Commercial Metals Co.: Full Speed Ahead

Metal manufacturer continues buying trend and strategic restructuring to fuel future growth.

For the second straight year, Commercial Metals Co. made IndustryWeek's 50 Best Manufacturers list, and it's not difficult to see why. The Irving, Texas-based company keeps investing and expanding while posting record profits.

Most recently, in September the company said it had completed two acquisitions -- the purchase of a Croatian steel mill by its subsidiary Commercial Metals International AG, and steel service center Economy Steel Inc. Commercial Metals assumed all debt owed by the Croatian mill, formerly known as Valjaonica Cijevi Sisak, which totals approximately US$45 million, and will pay an additional $7 million for shares.

Commercial Metals renamed the newly acquired division CMC Sisak d.o.o.

"The new name denotes both CMC's financial strength, steelmaking expertise and global market emphasis, while continuing the Sisak brand tradition, which is synonymous with quality pipes and tubes," said Hanns Zoellner, executive vice president of CMC and president of CMC International, after the deal was announced.

Operating under the CMC International division should help Sisak increase its market share throughout Europe, observed Zoellner. He said additions to the operations will include a new electric arc furnace, a ladle furnace and upgrades to the caster.

"Our strategy is to expand CMC's production capability in tubular and other products in the key markets of Central and Eastern Europe, and CMC Sisak is the optimal platform for growth in this key region," continued Zoellner.

The Economy Steel purchase fits into Commercial Metals' plan to build a "micro mill" in the Phoenix area, says Executive Vice President and Americas President Russ Rinn. The new division will operate as CMC Economy Steel as part of CMC Americas' Fabrication and Distribution segment. Economy Steel has operated as a fabricator, placer, and supplier of construction-related products, and steel service center in Las Vegas.

The micro mill is scheduled for completion in early 2009 and primarily will produce reinforcing bar through a unique process of moving metal uninterrupted from melting to casting to rolling. Estimated construction costs are $130 million.

The expansion and acquisitions come after a busy 2006, which included the buyouts of Concrete Formtek Services and Brost Forming Supply Inc. (see Commercial Metals Co.: Steelmaker Goes On Shopping Spree). That same year the company also named Murray McClean its new president and CEO. More recently, Commercial Metals moved Rinn to his current position as president of CMC Americas and Zoellner to president of CMC International.

Rinn had served in various roles prior to his newly formed position in May, including COO of the CMC Steel Group and president of CMC Steel Group West. Zoellner had served as president of marketing and distribution and as an executive vice president.

Commercial Metals Co.
At A Glance

Commercial Metals Co.
Irving, Texas
Primary Industry: Primary Metals
Number of Employees: 11,734
2006 In Review
Revenue: $7.5 billion
Profit Margin: 4.72%
Sales Turnover: 2.61
Inventory Turnover: 8.81
Revenue Growth: 14.61%
Return On Assets: 15.27%
Return On Equity: 39.61%

Meanwhile, profit remains strong for the company. Commercial Metals posted a strongest-ever third-quarter profit of $99.4 million, or 82 cents per share, compared with $78 million, or 62 cents per share, during the year-earlier period. McClean attributed the record-setting performance partly to strong sales at its Polish steel operation.

The Polish operation, CMCZ, posted a record quarterly operating profit of $39.8 million, 187% above third-quarter 2006.

"CMCZ took full advantage of our integrated business model from our mega shredder, through our mill and into our fabrication plants," McClean said.


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