Commercial Metals' fiscal first-quarter earnings and sales have reported a year-over-year decline, facing economic headwinds that are impacting demand alongside litigation-related costs. The metal product manufacturer anticipates a further sequential decline in results for the ongoing three-month period ahead. In the latest quarter that ended on November 30, the company saw its adjusted earnings dwindle to $0.78 a share, down from $1.49 a share recorded in the same period last year.
Despite this decrease, the results aligned with the expectations set by the FactSet's consensus estimates. Additionally, sales declined to $1.91 billion, compared to nearly $2 billion achieved in the prior year, although they surpassed market expectations of $1.85 billion. Peter Matt, the Chief Executive, commented on the reported results: "Financial results continued to be hindered by economic uncertainty that has weighed on new construction activity, pressuring steel pricing and margins.
We remain confident that this weaker demand environment will be temporary, as we expect the underlying drivers across infrastructure, non-residential, and residential end markets will provide multiyear support for our business." Examining the North American steel group segment, revenue edged down to $1.52 billion from the $1.59 billion recorded in the previous year’s quarter.
Notably, shipment volumes for finished steel, which include both steel and downstream products, indicated an increase of 4.4% year-over-year. However, average selling prices for both product categories experienced depreciation during this first quarter. Sales from the Europe steel group also faced a decline, slipping to $209.4 million compared to $225.2 million in the previous year.
This decline stemmed from long-steel consumption that remains "substantially below" historical levels, compounded by increased import flows from European countries that are seeking markets for products left unsold domestically. In the emerging businesses group segment, revenue saw a drop of 4.4%, falling to $169.4 million.
This reduction was impacted by a sales mix comprising lower-margin products and significant project delays experienced within the group’s Tensar division. Furthermore, costs and operating expenses escalated to $2.14 billion from last year’s $1.78 billion. The company noted it incurred an after-tax charge of $265 million during the quarter, attributed to a verdict reached in a pending litigation. Looking ahead, the company anticipates that its financial results during the second quarter will "decline from the first-quarter level," according to Matt.
It is projected that finished steel shipments within the North American segment will "follow normal seasonal trends," while results from the emerging businesses division could be further influenced by seasonal changes, as highlighted by the CEO. Matt also shared some glimmers of hope outside the construction sector, saying: "Measures of both big and small business confidence have improved significantly over the last two months.
The palpable shift in sentiment gives us confidence that current softness is transient and that we should soon enter a period of renewed strength in our core markets.".