Commercial Metals Company (NYSE:CMC) Q2 2023 Earnings Call Transcript

And we’ve experienced different, but other disaster situations here in the U.S., hurricanes and the like. And generally the rebuilding phase takes a little bit period — a longer period of time. So while I think the government there will be moving in great speed to try to recover, from the travesty. It just practically speaking, will take some time to remove the debris and then rebuild. So at this point, I can’t point to hard evidence of major impacts. But we did try to speak broadly there as you know in my opening remarks on some of the things we’re watching. We’re watching their procurement of scrap, we’re watching and we’ll continue to watch how those operations recover and then how that’s going to impact trade flows. So I would think in the medium to longer term, most of that material is going to stay domestic, which should tighten up markets in Europe and in the U.S. Buy America, as you know, is going to be supported and has always been supported in the U.S. for most of the infrastructure spending.

And so, that is another reason why we remain bullish on this market that the ongoing investment that’s been increasing related to the prior infrastructure bill finally materializing in the market has that Buy America component and then the future spending will also take advantage of that and really helpful to our business.

Timna Tanners: Okay, great. That’s helpful. Yes, the Turkey cadences seemed really quick. And so I was just wondering if you were seeing it or maybe the reports we’re hearing were a little early. So thank you for that. Just drilling down a little bit, I wanted to understand Tensar a little bit, because I know that last call you said that there were some unusual reasons for $11.4 million of EBITDA, the production challenges. And in this quarter, you are reporting, just about $8 million $9 million overall and $7.5 million in the U.S. Like is that just seasonal or is there some continuing production challenge? And then if you could also comment on the higher CapEx number . Thank you.

Barbara Smith: Thank you, Timna. Let me take a crack at Tensar and I’ll let Paul comment on CapEx. So we have two kind of, I’ll call it, unrelated things going on. We did have a press failure in our Georgia facility some months ago and had been waiting because of supply chain issues for the replacement press. And that press was installed last quarter. And as you can appreciate, we have been debugging that and ramping that up. And so at this point, the facility has largely recovered from that incident, but it did impact prior quarters and this reporting period as well. In terms of overall what are we seeing in terms of volume and activity level in Tensar. Tensar has a greater seasonal effect within this quarter than even CMC.

It is generally a more dramatic seasonal downturn than our traditional CMC business. And this quarter was no different. And just as weather impacted us, it also weather impacted Tensar, but they typically see a more dramatic seasonal effect. If we look at other indicators, which we’ve been tracking in terms of — because this is a product that is an innovative product and a growth product in the market, if you look at their volume last year relative to this year, they are seeing the expected growth in volume. So the innovative product is making inroads in the marketplace due to the unique characteristics and the construction problems that it solves. And so, that is a very good sign for us. The second thing is, they are constantly innovating and introducing new products into the market and they introduced a new product over the last number of quarters.

And that product is receiving very strong customer acceptance in the marketplace, which is another real encouraging sign. And every time we introduce a new product, it has enhanced features and typically carries margins associated with those enhanced features. So we’re very, very encouraged and the team there fully expects to have a really interesting and exciting construction season in the coming quarters.