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April 2004

Commercial Metals Company Reports All-Time Record Quarter

Irving, TX— Commercial Metals Company reported net earnings of $21.2 million or $0.71 per diluted share on net sales of $1.1 billion for the quarter ended February 29, 2004, ranking it as the strongest quarter ever reported for the Company. This compares with net earnings of $2.9 million or $0.10 per diluted share on net sales of $661 million for the second quarter last year. This year's second quarter included after-tax LIFO expense of $6.2 million or $0.21 per share compared to $1.9 million or $0.07 per share in last year's second quarter.

Net earnings for the six months ended February 29, 2004 were $33.8 million or $1.15 per diluted share on net sales of $1.9 billion. For the same period last year, net earnings were $5.1 million or $0.18 per diluted share on net sales of $1.3 billion. For the six months ended February 29, 2004, after-tax LIFO expense was $7.0 million or $0.24 per share compared to $1.8 million or $0.06 per share last year.

CMC chairman, president and chief executive officer Stanley A. Rabin said, "During December 2003, we consummated two important acquisitions, minimill operations in Poland and a rebar fabricator with operations in Texas and surrounding states. With these acquisitions' varying economic characteristics and internal management reporting changes, we have revised our financial reporting segments. We have maintained recycling and marketing and distribution while presenting the Polish entity separately. Our former manufacturing segment has been split between our five domestic mills and our downstream fabrication businesses."

Rabin said, "The primary story of the quarter was the unprecedented rise in the price of steel scrap accompanied by, albeit with a lag, a series of rapid price increases for our steel mill products. Not far behind was a surge in nonferrous prices. The result was an extraordinary jump in margins and profits for our recycling segment. At the same time, margins, volume and profits in our domestic mill segment were satisfactory because of robust demand. Conversely, margins in the fabrication segment were further compressed because of the rapid increase in input costs. Meanwhile, we further increased profitability in the marketing and distribution segment, and our acquisition in Poland got off to a very good start. Underlying the strong markets was continued robust demand in Asia (especially China), the upturn in the U.S. economy, the weak U.S. dollar, historically high freight rates and low end-user inventories. Manufacturing activity continued to pick up in many parts of the world. Construction markets were mixed, but perhaps modestly better than we expected at this point in the cycle."

Domestic Mills
Rabin continued, "Our domestic mill segment's adjusted operating profit was almost four times last year's depressed second quarter. Within the segment, adjusted operating profit for our steel minimills was substantially higher than a year earlier on the strength of improved selling prices and higher shipments while productivity was at exceptionally high levels at all four mills. Production and shipments were up at all of the steel mills. Of course, the extremely rapid rise in steel scrap costs was a significant offset. On a year-to-year basis, tonnage melted for the second quarter was up 19% to 567,000 tons; tonnage rolled was 540,000 tons, 26% above last year's second quarter; and shipments increased 13% to 609,000 tons. Our average total mill selling price was $68 per ton above last year's extraordinarily low level, and the average selling price for finished goods also was up by $68 per ton to $345 per ton. The average scrap purchase cost rose by $58 per ton versus a year ago. Copper tube production increased 11% and shipments increased 16% against the same period last year. Metal spreads improved by 12 cents per pound to 59 cents per pound despite the sharp rise in the underlying copper scrap price."

According to Rabin, "On December 3, 2003, we closed the previously announced purchase of a 71% controlling interest in Huta Zawiercie S.A. of Zawiercie, Poland (CMCZ), a steel minimill which produces over one million tons of rebar and wire rod as well as merchant bar. CMCZ recorded an adjusted operating profit of $6.2 million, which was well above our expectations in this seasonally weak quarter. For the quarter, melted tons equaled 375,000 tons; rolled tons equaled 271,000 tons; and shipments totaled 390,000 tons, including billets. Meanwhile the average selling price was $286 per ton (including 22% billets). The average scrap purchase cost was $147 per ton."

Rabin said, "The Recycling segment recorded an astounding quarter, primarily a result of the improved ferrous scrap market on 89% higher net sales dollars. This compared most favorably with the quarter a year ago; adjusted operating profit almost quintupled. Gross margins were significantly above last year while operating costs as a percent of sales declined. Strong international demand and the weak U.S. dollar continued to drive steel scrap prices, and prices surged further as the quarter progressed. Nonferrous markets also improved at a more rapid pace than the past several quarters. Versus last year, the average ferrous scrap sales price increased by 82% to $171 per ton and shipments climbed 32% to 493,000 tons. The average nonferrous scrap sales price for the quarter was approximately 34% above a year ago while nonferrous shipments were 15% higher. The total volume of scrap processed, including all our domestic processing plants, equaled 838,000 tons against 642,000 tons last year."

Rabin concluded, "Our outlook for the balance of the fiscal year remains very positive although accurate quarterly earnings forecasts are difficult. While we are in uncharted waters, we are navigating them well. "

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