Hello, and welcome, everyone, to the Fourth Quarter and Fiscal Year 2024 Earnings Call for CMC. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer; and Paul Lawrence, Senior Vice President and Chief Financial Officer. 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] After the company's remarks, we will have a question-and-answer session, and we'll have a few instructions at that time. 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, US steel import levels, construction activity, demand for finished steel products, the expected capabilities, benefits, and timeline for construction of new facilities, the company's operations, the company's strategic 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 actual results to differ materially from these expectations. These statements reflect the company's beliefs based on current conditions but are subject to certain risks and uncertainties, including those that are described in the risk factors and forward-looking statements sections of the company's latest filings with the US Securities and Exchange Commission, including 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 future events, changes in assumptions, the 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-end 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 Peter.

Thank you. Good morning, everyone, and welcome to CMC's fourth quarter and fiscal year 2024 earnings conference call. I am joined today by our Senior Vice President and Chief Financial Officer, Paul Lawrence. I will start this morning's discussion with an overview of CMC's fiscal 2024 results and the accomplishments during the year. I will then cover our fourth-quarter performance, provide commentary on current market conditions, and share an update on CMC's strategic planning efforts. Paul will cover the fourth quarter's financial information in more detail, and I will conclude with our outlook for the first fiscal quarter of 2025 and beyond. We will then open the call to questions. As a reminder, additional information regarding the quarter is provided in the supplemental slides that accompany this call, which can be found on CMC's Investor Relations website. Fiscal 2024 was another very solid year for CMC, one that included record employee safety performance, the third best financial results in our company's 109-year history, and meaningful progress across a number of strategic fronts. Of our many accomplishments this year, I am most proud of our continuous improvement in safety. Our success as a company starts with keeping our people safe and ensuring everyone leaves their shift in the same condition in which they arrived. In fiscal 2024, we came closer to that goal than ever before, achieving the lowest incident rate in the history of CMC and driving a meaningful reduction in absolute number of OSHA recordable events. That level of performance does not happen by luck. It happens through a methodical approach to identifying and addressing areas of risk, and through direct engagement with every employee. I would like to call out three areas of success on the safety front in fiscal 2024 that the CMC team should be very…

Thank you, Peter, and good morning to everyone on the call. As noted earlier, we reported fiscal fourth quarter 2024 net earnings of $103.9 million or $0.90 per diluted share compared to prior year levels of $184.2 million and $1.56, respectively. Consolidated core EBITDA was $227.1 million for the fourth quarter of 2024, representing a 31% decline from the $327.7 million generated during the prior year period, but still an historically strong result. Slide 14 of the supplemental presentation illustrates the year-to-year changes in CMC's quarterly financial performance. Profitability at the North American Steel Group was negatively impacted by lower margins over scrap, while results at Europe -- at the Europe Steel Group benefited from significant cost reductions. Adjusted EBITDA was unchanged in CMC's Emerging Businesses Group and consolidated core EBITDA margin of 11.4% remained above average historical levels when compares to 14.8% a year ago. CMC's North American Steel Group generated adjusted EBITDA of $210.9 million for the quarter, equal to $188 per ton of finished steel shipped. Segment adjusted EBITDA decreased 14% on a sequential quarter basis, driven primarily by lower margin over scrap costs on steel products. Results were also impacted by the P&L effect of selling higher-cost inventory into a falling price environment. The adjusted EBITDA margin for the North American Steel Group of 13.5% compares to 14.7% in the third quarter. During the quarter, CMC incurred mill operational commissioning costs related to Arizona 2 of $15.1 million, excluding depreciation. Including depreciation, costs amounted to $25.3 million. Both figures are on a pre-tax basis and were up from the levels incurred in recent quarters due to the high cost of power during peak summer months and time taken for some corrective outages that impacted our volumes. As Peter indicated earlier, demand for long steel products was…

Thank you, Paul. We expect consolidated financial results in our first fiscal quarter of 2025 to decline from the fourth quarter level as a consequence of temporary softness within certain areas of the construction industry amid continued macroeconomic uncertainty. Finished steel shipments within the North America Steel Group are anticipated to follow normal seasonal trends while the adjusted EBITDA margin is expected to decrease on lower steel product margins over scrap costs. We would note that the recent encouraging direction of scrap pricing gives us confidence that rebar pricing has come near the bottom and should begin to move upward if scrap -- if a scrap rebound is maintained. Adjusted EBITDA for our Europe Steel Group should experience a meaningful sequential increase driven by the receipt of an annual CO2 credit that is expected to be within the range of $35 million to $40 million. Underlying financial performance for the Europe Steel Group is likely to remain similar to the fourth-quarter levels. Financial results for the Emerging Businesses Group are anticipated to decline due to normal seasonality and the impact of economic uncertainty both in the United States and in Europe. We believe the current market conditions represent a transient period of softness created by uncertainty regarding important factors that influence any major capital investment, the cost of funding, and future government policy. As clarity emerges in the coming months, we believe renewed strength in our core markets will follow. We anticipate the first half of the year will be impacted by challenges related to the current uncertainty as well as typical seasonal slowness. However, we expect financial results to rebound in the second half as solid construction fundamentals return. Before we open the call up to questions, I want to reiterate how proud we are of CMC's financial results and the strong industry that we help create. We are excited about our potential to reach new heights in the future as we execute on our key strategic priorities and deliver significant value for our shareholders. As we move past near-term uncertainty, CMC is well-positioned to benefit from powerful structural trends in North America that should drive construction activity for years to come. I would like to thank our customers for their trust and confidence in CMC and all of our employees for delivering yet another quarter of solid operating performance. Operator?

[Operator Instructions] The first question comes from Sathish Kasinathan with Bank of America. Please go ahead.

Yeah. Hi. Good morning. Thanks for taking my questions. So my first question is on the guidance for the Emerging Business Group. So you indicated that the segment results could be lower on a sequential basis, but how should we look at it from a year-on-year basis given that you are continuing to see an increase in higher margin mix, especially at Tensar?

Yeah. I think we should expect it to be roughly similar. Again, it's really seasonal trends that we're calling out here. And if you remember, that business tends to have a very strong Q3 and Q4, even more seasonality than in the rest of our business.

Okay. Thank you. And then my next question is on the long-term strategic plan. So you talked about some of the examples of the initiatives that the company is working on. When do you think you'll be in a position to quantify those benefits? Are there any low-hanging fruits that you could highlight and we should see some immediate benefit in 2025?

Yeah. Thank you very much for the question, and we are really excited about our TAG initiative as a source of meaningful kind of earnings benefit. This is a program that we have structured to be over three to four years and we do expect there to be contribution in 2025. We have very clear goals internally for what this program is going to deliver. We are going to stop short on this call of sharing detail on specific numbers for 2025 and the period beyond because we are really at the starting point of the program. And let me just say a few words about that. What we have done is, we have kind of created as we said in the prepared remarks, over 150 different initiatives. We've taken a small subset of that and moved them into a detailed planning phase and then in the case of some of them into an execution phase. So we have a number of these initiatives that are now being executed across the company and the early returns are very positive. But again, we want to get a little bit more traction before we share more detail on that. But we do fully expect to periodically update you on the progress of that, including some of the targets that we've set and what we've achieved.

Okay. Thanks, Peter, for the color, and congrats on a solid year.

Thank you very much.

The next question comes from Katja Jancic with BMO Capital Markets. Please go ahead.

Hi. Thank you for taking my question. Staying a bit on the TAG initiative and I can appreciate, Peter, that you said you don't want to provide specifics right now. But let's say when we look at the current margins, they're above historical levels. When you say that you're targeting higher through-the-cycle margins, how did those stack up relative to the current margin environment? Are we talking about higher than where we are right now or kind of maintaining the current levels?

Well, so, it's a great question. And what I would say is it -- and I'm going to go back a few calls to some comments that I made where our goal, as you say, is higher through-the-cycle margins. And we believe that as a consequence of the consolidation that's occurred and the current trade environment that we are in an environment where we can and will and actually are delivering higher through-the-cycle margins. So based on what's happened so far, we would challenge the kind of current thesis in the valuation of our shares. Having said that, TAG is only an incremental contributor to that. And what we believe is that over time as we ramp up these initiatives, we will be able to deliver incremental margins to our company. And what does that mean? What it means is, if we are in an environment where we are today, where we feel like we're kind of -- we're not going to -- we're not calling the bottom, but we're kind of in the, let's call it the weaker part of what we think our business environment is going to experience, then TAG will supplement and take us to higher margin levels than we've been at in the past. If we are in a market where things deteriorate further, TAG will help us defend margins like what we have today. In both cases, we think there's tremendous upside in the story and that's what we're really excited about. So hopefully, that gives you some additional clarity, Katja.

No, thank you for that. And maybe if I may, one more on the backlogs right now. I think you mentioned they're still solid. Can you provide a little more clarity on the value of the backlog currently versus, let's say, last quarter?

Yeah, good morning, Katja. Backlog from a volume perspective, really, we continue to maintain a comparable level from either the end of the third quarter or 12 months ago. I think as Peter alluded to, construction activity is becoming more competitive as projects are delayed coming to market. And as a result, that is squeezing the margin and squeezing the price attributable to new work that is actually being contracted. And so we are seeing a lower level of value associated to the backlog and it's really tied to the underlying price of the rebar material that's in the backlog. So, volumes continue to be good and that's what's fueled the business that really during the fourth quarter we saw very sequentially and year-over-year level volumes, but the value is lower than where it was 12 months ago.

Okay. Thank you.

Thank you, Katja.

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

Yeah. Hey, good morning. I wanted to ask two kind of higher level questions. If we take a step back, first, I wanted to ask about Arizona 2. And if I look at my notes over the years of what you talked about with regard to the volume contribution, I think it was supposed to be 400,000 and then 250,000. But if you look at volumes in North America 2024 fiscal year, even over two years, we're talking about 150,000, call it. So what's happening? Are you able to run full-out? Are you running less other places? And how do you think about volumes going forward in a softer construction market?

Yeah. Well, let me comment -- there's a couple of different questions in your question. So let me comment first on Arizona 2 and then we'll talk about kind of the run rate levels. So, it's clear in Arizona 2 that we've had some challenges. You can see that in the fact that we continue to have additional start-up costs running through the system. Having said that, I just want to remind everybody that we're doing a lot of very innovative things in this mill. And as in any case where you're innovating, things don't happen linearly and that's what our experience has been. However, what I would say is we are absolutely making progress and we feel very comfortable that we are going to be able to get this up to full run rate, which is the expectation of our full run rate is 500,000 tons per annum and 150,000 tons of that being in the form of merchants, so that we can serve our customers across the country on a merchant basis. We feel very comfortable on that. And based on what we can see, we believe and we're very confident that this mill is going to be a workhorse in our organization for years to come. So bear with us. It's not exactly where we wanted it to be, but I think we are confident we can get to a good place. In terms of the demand in the market, clearly, we are seeing some softness today and the softness that we're seeing today is really -- and again, when we talk about the first quarter, we're talking about really seasonal weakness. But it's clear to say, Timna, that there is some -- that there is uncertainty out there. We are going to be a disciplined supplier to the market and you've heard many talk about kind of value over volume will be disciplined in that regard. But we do expect and we are optimistic that the construction demand is going to be strong. And certainly, if you kind of talk about timing, we're -- we think that we are in for a period of uncertainty over the next several months, but the back half of the year could be quite strong. And that's strength across all of our major segments, infrastructure, non-res, and residential. So hopefully that answers your question.

Yeah. Thanks. A lot of parts in there. I appreciate it. So we'll see more of AZ 2 potentially second half. And then the other question or question there is just around Europe, So I get the Germany is particularly weak and you're not guiding too much improvement there. And I get that you also talked about self-help, which is great. But what if Germany isn't on a quick path to recover and this continues? Like what options do you consider that you have? What would you model if you were in our seat? I mean, how should we think about the sustainability of this kind of business? It's been tough, I get it, but what are your options as you think higher level?

Yeah. Well, look, I mean, I just want to remind everybody that this business has been a fantastic contributor to CMC over time. And if we look at it over the long term, it's generated returns well in excess of its cost of capital. If you look at it in the '23 timeframe, it generated over $300 million of EBITDA. So it's been a meaningful contributor and it brings a lot to our company in terms of both construction trends and also steel making skills. I mean, if you ask the people in our North American business where some of the best steel makers in the company are, they'll say in Poland. So we're learning -- we learn a lot from what they've been doing in part because of the environment that they're in. We -- our current pace -- our current belief is that Germany should start to see some signs of recovery either late 2025 or coming into 2026. That's what seems to be the consensus based on the number of conversations that we've had. On that basis, we are committed, we're absolutely committed to this group and it's a core part of our business. And again, one of the things that we really love about this team is that they're not settling for kind of the results that they currently have. We are continuing to work on the convergence to breakeven. And based on what we've seen out of this team, we have every confidence that they're going to achieve that. And the last thing I would say, Timna, is that given the cost improvement that these guys have been able to demonstrate in the operation, when there is a recovery, the profitability should come back a lot quicker. I mean the -- if you look at the utilization rates that they're running at and the conversion costs that they've been able to maintain, this is a low cost operation and we're confident in that. So, thank you for the question.

Okay. Thanks for the color.

The next question comes from Tristan Gresser with BNP Paribas Exane. Please go ahead.

Yes. Hi. Good morning, and thank you for taking my questions. The first one is on the demand environment. So I understand that the pocket of weakness you mentioned that we are in the middle of because of the election. But in your presentation, you downgraded the estimated potential impact on rebar demand from infrastructure. I believe, before you were thinking it could increase rebar demand by 15%, 17%, roughly 1.5 million ton, 1.4 million ton and now you have it down to 8%, 12%, so 0.6 million tons or 0.9 million tons. So quite a bit downgrade. And my understanding is that the issue with the infrastructure was more timing than anything, but apparently the scale is also being revised downwards. So I was curious to see why you're looking at this a bit more cautiously, more than timing.

Yeah. It's a great question and I'll start and then Paul can add if I miss anything. But -- so, we have been looking and trying to calibrate the question of what is the inflationary impact we've been through a period of high inflation on the actual infrastructure dollars that are spent. And our work and it was interesting, there's a recent article out by PCA that suggests that the inflationary impact on the infrastructure spend could be somewhere in the range of 25% to 30%. And depending on the time, I think you can -- in some cases, you can look at it as a 20% to 30% range. But call it in -- call it as you will, 25% to 30% impact on that. That seems to corroborate what we have seen or what we are seeing in the market and the analysis that we've done. And so, as a consequence, we have adjusted our expectation. Now, part of this is, it's a -- this is not an easy estimate to come up with because, as you know, not all highway spending is federal, some of it is coming from the states and the states have been increasing their spend budgets. And the other thing too is inflation is now falling. So this is a moving target. So we have been kind of working to try to figure out what is the actual impact on the actual rebar tons that will be impacted. And this is the conclusion that we've come to, and that's why we are adjusting that number. Now, having said that, Tristan, I want to just highlight the fact that it's still a huge number. And we think that is something that's going to underpin our company results over years to come. And if you look at some of the recent data points out there about the amount of infrastructure spending that there has been, we've got something like 80% of the spending to go. So yes, I know it took longer to come, it took longer than we expected for it to come. But the reality is it's here now. We're seeing it. We're seeing it across all of our geographies and we think it's going to remain strong. So anyway, I hope that gives some clarity to you. Paul, is there anything to add?

No, I think hits it.

Yeah. No. Thank you for that. That's really helpful and clear. And I understand it's not an easy estimate to come up with. And my second question on the merchant bar market, it seems it decorrelated a bit with rebar. I mean, we've seen better pricing performance. It looks like in Europe, volumes are better maybe in the US as well. So trying to get a bit -- we talked a lot about rebar, but I was interested to get your perspective on the supply and demand dynamics in the US for merchant bar if possible. Thank you.

Yeah. There's -- so the demand, I would characterize the demand as really kind of consistent with what I say about rebar, it's good, it's not great. There are kind of -- again, you know that business goes mostly through service centers. Service center inventories are low. And given some of the uncertainty that's affecting kind of our broader business, I think that's also affecting the merchant market. And you've seen there has been some recent kind of price adjustments in the merchant market. And in fact, we would say that the merchant market has been kind of a bigger cause of the recent decline in margins than the rebar market has. So put another way, rebar has actually been a little bit more stable in the current market than merchant is. In general, we think it's a great product. We think it's obviously a core part of our portfolio and we think we have high confidence in the ability to generate good returns from those products.

All right. Perfect. Thank you very much.

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

Hey, good morning.

Hey, Phil.

Good morning, Phil.

Can you just -- and you may have made comments on it already, but can you just remind us where you're setting your fiscal '25 CapEx budget and how much of that is dedicated to some of these newer growth projects that you have on the horizon?

Yeah, Phil, thanks for the question. Yes, we guided towards in the range of $630 million to $680 million with the preponderance of that clearly being related to Steel West Virginia. There's really three buckets of spend that we have. We have what I'd classify as our normal maintenance CapEx and that's got more than just maintenance, but it also includes some smaller improvement-type projects. But that runs at an annual level of around $250 million. And then you've got a bucket of growth outside the large projects. And for next year, that's going to be in that sort of $80 million to $100 million range, and then the balance of it is going to be Steel West Virginia. So we got some exciting organic growth projects that have very attractive returns. And so that's what's driving the CapEx in 2025 to be higher than where we've historically been.

And then when you look at inorganic opportunities, it certainly seems like a pillar or a focus of your team to continue to consummate in the years ahead. Do you have a view of whether or not this is going to be something you necessarily need to do annually? I know that there always has to be a meeting in the minds on the target, and timing and valuation. But do you want to do one a year, two a year? I mean, how big of a commitment should we think you're making inorganic opportunities as you grow that profile?

Well, Phil, I would say we're committed for sure, but I would say we're going to be -- we're going to value discipline over pace. So, we're not going to rush into doing things that we don't think make economic sense just to get something done. And again, in our situation, I think it's really important that we prioritize discipline. So that's going to be our goal. But we see a lot of -- on the positive side, in terms of momentum there, we see a lot of areas that are potentially interesting areas that are kind of product categories that are coming into a construction site at the same time that we are. So at the same time as our geogrid or at the same time as our rebars coming into the construction site, high margins take advantage of some of these megatrends in the industry like shortage of labor and so forth. And we think that those businesses can be really nice complements to what we're doing and again, pull our overall margins higher, give us a broader portfolio of products, and -- that we can, over the longer term, develop real synergies between.

Thank you.

Thank you, Phil.

And due to time constraints, I'd like to turn the conference back over to Mr. Matt. Please go ahead with your closing remarks.

Okay. Thank you, everyone, for joining. At CMC, we remain confident that our best days are ahead. The combination of the structural demand trends we have noted, operational and commercial excellence initiatives to strengthen our through-the-cycle performance and value accretive growth opportunities create an exciting future for our company. We are committed to a balanced capital allocation strategy that includes investments in our company's future and a return of capital to our shareholders. Thank you for joining us on today's call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.