Yahoo Finance Commercial Metals (CMC) To Sell California Site for $300M
Commercial Metals Company CMC recently announced that it is selling its site in Rancho Cucamonga, CA in a deal worth around $300 million. The gross proceeds of the deal will be utilized to offset the cost of its new Arizona micro mill.
Rancho Cucamonga, located 40 miles east of Los Angeles, was home to the company’s Steel California and Rebar Etiwanda operations. The company had shuttered the Steel California operations in December 2020, citing high cost of doing business in California and stringent regulatory environment imposed by the state. The site sale is expected to close during the second quarter of fiscal 2022. Following the sale, Commercial Metals plans to service customers of its Rebar Etiwanda operations from its other fabrication locations. The site is expected to be repurposed for other industrial uses.
In August last year, Commercial Metals had announced it will build its third micro mill in Arizona. The company is progressing well with construction and the mill is anticipated to be commissioned in the second half of fiscal 2023. The mill will be the first in the world to produce merchant bar quality (MBQ) products through a continuous-continuous production process.
The facility will replace higher-cost rebar capacity and enable the company to efficiently meet West Coast demand for rebar and MBQ products with environmentally friendly technology. This calls for an investment of $300 million. It is anticipated to achieve an estimated nominal annual capacity of 500,000 tons, including 150,000 tons of merchant product. It is expected to generate $50 million in incremental EBITDA.
The company is also on track to complete the construction of its third rolling mill in Poland, which will begin commissioning in the fiscal third quarter, with commercial production to start shortly thereafter. Once fully operational, this mill is expected to generate incremental annual EBITDA of $20 million. The company will utilize the excess mill capacity to increase finished product output by roughly 200,000 tons.
Along with this, Commercial Metals continues to gain from its ongoing network optimization efforts, which will yield additional margin and reduce costs in the near future. The company is poised to benefit from robust steel demand, driven by elevated spending on residential and construction sector in North America, recovery in the manufacturing sector and strong highway infrastructure activities. Volumes in Europe are anticipated to remain healthy on the increasing demand from construction and industrial end market.
Price Performance
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The company’s shares have gained 48.1% over the past year compared with the industry’s rally of 92.7%.
Zacks Rank & Other Stocks to Consider
Commercial Metals flaunts a Zacks Rank #1 (Strong Buy) currently.
Some other top-ranked stocks in the basic materials space include AdvanSix Inc. ASIX, Atotech Limited ATC and The Chemours Company CC. While AdvanSix sports a Zacks Rank #1, Atotech and Chemours carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AdvanSix has a projected earnings growth rate of 160.4% for the current year. The company’s shares have appreciated 171.6% in a year.
Atotech has a projected earnings growth rate of roughly 122% for the current year. The company’s shares have rallied 24.4% in a year.
Chemours has a projected earnings growth rate of 86.4% for the current year. The company’s shares have rallied 38.7% in a year.
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