COMMERCIAL METALS Q3 FY26 earnings call CMC

Consolidated core EBITDA rose 78.6% YoY to $353.6M with margin up 440 bps to 14.2%, the highest level in three years, driven by metal margin expansion, TAG initiatives and the precast acquisitions. Net earnings were $173M ($1.55/share) and adjusted earnings $193M ($1.73/share), up 142.4% YoY. Management repeatedly stressed the quarter 'could have been even better' and is 'not indicative of full potential' because of three temporary NA headwinds — outages, scrap costs and weather. A sequentially weak North American Steel Group was offset by sequential improvement in Construction Solutions and Europe.

NA Steel adjusted EBITDA was $253.5M (+41% YoY, $234/ton), with metal margins up $111/ton YoY and margin up 270 bps to 14.2%. Three temporary factors hurt the quarter: planned maintenance outages at 7 of 10 mills (~$20M direct cost, with FY26 maintenance running ~2x normal and concentrated in Q3); scrap costs squeezing metal margins on war-related fuel costs (scrap +$28/ton sequentially); and weather curtailing construction (notably Texas), delaying rebar consumption. Combined with low post-outage inventory and commercial discipline, roughly 50,000 tons / ~$10M of volume was lost. Management says outages are behind them, price increases are taking hold and weather has normalized in Q4.

CSG net sales nearly doubled to $394.6M ($175.7M from acquired precast), with adjusted EBITDA up 138% to $97.4M (incl. $52.9M from precast) and margin up 400 bps to 24.7% (precast contributing 4.4 pts of accretion). Precast was light on ~2-week project-release delays and wet weather in Georgia/Southeast, but Mid-Atlantic and I-95 corridors were strong and backlog is at a record level. FY26 precast adjusted EBITDA guidance of $165-175M (ex purchase accounting) was maintained. Tensar profitability accelerated YoY and sequentially on Interax demand for energy and data-center megaprojects. Integration of the two precast acquisitions is 'tracking on plan' with early safety, commercial (lead-sharing) and operational (shared forms) benefits.

Europe Steel adjusted EBITDA was $34.7M, up significantly YoY, aided by a $20.4M CO2 credit (received semi-annually; next in Q1, not Q4). Underlying conditions improved: metal margins up $37/ton YoY ($34/ton price increase plus $3/ton scrap reduction). From December through end-May the company realized ~$75/ton of price increase (three increases) against ~$25/ton scrap, net margin-enhancing. CBAM is now in place (management estimates ~€50/ton properly enforced) and EU safeguards effective July 1 cut quotas 50% and raise above-quota tariffs to 50%. Poland demand remains strong and the business is ~50% hedged on electricity.

Acquisition-adjusted net leverage improved to 2.1x, tracking to below-2x by mid-2027 or sooner, with ~$1.8B liquidity and no near-term refinancing. FY26 capex is ~$550M ($300-350M for the West Virginia micro mill, $25M for new precast); FY27 capex is expected ~$200M lower. Combined with West Virginia and Arizona 2 ramp, TAG benefits and 48C/OBBB cash-tax savings (no significant US federal cash taxes FY26-27), management describes a significant free-cash-flow inflection. At the ~2.0x 'fulcrum,' both growth investment and elevated share repurchases are re-enabled; a half-day Investor Day is set for August 5.

US apparent steel consumption is up 3.2% this year; IIJA has >50% of funding yet to be spent, and non-residential demand is increasingly driven by data-center, semiconductor and energy megaprojects concentrated in CMC's Sunbelt/East Coast footprint. Imports were up ~20% YTD, mainly from South Korea, but management expects them to fall in H2 as Korean economics are uncompetitive at current prices, and has opened discussions with the US government. Four trade cases yielded a final 200% duty on Algeria and preliminary duties on three other countries covering ~500,000 tons of rebar (CY2024), potentially out of the market for 5-10 years. Management stresses CMC will operate its flexible mill network on a 'value over volume' basis and not disrupt the supply-demand balance despite new domestic capacity (e.g. HIBAR, Pacific Steel).

Arizona 2 micromill saw a step change in reliability to >75% utilization, producing the vast majority of expected merchant-bar volumes plus rebar, with full utilization targeted this year and framed as a FY27 earnings tailwind. Steel West Virginia — a standard rebar micro mill resembling the Oklahoma plant — will hot-commission later this summer (a slight slip from June due to ~100 days of weather delays) on budget, targeting ~250,000-300,000 tons in FY27 over a ~12-month ramp. Additional capital-light projects include the new Blackwell, Oklahoma geogrid line coming online and a second Galva Bar line in Knoxville starting late CY2026. Management reiterated no further mill investments are planned.