CMC Financial Analysis

Analysis Date: 1/27/2025

Business Model

CMC generates revenue primarily through its North America Steel Group, Europe Steel Group, and Emerging Businesses Group segments

Revenue Sources

• North America Steel Group (79.5% of Q1 2025 revenue) - Steel products including rebar, merchant bar and downstream products
• Europe Steel Group (11% of Q1 2025 revenue) - Rebar and merchant bar products
• Emerging Businesses Group (8.9% of Q1 2025 revenue) - Geogrids, construction services, impact metals and reinforcing steel

Revenue Distribution by Channel

• North America Steel Group: $1,518.6M (79.5%)
• Europe Steel Group: $209.4M (11%)
• Emerging Businesses Group: $169.4M (8.9%)

Income Statement Analysis

• Net sales decreased 4.7% year-over-year to $1.91B due to lower average selling prices
• Gross margin declined from 19.9% to 16.1% due to margin compression in steel products
• SG&A expenses increased 9.4% year-over-year to $177.9M

Balance Sheet Analysis

• Strong liquidity position with $856M cash and nearly $1.7B total available liquidity
• Total assets decreased slightly by 0.7% from Q4 2024
• Total liabilities increased 9.5% due primarily to $350M litigation accrual

Cash Flow Analysis

• Generated $213M operating cash flow, equal to 101% of core EBITDA
• Capital expenditures increased to $118.2M from $67M year-over-year
• Returned $71M to shareholders through dividends and share buybacks

Capital Allocation

FY2025 capex expected $630-680M with $350-400M for Steel West Virginia project. Increased quarterly dividend 13% year-over-year to $0.18/share. Repurchased $50.4M of shares in Q1. Maintaining disciplined approach to M&A opportunities.

Management Commentary

CMC team executed well across multiple fronts during Q1, including near-record safety performance

Financial results hindered by economic uncertainty weighing on construction activity and steel pricing

Encouraged by progress in operational and commercial excellence TAG program implementation

Customer optimism has improved significantly over last two months

Overall Sentiment: Cautiously optimistic despite near-term headwinds, with focus on operational excellence and long-term growth initiatives

Recommendation

Rating: Hold

Reason for Rating: Near-term challenges balanced by strong long-term positioning and improving customer sentiment

Disclaimer: This analysis is based on company filings and public information. It is for informational purposes only and not financial advice. Past performance does not guarantee future results.

Generated on: 1/27/2025, 2:02:01 PM