Commercial Metals Company — FY2023 Form 10-K
Reporting period: Fiscal year ended August 31, 2023. Although the request metadata says “2023 Q4,” this filing reports full-year results, not standalone fourth-quarter results. CMC operates North America and Europe segments, serving construction and related markets through metals recycling, steelmaking, fabrication and construction-related solutions.
Financial performance and liquidity
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Net sales | $8.800 billion | $8.913 billion | Down 1% |
| Net earnings | $859.8 million | $1.217 billion | Down 29% |
| Diluted EPS | $7.25 | $9.95 | Down 27% |
| Adjusted EBITDA | $1.385 billion | $1.746 billion | Down 21% |
| Cash from operations | $1.344 billion | $700.3 million | Up $643.8 million |
| Capital expenditures | $606.7 million | $450.0 million | Up $156.7 million |
| Cash and cash equivalents at year-end | $592.3 million | $672.6 million | Down $80.3 million |
| Total debt, including finance leases | $1.165 billion | $1.514 billion | Down $348.7 million |
Net earnings included a $273.3 million gain on the Rancho Cucamonga facility sale in FY2022. Excluding that prior-year item, CMC attributed the remaining earnings decline primarily to weaker Europe steel-product margins, partly offset by expanded North America downstream-product margins. Cost of goods sold was $6.988 billion; gross profit was approximately $1.812 billion, or 20.6% of sales, versus approximately $1.856 billion, or 20.8%, in FY2022. The effective tax rate rose to 23.4% from 19.7%. Interest expense was $40.1 million, down from $50.7 million.
Operating cash flow increased substantially as lower scrap prices reduced cash tied up in inventory and receivables. Investing activities used $835.2 million; financing activities used $599.5 million, including $389.8 million of net long-term debt repayments and $74.9 million of dividends. The $600 million revolving facility had $599.1 million available; no revolver or term-loan borrowings were outstanding. CMC reported compliance with debt covenants, with a 34.79-to-1 interest coverage ratio against a 2.50 minimum and a 0.22 debt-to-capitalization ratio against a 0.60 maximum.
Segments and material changes
- North America: Sales were $7.347 billion, up slightly; adjusted EBITDA was $1.455 billion versus $1.554 billion. Excluding the prior-year facility-sale gain, management cited higher downstream margins, supported by contracted selling prices and lower scrap costs. Steel-products shipments increased to 2.910 million tons from 2.830 million; downstream shipments declined to 1.466 million from 1.558 million.
- Europe: Sales fell 13% to $1.417 billion and adjusted EBITDA fell 82% to $61.4 million. Steel-products selling price declined 16% per ton; metal margin fell 18% per ton, and energy costs rose $51 per ton. CMC cited inflation, higher interest rates, delayed construction starts, currency translation and energy costs.
- Acquisitions: Six 2023 acquisitions expanded recycling, post-tensioning, geogrid and electrical-transmission anchoring operations. CMC said their combined impact was not material to FY2023 financial position or results. The Tensar acquisition contributed additional sales and EBITDA compared with the partial-year FY2022 period.
- Capital projects: The Mesa, Arizona third micro mill entered service in FY2023 and began commercial rebar production; merchant-bar production was expected to start in 2024. CMC is developing a fourth micro mill in Berkeley County, West Virginia.
Outlook, risks and unusual items
- CMC estimated FY2024 capital spending of $550 million to $600 million and said available cash, operating cash flow and financing sources should cover operations, investment, dividends and opportunistic repurchases for at least the next 12 months. No earnings or sales guidance was provided in the filing text.
- Management’s outlook depends on construction activity, steel demand and pricing, scrap and energy costs, imports and global overcapacity. Risks also include inflation, supply-chain constraints, labor availability, equipment outages, cyber incidents, climate and environmental requirements, litigation, foreign exchange and the indirect effects of the Russia-Ukraine war.
- Environmental costs were $49.3 million in FY2023; environmental capital spending was $5.8 million, with approximately $11.0 million anticipated for FY2024. Accrued environmental liabilities were $4.5 million. CMC identified several Superfund-related matters and other litigation, but said currently pending matters were not expected to have a material adverse effect; ultimate outcomes remain uncertain.
- FY2023 included $11.3 million of inventory write-downs, primarily in Europe, a $3.5 million non-cash impairment of right-of-use assets, and a $4.2 million pension settlement charge. A $17.7 million NMTC-related amount was recognized as revenue. Goodwill impairment testing resulted in no impairment charge.
- Peter R. Matt became President and CEO effective September 1, 2023; Barbara R. Smith became Executive Chairman. CMC paid quarterly dividends of $0.16 per share in FY2023, up from $0.14 in FY2022.
Important facts for investors to verify
- How much FY2022-to-FY2023 earnings decline remains after accounting for the $273.3 million prior-year asset-sale gain, and whether Europe margins recover.
- Startup, commissioning and capital-cost progress at the Mesa and West Virginia micro mills, including the timing of merchant-bar production and expected returns.
- Whether North America downstream margins remain resilient as older fixed-price contracts roll off and input costs change.
- Liquidity and capital-allocation plans against the $550–$600 million FY2024 capex estimate, debt repayments, dividends and remaining share-repurchase authorization.
- Developments in environmental proceedings, compliance costs, customer credit exposure and the company’s ability to manage scrap, energy and import-price volatility.