Hello, and welcome everyone to the fiscal 2026 second quarter earnings call for Commercial Metals Company. Joining me on today's call are Peter Matt, Commercial Metals Company'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 Commercial Metals Company's investor relations website. Today's call is being recorded. After the company's remarks, we will have a question-and-answer session, and I will have a few instructions at that time. I would like to remind all participants that today's discussion contains forward-looking statements, including with respect to economic conditions, effects of legislation and trade actions, U.S. steel import levels, construction activity, demand for finished steel products and precast concrete products, the expected capabilities, benefits, costs, and timeline for construction of new facilities, the expected performance of our recently acquired precast platform, the company's operations, the company's strategic growth plan and its anticipated benefits, legal proceedings, the company's future results of operations, financial measures, and capital spending. These statements reflect the company's beliefs based on current conditions, but are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-K, and other filings with the U.S. Securities and Exchange Commission contains additional information concerning factors that could cause actual results to differ materially from those projected in those forward-looking statements. Except as required by law, Commercial Metals Company does not assume any obligation to update, amend, or clarify these statements. 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. Now for opening remarks and introductions, I will turn the call over to Peter.

Good morning, everyone, and thank you for joining Commercial Metals Company's second quarter earnings conference call. The Commercial Metals Company team delivered another excellent financial performance this quarter, propelled by solid operational and commercial execution, a favorable market backdrop in most regions, and the addition of our newly acquired precast platform. For the quarter, Commercial Metals Company reported net earnings of $93 million or $0.83 per diluted share. Excluding certain charges, which Paul will take you through in more detail, adjusted earnings were $130.1 million or $1.16 per diluted share. Commercial Metals Company's consolidated core EBITDA of $297.5 million grew by 114% from a year ago, while our core EBITDA margin of 14% increased by 610 basis points. Cash flow from operating activities likewise improved significantly over the same period. While the domestic market environment remains supportive and we are pleased with our results, I would note that profitability was impacted by abnormally disruptive weather conditions that temporarily reduced production and increased energy costs. Absent these factors, we believe performance would have been even stronger. Overall, our impressive second quarter results were built on the strategic foundation we laid over the last 24 months, including the launch of our TAG program, organizational realignment in critical areas, the addition of key talent and resources to support growth, and of course, the establishment of our new precast platform, which is a regional leader and one of the largest in the United States. These self-directed actions are driving bottom-line improvement and generating value for our shareholders, and we are confident that there is much more to come as we continue to transform our company into an even stronger organization with higher, more stable margins, earnings, cash flows, and returns on capital. The second quarter marked Commercial Metals Company's entry into the precast concrete…

Thank you, Peter, and good morning to everyone on the call. As noted earlier, we reported fiscal second quarter 2026 net earnings of $93 million or $0.83 per diluted share, compared to net earnings of $25.5 million or $0.22 per diluted share in the prior period, prior year period. During the quarter, we called out $47.2 million in pre-tax expenses, $45.1 million of which was associated with our recent acquisitions of CP&P and Foley. Of that amount, $20.6 million was incurred as transaction fees and costs supporting the integration efforts, while $24.5 million reflects non-cash adjustments related to purchase accounting treatment of inventory and order backlogs. During the quarter, we also recorded $4.1 million for interest on the judgment amount associated with the previously disclosed PSG litigation, as well as $2 million related to an unrealized gain on undesignated commodity hedges. Excluding these expenses, which amounted to $37.1 million on an after-tax basis, adjusted earnings for the quarter totaled $130.1 million or $1.16 per diluted share, compared to $35.8 million or $0.31 per diluted share, respectively, in the prior year period. Purchase price accounting adjustments for our acquisitions of CP&P and Foley are reflected in Commercial Metals Company's second quarter financial statements. These adjustments relate to the allocation of the estimated fair values of the assets and liabilities acquired and placed into Commercial Metals Company's balance sheet. On-hand inventory was adjusted to fair value, resulting in a write-up of $6.7 million. This entire amount was recognized in the quarter in adjusted EBITDA, but removed in our core EBITDA adjustments. Several of the balance sheet adjustments will be depreciated or amortized over time, which will not influence core EBITDA, but will impact net income and EPS. These include property, plant, and equipment, which will be depreciated on a straight-line basis, as…

Thank you, Paul. Turning to our outlook, we expect consolidated core EBITDA in the third quarter of fiscal 2026 to increase meaningfully from the second quarter levels due to normal seasonal improvement within our key markets and the continued margin strength across our North American footprint. North America Steel Group adjusted EBITDA is anticipated to rise modestly on a sequential basis on higher seasonal volumes, the impact of which will be partially offset by annual maintenance outages across the mill network that are expected to add approximately $15 million-$20 million in costs during the quarter. Financial results for the Construction Solutions Group are expected to nearly double compared to the second quarter of fiscal 2026. Europe Steel Group adjusted EBITDA should substantially improve on higher seasonal volumes, modestly improved metal margins, and the anticipated receipt of an approximately $20 million CO2 credit. I am confident that Commercial Metals Company is well-positioned to drive further growth during the second half of fiscal 2026. Solid market dynamics, additional benefits from our TAG program, and effective operational execution are generating momentum in Commercial Metals Company's existing businesses, which will be supplemented by contributions from our newly established precast platform. For the full fiscal year, we continue to anticipate the precast business will generate between $165 million and $175 million in EBITDA. Longer term, we remain focused on creating significant value for our shareholders by continuing to execute against our strategic plan, delivering meaningful and sustained enhancements to our margins, earnings, cash flow generation, and return on capital. I would like to conclude by thanking our customers for their trust and confidence in Commercial Metals Company and all of our employees for delivering yet another quarter of very solid safety and operational performance.

Thank you. At this time, we will now open the call to questions. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please limit yourself to one question and one follow-up. At this time, we will pause momentarily to assemble the roster. The first question will come from Alexander Hacking with Jefferies. Please go ahead.

Hey, morning, guys. Thank you for taking my question.

Morning.

Hey, Alexander.

I want to just touch on the 3Q guidance for the North American segment to have some offsetting negative impacts from some annual maintenance outages. Maybe if we could just get some more detail there. I don't believe in previous years, maintenance activity was called out during 3Q. I just wanted to see if that was related to maybe some of the scheduled activity during 2Q being deferred given some of the more extreme weather we have seen. Or is maybe some of this on the voluntary side given the anticipated supply coming out of the market? Thank you.

No, I think, thank you, Alexander, for the question. There are a couple things going on there. Some of the maintenance outages are normal maintenance outages that we would put into that quarter. Some of them were deferred from Q2 just given some of the weather challenges and also some of the challenges in getting contractors to support those maintenance outages. It's it wouldn't be our preference to have quite as much as we have in this quarter, but that's the way it fell this year. Obviously we will work in the future to spread them out more evenly.

Yep. Helpful. Thank you.

Yep. Thank you.

The next question will come from Bill Peterson with J.P. Morgan. Please go ahead.

Hi, good morning, and thanks for taking the question. I appreciate the color on the AD/CVD. However, you know, year-to-date annualized, we've heard reports are tracking in line with sort of 2022, 2024 levels, and given some countries like South Korea have been stepping into the market. Trying to get a sense in your view on non-duty impacted countries still in the import flow, and whether this may be a persistent trend. Maybe more broadly, how would you characterize the sort of supply ramps from your North American competitors and are you still seeing some discipline in the market?

Let me start with the second question you asked. We are seeing supply and demand in a, I'd say, a relatively balanced place at this juncture. The North American capacity increases are entering the market. We can see them. They're manageable at the current levels given the demand profile. In terms of imports, it is true that you have seen some elevated imports, but we don't think that those are likely durable. As a consequence, we expect that number one, just given the fact that we haven't learned anything about South Korean imports coming in that make us believe that they're gonna be more than the 150,000 tons that people have spoken about, we think that's manageable. Turkey, given the war, I think is going to be facing higher energy costs and higher transportation costs that I think for Turkey and for other importers are gonna make it more challenging. I'd say we have quite a sanguine view of where imports are gonna be this year, despite the 2 months that I think you're referring to.

I appreciate that. Appreciate that comment. You characterized the sort of cost impact, I think, for your Polish operations, if I caught it correctly, maybe potentially $15-$20 a ton. Is there a way to characterize any potential risk for North America, whether it be energy prices or perhaps on, you know, on concrete, which is a kind of an energy-intensive part of the market? Are there other pass-through mechanisms here? Is there any sort of key risks we should be thinking about if the conflict is prolonged?

Yeah. At this juncture, we are not seeing material cost challenges to our operations. Things like fuel surcharges, we are working to pass those through, so that we expect to recoup that. And we'll have to take any other inflationary impacts as they emerge and adjust accordingly. So far, we haven't felt that at all.

Bill, I would just add, you know, with respect to Europe, we are confident that because of the situation that Peter outlined on the call, that it's competitively better positioned, that we will be able to pass along price increases to offset the costs. We've seen that. We've announced price increases. I think, you know, overall, while we're seeing the cost increase from an overall performance perspective, we're confident that it won't impact the margins.

Great. Thanks for that, those insights.

Thanks, Bill.

The next question will come from Sathish Kasinathan with Bank of America. Please go ahead.

Hi, good morning, and thanks for taking my questions. My first question is on the outlook for shipments in the North American segment. You mentioned that the backlogs are up year-over-year and are at the highest level since 2023. You also had some weather issues in Q2 and have scheduled some maintenance outages in Q3. At the same time, you have Arizona 2 ramping up and potentially West Virginia Mill, which will start up soon. Given all the moving parts, can you maybe give a sense of a potential volume or uplift that you will see in Q3 and into Q4?

Yeah, I think so. For Q3, I think we should expect a normal change in shipments. If we look at what we saw in Q2, we did have the weather impacts, but they actually impacted the production from a cost perspective more than they did the shipments. So we expect kind of a normal move moving from Q2 to Q3. Into Q4, we will be just starting up West Virginia. We would expect, I would say again, kind of a normal transition between Q3 and Q4, given the fact that it's the, you know, early days of the startup, and so I wouldn't expect those volumes to really heavily impact the market.

Okay. Thank you. Maybe one question on the pricing side. The downstream product pricing saw the first uptake in nearly like three years. Based on some of the more recent project awards and the current bidding activity, can you maybe talk about how the pricing for new fabrication orders today compare to what it is in the backlog? In other words, I mean, like, does it, I mean, is the pricing covering the recent $150-$200 increase in rebar price that we have seen?

Yeah. Let me start on that, and then maybe Paul can jump in. First of all, the current pricing of the backlog is already reflecting the business that we're putting into the backlog. In fact, I would say today that the booking price is higher than the backlog price in our backlog. We see strong level of bookings. As we kind of look forward here, I think over the next couple of quarters, you should see the pricing impact turn into a tailwind. Remember that the pricing that you are seeing in our data sheets is the backlog that we're executing that we booked, say, nine months ago. I think over the next couple quarters, you should see kind of the pricing translate into a tailwind in margins and margins improve in that downstream business.

The only thing I would add, Sathish, is, you know, I think we've talked recently about the discipline on the commercial side in the fabrication of ensuring we get value for the service that we bring and ensure that we're getting the necessary margin on the downstream business that we think is warranted. That has certainly had a positive contribution to how the backlog is, you know, up at this time of the year. Recall that it was, you know, May, June, July last year that rebar pricing really started to increase. For us to already realize it here in the second quarter is accelerated versus historical time frames.

Okay, thank you for the color.

Thank you.

Again, if you have a question, please press star and then one. The next question will come from Katja Jancic with BMO Capital Markets. Please go ahead.

Hi. Thank you for taking my question. Maybe going back to the cost, especially on the power side, can you remind us what is the percent of your total production cost that is accounted by power or driven by power?

Yeah. Katja Jancic, if we exclude scrap from that calculation, electricity is in the 15%-20%. Natural gas is generally a pretty small number. I will also from a Polish perspective share that, you know, we've talked certainly in the energy crisis at the beginning of the Ukraine war, how we were better positioned. We are around 50% hedged with long-term power purchase agreements in place in Poland. While the cost of electricity has the potential for increasing dramatically, we're well protected. Again, back to what Peter Matt said during the call, Poland, because it's self-sufficient with a lot of coal, it's not as susceptible as other European nations are to the electricity price increases.

Is the percentage similar in the North American operations, I would assume?

Yes. Yes. That's fair.

Maybe just quickly on the TAG. What is the current run rate EBITDA benefits that you have achieved so far?

What we've said, Katja, on that is that by the end of the year, we expect to exceed $150 million, and we are on track for that. In fact, I'm highly confident we're gonna end up being ahead of that number. We have not given any further updates to that, but the project is very successful in the company and not just for the initiatives, but as we said in the past, it's really creating a new mindset in the company about improving ourselves from both an operational and a commercial perspectives. We feel very good about where we are with TAG.

Okay. Thank you.

Yep. Thank you.

The next question will come from Andrew Jones with UBS. Please go ahead.

Hi, gents. I just want to dig into the recent index price decrease on rebar and what you're seeing there. I mean, I'm curious to what extent that's, you know, Hybar linked or, you know, I mean, basically, how much of an effect are you seeing from those volumes ramping up in the market and potentially undercutting on price? Just curious to your thoughts on what's happening in the market there.

Yeah. Thanks, Andy. I would say, again, as I said before, supply and demand today in our view is pretty balanced. We feel that the new capacity coming into the market is pretty manageable. In terms of a price impact, I would say that, again, pretty manageable. It's fair to say there are a few pockets of weakness, but I think a lot of those are attributable to some of the winter conditions that we've had and the slowing business in that harsh winter that we've had. We expect as the demand comes into the construction season, that we are gonna see prices firm up, and we feel comfortable about where they are.

Okay. Thanks very much.

Thank you.

The next question will come from Tristan Gresser with BNP Paribas. Please go ahead.

Yes. Hi. Thank you for taking my questions. The first one is how should we think about the profitability of steel products versus downstream into Q3 and Q4? I think you mentioned steady margins for North America. Is that fair to say that we should see the downstream profitability increase and offset those lower margins for steel products?

Tristan, thanks for the call. Yeah, there's a number of moving pieces that will impact the North America Steel Group in the third quarter. First and foremost, we'll see the volume rebound. That's what one would expect, as Peter said earlier, from a seasonal backdrop. One key aspect to recall is, you know, what we saw in the second quarter were successive increases in scrap costs. While we saw the selling price increase, what we will see flow through our earnings will be that higher cost scrap. Our metal margin statistic is likely to be very stable. That's our outlook. The earnings will be slightly impacted by that lag effect of the scrap in Q3 versus Q2. In addition, we have the maintenance outages. As you mentioned, for the downstream business, which you know is roughly a third of our volumes in North America, we'll see a margin pick up from the continued rise in the selling prices or the realized selling prices.

All right. That's clear. My second question, if you could give us an update on the rebar micromill, Arizona to West Virginia. More specifically, I was looking at the U.S. rebar volumes. On fiscal 2026, would you expect some growth for rebar?

In terms of the West Virginia mill, we're on track for a startup beginning in June of 2026. That's pretty much right on time. We have been in prior calls, we've talked about the fact that we've had over 100 days of weather delays in the construction of that project. Really proud of the team for kind of getting us to a place where we are today and with in sight of the startup. In terms of the market growth, we expect modest market growth this year on rebar from probably in the range of, say, 1%-3%, I think is a good number.

All right. Thank you.

At this time, there appears to be no further questions. Mr. Matt, I'll now turn the call back over to you.

Thank you. At Commercial Metals Company, we remain confident that our best days are ahead. The combination of structural demand trends, operational and commercial excellence initiatives to strengthen our through the cycle performance and value accretive growth opportunities create an exciting future for our company. Thank you 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. Have a good day.

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