Commercial Metals Has Strong Fourth Quarter
Dallas, TX - Commercial Metals Company reported net earnings of $24.3 million and net sales of $2.4 billion for the year ended August 31, 2001. This compares with net earnings of $46.3 million on net sales of $2.7 billion last year. Cash flows from operations for the year were $95 million or $7.23 per diluted share compared with a record $116 million or $8.15 per diluted share in fiscal year 2000.
Fourth quarter net earnings were $14.2 million on net sales of $646 million. This compares with $12.7 million in the fourth quarter a year ago. For the fourth quarter of 2001, cash flows from operations were $32 million compared with $38 million in the same period in 2000.
CMC Chairman, President and Chief Executive Officer Stanley A. Rabin said, "On an absolute basis, fiscal 2001 was a disappointing year and well below our plan; on a relative basis, we outperformed virtually all of our competitors in our various industry sectors. We earned the second-best third and fourth quarter earnings per share in our history. Our vertical integration, product diversification and geographic dispersion all contributed to our relatively better performance. Major positives included solid results in steel manufacturing and steel fabrication, strong earnings in copper tube production and continued profitability in Marketing and Trading. The principal problem was the persistent global economic slowdown and unprecedented import levels at depressed prices in some of our major product lines, which was not offset by those of our businesses that benefited from higher imports. Domestic competition, in turn, became even more aggressive.
"Operating profit for our four steel mills was 27% below fiscal 2000, primarily because of an operating loss at the Alabama mill and lower profits in Texas and Arkansas, which could not be offset by a turnaround at the South Carolina mill. For the year, tons melted and rolled decreased three percent to 1.8 and 1.7 million tons, respectively, while shipments rose three percent to 1.9 million tons.
The average annual mill selling price was $22 below last year, and the average selling price for finished goods plummeted $24 per ton to $290 per ton. Mill rebar prices remained weak while merchant bar and light structural prices were, simply put, atrocious. Sharply reduced steel scrap prices were a significant offset in maintaining mill product margins, with the average annual scrap purchase cost down by $17 per ton. Utility costs, on the other hand, rose nearly $10 million compared with the previous year, although in the fourth quarter they decreased by $750 thousand against the fourth quarter of fiscal 2000. The fourth quarter continued the significantly stronger second half results. Operating profit for the four steel mills was 21 percent higher than last year's fourth quarter on a 10 percent increase in tonnage shipped, but quarterly mill selling prices were down similar to the entire year. Scrap prices were slightly stronger than the third quarter, but still $10 per ton lower than one year ago."
"The Secondary Metals Processing Division (SMPD) was unprofitable compared with a profit the previous year," Rabin continued, "but showed a modest operating profit in the fourth quarter and second half. The combination of high imports of steel scrap, weak domestic steel mills and the strong U.S. dollar continued to dampen our ferrous scrap business. Nonferrous margins were impacted as well by the sharp drop in terminal market values. Total tons sold year-to-year were down four percent. Versus last year, the average ferrous price sank by $21 to $75 per ton and shipments fell five percent. The average nonferrous scrap price was approximately five percent lower than a year ago while nonferrous shipments were two percent higher. Total volume of scrap processed during fiscal 2001, including our CMC Steel Group operations, reached 2.3 million tons.
Mr. Rabin added, "Fiscal 2001 was another solid year in our downstream steel fabrication and related businesses, although operating profit was 28% below last year's very robust result. A considerable part of the decline in profitability was attributable to the litigation accrual of $8 million. Prices were mixed but volume increased. Shipments from our fab plants totaled 986,000 tons, 3% above the prior year, although this included new capacity. Operating profit for the downstream operations in the fourth quarter increased 5% over the previous fourth quarter even before consideration of the reversal of part of the litigation accrual.