit from the settlement of a new market tax credit transaction.
Paul Lawrence: Consolidated Core EBITDA was $204.1 million for the third quarter of 2025, representing a decline from the $256.1 million generated during the prior year period. Slide 12 of the supplemental presentation illustrates the year-to-year changes in CMC's quarterly financial performance. Profitability at our North American Steel Group was negatively impacted by lower margins over scrap, while adjusted EBITDA at both our Europe Steel Group and Emerging Business Group increased compared to the third quarter of 2024. consolidated core EBITDA margin of 10.1% compared to 12.3% in the prior year period. DMC's North American Steel Group generated a justity of $186 million for this quarter, equal to $161 per ton of finished steel shipped.
Paul Lawrence: Consolidated core EBITDA was $204 1 million for the third quarter of 2025, representing a decline from the $256 1 million generated during the prior year period.
Paul Lawrence: Slide 12 of the supplemental presentation illustrates the year to year changes in Cmc's quarterly financial performance.
Paul Lawrence: Profitability at our North American Steel group was negatively impacted by lower margins over scrap.
Paul Lawrence: Adjusted EBITDA at both our Europe steel group and emerging business growth increased compared to the third quarter of 2024.
Paul Lawrence: Consolidated core EBITDA margin of 10, 1% compared to 12, 3% in the prior year period.
Paul Lawrence: AMC is north American steel group generated adjusted EBITDA of $186 million for the quarter equal to $161 per ton of finished steel shipped.
Paul Lawrence: Segment-adjusted EBITDA decreased 24% compared to the prior year period, driven primarily by lower margin over scrap costs on steel and downstream products. North American Steel Group adjusts EBITDA margin of 11.9% compares to 14.7% in the third quarter of 2024. Segment results improved on a sequential quarter basis, as steel product margins expanded from their recent lows, and we experienced normal seasonal strength and volume.
Paul Lawrence: Segment, adjusted EBITDA decreased 24% compared to the prior year period, driven primarily by lower margin over scrap cost on steel and downstream products.
Paul Lawrence: North American Steel group adjusted EBITDA margin of 11, 9% compares to 14, 7% in the third quarter of 2024.
Paul Lawrence: Segment results improved on a sequential quarter basis as steel product margins expanded from their recent lows and we experienced normal seasonal strength in volumes.
Paul Lawrence: As Peter mentioned, we believe our fiscal second quarter represented the trough for our financial performance. And we see improving volume and margin conditions ahead as we move through the 2025 construction season. It is important to note that we exited the third quarter at a steel product metal margin of $518 per ton, which is $19 per ton higher than the quarter average. combination of this higher exit rate. Additional scrap cost reductions flowing through and selling price increases should result in further metal margin expansion during the fourth quarter. Segment results benefited also from a number of TAG initiatives, including scrap optimization, alloy consumption reduction, process yield improvement, and Logistics Optimization.
Paul Lawrence: As Peter mentioned, we believe our fiscal second quarter represented the trough for our financial performance and we see improving volume and margin conditions ahead, as we move through 2025 construction season.
Paul Lawrence: It is important to note that we exited the third quarter at a steel product met all margin of $518 per ton, which is $19 per ton higher than the quarter average.
Paul Lawrence: The combination of this higher exit rate.
Paul Lawrence: Additional scrap cost reductions flowing through and selling price increases should result in further metal margin expansion during the fourth quarter.
Paul Lawrence: Segment results benefited also from a number of tag initiatives, including scrap optimization alloy consumption reduction process yield improvements and and logistics optimization.
Paul Lawrence: In recent quarters, we have reported unrealized losses related to our hedging positions in copper derivatives. The impact of these positions on the third quarter were not material. As indicated earlier, demand for long steel products was resilient during the quarter. Average daily shipments of finished steel increased by 3.2 percent compared to a year ago, while combined daily rebar shipments from CMC's mill and downstream operations grew by approximately 1.3 percent. The Emerging Business Group third quarter net sales of $197.5 million increased by 4.7% on a year-over-year basis, while Adjusted EBITDA of $40.9 million increased by 7%. Improvement was largely driven by strong demand for proprietary products within CMC's Performance Reinforcing Steel Division.
Paul Lawrence: In recent quarters, we have reported unrealized losses related to our hedging positions in copper derivatives.
Paul Lawrence: The impact of these positions on the third quarter were not material.
Paul Lawrence: As indicated earlier demand for long steel products was resilient during the quarter average daily shipments of finished steel increased by three 2% compared to a year ago, while combined daily rebar shipments from CMC is nil and downstream operations grew by.
Paul Lawrence: Approximately one 3%.
Paul Lawrence: The emerging business group third quarter net sales of 197 5 million increased by four 7% on a year over year basis, while adjusted EBITDA of $40 9 million increased by 7%.
Paul Lawrence: The improvement was largely driven by strong demand for proprietary products within Cmc's performance reinforcing steel division.
Paul Lawrence: This business has had success in penetrating several major infrastructure projects requiring enhanced lifespan, strength, and corrosion-resistant characteristics. A higher mix of sales from performance-reinforcing steel within EVG's total sales, as well as continued adoption of Tensar's latest GeoGrid solution, led to a 40 basis point improvement in adjusted EBITDA margin compared to the third quarter of fiscal 2024. Financial performance of CMC's Tensar division was down modestly from a year ago due to delays in certain projects.
Paul Lawrence: This business has had success in penetrating several major infrastructure projects, requiring enhanced lifespan strength and corrosion resistant characteristics.
Paul Lawrence: A higher mix of sales from performance reinforcing steel within EDG as total sales as well as continued adoption of <unk> latest Geo grid solutions led to a 40 basis point improvement in adjusted EBITDA margin compared to the third quarter of fiscal 2024.
Paul Lawrence: Financial performance of Cmc's tenths or division was down modestly from.
Paul Lawrence: However, I would note that the pipeline of Tensar remains solid and we expect to reestablish growth on a year-over-year basis in the fourth quarter. for the Construction Services and CMC Impact Metal Divisions were little changed from a year ago. It is also worth noting that following several challenging quarters for Impact's core truck and trailer market, conditions have stabilized and are beginning to show early signs of recovery. Turning to slide 15 of the supplemental deck, our Europe Steel Group reported adjusted EBITDA of $3.6 million for the third quarter of 2025, compared to a loss of $4.2 million in the prior year period.
Paul Lawrence: From a year ago due to delays in certain projects.
Paul Lawrence: However, I would note that the pipeline of tensile remains solid and we expect to reestablish growth on a year over year basis in the fourth quarter.
Paul Lawrence: Adjusted EBITDA for the construction services and CMC impact metal divisions were little changed from a year ago.
Paul Lawrence: It is also worth noting that following several challenging quarters for impacts core truck and trailer market conditions have stabilized and are beginning to show early signs of recovery.
Paul Lawrence: Turning to slide 15 of the supplemental deck, our Europe Steel group reported adjusted EBITDA of $3 6 million for the third quarter of 2025 compared to a loss of $4 2 million in the prior year period.
Paul Lawrence: Improvement was driven by ongoing cost management efforts and a robust increase in shipment volume. Similar to recent quarters, the team in Poland continued to drive efficiency gains throughout the operation. and success in nearly every major cost category, including the labor actions discussed last quarter, consumable usage Maintenance and Overhead. These efforts have allowed the Europe Steel Group to remain roughly cash flow break-even within a challenging market backdrop. Most of these improvements are permanent in nature and set us up well to capitalize on a market recovery. As Peter mentioned, during the quarter we saw continued demand growth and a pullback in the levels of long steel imports into Poland.
Paul Lawrence: The improvement was driven by ongoing cost management efforts and a robust increase in shipment volume.
Paul Lawrence: Similar to recent quarters, the team and Paul and continued to drive efficiency gains throughout the operation with success in nearly every major cost category, including the labor actions discussed last quarter consumable usage.
Paul Lawrence: Maintenance and overhead.
Paul Lawrence: These efforts have allowed the Europe steel group to remain roughly cash flow breakeven within a challenging market backdrop.
Paul Lawrence: Most of these improvements are permanent in nature, and set us up well to capitalize on a market recovery.
Paul Lawrence: Peter mentioned during the quarter, we saw continued demand growth and a pullback in the levels of long steel and parts into Poland.
Paul Lawrence: The combination of these two factors provided CMC the opportunity to achieve stronger shipping volume.
Paul Lawrence: The combination of these two factors provided CMC the opportunity to achieve stronger shipping volumes.
Paul Lawrence: Moving to the balance sheet, as of May 31st, Kosh and Kosh equivalents totaled $893 million. In addition, we had approximately $834 million of availability under our credit and accounts receivable facilities, bringing total liquidity to just over $1.7 billion. Our cash position was augmented by the successful issuance of $150 million of tax-exempt bonds connected to CMC's Steel West Virginia project. This financing was raised in conjunction with the West Virginia Economic Development Authority and was priced at a very attractive rate of 4.625%. During the quarter, we generated $154.4 million of cash from operating activities. which included a $19.7 million usage of cash for working capital.
Paul Lawrence: Moving to the balance sheet as of May 31, cash and cash equivalents totaled 893 million and.
Paul Lawrence: In addition, we had approximately $834 million of availability under our credit and accounts receivable facilities, bringing total liquidity to just over $1 7 billion.
Paul Lawrence: Our cash position with augmented by the successful issuance of $150 million of tax exempt bonds connected to CMC steel West Virginia project. This.
Paul Lawrence: This financing was raised in conjunction with the West Virginia Economic development authority and was priced at a very attractive rate.
Paul Lawrence: Four 6% to 5%.
Paul Lawrence: During the quarter, we generated $154 4 million of cash from operating activities.
Paul Lawrence: Which included a $19 7 million usage of cash for working capital.
Paul Lawrence: Couple expenditures of $89.5 million were largely driven by construction activity related to our steel West Virginia micro mill project. At quarter end, CMC's leverage and liquidity metrics remain very attractive.
Paul Lawrence: Capital expenditures of $89 5 million were largely driven by construction activity related to our steel of West Virginia Micro mill projects.
Paul Lawrence: At quarter end, Cmc's leverage and liquidity metrics remain very attractive.
Paul Lawrence: We believe our robust balance sheet and overall financial strength provide us the flexibility to finance our strategic organic growth projects and pursue opportunistic M&A while continuing to return cash to shareholders. Turning to CMC's fiscal 2025 capital spending outlook, we now expect to invest between $425 and $475 million in total. This is down from our previous guidance of between $550 million and $600 million, with a reduction related to the timing of certain expenditures at CMC's West Virginia project that have been delayed due to two primary factors. The first factor relates to the pursuit and attainment of available tax credits under the Inflation Reduction Act, which is expected to yield net benefits of approximately $80 million.
Paul Lawrence: We believe our robust balance sheet and overall financial strength provide us the flexibility to finance, our strategic organic growth projects and pursue opportunistic M&A, while continuing to return cash to shareholders.
Paul Lawrence: Turning to Cmc's fiscal 2025 capital spending outlook, we now expect to invest between 425 and $475 million in total.
Paul Lawrence: This is down from our previous guidance of between 550 and $600 million with a reduction related to the timing of certain expenditures that CMC is west Virginia project that have been delayed due to two primary factors.
Paul Lawrence: The first factor relates to the pursuit and attainment of available tax credits under the inflation reduction Act, which is expected to yield net benefits of approximately $80 million.
Paul Lawrence: To obtain these credits, CMC had to meet several criteria, causing us to temporarily slow construction as we evaluated contract and vendor arrangements. The second factor is the impact of weather delays incurred at the site. We have lost around 70 days of construction. Based on updated project schedule, we expect to begin melt shop production during the spring of calendar 2026.
Paul Lawrence: To obtain these credits CMC add to meet several criteria, causing us to temporarily slow construction as we evaluated contract and vendor arrangement.
Paul Lawrence: The second factor is the impact of weather delays incurred at the site. We have lost around 70 days of construction.
Paul Lawrence: Based on updated project schedule, we expect to begin melt shop production during the spring of calendar 2026.
Paul Lawrence: As outlined on past earnings calls, CMC targets a prudent and balanced approach to capital allocation. Our first priority is value of creative growth that furthers our strategy and strengthens our business. Coming in a close second is providing our shareholders with an attractive level of cash distribution. in the form of both dividends and share repurchase.
Paul Lawrence: As outlined on past earnings calls CMC targets, a prudent and balanced approach to capital allocation.
Paul Lawrence: Our first priority is value accretive growth that furthers, our strategy and strengthens our business humming.
Paul Lawrence: Coming in a close second is providing our shareholders with an attractive level of cash distributions in the form of both dividends and share repurchases.
Paul Lawrence: To this end, CMC returned approximately $71 million to our shareholders during the third quarter.
Paul Lawrence: To this end CMC returned approximately $71 million to our shareholders during the third quarter <unk> repurchased approximately one 1 million shares at an average price of $45 30 per share.
Paul Lawrence: CMC repurchased approximately 1.1 million shares at an average price of $45.30 per share. As of May 31st, we had $254.9 million available for repurchase under the current authorization.
Paul Lawrence: As of May 31, we had $254 $9 million available for repurchase under the current authorization.
Peter Matt: This concludes my remarks and I'll now turn it back to Peter for additional comments on CMC's financial outlook. Thank you, Paul. We expect consolidated financial results in the fourth quarter of fiscal 2025 to improve compared to the third quarter. Finished steel shipments within the North America Steel Group are anticipated to follow normal seasonal trends, while our adjusted EBITDA margin is expected to increase sequentially on higher steel product margins over scrap. Based on project backlogs, we expect financial results for the Emerging Businesses Group will improve on both a sequential and a year-over-year basis. Our Europe Steel Group will receive a CO2 credit of approximately $28 million during the fourth quarter as a result of a recently signed Polish legislation that divided payments related to calendar 2024 energy cost rebates into two tranches.
Paul Lawrence: This concludes my remarks, and I'll now turn it back to Peter for additional comments on <unk> financial outlook.
Peter Matt: Thank you Paul we expect consolidated financial results in the fourth quarter of fiscal 2025 to improve compared to the third quarter fin.
Speaker Change: <unk> finished steel shipments within the North America Steel group are anticipated to follow normal seasonal trends, while our adjusted EBITDA margin is expected to increase sequentially on higher steel product margins over scrap.
Speaker Change: Based on project backlogs, we expect financial results for the emerging businesses group will improve on both a sequential and a year over year basis.
Speaker Change: Our Europe steel group will receive a credit of approximately $28 million during the fourth quarter. As a result of our recently signed Polish legislation that divided payments related to calendar 2024 energy costs rebates into two tranches, we will receive the second.
Peter Matt: We will receive the second tranche related to the calendar 2024 credit during the first quarter of fiscal 2026. Excluding this credit, adjusted EBITDA for our Europe Steel Group should increase sequentially in the fourth quarter as we continue to benefit from improved market fundamentals and extensive cost management efforts. I am confident in CMC's long-term outlook and continue to believe in our ability to generate significant value for our shareholders. We are executing on several strategic initiatives which we believe will deliver meaningful and sustained enhancements to our margins, cash flow, and return on capital.
Speaker Change: Tranche related too.
Speaker Change: The calendar 2024 credit during the first quarter of fiscal 2026.
Speaker Change: Excluding this credit adjusted EBITDA for our Europe Steel group should increase sequentially in the fourth quarter as we continue to benefit from improved market fundamentals and extensive cost management efforts.
Speaker Change: I am confident in Cmc's long term outlook and continue to believe in our ability to generate significant value for our shareholders. We are executing on several strategic initiatives, which we believe will deliver meaningful and sustained enhancements to our margins cash flow and return on capital we will.
Peter Matt: We will achieve this by leveraging our TAG operational and commercial excellence program to get more out of our existing enterprise, completing value-accretive organic growth projects, and adding complementary early-stage construction solutions that provide attractive new growth platforms. Taken together, we believe these efforts will position our company to take full advantage of powerful structural trends in the domestic construction market for years to come.
Speaker Change: <unk> this by leveraging our tag operational and commercial excellence program to get more out of our existing enterprise completing value accretive organic growth projects and adding complementary early stage construction solutions that provide attractive new growth platforms taken together we believe these.
Speaker Change: These efforts will position our company to take full advantage of powerful structural trends in the domestic construction market for years to come.
Peter Matt: I would like to conclude by thanking our customers for their trust and confidence in CMC and all of our employees for delivering yet another quarter of very solid safety and operational performance. Thank you.
Speaker Change: I would like to conclude by thanking our customers for their trust and confidence in CMC and all of our employees for delivering yet another quarter of very solid safety and operational performance.
Operator: And at this time, we will now open the call to questions. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. We ask that you limit yourselves to one question and one follow-up.
Speaker Change: Thank you and at this time, we'll now open the call to questions.
Speaker Change: To ask a question you May press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys is there any time. Your question has been addressed and you'd like to withdraw. Your question. Please press Star then two we ask that you limit yourselves to one question and one follow up.
Operator: At this time, we will pause momentarily to assemble our roster.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Sathish Kasinathan: And your first question comes from Sathish Kasinathan with Bank of America. Please go ahead. Hi, good morning. Thanks for taking my question.
Caisson: And your first question comes from cities Caisson, often with Bank of America. Please go ahead.
Peter Matt: My first question is on the steel product volumes in the North American segment. It seems the steel product volumes were only up like 7% sequentially in the third quarter versus the typical seasonal pickup of like 10% to 15%. Can you please talk about like what drove that and is it timing of shipments or did you see impact related to the outages that you had in the third quarter?
Speaker Change: Yes, hi, good morning, Thanks for taking my questions.
Speaker Change: My first question is on these deep product volumes in the North American segment it.
Speaker Change: It seems the steamboat volumes, but only up <unk>, 7% sequentially in the third quarter of associate typical seasonal pickup next 10% to 15%.
Speaker Change: And at least doubled.
Speaker Change: What drove that and is it is it timing of shipments or did you see impact related to the outages that you had in the third quarter and as a follow up how should we think about the fourth quarter volumes for the segment.
Peter Matt: And as a follow-up, how should we think about the fourth quarter volumes for the segment, both for steel products as well as downstream? Thanks, Sathish, appreciate the question. It's a good one. So I just want to put out there that overall, we are pleased with our Q3 performance in North America, but it wasn't our best performance. We had some outages. late in the quarter, and coming out of those outages, you know there's always some challenges associated with that. We didn't come out of those outages as well as we could have, and as a consequence, we ended up not having the production that we were aiming for.
Speaker Change: For steel products as well as downstream coatings. Thank you.
Speaker Change: Thanks, <unk> I appreciate the question. It's a good one so I just wanted to put out there, but overall we are pleased with our Q3 performance in North America, but it wasn't our best performance, we had some outages.
Speaker Change: Late in the quarter.
Speaker Change: And and coming out of those outages you know theres always some challenges associated with that we didn't come out of those outages as well as we could have.
Peter Matt: We ended up with lower inventories and consequently higher costs. So that, together with the impact of the flow through of scrap timing in our results, more than explains the myths in the North American Steel Group in terms of shipment volumes and in terms of profitability relative to the consensus out there. I think, you know, the bottom line is that we're a company of great operators. We've kind of circled back on each of these situations. We understand exactly what happened, and we're set for a strong fourth quarter. So we feel very good about where we are.
Speaker Change: And as a consequence, we ended up not having the production that we were aiming for we ended up with lower inventories and consequently higher costs. So.
Speaker Change: That together with the.
Speaker Change: The impact impact of the flow through of scrap timing.
Speaker Change: And our results more than explains the miss in the in the North American Steel group in terms of our shipment volumes and in terms of our profitability relative to the consensus out there.
Speaker Change: I think.
Speaker Change: The Bottomline is that we're a company of great operators, we've kind of circle back on in each of these situations, we understand exactly what happened and.
Sathish Kasinathan: In terms of fourth quarter volumes, I think you can expect them to be flattish to slightly up from where we are in the third quarter, and yeah, the volume should follow a normal seasonal trend. The only thing I would add is when we talk about finished steel tons, we combine steel products and downstream products because essentially all those are coming off the mills, whether it's through directly to mill customers or to our own customers through the downstream sales. And those were up 10% in alignment with normal volume trends between Q2 and Q3. Yeah, understood. Thank you.
Speaker Change: And we're set for a strong fourth quarter. So we feel very good about where we are.
Speaker Change: In terms of.
Speaker Change: Fourth quarter volumes I think you can expect them to be.
Speaker Change: Flattish to slightly up from where we are in the in the third quarter and and.
Speaker Change: Yes, it should the volumes should follow a normal seasonal trend.
Speaker Change: It tastes the only thing I would add is when we when we talk about finished steel tons, we combined steel products and downstream products because essentially all of those are coming off the mills, whether it's through directly to mill customers or to our own customers through that through the downstream sales and those were up 10.
Speaker Change: <unk> in alignment with that.
Speaker Change: Normal volume trends between.
Unnamed Speaker: Maybe my second question is on the U.S. rebar pricing. We saw Mills announce a $60 price hike recently. Are you seeing prices gaining traction and do you see further room for additional price hikes given where the import offers are? Yeah, um, it's a great question.
Speaker Change: Q2 and Q3.
Speaker Change: Yeah understood. Thank you.
Speaker Change: Maybe my second question is on the VEBA.
Speaker Change: But rising.
Speaker Change: MS Unknowns $60 I think.
Speaker Change: He is going to be.
Speaker Change: Are you seeing better is gaining traction and do see.
Speaker Change: Room for additional buybacks, given where the import uplift.
Peter Matt: I want to just start by saying we don't talk directly about price. But I will make a few comments around this one. Look, as a company, we are in pursuit of commercial excellence. And what I mean by that is value over volume. We've said that on prior calls, and it's a maniacal focus for our company. In the context of the current situation, there's a balance that we have to strike. It's a balance between creating the best value for CMC and generating a good return on the sales that we're making, and secondly, balancing what's right for the customer, and thirdly, incentivizing by America.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: It's a great question I wanted to just start by saying, we don't talk directly about price but.
Speaker Change: But I will make a few comments around this one look as a company. We are in pursuit of commercial excellence and what I mean by that is.
Speaker Change: Value over volume, we've said on prior calls and that's a it's a maniacal focus for our company.
Speaker Change: In the context of the current situation, there's a balance that we have to strike.
Speaker Change: It's a balance between doing what are creating the best value for CMC and generating a good return on the sales that we're making.
Speaker Change: And secondly, balancing what's right for the customer.
Peter Matt: So we think we struck the right balance in coming up with the move that we made. This is something that we evaluate on a regular basis. We're going to continue to monitor it, and we'll make adjustments as appropriate.
Speaker Change: Thirdly Incentivising by America.
Speaker Change: We think we struck the right balance in coming up with the move that we made this is something that we evaluate on a regular basis, we're going to continue to monitor it and we'll make adjustments as appropriate.
Sathish Kasinathan: Okay, thank you and good luck for the fourth quarter. Thank you.
Speaker Change: Okay. Thank you and good luck political thank.
Tristan Gresser: And your next question comes from Tristan Gresser with BNP Paribas. Please go ahead. Yes, hi.
Speaker Change: Thank you.
Speaker Change: And your next question comes from Tristan Gresser with BNP Paribas. Please go ahead.
Tristan Gresser: Thank you for taking my questions. First one just on volumes as well.
Tristan Gresser: Yes, hi, Thank you for taking my questions. The first one just.
Peter Matt: If you could provide us maybe an update on Arizona 2, the average utilization rate for this quarter and maybe the target for the next fiscal year. And if I understand you comment correctly about the plus $150 million EBITDA improvement, would that mean that the facility is currently still at break-even? Yeah, absolutely. So on Arizona 2, we made very good progress during the quarter, and I'm pleased with what the team has done that. We organized what we call internally a blitz. And the blitz was really a combination of resources internally and externally, to kind of drive the business to generate, or to prove that it can operate where we think it can operate, and that it can do so in a reliable way.
Speaker Change: On volumes as well if you could provide us maybe an update on Arizona to.
Speaker Change: The average utilization rate for this quarter and maybe to the.
Speaker Change: Targets for the next fiscal year, and if I understand your comment correctly about the plus $150 million EBITDA improvement.
Speaker Change: Would that mean that the facility is currently.
Speaker Change: At breakeven.
Speaker Change: Yeah, absolutely so on Arizona too we made very good progress during the quarter and I'm pleased with what the team has done that.
Speaker Change: We organized what we call internally, a blitz and the Blitz was really.
Speaker Change: A combination of resources internally and externally to kind of drive the business to generate that or to prove that it can operate where we think it can operate and that it can do so in a reliable way.
Peter Matt: I would say that the equipment is, we're most of the way through kind of our confidence in the equipment, and we have a good line of sight to be able to say that we are fully through the equipment issues that we've had. And I'm also really pleased with the fact that we got our MBQ up to a run rate where we're producing 75% of the SKUs by volume at the plant. So remember, this is the first plant ever to produce Merchant Bar quality products. As we exit the year from where we sit today, we think we're going to be exiting at around 70 to 75% utilization.
Speaker Change: I would say that the equipment is where most of the way through kind of our confidence in.
Speaker Change: In the equipment.
Speaker Change: And we have a good line of sight to be able to say that we are fully through the equipment issues that we've had.
Speaker Change: And I'm also really pleased with the fact that we got our MB queue up.
Speaker Change: To a run rate where were producing 75% of the skus by volume at the plant. So remember that this is the first plant ever to produce merchant bar quality products.
Speaker Change: As we exit the year from where we sit today, we think we're going to be exiting at around 70% to 75% utilization.
Peter Matt: But I know that's a little bit below what we've said before, but I think given some of the challenges we've had and the focus that we put on Merchant Bar, it makes to have a profit in the fourth quarter at Arizona, too. So all in all, good progress. We're working extremely hard, and I'm really proud of the job the team has done to get to where we are.
Speaker Change: And but I know, that's a little bit below what we said before.
Speaker Change: But I think given some of the challenges we've had and the focus that we put on merchant bar and it makes sense to come out where we are and we are confident that we can get the rest of the way there in early 2026 and I would also say that we do expect to have a profit in.
Speaker Change: The fourth quarter.
Speaker Change: At at Arizona, too so all in all good progress.
Speaker Change: We're working extremely hard and I'm really proud of the job. The team has done to get to where we are.
Tristan Gresser: Alright, that's very clear.
Peter Matt: And maybe the targeted mix for next year, do you expect to still be a very MBQ-driven mix, or what would be the right way to think about it versus rebar? Yeah, I think, you know, that's going to merge with the market conditions. As you know, the capacity of the plant is 500,000 tons, and our original plan was to make 350,000 of rebar and 150,000 of merchant bar. So I'd say kind of ordinary market conditions permitting, that's still our plan. But again, what's nice about this mill is that we have the flexibility to adjust to market conditions.
Speaker Change: Alright, that's that's very clear and maybe the targeted mix for next year do you expect to still be very <unk>.
Speaker Change: Driven mix or what would be the right way to think about it versus rebar.
Speaker Change: I think that's going to emerge with the market conditions as you know the capacity of the plan is 500000 tons and our original plan was to make 350000 of rebar and 150000 of merchant bar.
Speaker Change: So I'd say kind of ordinary market conditions permitting.
Speaker Change: Still our plan.
Speaker Change: Again, what's nice about this mill is that we have the flexibility to adjust.
Tristan Gresser: So if the rebar market's a little bit softer or the MBQ market's a little bit softer, we can adjust one way or the other to accommodate that. All right, that's, that's very clear.
Speaker Change: Market conditions. So if the rebar market is a little bit softer or the <unk> market is a little bit softer we can adjust one way or the other two to accommodate that.
Tristan Gresser: And maybe one last question just on West Virginia. I just wanted to confirm that the ramp. I'm not sure I understood correctly. It's been delayed by six months. It's planned for the summer next year. I understand you explained it with the tax rebate and some weather issues, but has some part of that decision also been driven by maybe a less robust near-term outlook? I mean, when you look at domestic supply, you have two new mills ramping up in Q3, Q4 calendar, and demand is not particularly great, so has that had any impact in your decision there?
Speaker Change: Alright, that's that's very clear and maybe one last question just on West Virginia, just wanted to confirm that the ramp.
Speaker Change: I'm not sure I understood correctly, it's been delayed by.
Speaker Change: Six months it has been for the summer next year.
Speaker Change: I understand you explained it with the tax rebate and some weather issues has some part of that decision also been driven by maybe a less robust neutral outlook I mean, when you look at domestic supply you have two new mill.
Paul Lawrence: Ramping up in Q3, Q4 calendar and to manage particular, great too has it had any impacting your decision there and also given the push how should we think about maybe capex for next year that it would be helpful and next fiscal year and I'll, let Paul take the <unk>.
Paul Lawrence: And also, given the push, how should we think about maybe CapEx for next year? Maybe that would be helpful next fiscal year. Thank you.
Peter Matt: And I'll let Paul take the CapEx question, but let me first start out on West Virginia. So timing, we've said first half. We're going to start, there's a cold commissioning phase, there's a hot commissioning phase. We're going to be doing the hot commissioning phase, you know, kind of in the first half of the year. So, and the timing on this is really, these are, it's a good thing that we came across this 48C thing, and the team did a phenomenal job in getting this grant from the Department of Energy, and it was worth waiting for this.
Speaker Change: Capex question, but.
Speaker Change: Let me first start out on West, Virginia, So timing, we've said first half.
Speaker Change: Going to start there's a cold commissioning phase there is a hot commissioning phase.
Speaker Change: We're going to be doing the hot commissioning phase.
Speaker Change: In the first half of the year, so and the timing on this is really.
Speaker Change: These are these are.
Speaker Change: It's a good thing that we came across this 48 C thing and the team did a phenomenal job in getting this this grant from the department of energy and it was worth waiting for this and what we needed to do.
Paul Lawrence: And what we needed to do, and what caused the delay was we needed to work through some of our processes internally to make sure that we could comply with the Department of Energy requirements. But as a consequence, we're getting $80 million towards this project, and what's the benefit of that? Well, it reduces the net capital that we put into the project, and therefore helps us drive higher returns. And hopefully you're seeing a consistent pattern here of our focus is on changing the return profile of the company, and in getting a grant like this, it absolutely helps us do this.
Speaker Change: And what caused the delay was we needed to work through some of our processes internally to make sure that we could comply with the department of energy requirements, but as a consequence, we're getting $80 million towards this project and what's the benefit of that while it reduces the net capital that we put into the project and.
Speaker Change: Therefore helps us drive higher returns and hopefully you are seeing a consistent pattern here of our focus is on changing the return profile of our company and.
Peter Matt: The timing has nothing to do with the conditions in the market. We are actually quite optimistic about market conditions. There is a lot of uncertainty out there today, but we believe that, you know, kind of things are going to stabilize, and in the stabilization of things, you're going to see emerge the demand for our rebar products, our merchant bar products that's consistent with what we've been saying for, you know, the last several quarters. You've got some megatrends, whether it's infrastructure, reshoring, energy transition, all of which we talked about, that I think are going to drive demand, and we're going to be ready to receive it.
Speaker Change: And getting a grant like this it absolutely helps us do this.
Speaker Change: Timing has nothing to do with the conditions in the market.
Speaker Change: We are we are actually quite optimistic about market conditions. There is a there's a lot of uncertainty out there today.
Speaker Change: But we believe that.
Speaker Change: Kind of things are going to stabilize.
Speaker Change: And in the stabilization of things Youre going to see emerge the demand for our rebar products, our merchant bar products, that's consistent with what we've been saying for for the last several quarters you've got.
Speaker Change: So mega trends and whether it's infrastructure re shoring energy transition all of which we talked about that I think are going to drive demand and we're going to be ready to receive it.
Paul Lawrence: Let me just add to Peter's comment around the investment tax credit, you know, the project qualified for the tax credit under the IRA and there's been no concern around this type of credit being clawed back. The credit could be either a 6% credit or a 30% credit and so the magnitude of the difference is significant and that's why we paused the contracting of work to ensure that we contracted in such a way to comply with the requirements of attaining the higher rate and we're now confident that we will in fact get that higher rate credit.
Peter Matt: Now, let me just add to Peter's comment around the.
Speaker Change: Around the investment tax credit the project qualified for the.
Speaker Change: The tax credit under the IRI and Theres been no.
Speaker Change: No concern around this type of credit being clawed back the credit could be there, a 6% credit or a 30% credit and so the magnitude of the difference is significant and that's why we paused.
Speaker Change: The contracting of war.
Speaker Change: Work to ensure that.
Speaker Change: We contracted in such a way to comply with the requirements of the AR of attaining the higher.
Speaker Change: The higher rate and we're now confident that we will in fact get that higher rate credit and so that will provide us as we said in the prepared remarks, a net 80 million dollar benefit to us next year.
Paul Lawrence: And so that will provide, as we said in the prepared remarks, a net $80 million benefit to us next year. So with the delays, you know, we've spoken many times around our expectation of normal ongoing CapEx, and that's going to be sort of maintenance plus core, smaller organic growth in the $250 million range. And then we would expect around $300 million associated to West Virginia next year. So as it looks right now, our CapEx for West Virginia, or for total for CMC, will be in the $550 million range for next year. All right, thanks a lot.
Speaker Change: With the delays we've spoken many times around our expectation of normal ongoing capex and that's going to be sort of maintenance plus core smaller organic growth in the $250 million range and then we would expect around $300 million associated to west.
Speaker Change: Virginia next year, so as it looks right now our Capex for West Virginia for total for CMC will be in the $550 million range for next year.
Tristan Gresser: Thanks, Tristan.
Speaker Change: Alright, Thanks, a lot.
Katja Jancic: And your next question comes from Katja Jancic with BMO Capital Markets. Please go ahead. Hi. Thank you for taking my questions.
Richard Dresden: Thanks, Richard Dresden.
Speaker Change: And your next question comes from <unk> <unk> with BMO capital markets. Please go ahead.
Katja Jancic: Maybe starting on the inorganic growth, Peter, you mentioned that the ideal transaction value would be somewhere between $500 million to $750 million. Can you talk a little bit about what type of multiples would be attached to that? Yep.
Speaker Change: Hi, Thank you for taking my questions, maybe starting on the inorganic growth. Peter you mentioned that the ideal transaction value would be somewhere between $500 million to $750 million can you talk a little bit about what type of multiples would you be attached to that.
Peter Matt: Great question, Katja. Thank you very much. It depends based on the asset that we're looking at. But what I would say is that the multiples generally for these businesses are higher than what CMC trades at. And I want to make a couple points about that because I think this is really important. One is the multiples for those businesses are higher because they're worth it. And what I mean by that is these are companies that have higher margins, better cash flow characteristics because they're lower capital intensity, and in most cases, some growth to them given some of the higher multiples that we may have to pay in this situation.
Speaker Change: Yeah, Great question Cotter you. Thank you very much.
Speaker Change: It depends based on the asset that we're looking at but what I would say is that the.
Speaker Change: The the multiples generally for these businesses are higher than what CMC trades.
Speaker Change: And I want to make a couple of points about that because I think this is really important one is the multiples for those businesses are higher.
Speaker Change: Because they're worth it and what I mean by that is these are companies that have higher.
Speaker Change: Higher margins better cash flow characteristics, because they're a lower capital intensity.
Speaker Change: And in most cases, some growth to them given some of the market trends.
Speaker Change: They're responding to so.
Speaker Change: So I do think that the businesses are worth the higher multiples that we may have to pay in this situation. The other thing that I think is really important when we talk about inorganic and I know it wasn't directly your question, but I'm going to throw it out there is.
Peter Matt: The other thing that I think is really important when we talk about inorganic, and I know it wasn't directly your question, but I'm going to throw it out there, is that we're going to be very disciplined about our inorganic growth and particularly recognizing that we're paying higher multiples for some of these businesses. And the discipline that we are going to hold ourselves to is that over a reasonable amount of time, say three, four years, we are going to bring the effective multiple that we pay down to our multiple, down to CMC's multiple. That's going to happen through a combination of synergies that we might bring to the table and growth.
Speaker Change: We're going to be very disciplined about our inorganic growth and particularly recognizing that we're paying higher multiples for some of these businesses and.
Speaker Change: And the discipline that we are going to hold ourselves to is.
Speaker Change: That over a reasonable amount of time say three four years, we are going to bring the effective multiple that we pay down to our multiple down to cmc's multiple that's going to happen through a combination of synergies that we might bring to the table.
Peter Matt: And if we can do that, we will create significant value in those acquisitions. And that's, again, that assumes zero multiple expansion for CMC. which, as we grow the portfolio of these value-added businesses, theoretically, we should enjoy some multiple expansion.
Speaker Change: And growth and if we can do that we will create significant value in those acquisitions and thats again that assumes zero multiple expansion for CMC.
Speaker Change: Rich.
Speaker Change: As we grow the portfolio of these value added businesses theoretically we should enjoy some multiple expansion. So I know that's beyond what you asked but I wanted to get it out on the table because I think it's important that everyone understands that.
Katja Jancic: So I know that's beyond what you asked, but I wanted to get it out on the table because I think it's important that everyone understands that. That's excellent. Thank you for that.
Peter Matt: And maybe just as a follow up, is there, you know, when you look at the current pipeline, how does it look? And do you have any, I know this is hard to answer or impossible, but is there any timeline on when you could complete a deal of this size? Yeah, good, good question. Thank you. The pipeline is good. I would say there are a number of different businesses that we've been looking at. And there are kind of processes that we are engaged in right now. Some of them are quite mature. Some of them are really just starting.
Speaker Change: That's excellent. Thank you for that and maybe just as a follow up.
Speaker Change: Yeah.
Speaker Change: When you look at the current pipeline how does it look and do you have any I know this is quite the ancillary impossible, but is there any timeline on when you could complete a deal of this size.
Speaker Change: Yes. Good good question. Thank you.
Speaker Change: The pipeline is good I would say there are a number of different businesses that we've been looking at and there are kind of processes that we are engaged in right. Now some of them are quite mature some of them are really just starting a I would say in general these processes are moving.
Peter Matt: I would say in general, these processes are moving slower, given some of the uncertainty in the market. But but they are moving forward. And we are we've done a lot of work. I think we as a company, we know what we want to do. So this is really a matter of kind of matching terms with a seller on terms that are acceptable to us. And then we'll be ready to proceed. But but we're ready.
Speaker Change: Lower given some of the uncertainty in the market.
Speaker Change: But they are moving forward and.
Speaker Change: We are we've done a lot of work I think we as a company. We know what we want to do so this is really a matter of kind of matching terms with a seller on on.
Katja Jancic: And as you say, it's it is hard to call the exact timing, but I would say we're ready. Perfect. Thank you so much. Thank you, Katja.
Speaker Change: Terms that are acceptable to us and then we'll be ready to proceed, but but we're ready and as you say, it's it is hard to call the exact timing, but I would say we're ready.
Speaker Change: Perfect. Thank you so much. Thank you got you.
Phil Gibbs: And your next question comes from Phil Gibbs with KeyBank Capital Markets. Please go ahead. Hey, good morning. Hey, Phil.
Phil Gibbs: And your next question comes from Phil Gibbs with Keybanc capital markets. Please go ahead.
Paul Lawrence: You outlined a $28 million credit for Europe in the fourth quarter and essentially said there was likely to be more in the first quarter. Can we have an idea of what that may be? Yeah, well, so what this is, is that our team in Poland, again, this is just another example of the great job that they do. They get the CO2 credit annually, and the CO2 credit typically pays out with an 11-month lag, so that's what we get it in November. which is obviously in our Q1. Through the good efforts of the team in Poland, what we've been able to do is to get this changed so that the payments will now be split in two.
Phil Gibbs: Hey, good morning.
Speaker Change: Phil.
Speaker Change: Yeah outlined a $28 million credit for Europe in the fourth quarter and.
Speaker Change: Essentially said there.
Speaker Change: To be more in the first quarter can we have an idea of what that may be.
Speaker Change: Yeah, well so what this is is that our team in Poland. Again. This is just another example of a great job, but they do.
Speaker Change: They get the Seo to credit annually and the Sidoti credit typically pays out within 11 months, a 11 month lag. So that's what we get it in November.
Speaker Change: As our Q, obviously in our Q1 <unk>.
Speaker Change: Through the good efforts of the team in Poland, what we've been able to do is to.
Paul Lawrence: The first payment in an ordinary year, this year it'll be in July, but in an ordinary year it'll be paid in May, will be 60% of the CO2 credit and the balance will continue to be paid in November. That'll be the remaining 40%. So what we're seeing in the first early installment, which will again, as I said, be paid in July, is the $28 million, which is 60%. And it's roughly, we're assuming it's kind of staying consistent with last year's CO2 credit, which as you know, that CO2 credit will vary depending on the cost of CO2 embedded in the energy cost.
Speaker Change: To get this changed so that the payments will now be split in two.
Speaker Change: The first payment in an ordinary year this year it'll be in July but in an ordinary year it'll be paid in may will be 60% of the <unk> credit and the balance will continue to be paid in November.
Speaker Change: That'll be the remaining 40% so what we're seeing in the first.
Speaker Change: In the first early installment, which will again as I said would be paid in July is the $28 million, which is 60% and it's roughly we're assuming it's kind of staying consistent with.
Speaker Change: With last year's C O two credit, which as you know that <unk> credit will vary depending on the on the cost of Seo to embedded in the in the energy cost.
Paul Lawrence: So I guess the key is we anticipate that each fiscal year will receive one year's worth of CO2 credits into the future split into two installments with the difference being essentially a catch-up that we'll get this year which will get the extra payment in fiscal 25. Okay, so we So we're likely to get $15 to $20 million in Q1, and there's likely to be some then paid in the fourth quarter of 26? Third or fourth quarter, yes. That's right. Okay. May is the technical timeline for payment. Okay.
Speaker Change: The key is we anticipate that each fiscal year, we will receive one year's worth of Sidoti credits into the future split into two installments with the difference being essentially a catch up that we will get this year, which will get the extra payment in <unk> and.
Speaker Change: In fiscal 'twenty five.
Speaker Change: Okay. So.
Speaker Change: So we're likely to get $15 million to $20 million in Q1 and.
Speaker Change: There's likely to be some then paid in the fourth quarter of 26.
Speaker Change: You heard our fourth quarter, yes, that's right.
Speaker Change: Okay.
Speaker Change: Technical time team timeline for payment.
Paul Lawrence: And with regards to the CapEx number you gave for next year, Paul, the 550, was that a gross number, meaning before the $80 million you outlined, or was that after the $80 million? That is gross, and so we would expect gross CapEx in the 550 range, the benefit of the tax credit to be $80 million to CMC, and then other incentives will probably be in the $20-$25 million range that we will receive as well. Okay, so roughly 450 MET. Are you getting anything in the fourth quarter of this year? I- We will probably get, it's all timing, we'll likely get a $25 million credit in the fourth quarter as well.
Speaker Change: Okay.
Speaker Change: And with regards.
Speaker Change: So the Capex number you gave for next year, Paul the $5 50 was that a gross number meaning before the $80 million you outlined or was that after the $80 million that is that is growth and so we would expect gross capex in the $5 50 range the benefit of the tax credit.
Speaker Change: It to be 80 million to CMC and then other incentives.
Speaker Change: We will probably be in the $20 million to $25 million range that we will receive as well.
Speaker Change: Okay, so roughly $4 15 that.
Speaker Change: Are you getting anything in the fourth quarter of this year.
Speaker Change:
Speaker Change: We will probably get it's all timing will likely get a $25 million credit in the in the fourth quarter as well.
Paul Lawrence: Okay, in addition to the 100-105 that you outlined? That's right.
Paul Lawrence: Okay, and The last one here is the timing of the startup of the West Virginia mill sounds like it's mid calendar 26. So the startup costs associated with that mill will be largely back unloaded, pretty like very back unloaded, I guess, for next year. Yeah, fiscal year. I think that's a fair assumption. Yeah, we'll we'll carry some team as we start to employ people throughout the year, but similar to other other mill startups that we've had.
Speaker Change: Okay. In addition to the 100 to 105 that you outlined that's right.
Speaker Change: Okay.
Speaker Change: And.
Speaker Change: Last one here is the timing of the startup of the West Virginia Mill Sao.
Speaker Change: It sounds like it's mid calendar 'twenty six so the startup costs associated with that mill will be largely backend loaded pretty like very backend loaded I guess for.
Speaker Change: For next year.
Speaker Change: For fiscal year, I think Thats, a fair assumption, yes, well carry some team as we start to employ people throughout the year, but similar to our other.
Paul Lawrence: And is there any CapEx from West Virginia, then, because of the slight delay that get moved into 27? relatively small amounts. Appreciate all that, caller. Thanks, guys. Thanks, Phil.
Speaker Change: Another mill start ups that we've had.
Speaker Change: And is there any capex that from West, Virginia, then because of the slight delay that get moved into 'twenty seven.
Speaker Change: Relatively small amounts.
Speaker Change: Okay.
Speaker Change: I appreciate all that color.
Bill Peterson: And your next question comes from Bill Peterson with J.P. Morgan. Please go ahead.
Speaker Change: Hey, guys. Thanks Bill.
Bill Peterson: And your next question comes from Bill Peterson with Jpmorgan. Please go ahead.
Peter Matt: Hi, good morning, and thanks for sticking me in. On Europe, the fiscal third quarter saw a diversion between Rebar and MBQ sequentially. Should we think of this reversing in the fourth fiscal quarter? And I guess, how should we think about overall shipments directionally? and others. Thank you. Yes, in Europe. Yeah. So we expect shipments in Europe to continue at a strong pace in the fourth quarter. And I think you were also asking about the mix of MBQ and rebar, and we expect MBQ shipments to be to be strong in the fourth quarter. We you know, we've we've done a lot of work on mix there based on where the profitability is.
Bill Peterson: Yes, hi, good morning, and thanks for sneaking me in on Europe.
Speaker Change: Fiscal third quarter stock aversion between rebar at MB Q sequentially.
Speaker Change: Should we think of this reversing in the fourth fiscal quarter and I guess, how should we think about overall shipments directionally.
Speaker Change: Youre, saying in Europe.
Speaker Change: Yes in Europe, yes.
Speaker Change: We expect shipments in Europe to continue at a strong pace.
Speaker Change: In the fourth quarter.
Speaker Change: And I think you were also asking about the mix of them be queuing rebar and we expect <unk> shipments to be to be strong in the fourth quarter.
Speaker Change: We've we've done a lot of work on mix there based on where the profitability is back to the kind of commercial excellence.
Peter Matt: So going back to the kind of commercial excellence story that I was telling before, and we're really focused on optimizing our mix to the products where the best margin is. And this year that's been MBQ. We're seeing a lot of projects come to market, certainly starting to see initial benefits of some of the EU money that is coming into the marketplace.
Speaker Change: Story that I was telling before and we're really focused on.
Speaker Change: Optimizing our mix to the products, where the best margin is in this year that's been <unk>.
Speaker Change: We're seeing we're seeing a lot of projects come to market certainly starting to see initial benefits of some of the.
Peter Matt: So we are expecting some increase in volume in the fourth quarter, which really is similar to a seasonal uptick in fourth quarter volumes that the EU marketplace And just to put a little bit more color on what Paul is saying, you know, the picture in Europe does appear to be getting better. And let me talk about a couple of different fronts. One is you've got in Poland, the economy obviously continues to chug along very nicely there. But the government's now put in place a new infrastructure spending program. And when you kind of look at that by the projects that they're going to be investing in, we're talking about, you know, kind of hundreds of thousands of tons over the next couple of years.
Speaker Change: The EU money that is coming into the market place.
Speaker Change: So we are expecting some.
Speaker Change: Some increase in in volume in the fourth quarter, which really is similar to the seasonal uptick in fourth quarter volumes at the EU market places.
Speaker Change: And just to put a little bit more color on what Paul saying.
Speaker Change: The picture in Europe, It does appear to be getting better and let me talk about a couple of different fronts.
Speaker Change: One is you've got in Poland. The economy, obviously continues to chug, along very nicely there but.
Speaker Change: But the government has now put in place a new interest infrastructure spending program.
Speaker Change: And when you kind of look at that by the by the projects that they're going to be investing in we're talking about kind of hundreds of thousands of tonnes over the next couple of years. So that's going to be a nice shot in the arm.
Peter Matt: So that's going to be a nice shot in the arm. You may have also read articles about there's a Poland's first nuclear power plant is going to be built. This is maybe a little bit lagged in terms of timing. It's probably going to start construction, my guess would be, in 27. But again, that's going to be a big consumer of rebar. And to Paul's point, you've got recovery and resilience funding going on. The other thing that I think is really important to note is it appears that things are moving nicely in Germany. And we talked about last time, we talked about the fact that there's the infrastructure bill, the 500 billion dollar infrastructure or euro, excuse me, infrastructure bill, and the lifting of the cap on spending on defense.
Speaker Change: You may have also read articles about Poland.
Speaker Change: Poland's first nuclear power plant is going to be built this.
Speaker Change: This is maybe a little bit a little bit lagged in terms of timing, it's probably going to start construction. My guess would be in 2007, but again, that's going to be a big consumer of rebar and to Paul's point, you've got recovery and resilience funding going on the.
Speaker Change: The other thing that I think is really important to note is it appears that things are moving nicely in Germany, and we talked about last time, we talked about the fact that there is the infrastructure build a 500 billion dollar infrastructure, our euro excuse me infrastructure Bill.
Peter Matt: And Chancellor Mertz. has been very strong in his statements about, in the case of defense spending, we need to do whatever it takes. And in the case of the economy, getting the economy back on track, our understanding is that he's making a really strong push on infrastructure spending and stimulus to some of the segments of non-residential spending. So, as a consequence, what we were saying, I think, on the last call was we expected we'd see that in the, you know, kind of the mid-to-back part of 26. We've heard discussions recently that suggest that we could start seeing some of that as early as the fourth calendar quarter of 25 and into the early part of 26.
Speaker Change: And the lifting of the cap on spending on defense.
Speaker Change: And Chancellor Mertz.
Speaker Change: It has been very strong in his statements about in the case of defense spending.
Speaker Change: We need to do whatever it takes and.
Speaker Change: And then in the case of the economy getting the economy back on track.
Speaker Change: Our understanding is that he is making a really strong push on infrastructure spending.
Speaker Change: And stimulus to some of the segments of nonresidential spending so as a consequence of what we were saying I think on the last call was we expected we'd see that in the kind of mid to back part of <unk> 26, a week.
Speaker Change: We've heard discussions recently that suggests that we could start seeing some of that as early as the fourth calendar quarter of 'twenty five and into the early part of 2006. So again, we need to see it on the ground, but I just pointed out because there are reasons for optimism in Europe.
Unnamed Speaker: So, again, we need to see it on the ground, but I just pointed out because there are reasons for optimism in Europe. Yeah, great. Thanks for that. And I realized you don't want to be precise around pricing. But in terms of the backlog, I think last quarter, you mentioned that project awards were benefiting from higher prices. How should we think about when that shows up and our pricing for, I guess, you know, what's entering the backlog now higher than existing prices that are in the backlog? Yeah, you're talking about on the fabrication side. Correct. Yeah.
Speaker Change: Yeah, great. Thanks for that and I realize you don't want to be precise around pricing, but in terms of the backlog.
Speaker Change: Last quarter, you mentioned that project awards were benefiting from higher prices, how should we think about when that shows up in our pricing for I guess.
Speaker Change: What's entering the backlog now higher than the existing prices that are in the backlog.
Peter Matt: So what I'd say on that, thanks for the question. It's a great question. So, Q3 was competitive, and we saw the booking prices continue to slide during the quarter. But as we go into Q4, we expect that we're going to see that turn, and the booking prices are going to start to increase in sympathy with the move in rebar prices. That's typically the way it flows. And I want to just take a minute here to really highlight the great job that our fabrication team across the company has done in this market environment. And it's really important because they are taking this business and they are helping us make it even better than it is today.
Speaker Change: You're talking about a fabrication side.
Speaker Change: Correct, Yeah. So.
Speaker Change: What I would say thanks for the questions Great question.
Speaker Change: So Q3 was competitive and we saw the booking prices continued to slide <unk>.
Speaker Change: During during the quarter.
Speaker Change: But as we go into Q4, we expect that we're going to see that turn in the booking prices are going to start to increase in sympathy with the move in rebar prices Thats typically the way it flows.
Speaker Change: And I wanted to just take a minute here to really highlight the great job that our fabrication team.
Speaker Change: <unk> the company has done.
Speaker Change: This market environment and.
Speaker Change: And it's really important because.
Speaker Change: They are they are taking this business and they are helping us make it even better than it is today and there are three things that I want to point out here that are really optimistic about one is.
Peter Matt: And there are three things that I want to point out here that I'm really optimistic about. One is through TAG and Operational Excellence, a lot of new initiatives are coming in the fabrication business, and we see opportunity for that business to be stronger. Secondly, they are absolutely paying attention to our mantra of value over volume. And what we're seeing is we are seeing our rebar fab guys walk away from jobs where it does not make sense because we cannot generate a return on the investment that we have. And that is – I'm super proud of the discipline, the market discipline that the team's showing.
Speaker Change: Through tag and operational excellence, a lot of new initiatives are coming in the fabrication business and we see opportunity for that business to be to be stronger.
Speaker Change: Secondly.
Speaker Change: They are absolutely paying attention to our mantra of value over volume and what we're seeing is as we are seeing.
Speaker Change: Our rebar fab guys walk away from jobs, where it does not make sense, because we cannot generate a return on.
Speaker Change: The investment that we have and that is that as I'm super proud of the discipline the market discipline that the team showing and the third thing that I want to really complement them on it.
Peter Matt: And the third thing that I want to really compliment them on is addressing some of the duration risk in this business. Those of you that have been following us for a long time know that there – that we do take duration risk in this business, and it can lead to periods where the fabrication business is less or not profitable. I'm pleased to say that by focusing on this duration risk – and by that I mean insisting that we have proper escalators to compensate us for the duration risk we're taking – we are making this business a better business.
Speaker Change: Is addressing some of the duration risk in this business those of you that have been following us for a long time know that we.
Speaker Change: We do take duration risk in this business and it can lead to.
Speaker Change: Periods, where the fabrication business is less or not profitable.
Speaker Change: I'm pleased to say that by focusing on this duration risk and by that I mean.
Speaker Change: Insisting that we have proper escalators to compensate us for the duration risk. We're taking we are making this business a better business and I think a great a great source of evidence of that is the fact that we will go through the trough of this cycle and fabrication and B a.
Peter Matt: And I think a great source of evidence of that is the fact that we will go through the trough of this cycle in fabrication and be a profitable business. And our goal is that we're going to increase that bar, we're going to raise that bar over time and make this a better business. So look, this is something – and again, I'm sorry, I know you didn't ask for all this, but I think it's really important, and I'm super proud of our team. And this is not something that's going to happen overnight, but I think it's going to help this business be better over time.
Speaker Change: Profitable business and our goal is that.
Speaker Change: We're going to increase that bar, we're going to raise that bar over time and make this a better business. So.
Speaker Change: Look this is this is something and I guess I'm, sorry, I know you didn't ask for all books, but.
Speaker Change: But I think it's really important and I'm super proud of our team and this is not something that's going to happen overnight, but I think it's going to help this business be better over time. So thanks for the question.
Peter Matt: So thanks for the question. Thanks for sharing the additional insights.
Speaker Change: Thanks for sharing the additional insights.
Mike Harris: And your next question comes from Mike Harris with Goldman Sachs. Please go ahead. Yeah, thanks, guys, for squeezing me in.
Speaker Change: And your next question comes from Mike Harris with Goldman Sachs. Please go ahead.
Peter Matt: I guess just given your strong financial position, why did you buy back more shares during the third quarter? And maybe speak to how we should think about the cadence of repurchases going forward, considering it looks like you've averaged roughly $50 million per quarter in repurchases since maybe the second fiscal quarter of 24.
Mike Harris: Yes, Thanks, guys for squeezing me in I guess, just given your strong financial position.
Mike Harris: Why did you buy back more shares during the third quarter and maybe speak to how we should think about the cadence of repurchases going forward considering that it looks like you've averaged roughly $50 million per quarter and repurchases Thats, maybe the second fiscal quarter of 2004.
Paul Lawrence: Yep, good, good question. I'll start and then I'll let Paul can jump in on this. But so look, we do have a strong financial position. We're also kind of working on some strategic initiatives around growth. And one of the things that's absolutely critical to us is that we maintain a strong financial position while we grow. So as we kind of understand where we're going from a growth perspective, I think that will help reorient us in terms of what we have the capacity to do on the share repurchase side.
Paul Lawrence: Yep. Good good question I'll start and then I'll, let Paul can jump in on this but.
Paul Lawrence: So look we do have a strong financial position, we're also kind.
Paul Lawrence: Working on some strategic initiatives around growth and one of the things Thats absolutely critical to US is that we maintain a strong financial position.
Paul Lawrence: While we grow so as we kind of understand where we're going from a growth perspective, I think that will help reorient us in.
Paul Lawrence: Maybe Paul can pick up there. Yeah, I think we've stated our capital allocation priorities. Clearly, number one is growth. And most recently, that's been through the organic growth side. But as Peter outlined, we have aspirations in the inorganic. Beyond that, we also have stated repeatedly a balanced approach to capital allocation, citing a commitment to return attractive levels of cash to shareholders. And so we announced the buyback program in January of 24 and said, you know, our plans was to execute that over a period of two to three years, and that's the course that we're on, and we don't see any change in the execution of our commitment on that.
Paul Lawrence: In terms of what we have the capacity to do on the share repurchase side, maybe Paul can pick up for there. Yeah. I think we've stated our capital allocation priorities clearly number one is growth and most recently that's been through the organic growth side, but as Peter outlined we have aspirations.
Paul Lawrence: And the inorganic.
Speaker Change: Got it.
Speaker Change: Beyond that we also have stated repeatedly our balanced approach to capital allocation.
Mike Harris: Allocation, citing a.
Mike Harris: A commitment to return attractive levels of cash to shareholders and so we announced the.
Mike Harris: The buyback program in January of 'twenty, four and set our plans was to execute that over a period of two to three years and that's the course that we're on and we don't see any change in the execution.
Mike Harris: Okay, thanks for the call, guys, and I'll stop there in the interest of time. Thanks, Mike.
Mike Harris: Of our commitment on that.
Mike Harris: Okay. Thanks for the color guys and I'll stop there.
Operator: And at this time, there appears to be no further questions.
Speaker Change: Thanks, Mike.
Peter Matt: Mr. Matt, I'll now turn the call back over to you. Thank you. And just a few concluding remarks from me. At CMC, we remain confident that our best days are ahead. The combination of the structural demand trends we have noted, operational and commercial excellence initiatives to strengthen our through-the-cycle performance, and value of creative growth opportunities create an exciting future for our company. We are committed to a balanced capital allocation strategy that includes investments in our company's future and a return of capital to our shareholders.
Speaker Change: And at this time there appears to be no further questions. Mr. Matt I'll now turn the call back over to you.
Speaker Change: Thank you and just a few concluding remarks from me at CMC, we remain confident that our best days are ahead. The combination of the structural demand trends, we have noted operational and commercial excellence initiatives to strengthen our through the cycle performance and value accretive growth opportunities create an exciting.
Mike Harris: Future for our company, we are committed to a balanced capital allocation strategy that includes investments in our company's future and our return of capital to our shareholders. Thank you for joining us on today's conference call. We look forward to speaking with many of you during our investor calls and meetings in the coming days and weeks.
Operator: Thank you for joining us on today's conference call. We look forward to speaking with many of you during our investor calls and meetings in the coming days and weeks. Thank you.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Mike Harris: Thank you.
Operator: You may now disconnect. © The Ultimate Parody Site! © BF-WATCH TV 2021
Mike Harris: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Mike Harris: Yeah.
Mike Harris: [music].
Mike Harris: Yeah.
Mike Harris: [noise] [music].
Mike Harris: Okay.
Mike Harris: [music].