Commercial Metals reports income of $0.7 million

Commercial Metals Company reported net income of $0.7 million or $0.01 per diluted share on net sales of $1.8 billion for the quarter ended November 30, 2010. This compares with a net loss of $31.2 million or $0.28 per share on net sales of $1.4 billion for the first quarter of last year. The period’s results included pre-tax LIFO expense of $5.7 million or after tax $0.03 per share. This compares with pre-tax LIFO income of $17.3 million or after tax $0.10 per share in last year’s first quarter. At quarter end, the LIFO reserve totaled $236 million.

The quarter has a disproportionately high effective tax rate. Losses in Croatia are not tax benefitted as the company may not be able to use them in the allowed carry forward period. The tax rate on all operations, excluding Croatia, is only 27 percent, but is applied against pre-tax income after adding back the Croatian loss, resulting in the higher rate.

The Americas Recycling segment had an adjusted operating profit of $8.2 million (including pre-tax LIFO expense of $2.2 million) compared to the prior year’s first quarter $1.2 million loss, with negligible LIFO effect. The increase in profitability was volume related as purchase prices moved in line with sales pricing. Shredded ferrous scrap prices rose, fell, and recovered during the quarter, continuing the general upward trend in pricing that began in December 2009 and has kept benchmark pricing levels above $300 a ton for every month of calendar 2010.

Export demand has been fairly constant with Turkish demand supplanting China; domestic mills appear to have underestimated steel demand, requiring more purchases late in the quarter. Nonferrous pricing (copper and aluminum) had steady increases throughout the quarter with a small pullback at quarter end. Chinese copper demand remains strong, but the segment also shipped significant quantities to Europe. The average ferrous scrap sales price for the first quarter was $284 per short ton, a 38 percent increase over the prior year first quarter. Average nonferrous scrap pricing was $2,944 per short ton, up 25 percent from the first quarter of last year. Shipments of ferrous scrap totaled 495 thousand tons, an increase of 24 percent from the first quarter of last year. Nonferrous scrap shipments totaled 63 thousand tons, 19 percent higher than last year. The segment exported 8 percent of its ferrous scrap tonnage and 37 percent of its nonferrous scrap tonnage during the quarter.