Commercial Metals Company Q1 FY2026 earnings call

• Commercial Metals Company reported net earnings of $1.773 billion or $1.58 per diluted share for the quarter. Excluding certain charges, adjusted earnings were $206.2 million or $1.84 per diluted share.
• Consolidated core EBITDA of $316.9 million grew by over 50% from a year ago and nearly 9% sequentially, reaching its highest level in two years with a core EBITDA margin of 14.9%.
• Strategic actions like TAG initiatives, organizational realignment, and talent onboarding are driving bottom-line improvement. The large-scale precast platform addition is expected to contribute more.
• North America Steel Group had strong operational performance, with CAG initiative efforts like scrap optimization boosting metal margin. Downstream backlog saw modest volume growth despite enhanced selectivity.
• Construction Solutions Group had strong results, with net sales up 17% YOY and adjusted EBITDA up 75% YOY. TENSAR and Commercial Metals Company Construction Services contributed to this growth.
• Europe Steel Group conditions softened, but CBAM is expected to benefit long steel pricing in the future. The rebar trade case with ITC had preliminary rulings against Algeria.

North America Steel Group: Adjusted EBITDA of $293.9 million for the quarter, equal to $257 per ton of finished steel shipped. Segment adjusted EBITDA increased 58% compared to the prior year period, with an EBITDA margin of 17.7%. Construction Solutions Group: First quarter net sales of $198.3 million grew by 17% on a year-over-year basis. Adjusted EBITDA of $39.6 million significantly increased by 75% year over year. Europe Steel Group: Adjusted EBITDA of $10.9 million for the 2026, down from $25.8 million in the prior year period, driven by lower CO2 credit.

• Consolidated core EBITDA is expected to decline modestly from first-quarter levels due to normal market slowdown, but offset by the acquisition of Precast businesses.
• North America Steel Group adjusted EBITDA is anticipated to be lower sequentially due to normal seasonal volume trends and planned maintenance outages, but steel product metal margin expected to remain relatively stable.
• Construction Solutions Group financial results are expected to improve compared to the prior year, with the Precast business contribution offsetting seasonal weakness in other divisions.
• Europe Steel Group adjusted EBITDA is expected to be approximately breakeven, with margin growth potential later in fiscal 2026 when CBAM takes full effect.

• Counterparty risk in fabrication contracts, addressed by proper escalators and indexation to protect margins.
• Impact of new steel supply on North American metal margins, but confident market can absorb new supply if demand grows.
• Uncertainty in trade case outcomes for other countries like Egypt, Vietnam, and Bulgaria in the rebar trade case.
• Seasonality affecting Construction Solutions Group, particularly in Q2 being the weakest period.

Q: Satish Kasinathan asked about positive surprises from acquisitions and North American metal margins.

A: Peter Matt said there were positive surprises from acquisitions with good cultural fit and excitement about synergies. On metal margins, expected mill margins to be flattish in Q2 with some offset from seasonal scrap, and downstream margins flat to slightly down but expecting TAG initiatives to contribute to margin growth later.

Q: Katja Jankic inquired about seasonality and West Virginia mill ramp-up.

A: Peter Matt said typical Q2 seasonality expected with 5% to 10% volume decline. West Virginia mill hot commissioning likely to begin in June, brought in on budget with capital discipline. Paul Lawrence added West Virginia is a rebar-only mill different from Arizona 2 and expected to ramp up over twelve months post-startup.

Q: Tristan Gresser asked about scrap sorting benefits.

A: Peter Matt said scrap optimization has grown from initial $5-10 million opportunity to a larger benefit, using less scrap and varying scrap quality. Paul Lawrence added scrap optimization and other TAG initiatives contributed to ~$50 million EBITDA last year and continue to drive margin improvement.

Q: Alex Hacking asked about counterparty risk and CBAM in Europe.

A: Peter Matt said counterparty risk is about margin preservation with proper escalators, and CBAM in Europe is expected to benefit pricing with an average impact of €50 per ton on some importers. Paul Lawrence reiterated no significant counterparty risk historically.

Q: Timna Tanners asked about CBAM volume impact in Europe and U.S. trade.

A: Peter Matt said there are volume opportunities in Europe but not huge yet. On U.S. trade, imports from Algeria-related countries have pulled back, but watching Turkey and other countries' imports.

Q: Bill Peterson asked about AZ2 ramp and CSG pricing.

A: Peter Matt said AZ2 ramped to profitability in Q4 and Q1, with expected full run rate in 2026 but suboptimal utilization initially due to training. On CSG pricing, downstream backlog prices continue to improve with solid demand.

Q: Carlos De Alba asked about commercial approach in fabrication and CSG EBITDA guidance.

A: Peter Matt said commercial approach is about indexation and proper escalators to protect margins, starting from a low base. Paul Lawrence added recognizing value from reliability. On CSG EBITDA guidance, it's early days with integration, and guidance is conservative but aiming for under-promising and over-delivering.

Q: Phil Gibbs asked about seasonality and Precast D&A.

A: Paul Lawrence said typical seasonality in Construction Solutions Group is 5% to 10% volume decline. On Precast D&A, unable to provide guidance yet due to complexity of purchase accounting for intangibles in acquisitions.