Commercial Metals Co Q2 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sathish Kasinathan - Bank of America - Analyst : Yes, hi, good morning. Thanks for taking my questions. My first question is on the US rebar market. You mentioned that you expect improved metal margins in the North American segment. Yet if you see the recent trend in rebar prices, it doesn't fully offset the increase in scrap costs that we have seen in the past three months. And then over the weekend, we saw one of your peers raising prices for merchant and beams and not for rebar. So can you provide some color on what you're seeing on the pricing side and whether you see further room for rebar price hikes in the near future? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 3:00PM, CMC.N - Q2 2025 Commercial Metals Co Earnings Call

Question: Sathish Kasinathan - Bank of America - Analyst : Yes. Maybe one follow-up on the Arizona 2 mill. So can you talk about the financial performance in Q2? Are you close to breakeven? And with higher volumes in Q3, should we expect the mill to turn EBITDA positive?

Question: Sathish Kasinathan - Bank of America - Analyst : Okay, thank you. I'll jump back in.

Question: Timna Tanners - Wolfe Research - Analyst : Hey, good morning. I wanted to just follow up on the last question to see if we could get a little bit more granularity around North American margins. So the change quarter-over-quarter in EBITDA per ton in of about $93.5, is that recoupable in the next quarter? I know there's moving parts and it sounds like on the steel side, maybe, but on the -- maybe you can give a little more color about how to think about any lags in the REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 3:00PM, CMC.N - Q2 2025 Commercial Metals Co Earnings Call downstream and how that might -- how to think about the trajectory in the next several quarters of recouping some of that lost margin? Thank you.

Question: Timna Tanners - Wolfe Research - Analyst : Helpful. Thank you. And then for a follow-up, if I could. On the positive side, your volumes were considerably better than we expected, growing like 9% year-over-year in rebar North America and merchants were up 4%. And merchants went up despite seasonality, rebar went down less than normal quarter over quarter. So do you think you brought forward some demand? Or can you help us understand is that just greater production from some of your expansions? What drove that better than at least we expected volumes?

Question: Timna Tanners - Wolfe Research - Analyst : Thanks again.

Question: Mike Harris - Goldman Sachs - Analyst : Yes, thank you. Good morning. Just a quick question around the North American rebar market. If you could -- how would you describe the current supply-demand balance? And how do you see utilization rates trending over the next year or so, if you could?

Question: Mike Harris - Goldman Sachs - Analyst : Okay, thanks. And then just as a follow up, how would you describe the likelihood and the potential impact of a composite rebar disrupting the long steel industry, and I guess what factors do you see as most critical in determining its adoption?

Question: Mike Harris - Goldman Sachs - Analyst : Okay. So more of a new application, not necessarily an opportunity for broader adoption is one way to look at that, I guess?

Question: Mike Harris - Goldman Sachs - Analyst : All right, thanks a lot.

Question: Andrew Jones - UBS - Analyst : Just wanted to ask a couple of questions about like the sort of longer-term drivers here. I mean, clearly, the market has been worrying about the impact of trade policy on end demand kind of on a longer-term view. I mean, I know just some of your structural drivers, the infrastructure investment and so forth, doesn't look it's changed in the presentation, but is there elements of that you see big risk and on some of the nonfederal driven aspects to the demand spectrum? And where do you see the most risk? And do you have any sense on quantifying any of that? And also, I guess, also a longer term question. I mean, this PSG mill seems to have broken ground. That's obviously going to be coming on at some point after 1.5 million tons or so of new capacity this year. I mean how do you see that market playing out in the longer term because it seems like there's quite a few risks there?

Question: Andrew Jones - UBS - Analyst : That's helpful. And just on the cadence of the timing of some of the nearer-term capacity versus your expectations for the demand trajectory over the next year or so? I mean, with that capacity coming in and maybe there being a bit of a lag to some of this demand uplift, I mean, how do you see that playing out over the next few quarters? Do you think the market is going to tighten further? Or do you think it all loosen before it that kind of tightness reemerges? Like what's -- how do you see it playing out over the next 12 months?

Question: Andrew Jones - UBS - Analyst : Okay, that's that's great. Thank you. I'll jump back in queue.

Question: Timna Tanners - Wolfe Research - Analyst : Hey guys, I didn't hear anyone ask about Europe, so I got back in the queue. I thought, a, can we find out if the $4 million net gas rebate was in your guidance? And b, how do you think about the timing of the benefit from this great big German stimulus? Is that what's -- is that more of a 2026 event as well? And also, for the tariffs, I assume that's also something that would benefit on a lag, the 15% or so cap they're trying to get to on imports. Any color there would be great.

Question: Timna Tanners - Wolfe Research - Analyst : Thanks again.

Question: Andrew Jones - UBS - Analyst : So just a follow-up on the rebar question, the start of the call. Just curious about any differences between the market in the West versus the market in the East. And obviously, given your comments, it sounds like you're getting those price increases above scrap from what you're saying, obviously, the indices don't track well tenet imply that. What do you think is being missed by the indices? Are there some regional variation? Or is there some sort of lag? I mean, how do you explain that basically?

Question: Andrew Jones - UBS - Analyst : Okay, sure. Thanks.