Commercial Metals Profit Drops 89% On Slumping Demand

Commercial Metals Co.'s (CMC) fiscal fourth-quarter profit fell 89% as the steelmaker and recycler saw revenue halved amid lower demand and falling prices.

While demand and output were higher from the prior quarter, President and Chief Executive Murray R. McClean said the jump "was more due to restocking than any pickup in real demand."

Shares recently traded down 5.7% to $14.96 even as results weren't as bad as analysts feared. The stock is still up 26% this year.

McClean went on to say Commercial Metals remains concerned about continued sustainability of demand, and it saw negligible benefit from U.S. government stimulus. But those programs "are likely to be effective" starting in January, "but at a slow pace." He added private, nonresidential construction should remain weak, with fiscal first-quarter prices trending "moderately lower" with shipments at slightly lower levels than the fourth quarter.

For the period ended Aug. 31, Commercial Metals reported earnings of $7.2 million, or 6 cents a share, down from $63.5 million, or 55 cents, a year earlier. Inventory accounting boosted the latest quarter's bottom line by 21 cents, while it cut profit by 78 cents last year.

Revenue fell 51% to $1.5 billion.

Analysts polled by Thomson Reuters had most recently forecast earnings of a penny a share on $1.46 billion in sales.

 
   -By Nathan Becker, Dow Jones Newswires; 212-416-2855; [e-mail];