Manufacturer of steel and metal products Commercial Metals Co. (CMC) Tuesday morning reported a loss for the second quarter compared to a profit last year, hurt by lower volumes, pricing and margins as demand weakened. Looking ahead, the company expects a loss for the third quarter, but narrower sequentially.

The company noted that lower prices and lower inventory quantities triggered LIFO income during the second quarter which mitigated a substantial amount of inventory revaluation.

In a statement, president and chief executive officer, Murray McClean said, The deterioration of global steel markets continued during the quarter, reaching Eastern and Central Europe and Australia, our last markets of relative strength. Volumes, pricing, and margins all declined from the first quarter as destocking continued and demand remained weak.

Second Quarter Results

The Irving, Texas-based company reported net loss of $35.31 million or $0.32 per share for the second quarter, compared to net earnings of $39.78 million or $0.34 per share in the prior-year quarter.

The company reported a loss from continuing operations of $34.55 million or $0.31 per share, compared to earnings of $43.01 million or $0.36 per share in the year-ago quarter.

The latest second quarter include after-tax LIFO income of $80.7 million or $0.72 per share, compared to LIFO expense of $38.3 million or $0.32 per share in comparable quarter a year ago. The company had anticipated second quarter LIFO earnings per share to be near breakeven.

On average, ten analysts polled by Thomson Reuters expected earnings of $0.03 per share for the second quarter. Analysts' estimates typically exclude special items.

Total net sales for the quarter dropped to $1.62 billion from $2.25 billion in the same quarter last year, and missed seven Wall Street analysts' consensus estimate of $1.88 billion.

Segment-wise, Americas Recycling reported sales that plummeted to $138.79 million from $478.03 million and sales at Americas Mills also plunged to $281.29 million from $467.79 million.

At Americas Fab and Distribution segment, sales increased to $685.54 million from $636.90 million. International Mills reported second quarter sales drop to $136.67 million from $245.89 million. International Fab and Distribution segment had sales of $587.75 million, down from $752.53 million last year.

Total costs and expenses for the second quarter dropped to $1.65 billion from $2.19 billion in the prior-year quarter. However, selling, general and administrative expenses increased to $172.88 million from $157.41 million in the year-ago quarter

The company ended the second quarter with cash and cash equivalents of $114.46 million, compared to $75.44 million at end of the prior-year quarter.

Earlier in the month, Commercial Metals declared a quarterly cash dividend of $0.12 per share, payable on April 17, 2009 to stockholders of record on April 3, 2009. This is the 178th consecutive quarterly cash dividend paid by the company.

Six-Month Highlights

For the first six months of fiscal 2009, Commercial Metals reported net earnings of $26.70 million or $0.23 per share, sharply down from $108.94 million or $0.91 per share in the prior-year period.

Earnings from continuing operations for the period plunged to $21.73 million or $0.19 per share from $107.98 million or $0.90 per share in the year-ago period.

Total net sales for the year-to-date period dropped to $3.99 billion from $4.37 billion in the same period last year.

Looking ahead.

The company estimates that its Americas steel mills would likely operate at 50% to 60% of capacity with highway markets in the five state Texas region still decent, but weakness on both coasts. With less certainty in ability to estimate than in the past, the company anticipates a third quarter loss, but at lower levels than the second quarter.

The company noted that the effects of the U.S. stimulus package will not be felt until late in calendar 2009 and even then expected to be modest.

Stock Quote

In Tuesday's regular trading session, CMC is currently trading at $11.23, down $0.15 or 1.36% on a volume of 1.22 million shares. In the past 52-week period, the stock has been trading in a broad range of $6.25 to $39.80.

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