EUR 850.00 For Business Accounts Only

Morningstar | Commercial Metals Offers Lower Earnings Volatility Than the Typical Steelmaker

Commercial Metals Co. is a vertically integrated steelmaker that manufactures steel via a fleet of five electric arc furnaces in North America and an electric arc furnace in Poland. The company also operates a scrap metal recycling business and steel fabrication operations.CMC's metal recycling business is one of the largest scrap processing operations in the United States, but due to the highly fragmented nature of the industry, the company holds only a fraction of the total market share. This business supplies roughly half of the ferrous scrap needs of the company's U.S. minimills, which in turn supply half of the unfinished steel that is processed by the company’s fabrication business.In recent years, CMC has made major changes to its asset portfolio by divesting noncore assets. In 2010, the company sold its joist and decking operations to Steel Dynamics, and in the first quarter of 2012, CMC closed its Croatian pipe mill, which had operated under the international mills reporting segment. The company sold its wholly owned copper tube manufacturing operation, Howell Metal, in the fourth quarter of 2013. In January 2018, CMC announced the $600 million acquisition of four steel mills and 33 fabrication facilities from Gerdau. The deal has significantly increased the company's production capacity for both steelmaking and steel fabrication.CMC's most profitable business is its Americas mills segment, which has consistently delivered the lion's share of companywide operating income. The Americas mills operations predominantly manufacture rebar, fence post sections, and structural steel. Its performance is closely tied to U.S. nonresidential construction. The Architecture Billings Index serves as a useful leading indicator for construction and thus can provide directional guidance as to how the company's shipment volume is likely to proceed.