Commercial Metals Co Q3 2024 Earnings Call Transcript

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

Question: Timna Beth Tanners - BNP Paribas - Analyst : Yeah, hi. Thank you for taking my questions. The first one is on the market situation in the US. You mentioned a healthy start of the construction season, but pricing indicators we look at don't necessarily indicate that usually we see scrap prices move higher price hikes on long products and this time around we didn't get any of that. So, was there anything different with this construction season that is ongoing and why does it appear weaker than usual? Thank you.

Question: Timna Beth Tanners - BNP Paribas - Analyst : Right. That's a that's very helpful. And my second question is on the guidance. And so you guide for stable EBITDA. But if Europe improves a bit from the EBG. business is up slightly and you have stable margin volume development in North America. Why shouldn't we see some modest improvement quarter on quarter and going back to North America, if we get lower start-up costs with ours in the two. And I think in the past quarter, you're also flagging some lag impact from low scrap prices that should also help. So just trying to square that.

Question: Timna Beth Tanners - BNP Paribas - Analyst : All right. That's very clear. Thank you very much.

Question: Curt Woodworth - UBS - Analyst : Yeah, thanks and good morning, Peter and team.

Question: Curt Woodworth - UBS - Analyst : And so, you noted that the rebar market in terms of supply demand seems to be improving in the West and infrastructure kind of bidding and leading is picking up. So, it would seem to suggest that Arizona, number two, it has room to continue to increase production and being optimized. But then you're also kind of guiding to flat shipments quarter on quarter. So, is the way to think about it that maybe further optimization in Arizona as being maybe mitigated by regional weakness or some of the interest rate sensitive parts of the market that you discussed?

Question: Curt Woodworth - UBS - Analyst : But I think that's fair. Okay. And then I guess just with respect to capital allocation, given the balance sheet and the free cash flow profile, you have pretty significant bandwidth to continue to fund organic growth and inorganic growth So just can you kind of comment on maybe how the M&A pipeline is looking? And then just given some of the distress conditions in Europe, would Europe be an area where you would look to trying to grow?

Question: Curt Woodworth - UBS - Analyst : No, very helpful. Thank you.

Question: Katja Jancic - BMO Capital Markets - Analyst : Hi. Maybe going back to Arizona 2. And looking to fiscal year '25, how should we think about the ramp-up there? Or how much do you think the mill could produce?

Question: Katja Jancic - BMO Capital Markets - Analyst : And I think initially it's going to be more rebar focused, and then I guess as the year progresses, we could see more of the MBQ? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 20, 2024 / 3:00PM, CMC.N - Q3 2024 Commercial Metals Co Earnings Call

Question: Katja Jancic - BMO Capital Markets - Analyst : Okay. And maybe one more on the CapEx side. Once the current project pipeline is completed, what would be a more normalized CapEx level?

Question: Katja Jancic - BMO Capital Markets - Analyst : Okay. Thank you.

Question: Timna Beth Tanners - BNP Paribas - Analyst : Yeah, I think this is the first day of summer and wanted to ask about a little bit more to hone in on the comments around the Home Interest Rate Sensitive construction component. I mean, I think of most construction as being interest rate sensitive, but I suppose is that does that refer to non-government or shorter cycle projects? And if you could sort of give us an idea of your end markets or of your shipments, how much of that would be in that category of interest rate sensitive that could potentially benefit from rate cuts?

Question: Timna Beth Tanners - BNP Paribas - Analyst : Okay. That's helpful. Thanks. And then my second question is about your backlog. So, you talk about the volumes being healthy there, but I was trying to think about the margins in that backlog because depending on the timeframe of when they were contracted prices were higher and now, they're lower. Obviously, costs are lower. So just to think about how that backlog is looking in terms of the margin profile relative to other past or recent quarters?

Question: Timna Beth Tanners - BNP Paribas - Analyst : And when you said margins returned to more normalized levels that also above historical levels, but not from the highs like somewhere in between the two. I guess.

Question: Timna Beth Tanners - BNP Paribas - Analyst : Got it. Okay. Just making sure I thank for the help. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 20, 2024 / 3:00PM, CMC.N - Q3 2024 Commercial Metals Co Earnings Call

Question: Alex Hacking - Citigroup - Analyst : Yeah, morning, and thanks for the call from. I guess, on Arizona. I'm not sure how much you disclose on this, but as you think about Arizona ramping up moving to profitability, what is the sort of EBITDA per tonne uplift? What you get from shifting production, you know, from an older male that's outside the region to suit the new Arizona mill?

Question: Alex Hacking - Citigroup - Analyst : Okay. Thanks, Paul. And then on the residential side, I take your point that longer term, the US, maybe short housing units. But if we look at the most recent data, it's not particularly encouraging, right? I think, but they are out today starts down 20% and permits kind of the lowest in several years. Are you seeing that kind of weakness in your residential order book or is it not as bad some of the headline data, which suggests actually, you know?

Question: Alex Hacking - Citigroup - Analyst : Okay, thanks. I was just referring to the US Census Bureau data that was released today. Okay, but as well, they get a lot more than just multifamily com. And then just finally, yes, sorry, finally, on contents or I guess on emerging business segment. And I think when you acquired the business and subsequently, you know, this is expected to be a growth business when we but if I look at revenue and EBITDA, right, it's effectively the same as it was last year. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 20, 2024 / 3:00PM, CMC.N - Q3 2024 Commercial Metals Co Earnings Call Is this still a business that we should be expecting should be growing. And I know there was some operating challenges that have created some constraints around growth and in prior quarters, but maybe you could just give us some more color there?

Question: Alex Hacking - Citigroup - Analyst : Thanks, Peter. And best of luck with everything.