Commercial Metals' fourth quarter rested on steel as precast fell short of guidance

Commercial Metals Company makes reinforcing bar and merchant bar in its steel mills, and since its precast acquisitions it also casts concrete pipe and structures for builders and road agencies. The case it has made to holders is that precast would make earnings steadier and less tied to the steel cycle. The quarter to 31 August 2026 does not show that yet. Core EBITDA, the company's adjusted measure of earnings before interest, tax, depreciation and amortisation, rose to $393.7 million, and the North American mills' gain was larger than the whole increase over the quarter before.

North America Steel's adjusted EBITDA rose $64.0 million on the quarter before. In June the chief financial officer had agreed with an analyst's estimate of an improvement of about $40 million. The company credited TAG cost savings, a wider metal margin as selling prices rose while scrap costs fell, and more merchant bar, the smaller shapes sold for industrial work including data centres, which shipped more than a year earlier. Construction Solutions, the segment that now holds precast, barely moved, well short of the mid-teens percentage growth management expected in June. Europe fell because the carbon credit booked in the third quarter did not recur.

Precast is where the shortfall sits. In March management said the business would earn $165 million to $175 million in the fiscal year, and it repeated the range in June. The chief executive put the contribution since the acquisition at roughly $150 million; the company's results release puts actual precast EBITDA since the deals closed at $143.5 million. Either way the year finished below the range. The company blamed residential softness, mainly in the Southeast, which cut volumes and left a less profitable regional mix, while the Mid-Atlantic grew.

The next marker is the annual figure. Asked whether about $240 million to $250 million a year was still the right way to think about the business, the chief executive, Peter Matt, said: "We believe it is. And we think that it's a good target for this year." Annualising last quarter's precast result gives $228 million, calculated from the reported figure, and he expects the current quarter to come in lower for seasonal reasons. If he meant the current fiscal year, reaching the target means later quarters better than any the business has posted under CMC. There is support for that: bookings and backlog both rose and prices kept moving up.

The other return the company has pointed to, the West Virginia mill, is arriving later and smaller. In March management said start-up would begin in June; in June it expected 250,000 to 300,000 tons in the current fiscal year. Now the full start-up is planned for near the end of the current quarter, output this year is expected to be a little under 200,000 tons, and the mill should break even about six months after starting.

The cash side of the story holds up better. Capital spending falls from $579.8 million last fiscal year to roughly $400 million, the company put net debt at 1.9x its acquisition-adjusted EBITDA, below the 2x it had targeted, well ahead of the deadline it set at the precast acquisitions and repeated in June, and it intends to speed up buybacks. That leverage ratio counts precast at an annualised $212 million rather than what it earned since the deals closed. For now the earnings carrying the year are steel's: management expects North America Steel to be nearly flat in the current quarter, with higher prices offsetting dearer scrap and start-up costs.