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commercial metals Q3 08_Presentation
1. CMC – Business Model
Vertical Integration
Product Diversification
Global Geographic Dispersion
3rd Quarter 2008 2
3rd Quarter 2008
Current Market Conditions & Outlook Current Market Conditions & Outlook
Expected 4th Quarter Earnings Range - $0.90 to
Global Demand Unabated (in Order of Strength):
$1.00 – Zero LIFO Expense
– Middle East / North Africa
– Russia Unusual Year
– Central / Eastern Europe / South America
– No Signs of Seasonal Correction
– Southeast Asia
– North America – Impact Beijing Olympics and Earthquake in China
– China
– Demand Continues to Outstrip Supply
Steel Input Cost (Scrap, Iron Ore, Alloys, Electrodes, – Low Inventory Levels in Most Markets
Energy) Underwriting Steel Finished Good Prices
Longer-Term Issues
Shredded / Other Ferrous Grades – Signs of
– Inflation
Pullback
– Credit Squeeze
3 4
3rd Quarter 2008 3rd Quarter 2008
1
2. North America North America
Ferrous Scrap Upward Volatility Working its Way
Backlogs Overall at Good Levels
Through
Best Markets are Highway; Worst are Retail
– Immediate Benefit to Recycling
Imports Continue to be Reduced in Long Products – Four to Six Week Benefit Delay for Mills
and Will Stay Low Through at Least the Fall
– Three to Four Month Pain for Fabricators
Same Factors at Play – Better International
Service Centers Continue to Match Purchases
Pricing; Weak Dollar; Strong Freight Rates with Consumption
– China to U.S. Gulf $80/MT
Copper Tube Results Remain Steady on
Commercial Market
– S.E. Asia to U.S. Gulf $110/MT
Nonferrous Prices High, but Volume Hurt by
– Black Sea (Turkey) to U.S. Gulf $80/MT
Weak Residential Markets and Lower
Manufacturing Output
Raw Material Markets Remain Extremely Positive
5 6 with Record Backlogs
3rd Quarter 2008 3rd Quarter 2008
Europe / Middle East Asia / Pacific
Demand in Arab States Extraordinary (20 Million MT China Rebar Production and Consumption Balanced
Rebars Consumed) China’s Determination to Cut Exports Taking Effect –
China’s Withdrawal from Exporting Billets Led to More to Come?
Increase in Global Billet Margins Earthquake Tragedy is Spurring Call for Stricter Building
Turkish Output Staying Local; Lower Imports to U.S. Codes with Consequent Demand on Steel
All Manner of Regulatory Schemes Being With Lower Supply, Prices Rising in S.E. Asia; Billets
Developed to Keep Scrap, Iron Ore, Finished Goods Again in Demand
in Home Markets – Russia, India, Taiwan, Saudi Credit Woes Temporarily Infect Vietnam Steel Products
Arabia Being Re-Exported
Poland has Good Internal Demand and Good Good Strength in Indonesia / Malaysia / Singapore /
Geography Thailand
Croatia – Progress Being Made: Workforce Australian Economy in Good Shape
Reduction; Developing Outlets for Product
India Imposes Steel Export Taxes
7 8
Inflation Remains a Concern for Most Asian Economies.
3rd Quarter 2008 3rd Quarter 2008
2
3. CMC Steel Arizona
Project Review
Mesa, Arizona
Arizona Micro Mill
– $165 Million
– 281,000 Tons of Rebar
– Expected Commissioning August 2009
Polish Wire Rod Block
– $40 Million
– Additional 100,000 Tons of Rod/Rebar/Coils
– Expected Commissioning End of 2008
Polish Flexible Section Mill
– $170 Million
– 650,000 MT
– Increased Product Range; Higher Quality Wire Rod / Larger
Sizes
– Expected Commissioning Early 2010
Polish Downstream Expanding in Wire Mesh
SAP Implementation – Poland Went Live April 2008
9 10
3rd Quarter 2008 3rd Quarter 2008
SAP Benefits
Expected Return on Investment is 25%+
Platform for Future Growth with Ability to Rapidly Integrate
Acquisitions
Entire Corporation Will be on a Single System with Identical
Functionality
Total Visibility Across the Entire Corporation; Real Time
Information for Decisions; Faster, More Accurate
Processings; Better Controls
Largest Benefit Areas
– Reduced Inventory
– Production Scheduling by Optimal Demand Planning and
Location
Statistics
– Coordinated Transportation and Logistic Admin
– Improved Maintenance Through Preventive Strategies
– Leverage Global Purchasing
11
3rd Quarter 2008
3
7. Americas Steel Mills
Americas Steel Mills
Average Selling Prices
Product Mix
Americas Americas
(Tons 000’s) ($ per Ton)
Mills Mills
673 CMC-TX CMC-AL CMC-SC CMC-AR
630
613
800 594
548
700 $950
828
600 $850 824
783
500 328 309 364
331 373 $750 748
400 $650
300
$550
200
220 285 266 300
282 $450
100
$350
0
3Q07 4Q07 1Q08 2Q08 3Q08
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Merchant Shapes, Billets & Rebar
25 26
Structurals
3rd Quarter 2008 3rd Quarter 2008
Americas Steel Mill Margins Electric Rates by Quarter
3rd Quarter Comparisons
Americas Americas
Mills Mills
FY FY CMC-TX CMC-AL CMC-SC CMC-AR
2008 2007 Change 7.00
Avg. Selling Price $718 $575 143
Cents/KWH
6.00
Cost of Scrap Utilized $399 $267 132
5.00
Metal Margin $319 $308 11
4.00
Tons Shipped* 673 613 60
Billet Tons Shipped* 96 88 8 3.00
3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
*Tons in thousands
27 28
3rd Quarter 2008 3rd Quarter 2008
7
8. Natural Gas Rates by Quarter Percentage of Manufactured Cost Per Ton
Average of Mills in Texas / Alabama / South Carolina
Americas Americas
Mills Mills
CMC-TX CMC-AL CMC-SC CMC-AR Year Year
20.00 Ended Ended
YTD
8/31/07 8/31/01
17.00 05/31/08
14.00 Material (Scrap)
$/MCF
59% 51% 35%
Supplies
11.00
11% 11% 15%
(Electrodes/Alloys)
8.00
Utilities (Electricity/Gas) 8% 9% 13%
5.00
Maintenance 5% 7% 8%
2.00
Labor 4% 5% 8%
3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
Depreciation 2% 3% 6%
Other 11% 14% 15%
29 30
3rd Quarter 2008 3rd Quarter 2008
Copper Tube Manufacturing Copper Tube Manufacturing
Average Prices Pounds Shipped
Americas Americas (in Millions)
Mills Mills
6.00
CY Avg – 4.71
5.00 LY Avg – 3.89 Selling 24
20.3
4.00 21
P r ic e P e r P o u n d
16.7
18
3.00 14.5
13.9
13.5
Cost 13.3
15
CY Avg – 3.59 11.7
11.5
LY Avg – 3.02 10.4
12
2.00
9
1.00 6
3
0.00
0
3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08
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31 32
3rd Quarter 2008 3rd Quarter 2008
8
11. Investor Information Forward-Looking Statements
This written and verbal presentation may contain forward-looking
Non-GAAP Financial Measures statements regarding the outlook for the Company's financial results
including net earnings, product pricing and demand, production rates,
and Regulation G inventory levels, impact of acquisitions, credit conditions and general
market conditions. These forward-looking statements generally can be
identified by phrases such as the company or its management “expect,”
This written and verbal presentation may use financial “anticipates,” “believe,” “ought,” “should,” “likely,” “appears,” “projected,”
statement measures considered non-GAAP financial measures “forecast,” “outlook,” “will” or other words or phrases of similar impact.
There is inherent risk and uncertainty in any forward-looking statements.
by the Securities and Exchange Commission (SEC). Variances will occur and some could be materially different from
In compliance with the SEC’s Regulation G, we have management's current opinion. Developments that could impact the
Company's expectations include construction activity, difficulties or delays
provided on our web site at in the execution of construction contracts resulting in cost overruns or
contract disputes, metals pricing over which the Company exerts little
www.cmc.com influence, interest rate changes, increased capacity and product availability
from competing steel minimills and other steel suppliers including import
quantities and pricing, court decisions, industry consolidation or changes in
a reconciliation to the most comparable GAAP measure and production capacity or utilization, the ability to integrate acquisitions into
other information that may be of interest to investors. operations; global factors including political and military uncertainties,
credit availability, currency fluctuations, energy and supply prices and
decisions by governments impacting the level of steel imports and pace of
overall economic activity, particularly China.
41 42
3rd Quarter 2008 3rd Quarter 2008
11
