commercial metals 2Q 08_Presentation

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commercial metals 2Q 08_Presentation

  1. 1. CMC – Business Model Vertical Integration Product Diversification Global Geographic Dispersion 2nd Quarter 2008 2 2nd Quarter 2008 Current Market Conditions & Outlook North America Across the Board, Geographies and Product Lines Backlogs Overall Strong, But Signs of Weakness are Exhibiting Unprecedented Upward Price Strength in Light Commercial Construction (Joist) There Will be a Correction, but When? Strongest Markets are Highway, Some Heavy Commercial Fallback Will Still be to Higher Benchmark Levels Rebar Imports Will Not be a Factor Until Earliest Expected 3rd Qtr. Earnings Range – $0.70 to $0.80 Late Summer with $0.11 LIFO Expense Weak Dollar, Better International Pricing, Strong Poland Likely to Have the Largest Change 2nd Qtr. to Freight (But Pullback from Previous Quarter) 3rd Qtr. – China to U.S. Gulf $69/MT CMCS (Croatia) – 2nd Qtr. Operating Loss of $6.4 – S.E. Asia to U.S. Gulf $75/MT Million; Now Expect Continuing but Smaller Losses in 3rd and 4th Quarter – Black Sea (Turkey) to U.S. Gulf $70/MT Ferrous Scrap Prices Continue Climb to Record High (Current Shredded Over $400/LT 3 4 2nd Quarter 2008 2nd Quarter 2008 1
  2. 2. North America Europe Service Center Inventory 10-Year Low, But No Chinese Exit from Semis and Rebar Spur Gorge Buying Yet Markets Nonferrous Scrap Results Should be Steady in a Poland Not Troubled by Turkish Imports; Volatile Pricing Environment Rebar Pricing $940+MT FOB Stowed Copper Tube Strong on Commercial Market and Billets $900/MT C&F Loss of Competitor Middle East Rebar $1,100/MT CFR Raw Material Markets Extremely Favorable Croatia – Bidding Activity Picking Up, But Losses Likely Until End of FY 2008 5 6 2nd Quarter 2008 2nd Quarter 2008 Asia Project Review Arizona Micro Mill All Evidence Points to 12-15 Million Cutback in – $155 Million Net Exports from China in 2008 – 281,000 Tons of Rebar – Expected Commissioning August 2009 No Steel Semis Exported in February Polish Wire Rod Block – $40 Million Result is Higher Asian Steel Prices – Additional 100,000 Tons of Rod/Rebar/Coils Iron Ore Settlements at 65% to 87% Increases – Expected Commissioning End of 2008 Polish Flexible Section Mill Depending on Product Grade – $170 Million Increase Will Support Scrap and, in Turn, – 650,000 MT – Increased Product Range; Higher Quality Wire Rod / Larger Sizes Higher Finished Good Prices – Expected Commissioning Early 2010 SAP Implementation – $119.4 Million Invested Through February 29, 2008 – Expect Two More Quarters at $14 Million Expense then Some Tail Off – Corporate, CMC Texas, U.S. Payroll Live 1/1/2008; CMCZ (Poland) Go Live 4/1/2008 7 8 2nd Quarter 2008 2nd Quarter 2008 2
  3. 3. CMC Steel Arizona Groundbreaking SAP Benefits Mesa, Arizona Expected Return on Investment is 25%+ Platform for Future Growth with Ability to Rapidly Integrate Acquisitions Entire Corporation Will be on a Single System with Identical Functionality Total Visibility Across the Entire Corporation; Real Time Information for Decisions; Faster, More Accurate Processings; Better Controls Largest Benefit Areas – Reduced Inventory – Production Scheduling by Optimal Demand Planning and Location – Coordinated Transportation and Logistic Admin – Improved Maintenance Through Preventive Strategies – Leverage Global Purchasing 9 10 2nd Quarter 2008 2nd Quarter 2008 Quarterly Net Sales ($ in Millions) $3,000 2,403 2,337 2,346 2,203 $2,500 2,016 $2,000 $1,500 $1,000 $500 Statistics $0 2Q07 3Q07 4Q07 1Q08 2Q08 Discontinued Operations 12 2nd Quarter 2008 3
  4. 4. Return on Beginning Equity Quarterly Earnings Per Share $1.25 50.0 43.3 0.86 39.6 0.82 $1.00 40.0 29.1 0.57 0.54 $0.75 26.0 30.0 0.34 $0.50 20.0 12.3 10.7 9.4 $0.25 5.7 10.0 3.8 $0.00 0.0 2Q07 3Q07 4Q07 1Q08 2Q08 1999 2000 2001 2002 2003 2004 2005 2006 2007 13 14 2nd Quarter 2008 2nd Quarter 2008 LIFO Expense (Income) Pre-Tax LIFO Earnings Analysis (Thousands) 1st Qtr. 2nd Qtr. 4th Qtr. 2nd Qtr. 3rd Qtr. 2007 2008 2008 1.25 2007 2007 1.13 1.04 Americas 0.96 (1,774) 10,276 (9,292) 1,832 4,969 1.00 Recycling 0.86 0.85 0.82 0.81 0.75 Americas 0.71 7,683 15,805 (135) (3,863) 18,193 0.75 0.66 0.65 0.64 Mills 0.63 0.62 0.57 0.55 0.54 Americas 14,139 2,911 (3,124) 4,307 35,160 0.50 Fab & Dist. 0.34 International (1,149) 1,963 3,743 (6,538) 632 0.25 Fab & Dist. 18,899 30,955 (8,808) (4,262) 58,954 Total 0.00 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 LIFO Reported Earnings 15 16 Earnings Before LIFO Adjustment 2nd Quarter 2008 2nd Quarter 2008 4
  5. 5. Dividend Payout Per Share Investments by Fiscal Year ($ in Millions) 0.48 494 $0.50 Sisak & Other Acq. 500 Mills – AZ & Poland 450 $0.40 SAP 0.33 400 CapEx 350 $0.30 300 206 250 0.17 $0.20 200 0.12 131 110 0.09 0.08 150 0.07 $0.10 52 50 100 50 $0.00 0 2002 2003 2004 2005 2006 2007 Annual 2003 2004 2005 2006 2007 Projected Rate 2008 17 18 Note: Excludes Acquisitions, Except for 2008 2nd Quarter 2008 2nd Quarter 2008 Adjusted Operating Profit Adjusted Operating Profit by Segment ($ in Millions) Americas 2nd Qtr. 2008 2nd Qtr. 2007 Recycling $50 13% (7)% 9% 20% 19% $40 26.3 19% 25.6 8% 25% $30 53% $20 41% $10 $0 2Q07 2Q08 Americas Fab Americas International Fab International Americas & Distribution Mills & Distribution Recycling Mills 19 20 2nd Quarter 2008 2nd Quarter 2008 5
  6. 6. Average Selling Prices Quarterly Scrap Shipments (Tons 000’s) Americas Americas Recycling Recycling 350 3.40 $323 325 300 2.90 275 $2.54 826 1,000 727 250 2.40 CU & AL $ Pound Ferrous $ Tons 800 225 200 1.90 600 175 400 150 1.40 125 200 100 0.90 $0.77 0 75 2Q07 2Q08 50 0.40 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Ferrous Nonferrous Ferrous Aluminum Copper 21 22 Source: CMC 2nd Quarter 2008 2nd Quarter 2008 Americas Steel Mills Adjusted Operating Profit Product Mix ($ in Millions) Americas Americas (Tons 000’s) Mills Mills $120 630 613 800 594 563 548 700 $100 600 $80 500 328 309 311 364 331 56.2 55.3 400 $60 300 $40 200 220 285 266 252 282 100 $20 0 2Q07 3Q07 4Q07 1Q08 2Q08 $0 2Q07 2Q08 Merchant Shapes, Billets & Rebar 23 24 Structurals 2nd Quarter 2008 2nd Quarter 2008 6
  7. 7. Americas Steel Mills Americas Steel Mill Margins Average Selling Prices 2nd Quarter Comparisons Americas Americas ($ per Ton) Mills Mills FY FY CMC-TX CMC-AL CMC-SC CMC-AR 2008 2007 Change $700 672 Avg. Selling Price $657 $556 101 658 $650 630 $600 630 Cost of Scrap Utilized $292 $215 77 $550 Metal Margin $324 $326 (2) $500 $450 Tons Shipped* 630 563 67 $400 Billet Tons Shipped* 113 51 62 $350 l v v g t t r b n b p c p c r 7 8 y Ju Oc Oc Ap Ma No No De De Au Ju Se Fe Se Fe Ma n -0 n -0 Ja Ja *Tons in thousands 25 26 2nd Quarter 2008 2nd Quarter 2008 Electric Rates by Quarter Natural Gas Rates by Quarter Americas Americas Mills Mills CMC-TX CMC-AL CMC-SC CMC-AR 20.00 CMC-TX CMC-AL CMC-SC CMC-AR 6.00 17.00 Cents/KWH 14.00 $/MCF 5.00 11.00 4.00 8.00 3.00 5.00 2.00 2.00 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 27 28 2nd Quarter 2008 2nd Quarter 2008 7
  8. 8. Copper Tube Manufacturing Percentage of Manufactured Cost Per Ton Average Prices Average of Mills in Texas / Alabama / South Carolina Americas Americas Mills Mills 6.00 Year Year Ended Ended YTD 5.00 LY Avg – 3.50 CY Avg – 3.83 8/31/07 8/31/01 02/29/08 Selling 4.00 Material (Scrap) 54% 51% 35% P r ic e P e r P o u n d Supplies 3.00 Cost 12% 11% 15% (Electrodes/Alloys) CY Avg – 3.08 LY Avg – 2.78 Utilities (Electricity/Gas) 8% 9% 13% 2.00 Maintenance 6% 7% 8% 1.00 Labor 5% 5% 8% 0.00 Depreciation 2% 3% 6% Other l t t 13% 14% 15% r b n b r p p y g Ja c Ja c v v Ju Oc Oc 07 08 Ap Ma De De Fe Ju Fe Ma Se Se No Au No n- n- 29 30 2nd Quarter 2008 2nd Quarter 2008 Copper Tube Manufacturing Adjusted Operating Profit Pounds Shipped ($ in Millions) Americas Americas (in Millions) Fabrication Mills & Distribution $30 24 20.3 21 $20 16.7 18 15.7 11.7 14.5 13.9 13.5 15 11.7 11.5 10.4 12 $10 9 (7.6) 6 $0 3 2Q07 2Q08 0 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 31 32 2nd Quarter 2008 2nd Quarter 2008 8
  9. 9. Shipments Average Selling Prices* (Tons 000’s) Americas Americas Fabrication Fabrication & Distribution & Distribution 600 2nd Quarter 500 429 428 2008 2007 395 366 376 400 Rebar $871 $817 300 Joist $1,310 $1,160 Deck $1,226 200 – Structural $2,662 $2,459 100 Fence Post $742 $713 0 2Q07 3Q07 4Q07 1Q08 2Q08 *Excludes Stock and Buyout Sales Posts Structurals Deck Joist Rebar 33 34 2nd Quarter 2008 2nd Quarter 2008 CMCS (Croatia) CMCZ (Poland) Adjusted Operating Profit Adjusted Operating Profit International ($ in Millions) International ($ in Millions) Mills Mills $20 $50 $45 $15 $40 $35 26.0 $10 $30 $25 16.1 $5 $20 (4.5) (6.4) $15 $0 $10 $5 (6 .4 ) -$5 $0 2Q07 2Q08 -$10 1Q08 2Q08 35 36 2nd Quarter 2008 2nd Quarter 2008 9
  10. 10. CMCZ Mill Margins CMCS Mill Margins 2nd Quarter FY Comparisons 2nd Quarter FY 2008 International International Mills Mills 2008 2007 Avg. Selling Price (PLN) 1,414 1,486 Tons Melted 2,600 Cost of Scrap Utilized (PLN) 825 826 Tons Rolled 12,100 Metal Margin (PLN) 589 660 Tons Shipped 9,200 Rebar Tons Shipped* 182 176 Welded Tons Shipped 7,000 Wire Rod Tons Shipped* 140 147 Drawn Tons Shipped 800 Billet Tons Shipped* 81 46 Seamless Tons Shipped 1,400 Total Tons Shipped* 403 369 % Domestic 45% % Domestic 59% 57% 37 38 *Tons in thousands 2nd Quarter 2008 2nd Quarter 2008 Adjusted Operating Profit Investor Information ($ in Millions) Non-GAAP Financial Measures International and Regulation G Fabrication & Distribution This written and verbal presentation may use financial $40 statement measures considered non-GAAP financial measures $35 by the Securities and Exchange Commission (SEC). $30 21.7 In compliance with the SEC’s Regulation G, we have $25 17.3 $20 provided on our web site at $15 www.cmc.com $10 $5 a reconciliation to the most comparable GAAP measure and $0 2Q07 2Q08 other information that may be of interest to investors. LIFO Expense (Income): (1.1) 0.6 39 40 2nd Quarter 2008 2nd Quarter 2008 10
  11. 11. 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. 41 2nd Quarter 2008 11

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