Commercial Metals Company (NYSE:CMC) Q3 2016 Earnings Conference Call - Final Transcript

Jun 23, 2016 • 11:00 am ET

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Commercial Metals Company (NYSE:CMC) Q3 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
operator

Hello and welcome, everyone, to today's Commercial Metals Company third quarter of fiscal 2016 earnings call. Today's call is being recorded and after the company's remarks, we will have a question-and-answer session. We will have a few instructions at that time.

(Forward-Looking Cautionary Statements)

And now, for opening remarks and introductions, I'll turn the call over to the Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, Mr. Joe Alvarado. Mr. Alvarado, the floor is yours, sir.

Executive
Joseph Alvarado

Thank you. Good morning and welcome to everyone joining us to review the results of our third quarter of fiscal 2016. I'll review highlights from the quarter and Mary Lindsey, Vice President and Chief Financial Officer, will cover the quarter in more detail. Afterwards, I'll conclude our prepared remarks with a discussion on our outlook for the fourth quarter of fiscal 2016, after which we'll open the call to questions.

As announced in our earnings release this morning, we reported net sales of $1.2 billion for the third quarter of fiscal 2016. Earnings from continuing operations were $35.1 million or $0.30 per diluted share. Also as noted in our press release on June 22, I'm pleased to report that the Board of Directors declared a regular quarterly cash dividend of $0.12 per share of CMC common stock for stockholders of record on July 7, 2016. The dividend will be paid on July 21, 2016. The cash dividend reflects CMC's 207th consecutive quarterly dividend.

Now turning to the current trends and conditions in the market in which we operate. Overall, the third quarter of fiscal 2016 was a strong quarter for CMC. Four of our five segments reported increased shipments compared to the third quarter of fiscal 2015. Shipments were driven by increased rebar demand from the non-residential construction market. Of particular note, our Americas Fabrication segment continued to be a significant contributor to CMC profitability by recording its best third quarter adjusted operating profit since the third quarter of fiscal 2007. This segment benefited from reduced raw material input costs resulting in expanded metal margins compared to the third quarter of fiscal 2015.

In scrap markets, monthly average ferrous scrap prices for the third quarter of fiscal 2016 as reported by AMM increased approximately 39% compared to the second quarter of fiscal 2016. As a result, average selling prices and metal margins for our recycling segment increased compared to the second quarter of fiscal 2016. Additionally, the increase in ferrous scrap prices has driven an increase in finished goods pricing.

Regarding the passage of the Fix America's Surface Transportation Act, or FAST, we have yet to experience much additional demand as a result; however, we expect that we will see some improved demand tied to this act but not until our fiscal 2017 and beyond. Our International Marketing and Distribution segment was adversely impacted by low demand for tubular products as well as US trade action related to flat-roll products.

With that as an overview, I'll now turn the discussion