Acquire or be acquired. That is the mantra of many manufacturers. And if you have the means, why not start shopping? Just be aware that your shopping bag might be attractive to others.
For Commercial Metals Co. (CMC) -- one of IndustryWeek's IW 50 Best Manufacturers for 2006 -- the means to shop is not an issue. The company, which manufactures, recycles and markets steel and metal products, reported net earnings of $78 million or 62 cents per diluted share on net sales of $2 billion for the quarter ended May 31, ranking it as the strongest third quarter ever reported for the company.
As for acquisitions, the Irving, Texas-based company has made several in 2006. The most recent acquisition: Concrete Formtek Services (CFS). CFS specializes in forming and shoring rentals. This facility will become a part of CMC Construction Services and will operate under the name of CMC Formtek, according to an Aug. 11 statement.
Commercial Metals also acquired all of the operating assets of Cherokee Supply. Cherokee Supply specializes in highway and commercial construction-related products, according to a July 18 statement announcing the acquisition.
According to a June 12 statement, Yonack Iron & Metal Co. and Metallic Industries LLC also were acquired by Commercial Metals. The acquisition included the operating assets of two affiliates, Yonack Services Inc. and Plastex International Inc.
Yonack operates scrap metal processing facilities in Dallas and Forney, Texas; Stroud, Okla. and Lonoke, Ark. Plastex is a recycler of plastic scrap with operations in Grand Prairie, Texas. The facilities will operate as part of the recycling segment of Commercial Metals under the CMC Recycling name.
In March, Brost Forming Supply Inc. was brought into the CMC fold. Brost Forming Supply specializes in concrete formwork, tilt-up and concrete-related products.
At A Glance
Commercial Metals Co.
Primary Industry: Primary Metals
Number of employees: 5,300
2005 In Review
Revenue: $6.6 billion
Profit Margin: 4.3%
Sales Turnover: 2.8
Inventory Turnover: 8.4
Revenue Growth: 38.3%
Return On Assets: 14.4%
Return On Equity: 43.3%
Acquisitions aren't the only things moving quickly at Commercial Metals. Murray R. McClean, who in January 2006 was promoted from executive vice president and COO to president of CMC, was recently named president and CEO effective Sept. 1. In addition, McClean was elected a director of the company.
"This is a well deserved promotion and in line with CMC's succession plan," said Stanley A. Rabin, chairman of the board and soon-to-be former CEO. "Murray has led CMC to record results as president and COO, and our board is confident of his future success," Rabin added.
As for the future, there are various predictions. With numerous companies added to its portfolio -- and pressure from rising raw materials costs within the steel industry -- some industry analysts feel that Commercial Metals might be a good merger candidate. According Leo Larkin, senior metals and mining analyst in S&P's equity research services, likely buyers include Nucor Corp. and U.S. Steel.
"Sharply rising costs for raw materials such as iron ore and ferrous scrap are creating pressure for companies to merge," says Larkin. "Steel producers have to become larger in order to have greater clout to obtain more favorable contracts from the iron ore miners. Also, larger companies would have the greater financial strength required to engage directly in iron ore mining or manufacture substitutes for ferrous scrap."
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