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COMMERCIAL METALS Co (CMC)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY25 net sales were $2.02B and diluted EPS $0.73; adjusted EPS was $0.74 as non-GAAP adds back $1.3M after-tax litigation interest tied to the Pacific Steel Group judgment .
  • Results missed Wall Street consensus: revenue $2.02B vs $2.07B estimate and adjusted EPS $0.74 vs $0.85 estimate; sequential improvement in core EBITDA margin to 10.1% from 7.5% as North American steel product metal margins inflected upward late in the quarter .
  • Segment trends: North America adjusted EBITDA $186.0M (11.9% margin), EBG adjusted EBITDA $40.9M (20.7% margin, second-highest on record), Europe returned to breakeven with adjusted EBITDA $3.6M and 1.5% margin amid improving Polish demand and reduced imports .
  • Guidance: Q4 FY25 expected to improve sequentially; Europe to receive ~$28M CO2 credit in Q4; FY25 capex cut to $425–$475M (from $550–$600M) with West Virginia timing adjusted to spring CY26 to optimize IRA 48C credits; dividend maintained at $0.18 and $254.9M remains under buyback authorization .
  • Potential catalysts: metal margin expansion trajectory, TAG program run-rate >$100M EBITDA benefits, EBG mix shift to proprietary reinforcing solutions, trade/tariff environment reducing imports; watch execution on Arizona 2 utilization and West Virginia ramp timing .

What Went Well and What Went Wrong

What Went Well

  • EBG profitability rebounded: adjusted EBITDA $40.9M (+7% y/y, +74% q/q); margin 20.7% (second-highest on record), driven by Performance Reinforcing Steel shipments and proprietary solutions demand .
  • Europe exceeded breakeven with adjusted EBITDA $3.6M and 1.5% margin; pricing up $51/ton q/q, shipment volumes +20.9% y/y, aided by cost management and reduced imports .
  • Metal margin inflection: North America steel product metal margin per ton rose to $499 and exited Q3 above the average, with ASP +$45/ton vs scrap +$22/ton; management emphasized “value over volume” discipline .

What Went Wrong

  • Miss vs consensus: adjusted EPS $0.74 vs $0.85 estimate; revenue $2.020B vs $2.067B estimate; North America adjusted EBITDA down 24% y/y on lower margins over scrap for steel and downstream products .
  • Operational outages late in Q3: management cited outages, lower inventories, and elevated costs—“didn’t come out of those outages as well as we could have”—impacting volumes and profitability .
  • Litigation drag persists: ~$3.8M pre-tax interest expense tied to PSG judgment in Q3; cumulative litigation expense continues to weigh on reported results .

Financial Results

Consolidated Results vs Prior Year, Prior Quarter, and Estimates

MetricQ3 2024Q2 2025Q3 2025 ActualQ3 2025 Consensus*
Net Sales ($USD Millions)$2,078.5 $1,754.4 $2,020.0 $2,066.5*
Diluted EPS ($)$1.02 $0.22 $0.73 $0.85*
Adjusted EPS ($)$1.02 $0.26 $0.74 $0.85*
Core EBITDA ($USD Millions)$256.1 $131.0 $204.1 N/A
Core EBITDA Margin (%)12.3% 7.5% 10.1% N/A
Steel Product Metal Margin ($/ton)$538 $476 $499 N/A

Notes: Bold misses vs consensus: revenue and adjusted EPS missed. Values with * retrieved from S&P Global.

Segment Breakdown (Net Sales and Adjusted EBITDA)

SegmentQ3 2024 Net Sales ($MM)Q2 2025 Net Sales ($MM)Q3 2025 Net Sales ($MM)Q3 2024 Adj. EBITDA ($MM)Q2 2025 Adj. EBITDA ($MM)Q3 2025 Adj. EBITDA ($MM)
North America Steel Group$1,671.4 $1,386.8 $1,562.3 $246.3 $128.8 $186.0
Europe Steel Group$208.8 $198.0 $247.6 ($4.2) $0.8 $3.6
Emerging Businesses Group$188.6 $158.9 $197.5 $38.2 $23.5 $40.9
Corporate & Other$9.7 $10.6 $12.7 ($37.1) ($34.9) ($37.0)
Total$2,078.5 $1,754.4 $2,020.0 $243.3 $118.2 $193.5

KPIs (North America Steel Group)

KPIQ3 2024Q2 2025Q3 2025
Steel Products Shipments (000 tons)764 746 798
Downstream Products Shipments (000 tons)371 298 355
Steel Products ASP ($/ton)891 814 859
Steel Product Metal Margin ($/ton)538 476 499

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated resultsQ4 FY25Improve vs Q3 implied by Q2 outlook Improve vs Q3: higher NA margins, EBG better y/y & q/q Maintained direction, with segment detail
Europe CO2 creditQ4 FY25Annual CO2 credit timing previously November (Q1) ~$28M in Q4 (60% of annual); remaining 40% in Q1 FY26 Timing split to two tranches; explicit Q4 amount
CapexFY25$550–$600M total; $250–$300M West Virginia $425–$475M total; timing adjusted for IRA 48C compliance Lowered
IRA credits/incentivesFY25–FY26Not specified~$25M credit in Q4 FY25; ~$80M net benefit expected next year New detail
West Virginia mill scheduleStart-upNot specified earlierHot commissioning in first half; melt shop production spring CY26 Clarified timing
DividendOngoing$0.18 per quarter (Mar ’24 raise) $0.18 declared June 18 (243rd consecutive) Maintained
Share repurchasesAuthorization$500M (Jan ’24) $254.9M remaining as of May 31, 2025 Updated remaining capacity

Earnings Call Themes & Trends

TopicQ1 FY25 (Prior-2)Q2 FY25 (Prior-1)Q3 FY25 (Current)Trend
TAG programEarly execution; benefits expected in FY25 On target to deliver FY25 benefits Trending to ~$50M FY25; run-rate >$100M Strengthening
Tariffs/importsEU rebar imports up; Poland pressure US import exemptions elimination discussed Section 232 rate up to 50%; trade case vs Algeria, Bulgaria, Egypt, Vietnam filed More favorable backdrop
Metal marginsNA margins softening NA margins declined y/y; trough in Q2 NA margins inflected upward; exit rate above average Improving
Backlog/awardsBacklog stable y/y New awards near 3-year high; backlog up q/q Downstream bid volumes robust; backlog stable y/y; booking prices expected to rise in Q4 Stable to improving pricing
Arizona 2 utilizationImproving cost performance MBQ shipments up; hedging losses in copper ~70–75% exit utilization; profit expected in Q4 Ramp progressing
Europe conditionsChallenging; CO2 credit received Breakeven; cost programs and natural gas rebate Breakeven+; pricing up; green shoots Improving
Capex/West VirginiaFY25 $630–$680M initial FY25 $550–$600M FY25 $425–$475M; schedule adjusted to capture IRA 48C Lower spend; optimized incentives
Inorganic growthStrategy laid out; disciplined Continued focus Target $500–$750M asset, >20% EBITDA margin, <2.0x net debt/EBITDA Active pipeline

Management Commentary

  • CEO: “We are aiming to deliver higher, more stable margins and cash flows through the cycle… Successful execution of our strategy should result in margin and cash flow levels well above what we think are currently priced into our shares.”
  • CEO on metal margins: “We exited the quarter at a much higher margin level than we entered… expect to further expand margins through the fourth quarter.”
  • CFO on NA segment: “We exited the third quarter at a steel product metal margin of $518 per ton… combination of higher exit rate, additional scrap cost reductions… should result in further metal margin expansion during the fourth quarter.”
  • CEO on outages: “We had some outages late in the quarter… didn’t come out of those outages as well as we could have… ended up with lower inventories and consequently higher costs.”
  • CEO on inorganic strategy: “We will maintain net debt to EBITDA below two times… ideal target $500–$750 million… EBITDA margins above 20% and free cash flow conversion above current CMC levels.”

Q&A Highlights

  • North America volumes/outages: Management acknowledged outages and scrap timing impacted Q3 volumes and profitability; expect Q4 volumes “flattish to slightly up” and seasonal trend .
  • Rebar pricing: Company emphasized commercial excellence and “value over volume”; expects booking prices to increase in Q4 in sympathy with rebar price moves, with improved escalators to manage duration risk in fabrication .
  • Arizona 2 ramp: Target exit utilization ~70–75%, producing 75% of MBQ SKUs; profitability expected in Q4; flexible mix (rebar vs MBQ) based on market conditions .
  • West Virginia schedule and IRA credits: Hot commissioning in first half; melt shop production spring CY26; ~$80M net benefit expected next year and ~$25M credit in Q4 FY25; FY26 net capex effects discussed .
  • Europe outlook: More projects entering market (EU funds, nuclear, transport); shipments and margins expected to increase with seasonal uptick and cost discipline .

Estimates Context

  • Q3 FY25 vs Consensus: revenue $2.020B vs $2.066B estimate; adjusted EPS $0.74 vs $0.85 estimate — both misses as NA margins over scrap remained below prior-year levels despite intra-quarter recovery .
  • Sequential vs Q2 FY25: core EBITDA margin improved to 10.1% from 7.5% and EBG margin rebounded to 20.7%; revenue rose q/q to $2.02B from $1.75B, but still below y/y .
  • SPGI consensus detail (latest available):
    • Q3 FY25: EPS $0.85*, revenue $2.067B*; Actual EPS $0.74 and revenue $2.020B .
    • Q2 FY25: EPS $0.30*, revenue $1.753B*; Actual EPS $0.26 and revenue $1.754B — slight revenue beat, EPS miss .
    • Forward: Q4 FY25 EPS $1.34* (actual later reported $1.37) and revenue $2.088B*; Q1 FY26 EPS $1.56*, revenue $2.066B* (monitor trajectory).
      Values with * retrieved from S&P Global.

Key Takeaways for Investors

  • Watch the metal margin trajectory: sequential improvement and Q3 exit above average support a Q4 margin expansion setup; upside if rebar pricing gains traction amid tariffs/trade case .
  • EBG is a structural earnings pillar: proprietary reinforcing solutions and anchoring systems support >20% margins; mix shift provides defensible profitability and cash generation .
  • Europe turning a corner: breakeven-plus with pricing up and imports down; CO2 credit timing split boosts Q4 reported performance; sustainability of cost reductions is key .
  • Capital discipline and incentives: FY25 capex lowered to $425–$475M; IRA 48C credits ($80M) and Q4 credits ($25M) enhance ROIC on West Virginia; schedule now spring CY26 .
  • Inorganic growth pipeline could be transformative: targets with >20% EBITDA margins and lower capital intensity; maintain leverage <2.0x — potential multiple uplift as portfolio tilts to value-added solutions .
  • Near-term trading setup: potential for Q4 beat on margins if booking prices rise and outages resolve; risk remains from operational execution at Arizona 2 and downstream duration risk .
  • Litigation overhang persists but quantifiably managed: ongoing interest expense on PSG judgment impacts GAAP; non-GAAP adjustments transparently reconcile to core performance .

Appendix: Supporting Press Releases

  • Dividend declaration: $0.18 per share; 243rd consecutive quarterly dividend, payable July 9, 2025 .
  • Bond financing: Priced $150M WVEDA tax-exempt bonds at 4.625% for West Virginia project; supports funding flexibility .

Sources

  • Q3 FY25 8-K and press release with supplemental slides .
  • Q3 FY25 earnings call transcript .
  • Q2 FY25 8-K and supplemental .
  • Q1 FY25 8-K and supplemental .
  • Dividend press release .
  • Bond financing press release .
  • S&P Global consensus estimates (EPS and revenue) for quarters noted above. Values with * retrieved from S&P Global.