CMC 2026财年第四季度业绩电话会议：EBITDA增长及2027财年展望

核心要点

• 2026财年核心EBITDA从2025财年的8.37亿美元升至约14亿美元。核心EBITDA利润率扩大80个基点至14.5%。
• 第四季度核心EBITDA同比增长35.1%至约3.94亿美元，而核心EBITDA利润率达14.8%，同比提升100个基点，环比提升60个基点。
• 北美钢铁业务部调整后EBITDA环比增长25.2%至3.17亿美元。受售价上涨、废钢成本下降和产品组合优化的支撑，金属利润空间每吨增加42美元，达到652美元。
• CMC在2026财年结束时，TAG效益按年化总额计算已超过2.5亿美元，并预计到2027财年末将再增加1亿美元的年化效益。
• 2027财年资本支出预计将减少近2亿美元至约4亿美元，从而支持自由现金流的改善并加快股票回购。
• 管理层预计2027财年将是又一个稳健的财年。第一季度，北美钢铁业务调整后EBITDA预计环比基本持平，建筑解决方案业务将出现季节性下滑，而欧洲业务将实现显著改善。

核心财务数据

业务与运营表现

北美钢铁业务

该业务板块受益于TAG举措、金属利润空间扩大以及商用棒材出货量增加。平均售价环比每吨增加32美元，而废钢成本每吨下降10美元。

成品钢材出货量环比增长7.1%。商用棒材出货量同比增长27.5%，反映出亚利桑那2号（Arizona 2）微型轧钢厂的产能优势及更强的产品组合灵活性。下游产品出货量同比增长8.5%，而下游储备订单量同比增长15.5%，环比增长5%。

CMC表示，数据中心、能源、工业回流和机构市场中规模更大、更复杂的项目，正利好其垂直整合的网络和下游能力。管理层看到了商用棒材出货量达到100万吨的路径，这意味着约15万至20万吨的增量。

建筑解决方案与预制件

建筑解决方案净销售额同比增长94.5%，调整后EBITDA增长超一倍，调整后EBITDA利润率扩大80个基点。

受东南部部分地区住宅建筑活动减弱影响，预制件业务表现低于管理层预期。这一变化也导致了不利的区域利润率组合。然而，新签订单量环比增长12.6%，储备订单量同比增长约3%、较第三季度增长4%，且储备订单平均价格有所改善。

管理层表示，非住宅及基础设施需求抵消了部分住宅市场的疲软。预制件业务的整合与协同效应释放保持正常或超预期推进，并在采购、运营、产能布局优化和商业执行方面发现了更多机遇。

增长项目

CMC已投资近15亿美元以对其贯穿全美东西海岸的轧钢厂网络进行现代化升级和完善。管理层预计这些投资将在2027财年从资本消耗阶段转向投资回报阶段。

西弗吉尼亚钢铁厂（Steel West Virginia）已轧制出首根钢坯，目前仍处于热调试阶段。管理层预计产能爬坡将耗时约12个月，约6个月后实现EBITDA收支平衡。由于热调试将持续至第一季度，2027财年产量目前预计将略低于20万吨。

位于俄克拉何马州布拉克韦尔（Blackwell）的新Tensar土工格栅生产线正在启动中。位于田纳西州的GalvaBar设施预计将于11月开始初步生产，并使CMC的耐腐蚀产品产能翻倍以上。

欧洲业务

欧洲业务的同比对比受到了第四季度缺乏碳排放配额补贴的影响。CMC在2025财年第四季度获得了3070万美元的配额补贴，在2026财年第三季度获得了2040万美元。

管理层表示，扣除这些配额补贴后，波兰的经营基本面继续改善。金属利润空间同比每吨增加32美元，平均售价同比每吨增加44美元，环比每吨增加15美元。本季度能源成本每吨增加约10美元。

CMC预计，欧盟碳边境调节机制（CBAM）以及关税配额框架的调整将随着时间的推移支撑更为建设性的贸易环境。该公司约50%的用电量已通过长期购电协议进行套期保值。

管理层业绩指引

• 北美钢铁业务：预计2027财年第一季度调整后EBITDA环比基本持平。定价改善应能很大程度上抵消废钢成本上升、开工费用以及出货量的温和季节性下滑。
• 建筑解决方案：由于正常的季节性疲软，预计第一季度调整后EBITDA将环比下降。管理层预计预制件业务业绩将较第四季度下降中至高个位数百分比。
• 预制件业务：在储备订单、定价和整合进度的支撑下，管理层继续将约2.40亿至2.50亿美元的年度EBITDA视为2027财年可实现的目标。
• 欧洲业务：预计第一季度调整后EBITDA将显著增长。CMC预计将获得1000万至1500万美元的碳排放配额补贴，但部分会被可能每吨再增10至15美元的能源成本所抵消。
• 西弗吉尼亚项目开工费用：CMC在第四季度产生约900万至1000万美元费用后，预计第一季度还将增加300万至500万美元的开工费用。
• 资本支出：2027财年的支出预计将下降至约4亿美元。其中约四分之一为增长性资本支出，主要与西弗吉尼亚、土工格栅和GalvaBar的投资相关。
• 税率：2027财年的有效税率预计约为24%。得益于48C税收抵免和加速折旧优惠，CMC预计在一年中的大部分时间里不会产生重大的美国联邦现金税。
• 收购储备订单摊销：预计第一财季约为2000万美元，第二财季约为200万美元。

风险与关注事项

• 住宅建设依然低迷，尤其是在新建单户住宅和部分东南部预制件市场。
• 预计在未来几个季度，正常的季节性因素将给建筑解决方案和欧洲需求带来压力。
• 柴油价格上涨可能会对废钢成本施加压力，而欧洲能源成本可能维持高位。
• 西弗吉尼亚钢铁厂仍处于调试阶段，这带来了短期开工成本并限制了2027财年的产量。
• 在贸易政策变动前积累的欧洲库存可能需要四到六个月的时间去化，从而推迟利润率改善的显现。
• 预制件业务的利润率对地理分布和产品组合仍较敏感，因为利润率较低的CP&P业务尚未完成整合及利润率提升进程。

分析师问答亮点

• 预制件业务前景：尽管第四季度住宅市场疲软，管理层仍重申对该业务的信心。价格继续上涨，新签订单增强，非住宅及基础设施工程对储备订单提供了支撑。
• 钢铁进口：CMC表示，随着进口经济效益竞争力下降，9月份来自韩国的螺纹钢进口量大幅下降。受反倾销和反补贴税案件覆盖的国家进口量也继续受限。
• 废钢与螺纹钢定价：管理层预计近期螺纹钢价格上涨将足以抵消废钢成本上升，支撑截至11月财季的平均售价和金属利润空间逐步改善。
• 商用棒材机遇：西弗吉尼亚项目的产能爬坡应能释放包括南卡罗来纳州在内的其他轧钢厂的产能，用于生产利润率更高的商用棒材产品，同时有助于保持螺纹钢供应与需求相匹配。
• 资本配置：鉴于经收购调整后的净杠杆率为1.9倍且资本支出正在下降，CMC打算在剩余约7.00亿美元的授权额度内加快股票回购。该公司还计划保留用于潜在收购的资金能力。
• 长期EBITDA框架：管理层对其2029财年16.5亿至18.0亿美元的核心EBITDA目标保持信心。包括西弗吉尼亚项目、商用棒材扩产、GalvaBar和土工格栅内生项目在内，预计随着时间的推移将贡献近2.00亿美元的EBITDA增量。

业绩电话会议完整文字记录

完整财报电话会议逐字稿

管理层陈述

Operator

Good morning, and welcome to the Commercial Metals Company Fiscal 2026 Fourth Quarter Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Andy Larkin, Vice President of Investor Relations. Please go ahead.

Andy Larkin

Hello, and welcome to the Commercial Metals Company Fiscal 2026 Fourth Quarter and Year-End Earnings Call. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer; and Paul Lawrence, Senior Vice President and Chief Financial Officer.

Today's materials include the press release and supplemental slides that accompany this call. which can be found on the CMC's Investor Relations website. As a reminder, today's call is being recorded. Peter will begin our prepared remarks with a high-level overview of the year and fourth quarter and comment on the progress against our strategic objectives. Paul will then provide a detailed discussion of our quarterly results as well as capital allocation. Peter will wrap up with our view on the path ahead. We will then provide instructions for the question-and-answer session to follow.

Today's discussion contains forward-looking statements, including with respect to economic conditions, effective legislation and trade actions, U.S. steel import levels, construction activity, demand for finished steel products and precast concrete products. The expected capabilities benefits costs and time line for construction and commissioning of new facilities, the expected performance and integration of our recently acquired Precast platform, the company's operations, the company's strategic growth plans and its anticipated benefits of the company's ability to achieve its stated deleveraging targets within the anticipated time frame, legal proceedings, the impact of tax credits on future results, the company's future results of operations, financial measures and capital spending including expected share repurchase activity.

These statements reflect the company's beliefs based on current conditions that are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-K and other filings with the U.S. Securities and Exchange Commission contain additional information concerning factors that could cause actual results to differ materially from those projected in forward-looking statements. Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release supplemental slide presentation or on the company's website. Unless stated otherwise, all references made to year or quarter end are references to the company's fiscal year or fiscal quarter. With that, I would like to turn the call over to CMT's President and CEO, Peter Matt.

Peter Matt

Thank you, Andy, and good morning to everyone joining us for today's call. We will discuss many accomplishments today, but none is more important than safety. I want to thank our employees for their continued focus and commitment to our most important company value. Our total recordable incident rate for fiscal 2026 remain near a historic low point and better than industry averages. During the year, we put significant effort into embedding CMC's safety-first culture across our newly acquired precast operations and strengthening safety performance throughout the organization. While we're proud of that progress, our standard is higher. Our goal is 0 harm, and we will be relentless in striving for it.

Now stepping back fiscal 2026 was a defining year for CMC. We made significant progress executing the strategy we laid out at our Investor Day, strengthening the quality and durability of our earnings profile expanding margins, reducing leverage, enhancing free cash flow generation and positioning the company for sustained shareholder value creation. For the full year, core EBITDA increased to approximately $1.4 billion, up from $837 million for fiscal 2025, while core EBITDA margin expanded 80 basis points to 14.5%.

These results reflect meaningful progress across each of our strategic priorities, including the execution of our Transform Advance and Grow program the advancement of key growth investments and the ongoing successful integration of our precast acquisitions. Just as importantly, we have strengthened our balance sheet, since completing our precast acquisitions, we have reduced leverage as adjusted for acquisitions to below our target range, providing greater financial flexibility to invest in growth while returning capital to shareholders.

Our momentum carried into the fourth quarter with core EBITDA increasing 35.1% and year-over-year to approximately $394 million, while core EBITDA margin expanded to 14.8%. Results in the quarter were driven by strong North American steel group performance, where execution against strategic priorities has created clear value for our business. Segment margins increased 220 basis points sequentially driven by strong tag contributions, including operational and commercial excellence initiatives. We are also seeing that as the market and our customers pursue larger and more complex projects in energy, industrial reshoring, data center and institutional sectors CMC scale, capabilities and network are increasingly making CMC a preferred partner.

Our downstream expertise with its customized solutions and customer-focused approach has us positioned to win in this increasingly complex environment. Downstream product volumes grew 8.5% year-on-year in the fourth quarter with expanding margins reflecting this dynamic. At the same time, our Arizona 2 micro mill is enhancing our merchant production capabilities to support growth and demand. Shipments for merchant bar increased 27.5% year-over-year, demonstrating the capabilities of the Arizona 2 plant and the flexibility it provides to optimize product mix to capitalize on strong market conditions and balance supply with demand.

For our Construction Solutions Group, fourth quarter results were below our expectations due primarily to our precast business with residential softness in certain Southeastern markets. Notably, we have seen the same regional softness in our fabrication book though it is not visible externally, given the geographic diversification of our fab footprint. As residential activity moderated lower volumes and regional margin mix headwinds and weighed on adjusted EBITDA performance. Precast generated adjusted EBITDA of $57.1 million during the quarter. And excluding the purchase accounting impact has contributed roughly $150 million of adjusted EBITDA since our acquisition.

The leading indicators for the business remain positive. The demand environment especially in nonresidential and infrastructure remains healthy with strong bidding activity in key markets like Atlanta picking up in recent months. Bookings were up year-over-year and increased 12.6% sequentially. Backlog levels are up roughly 3% versus the prior year and 4% versus Q3. While average backlog pricing has also trended higher. These factors position the business for solid performance in the year ahead. Strategically, as we closed 2026 and look ahead to fiscal 2027, we are highly confident in our direction and in the 3 powerful drivers of value creation we laid out at our Investor Day.

First, we will continue capturing the full potential of our business through TAG. Second, we will begin harvesting returns from significant growth capital deployed over the last several years. And third, we will continue reshaping our portfolio as a leading provider of early-stage construction solutions. Together, these initiatives, which are within our control, will power a stronger CMC, both operationally and financially. We have made significant progress in fiscal 2026 as TAG continue to evolve from a program into a core operating system for CMC. Across the enterprise, we realized meaningful productivity gains through yield improvements, scrap optimization, logistics efficiencies and manufacturing excellence initiatives and an increasing focus on commercial excellence.

Looking ahead, the opportunity set remains substantial with a full pipeline of initiatives that will drive additional earnings growth and margin expansion. We exited fiscal 2026 with more than $250 million of gross run rate benefits achieved and a clear line of sight to an additional $100 million of run rate benefits by the end of fiscal 2027. We view TAG as a durable source of margin expansion and an increasingly important competitive advantage for CMC. Turning to growth investments. fiscal 2027 will mark an important transition. For several years, we have invested significant capital to strengthen and modernize our asset base.

Nearly $1.5 billion of capital has been deployed to modernize and complete our coast-to-coast mill network, both improving our competitiveness and providing network flexibility. As we enter fiscal 2027, those investments increasingly shift from consuming capital to generating returns. At Steel West Virginia, commissioning and start-up activities continue to progress well. The team is executing a disciplined commissioning process, keeping its focus on safely increasing production developing the workforce and realizing the full potential of the mill. As production increases, Steel West Virginia will strengthen the flexibility of our whole network enabling us to flex and optimize production costs and product mix to better serve customer demand for different products across our footprint.

Before moving on, I'd like to recognize the team leading the construction and commissioning of our West Virginia Micromill. Their efforts have been outstanding and reflect the disciplined approach to capital deployment and project execution that defines CMC. At Tensar, the new geo grid line in Black Oklahoma is well into its startup and will increase geogrid production capacity enhanced service levels and fuel growth in higher-value nonresidential and infrastructure applications. We are equally encouraged by the construction progress at Galvabar, Tennessee where we expect first production of our Galvabar corrosion-resistant product beginning this November. The facility is expected to more than double our Galvabar production capacity, expanding our presence in this attractive higher-margin market segment.

Beyond our organic growth investments, we are reshaping our portfolio and diversifying our earnings profile most recently with our precast platform investments. Turning to our precast business. Integration activities remain on track and synergy capture is meeting or exceeding expectations. A great example of this is where through best practice sharing across our network, we have implemented several new operational practices that will improve our safety performance and eliminate millions of dollars of waste from our supply chain. To date, we have substantially completed the functional integration of the platform, creating a strong foundation to drive value creation.

Utilizing a tag approach and mindset we are advancing a broad range of operational excellence and commercial excellence initiatives and have identified further opportunities across operations, procurement, footprint optimization and commercial execution that will enhance growth over time. Precast plays a critical role in strengthening CMC's position in early-stage construction solutions. The business enhances our portfolio with leading positions in attractive growth markets and in-demand infrastructure applications. It brings compelling financial characteristics, stronger, more durable margins lower capital intensity and attractive free cash flow generation.

Precast also expands our growth runway through both organic opportunities and acquisition opportunities in a highly fragmented industry. With sound execution, we expect Precast to play a vital role in building a stronger CMC. Let's shift from our three value creation levers to the current operating environment. Regarding demand for early-stage construction products, the direction of travel remains unchanged. We see constructive conditions for all of our product categories across the majority of the markets we serve. Beginning with infrastructure, demand remains elevated significant federal and state funding continues to support a multiyear pipeline of projects and with a substantial portion of available funding yet to be spent, we have strong visibility into future activity.

Nonresidential construction demand varies by market, but remains a source of strength for CMC. Activity related to areas like data centers, power generation utility infrastructure, semiconductor manufacturing and institutional markets is solid. And the Dodge Momentum Index remains near record levels, suggesting a robust and extensive project pipeline. Many of these nonresidential projects are larger, more complex and increasingly requiring diverse solutions. As noted earlier, this plays directly to CMC's strengths. Our vertically integrated network, downstream capabilities and broad early-stage construction portfolio are differentiators and position us to meet the complexity and scale of these mega project opportunities better than ever before.

While residential remains mostly muted, particularly in new single-family construction, we remain optimistic for this market over the long term where the housing shortage in the U.S. will be a meaningful source of multiyear demand. On the steel supply side, our low-cost and flexible North American steel network is well positioned to win in this environment. The domestic rebar market remains highly consolidated, and the import landscape has materially improved compared to just a few years ago. Existing Section 232 measures have proven both effective and durable while recently finalized trade cases against unfairly traded imports have effectively removed hundreds of thousands of tons from the market. Importantly, rebar imports are beginning to show signs of moderation as arbitrage opportunities diminish.

Notably, South Korean imports decreased in September as we have been expecting and the imports from other sources continue at a fraction of prior year levels. Meanwhile, we continue to see heightened focus across the industry on trade enforcement and ensuring that imported material competes on a level playing field. Taken together, we believe these dynamics support a more rational and sustainable competitive environment where CMC can reap the benefits from its investments made and more fully capture the value we bring to the market.

Now before providing our outlook, I'll ask Paul to go through the quarter in more detail. Paul?

Paul Lawrence

Thank you, Peter. I'll pick up on Slide 13. Briefly, at the consolidated level, CMC reported fourth quarter net earnings of approximately $213 million or $1.91 per diluted share. Similar to the third quarter, we incurred approximately $26.8 million of pretax expenses excluded from adjusted earnings, including $19.8 million of noncash amortization related to acquired backlog. Adjusted earnings increased 21% sequentially. The Core EBITDA margin remains an important indicator of the progress we are making. The benefits of our portfolio diversification strategy and tag initiatives are becoming increasingly evident in this metric.

In the fourth quarter, core EBITDA margin increased 100 basis points year-over-year and 60 basis points sequentially, and capping a very strong fiscal year in underscoring the enhanced earnings power of the business. Within the North American Steel Group, adjusted EBITDA increased 25.2% sequentially to $317 million, driven by tag benefits, metal margin expansion and growth in merchant bar shipments. Metal margin increased $42 per ton sequentially to $652 driven primarily by a $32 per ton increase in average selling price. The improvement in average selling price benefited from a richer product mix, including higher merchant bar volumes, which currently carry a meaningful premium to rebar prices.

Meanwhile, scrap costs declined $10 per ton sequentially. Regarding scrap, we expect a relatively stable environment with some upward pressure in the near term correlated to the higher diesel costs we're incurring. Finished steel shipments increased 7.1% sequentially with strong growth across merchant products as well as downstream and rebar volumes. Our downstream backlog increased 15.5% year-over-year and 5% sequentially, demonstrating the value of our differentiated capabilities, particularly on large, more complex projects. North America Steel Group adjusted EBITDA margin expanded to 16.4%, an increase of 220 basis points sequentially and 160 basis points compared to the same period of the prior year.

For the Construction Solutions Group, net sales increased 94.5% year-over-year. Adjusted EBITDA more than doubled, and adjusted EBITDA margin expanded 80 basis points. Besides precast, which Peter discussed earlier, delivered results that were largely consistent with both the prior quarter and the year ago period, capping a strong fiscal 2026 in which profitability increased approximately 50%. This performance reflects solid commercial execution and healthy activity levels across its core end markets. Construction Services and Impact Metals also delivered strong year-on-year revenue and EBITDA growth during the quarter. Performance reinforcing steel results were lower due to an unplanned outage at our Galvabar facility that affected shipments during the period.

The outage is now resolved and customer demand remains robust with bookings, backlog and pricing trends continuing to support a positive outlook for the business. In Europe, adjusted EBITDA comparisons were affected by CO2 credits received in prior periods. We received credits totaling $30.7 million in the fourth quarter of fiscal 2025 and $20.4 million in the third quarter of fiscal 2026. While the current quarter did not benefit any credit. Excluding these impacts, underlying business fundamentals in Poland continue to improve. Metal margin expanded $32 per ton year-over-year, supported by strengthening steel prices. Average selling prices increased $44 per ton versus the prior year and $15 per ton sequentially in the fourth quarter, offsetting a portion of this benefit with energy costs increasing approximately $10 per ton in the quarter.

We anticipate energy costs to remain elevated in the first quarter and could potentially increase by a further $10 to $15 per ton. Market conditions in Europe are becoming increasingly constructive. The implementation of the C BAM and enhancements to the tariff rate quota framework are helping create a more favorable trade environment, combined with gradually improving demand fundamentals, these developments reinforce our confidence in a continued recovery toward mid-cycle profitability over time. Lastly, A few comments on the balance sheet and capital allocation and key modeling considerations for fiscal 2027. Starting with the balance sheet.

In less than a year, we have successfully reduced net leverage adjusted for acquisitions to below our target of 2x. At 1.9x, this represents significant progress from post-close levels and position us to pursue our long-term balanced capital deployment priorities of growth and shareholder returns. We expect the balance sheet to strengthen further in fiscal 2027, supported by improving cash flow as capital expenditures moderate. In fiscal '26, total capital spend was approximately $580 million.

For fiscal '27, we anticipate capital expenditures to decline by nearly $200 million to roughly $400 million as we cycle past the elevated investment levels associated primarily with the West Virginia Micromill project. Roughly 1/4 of our anticipated 2027 spend is associated with growth CapEx that we expect will further decrease in 2028. As a result, free cash flow and free cash flow conversion is expected to improve in fiscal '27 and again in fiscal '28. This increased financial flexibility creates opportunity to further enhance shareholder returns and reinforces a topic we first discussed at Investor Day.

At that time, we announced a significantly expanded share repurchase authorization, which currently has approximately $700 million remaining. Since then, our conviction has only strengthened. With our strong cash-generating capabilities and the opportunity we see in the current share price, we intend to accelerate our pace of activity under the program. This action reflects our confidence in CMC's outlook and our conviction that investing in our own shares represents a compelling value creation opportunity.

As you think about your fiscal 2027 models, there are two items worth noting. First, we have just over 1 quarter remaining of the acquired backlog amortization. This will amount to approximately $20 million in the first quarter and roughly $2 million in the second quarter. Second, CMC will continue to benefit from meaningful cash tax savings associated with the 48C program. Bonus depreciation related to our West Virginia mill investment and accelerated depreciation on assets acquired through the precast acquisitions. As a result, we do not anticipate paying significant U.S. federal cash taxes through much of fiscal 2027.

For modeling purposes, we expect our effective tax rate to be approximately 24% for fiscal 2027. With that, I'll hand it back to Peter for our outlook. Peter?

Peter Matt

Thanks, Paul. As we look ahead to fiscal 2027, we are encouraged by both the external environment and the opportunities within our control. Domestic steel supply remains disciplined demand for early-stage construction products is supported by strong backlogs at attractive prices, and our value creation initiatives continue to gain momentum. TAG remains a significant source of earnings growth. Our recent growth investments are transitioning from capital deployment to return generation and our evolving portfolio is enhancing both the quality and the durability of our earnings.

Together, these factors support our confidence that fiscal 2027 will be another solid year for CMC. Specifically for the first quarter, we continue to expect healthy operating performance across the portfolio, though normal seasonal factors and cost will impact results sequentially. Within our North American Steel Group, improved pricing is expected to largely offset higher scrap costs, start-up expenses and a slight seasonal decline in shipments resulting in adjusted EBITDA that is expected to be nearly flat in comparison to the fourth quarter. Within our Construction Solutions Group, adjusted EBITDA is expected to be down sequentially, reflecting typical seasonal trends impacting the end market activity in this segment.

In Europe, adjusted EBITDA is expected to meaningfully increase sequentially, benefiting from the improving operating conditions and a CO2 credit. All in all, we remain confident in the operating environment animated by our priorities and above all, eager to deliver on the financial and strategic opportunities ahead of us in fiscal 2027.

With that, I'll ask the operator to provide instructions before fielding your questions. Thank you very much.

Operator

[Operator Instructions]. The first question today comes from Samuel McKinney with KeyBanc Capital Markets.

分析师问答

Samuel McKinney

Good morning, Peter and Paul. After a relatively soft third quarter, you said it was challenged by weather. The fourth quarter precast EBITDA number came in about $20 million short of the number you intimated on the last call. Just given the residential market challenges, is annual run rate EBITDA around that $240 million, $250 million still the right way to be thinking about this business before you make any more acquisitions?

Peter Matt

Sam, thank you very much for the question. We believe it is. And we think that it's a good target for this year. When we look at the backlogs in the business, when we look at the progress we've had on integration, and kind of overall momentum, we feel like we can achieve that. We will have some near term. And by near term, I'm talking Q1, we will have some seasonal weakness. And that seasonal weakness probably leads to a Q1 that's going to be down mid- to high single digits from where it is in -- but overall, we remain very positive on this business.

I think one thing that's interesting about this is that as residential has declined, it's been filled in by a strong slug of nonres and infrastructure. And so again, that's what's supporting our backlog and giving us a lot of confidence in this. And pricing remains very strong in the business. We continue to see pricing rising across the portfolio. So I guess, all in all, we remain very confident and we see this as a continuing strong contributor to our portfolio.

Samuel McKinney

Okay. And then you did mention that the South Korean long product imports finally took a big step down in September. How do you think about the sustainability of these trends? And do you expect any sort of government action now that South Korea has also made itself a meaningful importer of flat products this year?

Paul Lawrence

Yes. Well, I won't speak to flat products, but I'll kind of keep my comments on the products that impact our business. Yes, we did see the significant decrease. We expected it to be a little sooner, but it did happen. And I think the reality is, is that when you kind of stack up the costs in the current environment of getting rebar to the U.S. from South Korea, it's not competitive with where our pricing is even with the current price increases that we've just recently put in place. And so I think economics are it's taking care of the issue for us for the short term. As I've said in prior calls and engagements and at the Investor Day, where we see that someone is violating our trade laws, we are not going to be shy about going after them.

But right now, I think we're going to monitor the situation, and we're comfortable with where things stand. I think it's also a further note that if you look at the countries against whom we are against which we filed these antidumping and countervailing duty cases, they have effectively kind of gone away from the import market, right? So we're not seeing any material imports from any of those countries, which I think kind of goes to support the point that I made at the Investor Day and I've made on calls before this that this is durable supply management that we're working on.

And again, I'll just remind the audience and you -- I know you know this, but those antidumping and counterval-duty cases and the duties that come from them, they have a duration of at least 5 years and generally $10 million.

Operator

The next question is from Sathish Kazinathan with Bank of America.

Sathish Kasinathan

Yes. Thank you. Congrats on the strong finish to the year. yes. My first question is on the guidance for the first quarter. Can you maybe walk us through some of the moving parts, especially like how much CO2 credits do you expect in EU? And what is the magnitude of start-up costs you're assuming for Design mill.

Paul Lawrence

Yes. Satish, as we look at Europe, I think we mentioned really two factors. The CO2 credit. We are expecting at this stage somewhere between $10 million and $15 million of CO2 credits. Offsetting that in Europe will be the higher energy costs that I cited. We've seen those so far throughout the quarter around $10 to $15 a ton. And so that will erode a little bit into the earnings of the business. So those are the two drivers of the Europe space overall, expect, as we said, a meaningful increase in overall results, but guided by those two factors.

Sathish Kasinathan

And then on the start-up costs for West Virginia mill.

Paul Lawrence

Sorry, yes. On start-up costs, we're -- as Peter said, we're making good progress on the commissioning space. We anticipate that in the first quarter, we'll probably incur extra $3 million to $5 million of incremental cost. So what we've incurred in the fourth quarter was in the $9 million, $10 million range. So it's just a slight uptick from that as we start the operation up.

Sathish Kasinathan

Maybe one follow-up on the West Virginia mill. So can you maybe give some additional color on how you see the cadence of ramp-up. So when do you expect the first commercial shipments? And then are you still on track for maybe 250,000 to 300,000 tonnes of volumes from the mill that you previously guided to?

Peter Matt

Yes. I think -- so again, remember on this, we did have some construction weather delays. So but we are kind of making great progress on the hot commissioning at this point. We have rolled our first billet and we are progressing with the start-up. I think it's fair to say that we expect the startup to occur over kind of a 12-month period. and we should be breakeven after about 6 months. I think the -- when we look at the overall project, we're super pleased with the fact that we've been able to bring it in kind of effectively on time and effectively on budget. And I think that's a testament to the -- as I said on the -- in the prepared remarks, the great job that the team has done and the capital discipline that we have as a company.

Paul Lawrence

So overall, to your question of the volume, Satish, I think it will be a little less than what you indicated just given the commissioning is ongoing, and really, we'll expect to start the true commission. The start-up activities near the end of the first quarter. So we'll probably be a little under 200,000 tons of production in the current year.

Operator

The next question is from Bill Peterson with JPMorgan.

William Peterson

And again, a really strong finish to the fiscal year. I wanted to come back to precast if I could. So I guess from a -- if you took the quarterly numbers and annualize that, you were ahead of, let's say, where you were or what you had talked about at the time of acquisition in terms of sales, but actually behind in terms of -- so I'm just trying to get a better sense of what's going on. Maybe you can characterize it relative to the markets you're operating in. It sounds like it's primarily residential, but also -- it sounds like your pricing is fine, but is there some cost pressures to call out? Is there some mix related areas to call out, especially on the profitability side?

Peter Matt

Yes. Great question, Bill, and we'll try to fill in some of the detail here. So as we said in the prepared remarks, this is really about weakness in residential and in the Southeast, and it's really about volume weakness in that region in residential. And what I think is interesting to note is that the volumes are actually, if we look at the CPMP portfolio, volumes are up and actually almost offsetting all of the volume decline in the Southeast. So what that leads to is that you'll remember when we announced these transactions, that there was a pretty sharp discrepancy between the margins on the FOL portfolio and the margins in the CP&P portfolio.

Again, this is one of the opportunities in CP&P that we saw is to bring those margins up. But as we're working through the integration, we haven't completed that yet. And so losing volumes in the Southeast was kind of painful from a just magnified the EBITDA impact of the lost volume. As I said, the price is not the issue. The price has been going up. We have quarter-over-quarter price increases and year-over-year price increases. So it's very disappointing. It's kind of not how we would have written the script. But what I want to be categorically clear about is that we are not overly concerned. As retail -- as the residential has slowed, the nonresidential and the infrastructure have filled in the backlog. Our margins in spite of that volume loss remained at 30%, which is -- again, this is -- remember, we're on the front end of an acquisition.

So we've got some of the integration costs before we get the benefits of integration. And a lot of the business indicators, I think, point us to confidence here. So bookings, as we noted, up 12.5% in the fourth quarter and have continued to rise in the month of September. Pricing, again, as I noted, up backlog up 4% year-over-year, 3% in the fourth quarter. with growth in September. And the other thing I would say is that the integration has proceeded in a really nice way. I would say we are, if anything, ahead of plan or synergy, as we look at the business more, we see more opportunities to do things with it that are going to lead to kind of higher growth synergies.

So on balance, this is a -- yes, there's some softness in the market. But one other final point that maybe I'll leave you with is that the residential portion of our portfolio is running at about 50% to 60% of kind of what a normal environment would be. So we feel like we've taken much, if not all, of the pain on the residential side. So I'm sorry, that's a long explanation, but there's a lot to get in there.

William Peterson

No, SP1 That was good insight. I appreciate that. Very helpful. So my next question is on North American steel. You commented about MBQ, the mix is rich. It looks like shipments are at least at a 5-year high I'm trying to get a sense of is there further opportunities to shift more of the next MDQ and I guess, how to take that into account as we look at this fiscal year in terms of the cadence of rebar versus as especially with West Virginia ramping, which is rebar. So does that mean more A2 goes to MBQ, things like that?

Peter Matt

Yes. No, great question. And we see there's a nice opportunity in MBQ. And remember, one of the things that we've talked about over time is the fact that the portfolio that we have gives us latitude not only to control supply demand by producing fewer rebar tons but also by producing other products. And this is a perfect example of what we're able to do here. with the demand on merchant, which is really kind of a broad-based response to overall strength in the economy.

And so we are -- we have been shipping materially more merchant bar. And as we start West Virginia, what that will do is it will free up South Carolina, for example, to produce more merchant products. So as we said in the Investor Day, we believe that as a starting objective, we think there could be more over time. But as a starting objective, we can get up to 1 million tons of merchant shipments. And that would imply about 150,000 to 200,000 tons of incremental merchant shipments. So again, it's a nice margin opportunity in the current environment, and it's a nice way to keep the rebar market tighter.

Paul Lawrence

Just one thing to add to Peter's comment. When we disclose merchant bar and other, that's got our merchant bar and the wire rod principally that we produce out of our Florida facility. So there's about 150,000 tons of wire rod that we're shipping on an annualized basis. So that supplements to the 1 million-ton target for merchant buyer that we have.

Operator

The next question is from Timna Tanners with Wells Fargo.

Timna Tanners

Wanted to touch base on the recent move up in October for #1 heavy melt scrap, it looks like $27.50. Does that get fully passed through with the recent increase in rebar prices that you announced? And any thoughts on the timing impact there into the November quarter?

Peter Matt

Yes. So thank you, Tim, for the question. it will. And we feel confident that as we go into the November quarter, you're going to see a kind of a gradually improving top line from an ASP perspective. and gradually improving metal margins. So we will -- we believe will outpace the move in scrap as it filters through our portfolio.

Timna Tanners

Okay. That's helpful. And then secondly, I wanted to shift over to Europe, and I know you talked about some recovery there from low levels. A couple of moving parts. Of course, you talked about better demand, but also several favorable trade policies. Like what are you seeing there in terms of how much of that is volume driven? And how much of that might be because of better demand? And how much of that might be of the tariff actions?

Peter Matt

So what I'd say is that the demand is good, and it's been good in Poland, right? So -- and we've said that on several prior calls, the challenge has been really on the supply side. And that's where we've been optimistic about the impact of some of these trade policies. What we've seen, however, is that -- so -- and just kind of rewinding the clock to the beginning of the year, you had CAM but then kind of in front of CBAM, everyone imported a lot of steel into Poland. So we had this 2- to 3-month period where we had to kind of deal with that -- and then the market started to tighten up and we saw pricing and margins improved. So we felt pretty good about that.

And then the safeguards, which took effect in July, same impact happened where people are kind of bringing material into Poland or into Europe in advance of that. And so we're kind of working our way through that, but we are optimistic that we are on the way to seeing an improving environment. It would be it would be great if we could see some general improvement in the European economies, the fact that the German economy has not improved the way we expected it to is maybe a little cautionary note. But we are optimistic that we can get this business back to $100 million or our through the cycle number.

Paul Lawrence

Timna, just to add a little color. It really is a margin growth that we're looking for to get us to that $100 million level. within TAG, a good portion of that, both in North America and in Europe is commercial excellence. There's a strong commercial excellence process going on in Europe. To really be selective around the volumes that we want to sell that drive the greatest margins for the business. So this is about us realizing a margin enhancement as opposed to a volume growth.

Operator

The next question is from Nick Cash with Goldman Sachs.

Nicklaus Cash

Just stepping back to the Analyst Day for a second. Can you help us bridge, I guess, the 26 core EBITDA of, call it, $1.4 billion versus the 29 target of of $1.65 billion to $1.8 billion. And can you also remind us, I guess, how much was West Virginia, precast tag and other? And does the precast weakness that you're currently seeing in the mix shift change that mix at all?

Paul Lawrence

Yes. Thanks, Nick. Great question. We're -- we believe that we are, I think, demonstrating the capabilities of the business the fourth quarter aligned to the targets that we have for 2029. The math of the organic growth projects, whether that be West Virginia, whether that be through the merchant bar expansion that Peter said, whether it be the Galvabar line or the Geogrid line that we're constructing. All of that is close to $200 million of incremental EBITDA that we've talked about there. We've got the ability or the strength in Arizona to continue to enhance the contributions.

We've got the growth in the precast business, obviously, from where it was in 2026, the full year impact, but also the growth that we anticipate in that business as well as the mid-teens growth in the rest of the Construction Solutions group. So we think the $1.4 billion that we earned in the fourth quarter, recognizing that the scenario we laid out was a 25% tariff environment, but there is -- we're well on our way with all of that growth opportunities to achieve that or in today's environment, far exceed the low end of the range based on the way we're performing now in the markets that we're seeing.

Peter Matt

And Nick, can I just jump in on that to say you asked the question about does the precast softness change at all. And I want to categorically say it does not. If anything, as I said earlier, we have more conviction in precast. And by 2029, we're confident that we're going to get to where we thought we could get to.

Operator

The next question is from Richard Garchitorena with Barclays.

Richard Garchitorena

I believe in the prepared remarks that you mentioned that CapEx for fiscal 2017 would be $400 million with 25% of that being growth CapEx. I was wondering if you could provide some color in terms of what are the key growth projects that you're going to be working on this year, particularly in the CSG and pre castings. And then how should we think about that impacting potential growth in fiscal '28 and beyond.

Paul Lawrence

Yes. Thanks, Richard. The vast majority of the $100 million growth is West Virginia. There's a few payments related to performance targets that need to be made, and we expect to make those in 2027. So that's well over half of the spend. And then the spend on the Geo grid line and the GalvaBar line, both those will -- well, all 3 of those will be in start-up mode in 2027.

So their EBITDA contribution will be limited as far as the long-term capabilities of those plants, we expect the Galvabar facility to begin commissioning late in calendar and the GEO grid line is continuing to be in the start-up and commissioning time now. So that one is most likely to contribute in '27. As Peter said, we expect West Virginia to ramp up nicely and within 6 months of the start-up being breakeven from an EBITDA perspective, so into Q3 for us on that one.

Peter Matt

And we expect -- just to put a bow on that, again, as we think about maintenance, we've talked about maintenance in the past is $275 million. So going forward, if you think about kind of million of growth investments, that's the type of range we would be in for kind of ongoing CapEx. And again, I think that one of the things that's really important that we're trying to do across the company is look for opportunities to invest in projects that make our operations more efficient and generate kind of high returns from that. So you'll see that's where we'll devote most of the growth, too. As we've said before, we're not building a new steel mill, anything like that. It will all be investments in efficiency.

Richard Garchitorena

Great. And maybe just thinking to capital allocation, congrats on getting leverage down below your target level. As you move forward, obviously, CapEx coming down as well. How should we think about share repurchases, is that going to be the bulk of the target? Or are you looking to keep some dry powder for M&A? How should we think about that?

Peter Matt

Yes. I mean I think, look, we are definitely going to keep some dry powder for M&A. If we think about, we have built a kind of pretty active M&A dialogue across the priority areas. We don't have anything that's significant to do right now. So -- but we're -- that works fine because we've got a lot of work to still do on integration and optimizing the precast platform. But again, returns to shareholders are an important piece. And as we -- you heard what Paul said in his prepared remarks about increasing our share repurchase.

And I think looking at our free cash flow and seeing the strength of it and also looking at the share price, and it looks like it's a very compelling investment at this price, it seemed like it made sense to accelerate the share repurchase. We had a -- we announced an authorization of -- or we increased our authorization to about $700 million with the -- we increased it by $600 million, but to get to about a $700 million total authorization. We said we intended to do that over 3 years. What we're saying today is we're going to pull that forward. We'll see how that progresses, but I think you should expect a meaningful increase in the amount of shares that we're buying.

Operator

Next question is from Tristan Gresser with BNP Paribas.

Tristan Gresser

The first one is on North America. If we put everything together, West Virginia, the product mix you just mentioned as well. And I don't know if there's some leftover from Arizona two for fiscal 2027. But you able to share the percentage volume increase you have in mind for the fiscal year for the division. And if you have any -- if there's any difference between steel products and -- or downstream products?

Peter Matt

Well, I guess what I'd start out with is demand, right? And so far this year, we've seen demand growing year-to-date. I think it's over 4%. And so the good news is that we have the capability to flex our production to meet increased demand. And yes, there is additional capability in Arizona, and there's obviously additional capability in West Virginia. But again, I want to come back to remind everyone that our objective is to kind of keep supply and demand in balance. And the flexibility of our network given it's a high variable cost network allows us to do that. So I think we'll have to see how the market grows, but assuming that it continues at this pace, something of that order could be what we'd expect SP-8 I don't know, Paul, if you would add anything to.

Paul Lawrence

I think what we're particularly proud about because I think if you look, as Peter said, the market is up 4% to 5% in terms of rebar consumption, our downstream business in which we have executed and demonstrated strong, strong commercial discipline in terms of really only looking to take on margin-accretive work for the business. And yet we're up 7% on a year-over-year basis. That speaks to the capabilities and the ability for us to do these large mega jobs that are really sustaining the construction activity right now. And those are projects that are not just being done in 2026, but we'll be multiyear in length. And it gives us confidence as we look forward that those capabilities will be rewarded in terms of lower risk to the contractors, lower risk to the project owners of contracting with CMC and continue to feel a real sense of opportunity for us to grow margins and continue a strong downstream pull.

Tristan Gresser

All right. No, that's very clear. And the second question is on Europe. A bit of the same question to start with on the volume book. If you -- if you expect to continue to gain market share and what we can expect for the year? And also just trying to understand a bit the margin development. You sound pretty constructive, but when I look at rebar prices and maybe I should look at Polish rebar prices and just general European prices, but they've been pretty flat over the past couple of months and energy costs are through the move. So and other long steel producer in the regions have been forced to shut down. So what you're doing differently? Can you remind us how you procure your electricity, natural gas and maybe some of your hedging strategy you have in place? Or maybe there's something different, it's just about mix or something else that makes you a bit more resilient.

Peter Matt

So thanks, Tristan. So I'm going to start and then Paul can walk you through what we're doing in terms of energy procurement. But in terms of volumes, we've said demand is good. And we've been running at, I would say, a pretty high rate of utilization in our Polish operation recently. So we -- and I would say we expect demand to be kind of stable, maybe modestly better in that marketplace. Pricing, you're right, has been -- well, we saw -- as I said earlier, we saw in the wake of C-band, we saw a nice rise in pricing to the tune of $100 a ton.

But then we saw, obviously, scrap kind of went up along with it. And with the safeguards coming in and the pre-buy there, you've seen us give some of that -- a little bit of that back. So we are still optimistic, though, that as the inventory prebuy related to the safeguards filters through that you're going to see margins expand in that market. So we're -- and again, expand gradually in that market. We're not expecting any sea change, so to speak. But maybe, Paul, you can talk about the energy side.

Paul Lawrence

Yes. On the cost side, earlier I spoke of the focus that the team is doing on commercial aspects of TAG. Operationally, the team has done a phenomenal job of rightsizing and driving costs to where it needs to be from a competitive perspective in the tight market that exists in Europe. And one of those areas that the team has always been focused on is electricity consumption. But also having the foresight to enter into longer-term energy contracts. And so we have around 50% of our electricity hedged through long-term purchase agreements. These were entered into prior to the Ukraine or prior to energy costs taking off in Europe. And so really competitively situate the mill in a positive environment.

So combination of a strong hedging process through those agreements as well as a focus on consumption that drives a significant competitive advantage. And hence, why we're able to withstand the costs where they are. As I said, we do anticipate energy costs continuing to rise, but expect to continue to be a strong position economically from a margin perspective with those increases taken into consideration.

Peter Matt

And Tristan, the last thing I would just say is just remember, as you kind of think forward the next couple of quarters, we're coming into the difficult part of the year in terms of kind of the ultimate demand, right? So there's going to be some -- likely some seasonality to the numbers over the next couple of quarters.

Tristan Gresser

All right. No, that's very clear. And one quick follow-up. This inventory overhang, you mentioned, would you see that clearing up already before year-end? Or it's going to take a bit much longer than that.

Peter Matt

Well, again, if we think about -- I would say what we saw in CBAM, it took longer than what we expected to clear up. So -- and I would say, to the tune of probably 4-ish Yes, 4 to 6. So I think we might see the same here.

Paul Lawrence

So by the end of the calendar year, we would expect the benefits really of BAM and the tariff rate quota to start being realized in a more meaningful way.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Peter Matt for any closing remarks.

Peter Matt

Well, thank you for the thoughtful questions and for joining us today. every CMC employee should be proud of what we have accomplished in fiscal 2026 and even more excited about the opportunities ahead. enabled by their efforts and our collective performance and a clear vision we believe fiscal 2027 will be another great year for CMC. To our shareholders, we thank you for your support, and we look forward to continuing the conversation over the weeks and months ahead. Have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.