Executive Summary / Key Takeaways

• Strategic Transformation Underway: Commercial Metals Company (CMC) is executing a "game-changing" strategy to transform into a leading early-stage construction solutions provider, aiming for sustainably higher, less volatile margins and improved returns on capital. This involves a pivot towards higher-value, lower-capital-intensity businesses like precast concrete.
• Transformative Acquisitions Drive Growth: The recent acquisitions of Concrete Pipe and Precast, LLC (CPP) and Foley Products Company are foundational to this strategy, creating the third-largest precast player in the U.S. This new platform is expected to generate approximately $250 million in adjusted EBITDA in calendar 2025 with EBITDA margins exceeding 34%, significantly enhancing CMC's financial profile.
• Operational Excellence Delivers Tangible Benefits: The "Transform, Advance, and Grow" (TAG) program, an enterprise-wide operational and commercial excellence initiative, generated $50 million in EBITDA benefits in fiscal year 2025, exceeding expectations. It is projected to achieve an annual run-rate EBITDA benefit of over $150 million by the end of fiscal 2026 with minimal capital investment.
• Robust Balance Sheet Supports Strategic Initiatives: Despite the significant acquisition outlays, CMC maintains a strong financial position with over $1.7 billion in total liquidity as of August 31, 2025. Management is committed to delevering to below two times net debt within 18 months, supported by strong free cash flow from the new precast platform, winding down capital expenditures for the Steel West Virginia micro mill, and substantial cash tax savings.
• Long-Term Demand Tailwinds: CMC is well-positioned to capitalize on powerful structural trends in North America, including infrastructure investment, reshoring of manufacturing, energy transition, AI infrastructure build-out, and addressing the U.S. housing shortage, which are expected to drive strong construction activity for years to come.

A Century of Steel and Sustainable Evolution

Commercial Metals Company, founded in 1915 as a single scrap yard in Dallas, Texas, has evolved into an innovative solutions provider for the global construction sector. Its business model is deeply rooted in sustainable principles, utilizing approximately 98% recycled material in its steel manufacturing processes via energy-efficient electric arc furnace (EAF) technology and employing closed-loop water recycling. This century-long commitment to sustainability is not merely an environmental stance but a core operational advantage, providing a secure supply of low-cost raw materials and differentiating its product offerings. CMC's operations are structured into three reportable segments: North America Steel Group, Emerging Businesses Group, and Europe Steel Group, reflecting its extensive manufacturing network across the U.S. and Central Europe.

The company's strategic journey has been marked by both organic and inorganic expansion. A period of significant growth in 2022 and 2023 saw CMC acquire several recycling and fabrication businesses, including Advanced Steel Recovery, Kodiak, Roane Metals Group, Tendon Systems, BOSTD America (geogrids), and EDSCO Fasteners (rebranded as CMC Anchoring Systems). These acquisitions broadened CMC's portfolio and strengthened its vertically integrated value chain. Concurrently, CMC invested in organic growth, commissioning its third EAF micro mill in Mesa, Arizona, in the fourth quarter of 2023, and initiating construction of a fourth EAF micro mill in Berkeley County, West Virginia, with melt shop production anticipated in 2026.

Technological Edge: Modern Steelmaking and Innovative Solutions

CMC's operational backbone is its advanced EAF steelmaking technology, which is inherently more efficient and environmentally friendly than traditional blast furnace methods, consuming less energy and producing significantly less carbon dioxide per ton of steel. The company's EAF micro mills, such as the one in Mesa, Arizona, utilize unique continuous process technology where metal flows uninterrupted from melting to casting to rolling into finished steel products. This innovation enhances operational efficiency and product quality. The Arizona II micro mill, notably the first in the world capable of producing both rebar and merchant bar products through a continuous process, exemplifies CMC's commitment to technological advancement. This flexibility allows CMC to adapt its product mix to market conditions, optimizing output for either rebar or merchant bar based on demand.

Beyond its core steel production, CMC differentiates itself through a portfolio of innovative, value-added products within its Emerging Businesses Group. Performance reinforcing steel offerings like Galvabar, ChromX, and CryoSteel provide advanced solutions for specific construction challenges. Galvabar, a galvanized rebar with a zinc alloy coating, offers superior corrosion protection and post-fabrication formability. ChromX is designed for high-strength capabilities and corrosion resistance, boasting a service life of over 100 years. CryoSteel provides cryogenic reinforcing steel that exceeds performance requirements at extremely low temperatures, crucial for specialized applications like LNG infrastructure. These products offer tangible benefits such as extended asset life, reduced construction costs and time, and enhanced durability, directly addressing critical needs in modern construction.

The Tensar division, a part of the Emerging Businesses Group, offers geogrids and Geopier foundation systems. Geogrids are polymer-based products used for ground stabilization, soil reinforcement, and asphalt optimization, contributing to extended road service life, water conservation, and reduced aggregate consumption. These solutions are inherently sustainable and help customers meet their own ESG objectives. Additionally, CMC Bridge Systems, through a licensing agreement with InQuik Inc., provides patented prefabricated and modular systems for constructing reinforced concrete bridge components off-site, which are then installed on-site. This technology reduces construction duration and labor usage, offering a compelling value proposition in an industry facing labor scarcity. These technological differentiators contribute to CMC's competitive moat by enabling higher average selling prices, lower overall project costs for customers, and a stronger market position in specialized, high-growth applications.

Strategic Transformation: Forging a High-Margin Future

CMC is actively pursuing a "game-changing" strategy to drive meaningful and sustainable improvements to its margins, earnings, cash flow, and returns on capital, while simultaneously reducing business volatility. This overarching strategy is built upon three interconnected pillars: investing in its people and pursuing excellence in all operations, driving value-accretive organic growth, and executing capability-enhancing inorganic growth. This strategic pivot is designed to deliver higher, more stable margins and cash flows through the cycle, alongside a significant step change in returns on capital.

The company's commitment to operational excellence is embodied in its "Transform, Advance, and Grow" (TAG) program, launched in fiscal 2025. This enterprise-wide initiative, encompassing over 150 distinct projects across all business lines and support functions, aims to permanently enhance CMC's margin profile. In its inaugural year, the TAG program generated $50 million in EBITDA benefits, exceeding initial expectations. Management projects an annual run-rate EBITDA benefit of more than $150 million by the end of fiscal 2026, with minimal associated capital investment. Specific initiatives under TAG include reducing alloy consumption and waste (expected to yield approximately $5 million annually), improving melt shop yields through enhanced technical knowledge sharing and disciplined processes (projected $5 million to $10 million annually), and optimizing logistics (targeting $5 million to $10 million in annual benefits). These efforts are designed to create sustainable improvements in CMC's cost structure and operational efficiency.

Organic growth remains a vital component of CMC's strategy, particularly through its micro mill investments. The Arizona II micro mill, which achieved positive adjusted EBITDA in Q4 2025, is expected to reach continuous profitability in fiscal 2026 and exit fiscal 2025 at a run rate near its nameplate capacity of 500,000 tons annually. The fourth micro mill under construction in Berkeley County, West Virginia, is on track for commissioning in late calendar 2025, with melt shop production expected to begin in 2026. This project is further bolstered by an approximately $80 million net tax credit under the 48C program, which will be realized in fiscal 2026, effectively reducing the capital investment and enhancing project returns. Beyond these large-scale mill projects, CMC is also making smaller, high-return organic investments in specialized solutions, such as expanding post-tension cable production, adding a second GalvaBar coating line, and increasing GeoGrid manufacturing capacity, all expected to be in service within the next 18 months.

The most recent and transformative aspect of CMC's strategy is its capability-enhancing inorganic growth, particularly its strategic entry into the precast concrete industry. On September 17, 2025, CMC announced the acquisition of Concrete Pipe and Precast, LLC (CPP) for $675 million. This was swiftly followed by the announcement on October 15, 2025, of the acquisition of Foley Products Company for approximately $1.84 billion. These two acquisitions will establish CMC as the third-largest precast player in the U.S., with 35 facilities across 14 states, primarily in the Mid-Atlantic and Southeast regions. The combined precast platform is projected to generate approximately $250 million of adjusted EBITDA in calendar 2025 (before growth and synergies) with EBITDA margins exceeding 34%. This significantly shifts CMC's earnings composition, with the Emerging Businesses Group and the new Precast platform expected to contribute over 32% of total operating segment adjusted EBITDA. The acquisitions are anticipated to be immediately accretive to earnings and free cash flow per share. Furthermore, the Foley acquisition alone is expected to generate annual run-rate synergies of $25 million to $30 million of EBITDA by year three, in addition to the $5 million to $10 million identified for CPP. Management emphasizes that these precast businesses are lower capital intensity, requiring less reinvestment for maintenance and organic growth, thereby enhancing free cash flows and reducing overall earnings and cash flow volatility for CMC.

Competitive Arena: Differentiated Strength in a Cyclical Industry

CMC operates within a highly competitive and cyclical global steel industry, facing rivals that range from regional players to large international conglomerates. Its competitive positioning is underpinned by a vertically integrated business model, a diversified product portfolio, and a strategically located operational footprint.

In the North America Steel Group, CMC competes with scrap metal processors and primary nonferrous scrap metal producers, where its recycling operations are among the largest in the U.S. for nonferrous scrap. In steel production, CMC is a major regional processor of ferrous scrap and believes it is the largest manufacturer and fabricator of rebar, the largest manufacturer of steel fence posts, and among the largest manufacturers of merchant bar in the U.S. This market leadership is a significant competitive advantage. In Poland, CMC is recognized as the second-largest producer of rebar and wire rod and the largest producer of merchant bar.

Compared to major competitors like Nucor Corporation (NUE) and Steel Dynamics Inc. (STLD), CMC's vertical integration provides an advantageous cost structure. Its recycling facilities supply low-cost scrap to its EAF steel mills, which in turn feed its fabrication operations. This closed-loop system ensures a secure supply of raw materials and consistent demand for its mill products, offering a strategic advantage, especially during periods of increased imports. While Nucor and Steel Dynamics are also highly efficient EAF producers, CMC's deep integration from scrap to fabricated products, coupled with its specialized downstream offerings, provides a differentiated value proposition to customers.

The Emerging Businesses Group further enhances CMC's competitive standing by offering specialized, high-value-added solutions that complement its core steel products. Products like Galvabar, ChromX, CryoSteel, and Tensar geogrids address niche, high-growth applications where standard materials may fail or where enhanced performance is critical. This allows CMC to capture higher margins and differentiate itself from competitors focused solely on commodity steel products. The strategic entry into the precast concrete market through the CPP and Foley acquisitions further diversifies CMC's portfolio into a sector with attractive margins and lower capital intensity, positioning it as a comprehensive early-stage construction solutions provider. This move broadens its commercial offerings and leverages existing customer relationships, creating a unique "one-stop shop" for many construction applications.

The global steel industry faces challenges from overcapacity, particularly from countries like China, which can lead to depressed prices from imports. CMC actively addresses this through its global strategy and differentiating customer service. Trade enforcement laws, such as Section 232 tariffs in the U.S. (restored and expanded in February 2025, with tariffs increasing to 50% in June 2025), provide a favorable backdrop for domestic long steel markets by supporting domestic production and reducing unfairly priced imports. Similarly, the European Union is considering bolstering trade legislation to reduce foreign steel quotas and impose higher tariffs, which could benefit CMC's Europe Steel Group. While these trade actions introduce uncertainty and can cause project delays in the near term, they are viewed by management as part of a broader program to stimulate domestic investment, which should benefit construction activity in the long term.

Financial Performance: Resilience Amidst Headwinds

Commercial Metals Company reported net sales of $7.80 billion for fiscal year 2025, a 2% decrease from $7.93 billion in fiscal year 2024. Net earnings for fiscal year 2025 significantly declined to $84.66 million, an 83% decrease from $485.49 million in 2024, primarily due to a substantial litigation expense. Diluted earnings per share (EPS) for 2025 stood at $0.74, down from $4.14 in 2024.

The primary driver of the year-over-year decrease in net earnings was a $362.30 million litigation expense recorded in 2025, related to a jury verdict in favor of Pacific Steel Group (PSG), which was subsequently trebled. This amount, classified as a current liability, represents CMC's estimate including attorneys' fees and post-judgment interest, and significantly impacted the company's profitability. Excluding this one-time charge, adjusted earnings for Q4 2025 were $155.0 million, or $1.37 per diluted share, surpassing analyst forecasts.

The North America Steel Group saw net sales to external customers decrease by 4% to $6.08 billion in 2025 from $6.31 billion in 2024. Adjusted EBITDA for this segment decreased by 21% to $742.485 million, primarily due to compression in steel and downstream products metal margins. However, Q4 2025 showed strong sequential expansion in steel product margins, reaching a two-year high, with adjusted EBITDA of $239.4 million, up 18% year-over-year. This was driven by higher margin over scrap cost and contributions from the TAG program.

The Emerging Businesses Group demonstrated resilience, with net sales increasing by 4% to $747.486 million in 2025 from $717.397 million in 2024. Adjusted EBITDA for this segment grew by 6% to $137.721 million, primarily driven by a $22.6 million increase in performance reinforcing steel offerings due to increased shipments and improved margins. Q4 2025 marked the best-ever quarterly results for this segment, with adjusted EBITDA of $50.6 million, up 19.1% year-over-year, fueled by strong demand for geogrids and proprietary products.

The Europe Steel Group experienced a notable turnaround, with net sales increasing by 8% to $918.320 million in 2025 from $848.566 million in 2024. Adjusted EBITDA surged by 208% to $69.282 million, largely due to a 10% increase in steel products shipment volumes and a $10 per ton expansion in steel products metal margin. The segment also benefited from $78.7 million in government assistance in 2025, up from $69.4 million in 2024, to offset rising energy costs. Q4 2025 adjusted EBITDA for this segment was $39.1 million, a significant improvement from a $3.6 million loss in the prior year, partly due to a $31 million CO2 credit.

Consolidated core EBITDA for Q4 2025 was $291.4 million, a 33% increase year-over-year, with a core EBITDA margin of 13.8%. This indicates improving operational performance despite the full-year impact of the litigation expense. Selling, General and Administrative (SGA) expenses increased by $31.8 million, or 5%, in 2025, primarily due to higher employee-related and information technology costs. The effective income tax rate for 2025 was 21.3%, down from 23.6% in 2024, reflecting the impact of the litigation loss.

Capital Allocation and Liquidity: Fueling Growth and Shareholder Returns

CMC maintains a robust financial position, providing significant flexibility to execute its strategic growth plan while returning value to shareholders. As of August 31, 2025, the company reported cash and cash equivalents of $1.04 billion, with total liquidity, including available credit facilities, exceeding $1.7 billion. This strong liquidity position is deemed sufficient by management to cover operations, capital expenditures, litigation expenses, dividends, and opportunistic share repurchases for at least the next twelve months, with long-term needs also expected to be met by cash flows from operations and financing arrangements.

The company's capital allocation strategy prioritizes value-accretive growth and competitive cash returns to stockholders. For fiscal 2026, capital spending is projected to be approximately $600 million, primarily driven by the ongoing construction of the fourth micro mill in Berkeley County, West Virginia. This includes about $350 million for the West Virginia mill and high-return growth investments in the Emerging Businesses Group, with the remaining $250 million allocated to normal sustaining investments and smaller organic growth projects.

A key aspect of CMC's financial strategy is its commitment to delevering following the significant acquisitions of CPP and Foley. The aggregate purchase price for these precast companies is $2.5 billion, expected to be funded through cash on hand, capital markets transactions, and borrowings. Following these transactions, CMC's net debt is projected to temporarily increase to approximately 2.7 times trailing twelve-month adjusted combined EBITDA. However, management is confident in its ability to reduce net leverage to below its long-term target of two times within 18 months.

This rapid deleveraging will be supported by strong free cash flow generation from the newly acquired precast platform, the wind-down of capital expenditures for the Steel West Virginia micro mill, and significant cash tax savings. These tax savings will stem from an $80 million net tax credit under the 48C program for the West Virginia mill and accelerated depreciation from the acquired Foley and CPMP assets, leading to no significant U.S. Federal cash taxes in fiscal 2026 and much of fiscal 2027.

CMC also maintains a consistent shareholder return policy. The Board declared its 244th consecutive quarterly cash dividend of $0.18 per share on October 15, 2025. While share repurchases will be temporarily slowed to offset employee share grants and prioritize delevering, they remain a critical component of the capital allocation strategy and are expected to ramp up once the net leverage target is achieved. As of August 31, 2025, CMC had $205 million remaining under its share repurchase authorization.

Outlook: A Clear Path to Enhanced Value

CMC's outlook for fiscal 2026 reflects a confident stance on continued operational improvement and market recovery, underpinned by its strategic initiatives. Consolidated financial results for fiscal 2026 are expected to be generally consistent with the strong performance observed in the fourth quarter of fiscal 2025.

For the first quarter of fiscal 2026, the North America Steel Group anticipates finished steel shipments to follow normal seasonal trends, with adjusted EBITDA margin expected to increase sequentially due to higher steel product margins over scrap. The Emerging Businesses Group is projected to see a sequential decline in financial results due to normal seasonality but an improvement year-over-year. The Europe Steel Group is expected to receive a second tranche of the annual CO2 credit, approximately $15 million, in Q1 2026. Excluding this credit, the segment's adjusted EBITDA is likely to be around breakeven, influenced by seasonal factors and scheduled maintenance outages.

Management's optimism is rooted in several key assumptions: the transient nature of current market softness, the imminent return to growth in core markets, and the sustained impact of powerful structural trends. These trends include robust infrastructure investment, the ongoing reshoring of industrial capacity, growth in energy generation and transmission, the build-out of AI infrastructure, and the persistent U.S. housing shortage. The Dodge Momentum Index, which reached a record high in September 2025, and improving business confidence across sectors, reinforce the expectation of substantial pent-up demand being unlocked.

The TAG program is a significant driver of this positive outlook, with an expected annual run-rate EBITDA benefit of over $150 million by the end of fiscal 2026. Organic growth projects, particularly the Arizona II micro mill (expected to be continuously profitable in 2026) and the Steel West Virginia micro mill (commissioning in late 2025), are also poised to contribute over $150 million in combined incremental EBITDA. The transformative acquisitions of CPP and Foley are expected to immediately enhance CMC's financial profile, contributing approximately $250 million in adjusted EBITDA from the new precast platform in calendar 2025. These factors, combined with disciplined capital allocation and significant cash tax savings, provide a clear path to enhanced shareholder value.

Conclusion

Commercial Metals Company stands at a pivotal juncture, strategically transforming its business to become a leading solutions provider in early-stage construction. The company's century-long foundation in sustainable steelmaking, coupled with its advanced EAF micro mill technology and innovative product offerings like performance reinforcing steels and geogrids, provides a distinct competitive edge. The "Transform, Advance, and Grow" (TAG) program is demonstrably enhancing operational efficiency and margin profiles, while significant organic investments in new micro mills are expanding its manufacturing capabilities.

The recent, transformative acquisitions of Foley Products Company and Concrete Pipe and Precast, LLC are set to create a high-margin, lower-capital-intensity precast platform, fundamentally shifting CMC's earnings composition and reducing volatility. This strategic pivot, alongside a disciplined capital allocation strategy focused on growth, consistent dividends, and a clear path to deleveraging, positions CMC to capitalize on powerful, multi-year structural demand trends in North American construction. Despite a recent litigation expense impacting fiscal 2025 net earnings, the underlying operational performance and forward guidance signal a robust outlook, making CMC a compelling investment thesis for those seeking exposure to a resilient and strategically evolving industrial leader.