commercial metals BofA_05/08

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commercial metals BofA_05/08

  1. 1. CMC – Business Model Vertical Integration Product Diversification Global Geographic Dispersion Bank of America BASics/Industrials Conference Bank of America May 7, 2008 BASics/Industrials Conference May 7, th Quarter 2007 CMC 42008 CMC – Track Record CMC – A Global Steel and Metals Company Conservative Company with a Strong, Over 14,000 Employees Worldwide in 14 Different Countries Experienced Management Team Steel Minimills 30 Consecutive Years of Profitability Steel Fabrication Plants Steel Joist & Deck Plants Build Markets, then Build Manufacturing/ CMC Manufactures, Heat Treating Plants Recycles, Markets Processing Operations Steel Fence Post Mfg. Plants and Distributes Steel Steel Service Centers and Metal Products Vertically Integrated: Scrap Processing and and Related Materials Construction-Related Product Steel Fabrication are Hedges for the Steel and Services Through Warehouses and Copper Tubing Mills a Network of Over 200 Copper Tube Minimill Locations Worldwide Marketing and Distribution Consistently Metal Recycling Facilities Marketing and Distribution Profitable Offices People Development Bank of America Bank of America Strategic Investments BASics/Industrials BASics/Industrials Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008
  2. 2. CMC – Five Operating Segments CMC – Strategy Global Reach with a CMC AMERICAS Regional Focus (1) Recycling • All Recycling Facilities Including 7 Shredders Locations Throughout the Longer Term, 50% of Sunbelt; Significant Regional Processor of Ferrous and Nonferrous Revenues from Outside (2) Mills U.S.A. (Currently 60% • 4 Steel Minimills (Long Products) • Copper Tube Mill U.S.; 40% Non-U.S.) (3) Fabrication & Distribution • Downstream Rebar Fab, Joist & Deck, Construction-Related Products, Structural Focus on Growth Markets / Regions Fab, Fence Posts, Heat Treating • Steel Import/Export Business Geographic Diversification CMC INTERNATIONAL (4) Mills (Poland & Croatia) Product Line Diversification • Includes Captive Recycling Facilities and Two Shredders • Main Products: Rebar, Wire Rod, Merchants (Poland); Pipe & Tube (Croatia) (5) Fabrication & Distribution Bank of America Bank of America • International Downstream Operations BASics/Industrials BASics/Industrials • International Marketing and Distribution Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008 United States End-Use Markets Current Pricing Product U.S. Poland 30% Public Infrastructure REBAR Heavy -Domestic $855+ ST $1,004 MT FCA 15% Commercial -Export – $1,060 MT FCA 15% Service Centers BILLETS Light -Domestic $700 FOB Mill $936 MT FCA 10% Commercial $900+ MT FCA -Export $750+ FOB Mill (Middle East) 5% Agriculture SCRAP 5% Residential $460 MT -Domestic $561 LT Shredded Unprepared OEM’s and 20% -To Turkey $680 MT CFR – Bank of America Bank of America Other BASics/Industrials BASics/Industrials Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008
  3. 3. Outlook – North America Outlook – North America Steel Long Products Ferrous/Nonferrous Scrap Ferrous Scrap Pricing Currently Non-Residential Construction Markets in the Main Remain only Slightly Affected by Credit Implosion – Continued Solid Domestic Demand – International Prices Rising Anticipate 2008 Demand Similar to 2007 (Slightly Lower) – Increase in Iron Ore Prices Supports Ferrous Pricing Credit Debacle May Cause a Pause; Varies by Geography All Factors Lead to Sustained Historically Higher Customers Hate Uncertainty Ferrous Scrap Prices Rebar Imports 29% Reduction Year Over Year Ferrous Scrap Prices Will Correct, But to a – Weak U.S. Dollar Higher Level – High Ocean Freight Rates Nonferrous Exports Active – Better International Prices Copper Pricing – Concerted Government Effort Not to Export – China/India – Always a Good Global Economic Barometer With Lead Times, Earliest Date Import Trend Could – Strong Above $3/lb. Reverse is Late Summer Bank of America Bank of America BASics/Industrials BASics/Industrials Service Centers Low Inventory Levels; Showing Discipline Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008 Outlook – Poland/Croatia - CEE Outlook – China Strong Demand in Neighboring Markets Steel Consumption Higher than GDP Imports Not Attracted to Polish Market Domestic Steel Prices Rising Prices Increasing Government Focus Anticipate Strength Through Spring / Summer 2008 – Energy & Environment New Polish Government – Pro Business – Control Inflation & Speculation From Poland Through to Russia, Construction – Reduce Further Steel Exports Markets Should Remain Strong. – Rate of Steel Capacity Expansion Slowing Croatia - Turnaround Bank of America Bank of America BASics/Industrials BASics/Industrials Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008
  4. 4. Outlook – China Summary – Outlook 2008 Positives – U.S. 2007 Net Finished Steel Exports 46 Million Tonnes – Exports 63 Million Tonnes U.S. Steel Prices Lowest in the World – Imports 17 Million Tonnes Declining Steel Imports 2008 Anticipate 30% Reduction in Net Exports Weak U.S.$ Barrier to Imports – Removal VAT Tax Rebates / Increased Export Taxes – High Bulk Freight Rates High Ocean Freights Also a Barrier to Imports – Protective Measures – U.S. / EU Low Inventory Levels – Mills/Service Centers – Currency Appreciation Ferrous Scrap Prices at All-Time Highs; – Higher Raw Material / Energy Costs Will Correct at High Levels – Shift from Low Value to Higher Value Products Supply Driving Up Steel Prices – Reduced Production at Smaller / Medium-Sized Mills Rebar/Merchant Bar Margin Spread Well Over Impact of Reduced Chinese Steel Exports $300/Ton – Higher Prices in Asia & Internationally Non-Residential Construction Remains Good Bank of America Bank of America Chinese Steel Inventories Are Low BASics/Industrials BASics/Industrials Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008 Summary – Outlook 2008 Investor Information Positives – Global Non-GAAP Financial Measures and Regulation G Global Infrastructure Activities Strong Global Economies, in Particular Emerging, are Very Good This written and verbal presentation may use financial China Has Increased Export Taxes on Most statement measures considered non-GAAP financial measures Steel Products by the Securities and Exchange Commission (SEC). In compliance with the SEC’s Regulation G, we have China Net Steel Exports Likely to be Reduced by provided on our web site at 30% in 2008 (Impact 12-15 Million MT) www.cmc.com Iron Ore Contract Prices Increase 65% from April 1, 2008 Higher Iron Ore Prices Cause Ferrous Scrap a reconciliation to the most comparable GAAP measure and Prices to Rise and Result in Higher Steel Prices other information that may be of interest to investors. Global Steel Prices Have Risen Sharply in Recent Bank of America Bank of America BASics/Industrials BASics/Industrials Weeks; Likely to Stabilize at Higher Levels. Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008
  5. 5. Forward-Looking Statements This written and verbal presentation may contain forward-looking statements regarding the outlook for the Company's financial results including net earnings, product pricing and demand, production rates, inventory levels, impact of acquisitions, credit conditions and general market conditions. These forward-looking statements generally can be identified by phrases such as the company or its management “expect,” “anticipates,” “believe,” “ought,” “should,” “likely,” “appears,” “projected,” “forecast,” “outlook,” “will” or other words or phrases of similar impact. There is inherent risk and uncertainty in any forward-looking statements. Variances will occur and some could be materially different from management's current opinion. Developments that could impact the Company's expectations include construction activity, difficulties or delays in the execution of construction contracts resulting in cost overruns or contract disputes, metals pricing over which the Company exerts little influence, interest rate changes, increased capacity and product availability from competing steel minimills and other steel suppliers including import quantities and pricing, court decisions, industry consolidation or changes in production capacity or utilization, the ability to integrate acquisitions into operations; global factors including political and military uncertainties, credit availability, currency fluctuations, energy and supply prices and decisions by governments impacting the level of steel imports and pace of overall economic activity, particularly China. Bank of America BASics/Industrials Conference May 7, th Quarter 2007 CMC 4 2008 CMC – Core Values Integrity & Honesty Respect for the Individual (The CMC Way) Background Info Conservatism in Business Conduct (Doing it the Right Way) Highest Ethical, Moral & Legal Standards Bank of America Bank of America BASics/Industrials BASics/Industrials Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008
  6. 6. CMC – People United States End-Use Markets % Market Uses Product Safety 30% Public Infrastructure Roads; Bridges Rebar 2007 – Americas Minimills High Rise; Industrial; Rebar; • #1 CMC Steel Arkansas 15% Heavy Commercial Utility; Education; Merchant Healthcare • #2 CMC Steel Alabama 15% Service Centers Service Centers Merchant • #3 CMC Steel South Carolina Strip Shopping; 10% Light Commercial Joist; Rebar Parking; Stand Alone Retail • #5 CMC Steel Texas 5% Agriculture Fencing; Stakes T-Posts Safety Committee Single/Multi Family; 5% Residential Rebar Condo “Achievement of a Consistent Safety Performance at all CMC Locations” 20% OEM’s and Other Various Merchant Bank of America Bank of America BASics/Industrials BASics/Industrials Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008 Financial Performance Financial Performance Earnings Per Share Growth Net Earnings Net Sales ($ Millions) ($ Billions) $3.50 $3.50 9 400 $3.00 $3.00 8 350 $2.50 $2.50 7 $2.00 $2.00 300 6 $1.50 $1.50 250 5 $1.00 $1.00 200 4 $0.50 $0.50 150 3 $0.00 $0.00 100 2 2003 2004 2005 2006 2007 50 1 0 0 Bank of America BASics/Industrials '03 '04 '05 '06 '07 '03 '04 '05 '06 '07 Conference May 7, th Quarter 2007 CMC 42008
  7. 7. Financial Performance Financial Performance Dividend Payout Per Share Quarterly Earnings Per Share (by Fiscal Year) 0.48 $0.50 $1.25 $1.25 $0.45 $0.40 $1.00 $1.00 $0.35 $0.30 $0.75 $0.75 $0.25 $0.20 $0.50 $0.50 $0.15 $0.10 $0.25 $0.25 $0.05 $0.00 $0.00 $0.00 2003 2004 2005 2006 2007 Current 2Q07 3Q07 4Q07 1Q08 2Q08 Annual Bank of America Bank of America Rate BASics/Industrials BASics/Industrials Conference Conference May 7, th Quarter 2007 CMC 4 2008 May 7, th Quarter 2007 CMC 42008 Financial Performance Investments 5 Year Cumulative Total Return ($ in Millions) (Fiscal Years) Comparison Among CMC, the S&P 500 Index and the S&P Steel Index 494 Sisak & Other Acq. 500 Mills – AZ & Poland CMC $650 CMC 450 SAP S&P 500 S&P Stl Ind 400 $550 CapEx S&P Stl Ind 350 $450 300 206 250 $350 200 131 $250 110 150 S&P 500 52 50 $150 100 50 $50 0 2002 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Projected 2008 2002 2007 Bank of America BASics/Industrials Commercial Metals Company $100.00 $648.86 Note: Excludes Acquisitions, Except for 2008 Conference S&P 500 $100.00 $176.25 May 7, th Quarter 2007 CMC 42008 S&P Steel Industry Group $100.00 $561.57
  8. 8. Adjusted Operating Profit by Segment 9% 4% 20% 9% 17% 11% 18% 9% 17% YTD 17% 15% 20% 2006 2007 2008 40% 50% 44% Americas Fab Americas International Fab International Americas & Distribution Mills Recycling & Distribution Mills Note: 2008 for six months YTD 2/29/2008

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