Good day, and welcome everyone to the First Quarter Fiscal 2022 Earnings Call for Commercial Metals Company. Today’s materials, including the press release and supplemental slides that accompany this call can be found on CMC’s Investor Relations website. Today’s call is being recorded. [Operator Instructions] I would like to remind all participants that during the course of this conference call, the Company will make statements that provide information other than historical information and will include expectations regarding economic conditions, effects of legislation, U.S. steel import levels, U.S. construction activity, demand for finished steel products, the expected capabilities and benefits of new facilities, the Company’s future operations, the time line for execution of company’s growth plan, the Company’s future results of operations, financial measures and capital spending. These and other similar statements are considered forward-looking and may involve certain assumptions and speculation and are subject to risks and uncertainties that could cause the actual results to differ materially from these expectations. These statements reflect the Company’s beliefs based on current conditions that are subject to certain risks and uncertainties, including those that are described in the Risk Factors and forward-looking statements section of the Company’s latest annual report on Form 10-K. Although these statements are based on management’s current expectations and beliefs, CMC offers no assurance that these expectations or beliefs will prove to be correct, and actual results may vary materially. All statements are made only as of this date. Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements in connection with the future events, changes in assumptions, occurrence of anticipated or unanticipated events, new information or circumstances or otherwise. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the Company’s earnings release, supplemental slide presentation or on the Company’s website. Unless stated otherwise, all references made to year or quarter and are references to the Company’s fiscal year or fiscal quarter. And now for opening remarks and introductions, I will turn the call over to the Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, Ms. Barbara Smith. Please go ahead.

Good morning, everyone, and thank you for joining CMC’s first quarter earnings conference call. Hopefully, each of you had a wonderful holiday season. As we reported in our press release issued this morning, the first quarter of fiscal 2022 was another outstanding period with record consolidated and segment results. I’d like to thank CMC’s 11,000 employees for their continued hard work and focused efforts on behalf of our customers and stakeholders, and we thank our customers for their continued trust in and partnership with CMC. I will begin today’s call with a few highlights from the quarter and commentary on CMC’s strategic growth projects. Paul Lawrence will then cover the quarter’s financial information in more detail, and I will conclude with a discussion of the current market environment and our outlook for the second quarter of fiscal 2022, after which we will open the call to questions. Before starting my prepared remarks, I’d like to direct listeners to the supplemental slides that accompany this call. The presentation can be found on CMC’s Investor Relations website. I’m pleased to report that CMC’s first quarter fiscal 2022 earnings were the best in our Company’s 106-year history. Earnings from continuing operations were $232.9 million or $1.90 per diluted share on net sales of $2 billion. Excluding the impact of a tax benefit related to an international reorganization, adjusted earnings from continuing operations were $199.2 million or $1.62 per diluted share. CMC generated core EBITDA of $326.8 million, an increase of 109% from the year-ago period and an improvement of 28% from the prior quarter. This was the third consecutive quarter in which our Company has reported record bottom line earnings, core EBITDA, and segment-level EBITDA. These achievements are a result of the execution of our strategic plans presented to shareholders during our virtual…

Thank you, Barbara, and good morning to everyone on the call today. As Barbara noted, we reported record fiscal first quarter 2022 earnings from continuing operations of $232.9 million or $1.90 per diluted share, more than triple prior year levels of $63.9 million and $0.53, respectively. Results this quarter include a net after-tax benefit of $33.7 million, primarily related to a tax capital loss recognition on an international tax restructuring transaction, which took place in the quarter. Excluding the impact of this item, the adjusted earnings from continuing operations were $199.2 million or $1.62 per diluted share. Core EBITDA from continuing operations was $326.8 million for the first quarter of 2022, more than double the $156.6 million generated during the prior year period. Slide 9 of the supplemental presentation illustrates the strength of CMC’s quarterly results. Both our North America and Europe segments contributed significantly to year-over-year earnings growth, while core EBITDA per ton of finished steel reached a record level of $233 per ton. The first quarter marked the 11th consecutive quarter in which CMC generated an annualized return on invested capital at or above 10%, which is in excess of our cost of capital. Now, I will review our results by segment for the first quarter of fiscal ‘22. The North American segment recorded adjusted EBITDA of $268.5 million for the quarter, an all-time high. This compares to adjusted EBITDA of $155.6 million in the same period last year. Largest driver of this 73% improvement was a significant increase in margins on steel products and raw materials. Partially offsetting this benefit were higher controllable costs on a per ton of finished steel basis due primarily to increased unit pricing for freight, energy and alloys. Selling prices for steel products for our mills increased by $364 per ton on…

Thank you, Paul. Turning now to market conditions, first, in North America. We are seeing strong activity within nearly all of our end markets. At the mill level, demand for rebar, merchant bar and wire rods remains robust with total domestic consumption for each of these products growing on a year-over-year basis during CMC’s fiscal first quarter. Rebar and wire rod in particular are being supported by continued construction growth. During CMC’s first quarter, total domestic construction spending increased roughly 10% from the prior year, according to U.S. Census Bureau, driven by growth in both residential and private nonresidential categories. While national spending was largely unchanged for infrastructure, activity within CMC’s core geographies outperformed the national average during the first quarter, driven by healthier state-level budgets and the need to accommodate growing populations with expanded infrastructure networks. Strength in construction activity has also benefited our merchant bar product lines which are used in various applications, including ceiling joists, industrial stairs and railings and warehouse racking. The industrial markets served by CMC’s merchant products are healthy, and we are seeing particular strength among machinery and equipment manufacturers. As you know, construction is by far CMC’s largest end market, and our best leading indicator is our volume of downstream project bids. Activity levels have been very strong for the last three quarters, driven by a good blend of private and public sector work. Project owners are also awarding high volumes of new work, which has allowed CMC to grow our downstream backlog on a year-over-year basis for two consecutive quarters. Work is entering our backlog at very attractive average price levels, which we expect to drive profitability when shipped in future quarters. The picture is equally positive in Europe. Construction activity is strong with new residential construction permits increasing by double-digit percentages…

[Operator Instructions] Our first question comes from Sathish Kasinathan with Deutsche Bank. Please go ahead.

Yes. Hi. Happy New Year, and thanks for taking my questions. My first question is on the announced new micro mill. You mentioned that it will be rebar centric and that you are looking to add MBQ capability. But can you provide any rough estimate on the size and CapEx for the mill?

Yes. Sathish, I think until we conclude our -- all of our analysis and our site selection, we’re not prepared to give further specifics on that, but I think if you look at our track record with our other micro mills, we will be very disciplined in the way we look at the market and we’ll come back to you as soon as we can with more specifics around the CapEx needs.

And my second question is on the funding for the Tensar acquisition. Now that you had a little more time to explore your options, any initial thoughts on what the mix of debt or cash would be?

We benefit from the very strong balance sheet that we have. And so as we work towards closing, which Barbara outlined, will be likely in the third fiscal quarter, we will take stock and leverage that strength of the balance sheet to make sure we fund the growth project in an efficient manner. So, at this stage, we have not determined exactly what that will be, but we have a lot of tools in the toolbox to get that done well.

Our next question comes from Timna Tanners with Wolfe Research. Please go ahead.

I just want to ask two questions. One on the new mill, in the past, you’ve really flagged the importance of your Southern base and the specific growth in that region. I just wanted a little more color on why the East Coast or Midwest, and if you’re concerned about any greater exposure to imports there? And the second question is just about volumes in the quarter. I thought they were a bit light, just wanted to understand that and if that still implies a decline into the Feb quarter as per traditional? Thanks.

A couple of comments on the new mill. I think we have had a traditional Southern -- primarily Southern exposure, but following the acquisition of a few years ago that really rounded out our footprint and opened us up to take advantage of a very, very high consuming rebar market in the Northeast. And as you know well, the infrastructure bill that was passed, something that has been talked about for probably the last 10 years that I’ve been here at CMC is going to create an enormous amount of additional demand. And we think the timing of this is perfect to take advantage of that in addition to all of the other benefits that come with upgrading the technology. We clearly have a commitment to green technology. This micro mill technology is the most efficient in the world, and with it comes all kinds of quality and customer benefits. So, this is very consistent with our long-term strategy to make sure that we have -- we employ the latest technology in the industry, which happens to also be the greenest technology in the world, and the infrastructure bill that’s coming is going to fully support the offtake of this new investment. And then you had the question around volume. Do you want to take that one, Paul?

Yes, sure. So, Timna, with respect to volumes, I’ll start with Europe. As I mentioned, Europe had a significant outage in one of its mills. That was a planned maintenance outage and that drove much of the reduction in volume. So, we do expect that quarter-over-quarter, sequentially, we will not follow the normal seasonal trend of lowest shipments in the fiscal second quarter. But in fact, we’ll probably see a modest uptick to volumes in the second quarter in Poland. In North America, the total finished volumes, if we add both the steel product volumes as well as downstream products, we’re essentially flat to a year-ago period. There was a shift between mill steel product shipments to downstream as we enhanced our backlog and shipped more internally. But overall, the volume was essentially flat to where we were a year ago and somewhat impacted by the holiday -- the beginning of the holiday season as well as some maintenance outages that we had during the quarter. With respect to North America, we do expect a traditional seasonal downswing in volumes of the total steel products and downstream groupings into the second quarter aligned to normal, and that would be generally down around 5% from where we were in the first quarter, and that’s just primarily related to the extended holidays over the Christmas period.

Got you. And then, I’m sorry, on the question on the Midwest and -- or the East Coast mill, I had snuck in a question about if that opens you up more to imports or if that’s a concern, would you mind answering that part, please?

Yes. Timna, I mean, you’re well aware of where the major importing locations are. And I think that we -- our assessment is we’re going to enjoy a pretty favorable import environment, even with the adjustments that have been made to the European situation. It’s always a risk, but we monitor that carefully, and again I point back to our track record of introducing the micro mill, the benefits of that technology, and quality and cost. Every time we’ve built a new mill, it has started up and been full. So between the infrastructure plan and the benefits of the technology, we don’t see a major factor there. And the fact that I think we’re going to enjoy a favorable import environment in the foreseeable future.

Thanks. And Buy America probably helps also.

Yes, absolutely.

[Operator Instructions] Our next question comes from Seth Rosenfeld with Exane BNP Paribas.

I got another question, please, with the new East Coast mill. You touched on earlier potential for some synergies and operating efficiencies. Are you able to give us any tangible examples of what you’re looking out on the operating efficiency side, perhaps quantify any scale of synergies that would make this investment particularly attractive versus what we’ve seen on a standalone greenfield asset in the past, please? I’ll stop there.

Yes. Seth, Happy New Year. Hope you are doing well. I think, again, I’d just point back to our track record. And we’re always evaluating the long-term capital needs of existing capacity balanced with upgrading to a more current and new technology. And if you look at -- when we did the analysis, it was economically more attractive to go ahead and invest in this new technology that’s going to be a lot more efficient, cost-effective, higher quality, lower environmental impact than reinvesting in the older legacy technology. The other factor we always evaluate is market demand. And as I indicated earlier, the demand today is very robust and the markets are, I will say, in a sold-out condition. And when you layer on the additional investment that’s going to be made over the coming 5, 7, 10 years between the market analysis and that economic equation that makes this project very attractive.

Okay. I guess a separate question with regards to fabrication pricing. I believe in your prepared remarks, you commented you expect backlog prices to increase throughout the coming fiscal year. Given that I think in the past that pricing is often been set kind of with reference to steel cost, is that comment a sign of confidence that spot rebar prices continue increasing or rather call on the unique kind of supply-demand dynamics for fab itself improving the pricing for fabrication, please?

Seth, I’ll start and then Barbara can add some comments. And as you are aware and know our business well, essentially, the fab pricing is based when the contract is awarded at a price over and above typical rebar pricing. And as we look throughout last year, rebar pricing increased north of $300 a ton. And while we saw a nice repricing of the backlog during the first quarter, we’re still lagging the overall increase in what we’re shipping because of the older contracts that remain in our backlog. So, we do and pay that the -- based on the bid activity that we are seeing today, which is very strong that we’ll continue to see strong rebar pricing and as a result, continue to see new work going into our backlog that is reflective of these higher price contracts that we’re seeing today.

Our next question comes from Andreas Bokkenheuser with UBS.

Just two quick questions for me. Can you just give us a little bit more clarity on how you look at the overall cost outlook for 2022? Obviously, on the scrap side, maybe also on the energy side, obviously, there are always some voices in the in the market talking about higher scrap prices for longer. And obviously, there’s a little bit of an energy crunch going on. So to what extent, if at all, you are impacted by any of this and how you’re kind of looking at 2022 is my first question. And my second question, assuming for a moment, it’s going to be another stellar year for you guys on the margin side, do you have a preference for buybacks over dividends? How should we think about that from a capital allocation point of view? Thank you very much. Those are the two questions.

Thank you. I’ll begin, and then Paul can maybe give a little more guidance if you’re looking for a modeling question. Clearly, there’s all sorts of inflationary pressures out there. And what I would say is the market is absorbing those inflationary pressures. And at the same time, we’re trying to manage our own cost structure to -- with an objective to have our inflation be less than what you would look at in terms of an overall market inflation number. And I think our results would bear out that we’ve done a really good job of using productivity to offset some of those inflationary pressures. But the strong market is allowing those -- the inflation to be passed through and I would remind that the pressures that we’re seeing are not any too different than everyone else in the marketplace. If you get down to individual line items, and I’m going to probably turn this over to Paul to give specifics. There are some components of the cost structure where the inflation seems to be moderating and then there’s other elements of the cost structure where we may see some continued pressure on inflation. As it relates to scrap, scrap ebbs and flows throughout the year and ebbs and flows based on market demand and tightness and whether or not scrap is moving offshore and not. Unlike a lot of other steel products other than our fab backlog, we really are in the market on a spot basis. And so, our products are able to absorb those fluctuations, and we see just continued strength in demand as the primary factor that’s going to help preserve our metal margins going forward. From my perspective, as it relates to capital allocation, I think we were fairly clear in October when we took action on increasing both, the dividend and reinitiating our share repurchase program. That was a very healthy increase in the dividend and a meaningful repurchase program that was put in place. And our Board evaluates that on an ongoing basis. And right now, we’ll execute on that. And I’m sure at the right moment, we’ll reevaluate it and see where we go from here.

Andreas, I’ll just add to your question with respect to energy specifically. In Europe, the latter half of December, we certainly saw energy levels come back down. And as a result, I think we’re through the period of the peak that we saw throughout much of the fourth quarter of 2021 and there should be lower costs ahead. Now, we were sheltered from much of that increase in the spot pricing due to, A, we operating in Poland had significantly lower cost energy than most other countries within Europe as well as a result of our hedging arrangements. And I guess to add a little bit of color to Barbara’s point, if you look at where costs have had the most impact to us, it’s energy, it’s freight and it’s some of the long-term consumables that we use in our business. Energy, as we’ve seen in our Polish operations, the hedging and activity that we have there to mitigate some of these price spikes certainly have helped. We have a fairly significant fleet of our own rail and tractor trailers that help with respect to some of the challenges on the logistics front here in the U.S. And so, that helps with some of the inflation that we’re seeing there. And finally, with respect to some of the consumables, we’ve prided ourselves with contracts that we have in place with our suppliers, which again allow us to manage those costs and ultimately have greater visibility to those costs. And certainly, as some of the industry, principally the hot rolled sort of slows down its production rates, we would expect to see some of those rates to dissipate in the alloy area. So overall, competitively speaking, I think we’re in good shape with respect to the key areas that have seen inflation this year.

Our next question comes from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

The Tensar acquisition expected to close in your third fiscal quarter, that’s going to be I think the biggest acquisition after they grew down one and pretty sizable in terms of the platform. Is there more M&A that you have your eyes on as you grow the Company?

Yes. Thank you, Phil. As you know, you’ve been around a long time, we’re not going to give any specifics as it relates to potential targets, but we’ve worked hard to reposition the portfolio and to have a balance sheet that is impeccable and allows us a lot of flexibility. And clearly, we believe that the addition of Tensar opens up the opportunity to think about some other things. And so, we would look at it as another avenue for growth. Our first objective is to get the acquisition closed and fully integrated and to reap the benefits of the acquisition. But already, we are to the extent we can interacting with the team as we await the regulatory approval, we are finding more and more situations where we both are working on the same job sites and where we have worked together in the past on projects. And so, we’re just really excited to get across the finish line and get it closed so we can really dig into those commercial opportunities that will no doubt exist. And the timing will be really attractive, as I indicated earlier, with the infrastructure bill, we think that that will be just a great time for us to be taking this on, and we really look forward to where we can go from there. But we’re always screening things, and we see a lot of opportunity on the horizon.

I know the deal hasn’t closed yet, but regarding Tensar, is there a likelihood that you’re going to have to put more capital into that business as you grow it, or as you see fit with infrastructure and new capacity, it’s on top of the amount of capital that you’re putting down by the business?

Yes. Interestingly enough, Phil, one of the things that was attractive about the Tensar business to us is the higher margins available because it is more of an engineered solution and there is a heavy technology R&D component to it, but secondarily, the lower capital intensity. We believe the footprint that exists within Tensar has sufficient ability to expand and increase the output to meet the demand in the foreseeable future. But if the demand exceeds even our expectations, the investment needed to add manufacturing is order of magnitude less on an initial investment than what you think of in our traditional steelmaking footprint.

At this time, there appears to be no further questions. Ms. Smith, I’ll now turn the call back over to you.

Thank you everyone for joining us on today’s conference call. We look forward to speaking with many of you during our investor calls in the coming days and weeks. And once again, happy New Year, and look forward to speaking with you sometime soon. Have a great day.

This concludes today’s Commercial Metals Company conference call. You may now disconnect.