Commercial Metals Company (CMC) announced a successful fiscal year 2024, marked by record employee safety performance and strong financial results despite market challenges. The company achieved core EBITDA of €1 billion, down from €1.4 billion in FY2023, but still 40% above pre-pandemic levels.
Key points:
- Core EBITDA of €1 billion for FY2024
- €900 million cash flow from operations
- €261.8 million returned to shareholders, an increase of 48% compared to the 2023 financial year
- The Arizona 2 micro-mill is expected to reach operational break-even in the first quarter of 2025
- Steel West Virginia project on track for commissioning in late 2025
Company Outlook
- Anticipates an improvement in market conditions in the second half of fiscal 2025
- Strong pipeline of construction projects driven by infrastructure investments
- Implementation of the TAG initiative for margin improvement and growth opportunities
- Forecast capital expenditure of €630-680 million for financial year 2025
Bearish points
- Expected decline in consolidated financial results for the first quarter of 2025
- Temporary weakness in the construction industry
- Price drop in the Steel North America group
- Increase in imports of rebar impacting the Steel Europe group
Bullish points
- Record performance in employee safety
- Strong performance of the Emerging Businesses group
- Improved debt ratios with a net debt/EBITDA ratio of 0.3
- Positive long-term outlook for the construction market
Shortages
- Fourth quarter net profit of €103.9 million, down from €184.2 million a year earlier
- Consolidated basic EBITDA of €227.1 million, a decrease of 31% year-on-year
- Reduced profitability in the North American Steel group due to lower steel margins
Highlights from the Q&A session
- The Arizona 2 mill is expected to reach a full production rate of 500,000 tonnes per year
- Revised forecast for impact of infrastructure spending on rebar demand
- Disciplined approach to potential acquisitions, focused on economic viability
Commercial Metals Company (CMC) reported strong performance for fiscal 2024, despite market challenges. The company achieved core EBITDA of €1 billion, which, although lower than the previous year’s €1.4 billion, remained 40% above pre-pandemic levels. CMC generated €900 million in cash flow from operations and returned €261.8 million to shareholders, an increase of 48% compared to the 2023 financial year.
CEO Peter Matt highlighted the company’s record performance in employee safety and progress on key projects. The Arizona 2 micro-mill is expected to reach operational break-even in the first quarter of 2025, with a production target of 500,000 tonnes by the end of 2025. The Steel West Virginia project is progressing as planned, with commissioning expected at the end of 2025.
For the fourth quarter, CMC announced a net profit of €103.9 million (€0.90 per diluted share) on a turnover of €2 billion, with a consolidated EBITDA of €227.1 million. While the North America Steel group faced falling prices, the Emerging Businesses group posted strong results.
Looking ahead, CMC expects market conditions to improve in the second half of fiscal 2025, supported by a strong pipeline of construction projects driven by infrastructure investments. The company is implementing its TAG initiative to improve margins and explore growth opportunities, both organic and inorganic.
CMC maintains a strong liquidity position, with total liquidity close to €1.7 billion. The company’s debt ratios have improved, with a net debt to EBITDA ratio of 0.3. For fiscal year 2025, CMC forecasts capital expenditures of between €630 million and €680 million, primarily allocated to the Steel West Virginia project and sustainment investments.
Although CMC expects consolidated financial results for the first quarter of 2025 to decline due to temporary weakness in the construction industry, management remains confident in the long-term strength of the construction market and in the positive contributions of ongoing strategic initiatives.
Perspectives InvestingPro
Commercial Metals Company’s (CMC) strong performance for fiscal 2024, despite market challenges, is reflected in several key InvestingPro metrics. The company’s market capitalization stands at €6.43 billion, indicating its significant presence in the steel industry. CMC’s P/E ratio of 12.96 suggests the stock is reasonably valued relative to its earnings, consistent with the company’s reported financial stability.
InvestingPro data shows that CMC’s revenue for the trailing twelve months to Q4 2024 was €7.93 billion, with a gross profit margin of 17.14%. Although revenue growth was negative at -9.93%, this is consistent with the company’s report of market challenges. However, the operating profit margin of 8.75% demonstrates CMC’s ability to maintain profitability even in a difficult environment.
Two InvestingPro tips of particular relevance to CMC are:
1. “Management carried out aggressive share buybacks” – This matches the company’s report stating that it returned €261.8 million to shareholders, an increase of 48% on the financial year 2023.
2. “Maintained dividend payments for 54 consecutive years” – This impressive track record highlights CMC’s commitment to shareholder returns, even during difficult times.
This guidance, along with CMC’s dividend yield of 1.28% and dividend growth of 12.5% over the past twelve months, highlights the company’s focus on shareholder value, which which was highlighted in its report for the fiscal year.
