CMC 2026 財年第四季法說會：EBITDA 成長與 2027 財年展望

重點摘要

• 2026 財年核心 EBITDA 從 2025 財年的 8.37 億美元增至約 14 億美元。核心 EBITDA 利潤率擴張 80 個基點至 14.5%。
• 第四季核心 EBITDA 年增 35.1% 至約 3.94 億美元；核心 EBITDA 利潤率達 14.8%，年增 100 個基點，季增 60 個基點。
• 北美鋼鐵事業群調整後 EBITDA 季增 25.2% 至 3.17 億美元。受惠於售價提高、廢鋼成本降低及產品組合改善，金屬利差每噸增加 42 美元至 652 美元。
• CMC 在 2026 財年結束時已實現超過 2.5 億美元的總年化 TAG（轉型與成長）效益，並預計到 2027 財年結束前將再增加 1 億美元的常態化效益。
• 預計 2027 財年資本支出將減少近 2 億美元至約 4 億美元，進一步支撐自由現金流改善並加速股票回購。
• 管理層預期 2027 財年將是另一個穩健的年份。第一季方面，北美鋼鐵調整後 EBITDA 預計與上季持平，營建解決方案將呈現季節性下滑，歐洲市場則將顯著改善。

核心財務數據

業務與營運表現

北美鋼鐵

該部門受惠於 TAG 專案、金屬利差擴張以及商用棒鋼出貨量增加。平均售價每噸季增 32 美元，而廢鋼成本每噸季減 10 美元。

鋼材成品出貨量季增 7.1%。商用棒鋼出貨量年增 27.5%，反映出亞利桑那二號 (Arizona 2) 微型鋼鐵廠的產能優勢以及更具彈性的產品組合。下游產品出貨量年增 8.5%，下游在手訂單則年增 15.5%、季增 5%。

CMC 表示，資料中心、能源、工業回流及機構市場中規模更大且更複雜的專案，正有利於其垂直整合網路與下游能力。管理層認為商用棒鋼出貨量有機會達到 100 萬噸，意味著約有 15 萬至 20 萬噸的額外增量。

營建解決方案與預鑄業務

營建解決方案淨銷售額年增 94.5%，調整後 EBITDA 成長超過一倍，調整後 EBITDA 利潤率擴張 80 個基點。

由於東南部部分地區住宅活動較為疲弱，預鑄業務表現低於管理層預期。該下滑也導致不利的區域利潤率組合。然而，新簽訂單季增 12.6%，在手訂單年增約 3%、較第三季成長 4%，且在手訂單平均價格亦有所提升。

管理層指出，非住宅及基礎建設需求抵消了部分住宅市場的疲弱。預鑄業務的整合與綜效實現保持在軌道上或優於預期，並在採購、營運、據點最佳化及商業執行等層面發現了更多機會。

成長專案

CMC 已投入近 15 億美元升級並完善其橫跨美國東西海岸的鋼鐵廠網路。管理層預期這些投資將在 2027 財年從消耗資本轉為產生回報。

西維吉尼亞鋼鐵廠 (Steel West Virginia) 已軋製出首批鋼胚，目前仍處於熱試運轉階段。管理層預計產能提升需耗時約 12 個月，並在約 6 個月後達到 EBITDA 損益兩平。由於試運轉將持續至第一季，2027 財年的產量預計將略低於 20 萬噸。

位於奧克拉荷馬州布萊克韋爾 (Blackwell) 的新 Tensar 地工格網生產線正在啟動階段。位於田納西州的 GalvaBar 工廠預計將於 11 月開始初始生產，並使 CMC 的耐腐蝕產品產能翻倍以上。

歐洲地區

歐洲業務的對比受第四季缺乏二氧化碳排放配額效益影響。CMC 在 2025 財年第四季取得 3,070 萬美元的配額效益，在 2026 財年第三季取得 2,040 萬美元。

若扣除這些配額效益，管理層表示波蘭的營運基本面持續改善。金屬利差年增每噸 32 美元，平均售價年增每噸 44 美元、季增每噸 15 美元。本季能源成本每噸增加約 10 美元。

CMC 預計歐盟碳邊境調整機制 (CBAM) 及關稅配額架構的調整將隨著時間推移帶來更有利的貿易環境。該公司約有 50% 的電力已透過長期購電協議進行避險。

管理層業績展望

• 北美鋼鐵：預計 2027 財年第一季調整後 EBITDA 將與上季持平。價格改善應可大致抵消廢鋼成本上升、建廠啟動費用以及出貨量輕微的季節性下滑。
• 營建解決方案：受正常季節性淡季影響，預計第一季調整後 EBITDA 將季減。管理層預期預鑄業務表現將較第四季下滑中至高個位數百分比。
• 預鑄業務：在在手訂單、價格及整合進展的支撐下，管理層繼續將全年度約 2.4 億至 2.5 億美元的 EBITDA 視為 2027 財年可實現的目標。
• 歐洲地區：預計第一季調整後 EBITDA 將顯著增加。CMC 預計將獲得 1,000 萬至 1,500 萬美元的二氧化碳排放配額效益，但部分會被每噸可能再增加 10 至 15 美元的能源成本所抵消。
• 西維吉尼亞廠啟動費用：在第四季產生約 900 萬至 1,000 萬美元的啟動費用後，CMC 預計第一季將再產生 300 萬至 500 萬美元的啟動費用。
• 資本支出：預計 2027 財年支出將降至約 4 億美元。其中大約四分之一將用於成長性資本支出，主要與西維吉尼亞廠、地工格網及 GalvaBar 的投資有關。
• 稅務：預計 2027 財年有效稅率約為 24%。得益於 48C 抵減稅額及加速折舊效益，CMC 預計在該年大部分時間內不會產生金額龐大的美國聯邦現金稅。
• 併購產生的在手訂單攤銷：預計第一季約為 2,000 萬美元，第二季約為 200 萬美元。

風險與關注事項

• 住宅建設依然低迷，特別是在新建單戶住宅以及部分東南部預鑄市場。
• 預計未來幾個季度正常的季節性因素將對營建解決方案與歐洲需求帶來壓力。
• 柴油價格上漲可能會對廢鋼成本造成壓力，而歐洲能源成本可能維持高位。
• 西維吉尼亞鋼鐵廠仍處於試運轉階段，這將產生短期啟動費用並限制 2027 財年的產量。
• 在貿易政策改變前囤積的歐洲庫存可能需要 4 到 6 個月才能去化完畢，從而延遲利潤率效益的顯現。
• 預鑄業務利潤率對地理區域及產品組合仍具敏感度，因為利潤率較低的 CP&P 業務尚未完成整合與利潤率改善計畫。

分析師問答亮點

• 預鑄業務展望：儘管第四季住宅市場疲弱，管理層仍重申對該業務的信心。價格持續上漲、新簽訂單增強，且非住宅與基礎建設工程為在手訂單提供了支撐。
• 鋼材進口：CMC 表示，由於進口經濟效益競爭力下降，9 月來自南韓的螺紋鋼進口量顯著下降。來自涉及反傾銷與反補貼稅案件國家的進口量也維持在低位。
• 廢鋼與螺紋鋼定價：管理層預期近期螺紋鋼價格的上漲將足以抵消廢鋼成本的上升，從而支持截至 11 月的財季中平均售價與金屬利差漸進改善。
• 商用棒鋼機會：西維吉尼亞廠的產能提升應能釋放包括南卡羅來納州在內的其他鋼鐵廠產能，用於生產利潤率更高的商用產品，同時有助於使螺紋鋼供應與需求保持一致。
• 資本配置：隨著經收購調整後的淨槓桿率降至 1.9 倍且資本支出減少，CMC 打算在剩餘約 7 億美元的授權額度內加速股票回購。該公司還計劃保留彈性以應對潛在的收購。
• 長期 EBITDA 框架：管理層對 2029 財年 16.5 億至 18 億美元的核心 EBITDA 目標保持信心。隨著時間推移，包括西維吉尼亞廠、商用棒鋼擴產、GalvaBar 及地工格網產能在內的有機成長專案預計將帶來近 2 億美元的額外增量 EBITDA。

法說會逐字稿全文

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.