CMC — FY2026 Financial Report Analysis

A rebar boom, a precast buying spree, and a one-time tax credit

Commercial Metals Company (CMC), one of the largest US makers of steel reinforcing bar ("rebar", the steel rods set inside concrete), grew net sales 20.5% to $9.39 billion in fiscal 2026 (the year ended August 31, 2026), and net earnings jumped from $84.7 million to $655.8 million. That jump overstates the improvement: the prior year was flattened by a $362.3 million charge for losing an antitrust lawsuit, and this year was lifted by a $145.4 million federal tax credit for building its new West Virginia steel mill. Underneath both, the real story is wider steel margins in North America plus about $511 million of sales from two precast-concrete businesses CMC bought in December 2025, paid for largely with $2.0 billion of new bonds.

At a glance

• $627 per ton steel "metal margin" in North America, up from $509 (+23%). Metal margin is the gap between what CMC sells finished steel for and what it pays for the scrap metal it melts down to make it. Selling prices rose 17% to $981/ton while scrap cost rose only 6% to $354/ton — this one spread drove most of the profit gain.
• About $1.30 of the $5.86 diluted EPS came from a one-time tax credit. CMC's effective tax rate fell to 7.8% from 21.3% because a $145.4 million investment tax credit for the West Virginia mill was booked this year. Strip it out and GAAP EPS is roughly $4.56.
• $2.52 billion spent on acquisitions, funded with $2.0 billion of new debt. Interest expense more than tripled, from $45.5 million to $143.3 million, which is the cost of turning CMC into a bigger construction-materials supplier rather than just a steelmaker.

The numbers

CMC doesn't report an operating income line; the operating margin above is earnings before income taxes plus interest expense, divided by net sales. Excluding the lawsuit charge in both years it would be 9.3% versus 6.6%.

Where the profit came from

CMC reports three business segments and judges each by adjusted EBITDA — earnings before interest, tax, depreciation and amortization, a rough gauge of the cash profit a business throws off before financing and accounting write-downs.

North America Steel Group (74% of sales) is the engine. External net sales rose 15% to $6.998 billion and adjusted EBITDA rose 53%, or $392.1 million, to $1.135 billion. The filing attributes this "primarily" to the steel metal margin expanding 23%, "as the increase in steel products average selling price outpaced the increase in the cost of ferrous scrap." Volume was not the driver: steel product shipments were flat (rebar shipments actually fell 5% to 2.01 million tons, offset by merchant bar rising 7%). What grew was scrap sold to outside buyers (+19% in tons) and downstream fabricated rebar (+7% in tons).

The pricing backdrop is largely policy-made. Section 232 tariffs on imported steel went to 50% in June 2025, and during fiscal 2026 the US Commerce Department imposed antidumping duties on rebar from Algeria (127.32%), Bulgaria (53.27%), Egypt (34.20%–52.73%) and Vietnam (128.53%–136.57%) after petitions from a coalition that includes CMC. The 10-K itself warns that if these tariffs are relaxed or repealed, "a resurgence of substantial imports of foreign steel could occur."

Construction Solutions Group (14% of sales) nearly doubled: external sales up 79% to $1.339 billion and adjusted EBITDA up 112% to $292.1 million. Of that, the newly bought precast platform (Foley Products, acquired December 15, 2025, and Concrete Pipe & Precast, acquired December 1, 2025) supplied $511.1 million of sales and $143.5 million of adjusted EBITDA. Organically, Tensar (soil-stabilization products) added $27.5 million of adjusted EBITDA on higher demand and richer product mix, while the Performance Reinforcing Steel unit lost $14.7 million because of an unplanned outage at its Galvabar line. The earnings release adds that fourth-quarter precast adjusted EBITDA ($57.0 million) "fell below management's prior expectations," blamed on regional residential softness in the Southeast.

Europe Steel Group (Poland, 11% of sales) is the weak spot. Sales rose 11% to $1.020 billion — helped by a 5% rise in tons shipped after the EU's Carbon Border Adjustment Mechanism (a carbon-based levy on imports) took effect in January 2026, and by roughly $50 million of favorable currency translation as the dollar weakened against the zloty. Yet adjusted EBITDA fell 14% to $59.8 million, because Polish government energy-cost relief dropped to $36.0 million from $78.7 million. Steel metal margin there improved 12% to $325/ton, still about half the North American level.

What the headline numbers hide

• The 675% earnings jump is mostly two one-offs. FY2025 carried $362.3 million of litigation expense (roughly $274 million after tax, per the filing) from the Pacific Steel Group antitrust verdict; FY2026 carried only $15.4 million (mostly interest accruing on that judgment). FY2026 was then boosted by the $145.4 million Section 48C tax credit, which alone cut the effective tax rate by 20.4 percentage points. The judgment has not been paid — it sits in current liabilities while CMC appeals — so a real cash outflow is still ahead unless the appeal succeeds.
• "Adjusted" EPS of $6.82 still includes the tax credit. CMC's adjusted earnings ($762.9 million) add back $136.2 million of pre-tax items — the litigation expense, $49.0 million of acquisition and financing costs, $57.2 million of amortization of the acquired order backlog, a $6.7 million inventory purchase-accounting charge and hedge marks — but do not remove the 48C credit. Removing it would put adjusted EPS near $5.52, still up about 76% on FY2025's $3.13. That is the cleaner measure of how much better the business actually got.
• Cash conversion was strong, with an asterisk. Operating cash flow of $1.059 billion was 1.6 times net earnings, helped by $395.9 million of depreciation and amortization (up from $285.9 million as the acquired assets were added). But the tax credit is not cash yet: an income tax receivable of $131.6 million appeared on the balance sheet (versus $0.8 million a year earlier). After $579.8 million of capital spending, free cash flow was about $479 million, up from about $312 million.
• Working capital looks normal. Receivables grew 19.9% to $1.440 billion and inventory 18.2% to $1.105 billion, both slightly slower than the 20.5% sales growth, and both include the acquired precast businesses.
• Buybacks helped only a little. Diluted shares fell about 2% (114.1 million to 111.9 million) on $102.8 million of repurchases, so nearly all the per-share growth came from operations and the tax rate. Higher interest worked the other way: the extra $97.8 million of interest expense came straight out of pre-tax profit.
• The balance sheet is more leveraged. Total long-term debt (excluding finance leases) was $3.21 billion at year-end, and cash fell to $775.7 million from $1.043 billion. The company puts net debt at $2.60 billion, or 1.9 times its own "modified" EBITDA — a figure that annualizes the precast businesses' partial-year results, so it flatters slightly.

Takeaway: CMC's FY2026 earnings rest on a policy-supported steel spread: the North American metal margin widened by $118 a ton on flat shipments, while tariffs and antidumping duties kept imported rebar out. The precast acquisitions add a second leg, but they came with $2 billion of debt and a fourth quarter below plan — so FY2027 depends on that spread holding more than on anything CMC builds.

What comes next

Management did not give a full-year number, but for the first quarter of fiscal 2027 (September–November 2026) it expects North America Steel adjusted EBITDA to be "nearly flat" with the fourth quarter (which was $317.5 million), as better pricing offsets higher scrap costs, start-up expenses at West Virginia and a seasonal dip in shipments; Construction Solutions is expected to decline sequentially on normal seasonality. The release says downstream backlog volumes were up 15.5% year on year, with backlog pricing still rising.

Three things to watch. First, the West Virginia micro mill — CMC's fourth, placed in service in the fourth quarter, with sales expected to start in Q1 FY2027 — adds rebar capacity into a market where CMC's own rebar shipments fell this year; start-up costs come before the profit. Second, the precast businesses need to show the fourth-quarter miss was a regional residential blip, since the leverage math assumes about $212 million of annual EBITDA from them. Third, the Pacific Steel Group appeal: losing it means a cash payment of roughly $330 million plus fees and interest. CMC plans about $400 million of capital spending in fiscal 2027, lower than this year's $580 million, which should leave more free cash flow for debt reduction or the newly expanded $702 million buyback authorization. Our read: the business is earning far more per ton than a year ago, but that margin is tied to trade policy. The 48C tax credit is also not a recurring profit source — the filing says some recognition continues into 2027 as remaining mill assets go into service, but its size depends on those spending levels — so comparing FY2027 EPS against FY2026's tax-boosted $5.86 will need the same adjustment readers should make here.