Commercial Metals Co (CMC) 2020 Q1 法說會逐字稿

Hello, and welcome, everyone, to the First Quarter Fiscal 2020 Earnings Call for Commercial Metals Company.

Today's call is being recorded.

(Operator Instructions)

I would like to remind all participants that during the course of this conference call, the company will make statements that provide information other than historical information and will include expectations regarding economic conditions, effects of legislation, U.S. steel import levels, U.S. construction activity, demand for finished steel products, the company's future operations, the company's future results of operations, the ability to realize the anticipated benefits of our investment in our new micro mill in Durant, Oklahoma and capital spending.

These and other similar statements are considered forward-looking and may involve speculation and are subject to risks and uncertainties that could cause actual results to differ materially from these expectations.

These statements reflect the company's beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are described in the Risk Factors section of the company's latest annual report on Form 10-K.

Although these statements are based on management's current expectations and beliefs, CMC offers no assurance that these expectations or beliefs will prove to have been correct, and actual results may vary materially.

All statements are made only as of this date.

Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements in connection with future events, changes in assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise.

Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release or on the company's website.

Unless stated otherwise, all references made to year or quarter end are references to the company's fiscal year or fiscal quarter.

And now for opening remarks and introductions, I will turn the call over to the Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, Ms. Barbara Smith.

Please go ahead.

Thank you, Andrea.

Good morning, and thank you for joining the call to review CMC's results for the first quarter of fiscal 2020.

I'd like to start by wishing everyone a happy new year as we roll the calendar forward to a new decade.

I'll begin the call with highlights for the first quarter.

Paul Lawrence will then cover the quarterly financial information in more detail, and I will conclude our prepared remarks with a discussion of our outlook for the second quarter of fiscal 2020, after which we will open the call to questions.

As announced in our earnings release this morning, we reported fiscal first quarter 2020 earnings from continuing operations of $82.8 million or $0.69 per diluted share on net sales of $1.4 billion.

Excluding the impact of certain facility closure costs, our adjusted earnings from continuing operations were $87.8 million or $0.73 per diluted share.

I'm very proud of the CMC team's first quarter performance.

Through our deliberate actions and a supportive market environment, we generated the highest quarterly core EBITDA in over a decade.

These results are the best we have ever achieved with our strategically repositioned portfolio of manufacturing-focused operations.

This quarter is certainly one in which we can see the full fruits of a sound strategy and our employees' ability to execute.

While the CMC team should be proud of these results, there is still further to go and more opportunity ahead.

It's worth reviewing some of the highlights and key accomplishments this quarter.

Our fabrication segment was a strong contributor to earnings.

Solid bottom line results should continue over the next several quarters.

Our mills continued their work to enhance product mix capabilities.

Domestic mill shipments of merchant bars, spooled rebar and high-value rebar increased by 14% over last year's first quarter.

The addition of a new mill capacity gives us the flexibility to strategically redirect some production towards higher-value products.

We continued our mill network optimization efforts, most recently through the closure of the Rancho Cucamonga melt shop, a decision driven by the high energy and compliance costs of manufacturing in California.

This move will lower the cost of finished rebar out of Rancho while supporting utilization rates at our other CMC mills.

Strong financial results require satisfied customers.

And we maintained our industry-leading customer service ranking in the most recent Jacobson survey.

Solid earnings and good working capital management allowed us to further strengthen our balance sheet.

We reduced total debt by $51.5 million during the quarter, bringing gross debt to a little over 2x trailing 12-month core EBITDA.

This is in line with investment-grade issuers and better than the metals and mining sector average of 2.5x.

As a result of everything I previously mentioned, CMC has generated a core annualized ROIC of nearly 15% over the last 3 quarters, a return well above our cost of capital that we believe provides attractive returns to our stakeholders.

Finally, as I noted in our press release, as noted in our press release, the Board of Directors declared a quarterly cash dividend of $0.12 per share of CMC common stock for stockholders of record on January 15, 2020.

The dividend will be paid on January 30, 2020.

This represents CMC's 221st consecutive quarterly dividend.

Turning to market outlook.

We are positioned to continue benefiting from the positive trends in our core markets and remain optimistic about the construction market, as many of the macro indicators we monitor point to resilience ahead.

Let me now cover some of them.

U.S. construction spending continues to grow year-over-year, led by public projects.

In particular, we're seeing strength in state and local highway spending.

The Architectural Billings Index, a leading indicator for construction expansion remains supportive of future growth.

The South and West regions show the highest readings, both core markets for CMC.

U.S. unemployment rates and interest rates remain historically low, contributing to positive sentiment within our markets and giving customers confidence to make investment decisions.

Finally, our own bidding activity remains strong, offering encouragement that the pipeline of work is solid.

I would further add that our fabrication backlog sits at a healthy volume and pricing levels.

The average price per ton in our backlog is up nearly $100 from 1 year ago, and we expect it to be profitable when shipped given current rebar prices.

Turning to the markets we serve in Europe.

The Polish economy remains among the fastest-growing in Europe with GDP expansion of 4.1% in the most recent quarter.

The outlook for calendar 2020 calls for continued growth of 3.5% to 4.5%.

Similar to the U.S., Poland's unemployment rate is at historic lows.

Construction activity is healthy, with committed EU funding in place to support infrastructure investment through 2023, which we expect to benefit rebar demand.

However, the outlook for nearby industrial markets, such as German manufacturing, is less robust, which will negatively impact exports of wire rod and merchant products.

With that as an overview, I'll now turn the discussion over to Paul Lawrence, Vice President and Chief Financial Officer, to provide some more comments on the results for the quarter.

Paul?

Thank you, Barbara, and good morning to everyone joining us on the call.

As Barbara mentioned, for the first quarter, we reported earnings from continuing operations of $82.8 million or $0.69 per diluted share compared to earnings from continuing operations of $19.4 million or $0.16 per diluted share in the first quarter of 2019.

First quarter 2020 results include after-tax costs of $5.0 million related to the closure of the Rancho Cucamonga, California melting operations.

Excluding these costs, adjusted earnings from continuing operations were $87.8 million or $0.73 per diluted shares.

Our core EBITDA from continuing operations was $174.4 million for the first quarter of 2020, an increase of 78% compared to the $97.7 million reported for the first quarter of 2019.

This does not include $8.3 million benefit from the amortization of the unfavorable acquired contracts.

As a reminder, we no longer provide specific financial performance for operations related to the rebar assets acquisition completed last year, as these locations are now fully integrated into our network of operations.

That said, we continue to be pleased with our performance.

The acquired mills remain nicely profitable in the first quarter, and the acquired fabrication facilities contributed to the overall positive EBITDA results of the fabrication segment.

Now I will review our results by segment for the first quarter.

Americas Recycling segment recorded adjusted EBITDA of $3.4 million for the first quarter of 2020 compared to adjusted EBITDA of $15.4 million in the same period last year.

Market environment was challenging, with the recycling segment facing the effects of low ferrous pricing as well as constrained scrap flows in our yards.

Our average ferrous selling price declined by 33% from the first quarter of 2019, while total ferrous and nonferrous shipments declined by 14%.

Importantly, we were able to continue to generate positive EBITDA in this difficult environment through a focus on disciplined material buying, cost control and rapid inventory turnover.

The Americas Mills segment recorded adjusted EBITDA of $155.0 million for the first quarter of 2020 compared to adjusted EBITDA of $113.9 million for the first quarter of 2019.

Shipment volumes increased compared to the first quarter of last year, primarily driven by 2 additional months of contribution from the acquired mills.

Selling prices declined by $34 per ton from the fourth quarter, but the reduction in ferrous scrap costs of $20 per ton allowed our mills to maintain high metal margins of $385 per ton.

This was $10 per ton higher than a year ago, but a $14 per ton sequential quarter decline.

Within the context of a significant pricing volatility across the steel industry, we have managed 5 consecutive quarters of metal margins within a tight $25 per ton range.

We believe that this points to greater stability of our products and end markets compared to the broader domestic steel industry.

The Americas Fabrication segment recorded adjusted EBITDA of $17.5 million in the first quarter of 2020 compared to an adjusted EBITDA loss of $37.0 million in the prior year quarter.

As in the past, these results do not include the benefit from amortization of the unfavorable acquired contracts.

Financial performance improved as a result of rising selling prices against declining rebar input costs, which led to significant margin expansion.

Average selling prices of $976 per ton increased by $108 compared to the first quarter of 2019.

High-priced work booked more recently has replaced the lower-priced projects awarded prior to the Section 232 tariffs being implemented.

As mentioned by Barbara, our backlog is favorably priced, and we expect it to be profitable when shipped in future quarters.

International Mill segment recorded adjusted EBITDA of $11.4 million for the first quarter of 2020 compared to adjusted EBITDA of $32.8 million in the prior year quarter.

Volume decreased by 54,000 tons or 14% compared to the prior year, due primarily to the absence of opportunistic billet sales made during the first quarter of 2019.

Rebar shipments increased year-over-year, demonstrating the ongoing health of the construction-related demand in the domestic Polish market.

Volumes of merchant product were impacted, however, by lower German industrial demand.

Metal margins were down on both a year-over-year and sequential quarter basis, pressured by a continued surge of imported material.

European safeguard measures have, thus far, been ineffective in deterring disruptive imports from countries like Turkey, Russia and Ukraine.

As demonstrated that during the third quarter of 2019, the market share of rebar imported into the EU spiked to over 18%, which is the highest level since 2017.

With respect to our consolidated results, our effective tax rate for the quarter was 24.8%, which we anticipate will approximate our effective tax rate for 2020.

Turning to our balance sheet and liquidity.

As of the end of the quarter, cash and cash equivalents totaled $224.8 million, and we had availability under our credit and accounts receivable program of approximately $660 million.

During the quarter, we generated $146 million of cash from operating activities.

Strong earnings and working capital management allowed us to increase our cash balance sequentially, even while funding $45.6 million of capital expenditures and reducing debt by $51.5 million.

Turning to capital expenditures.

We estimate spending for fiscal 2020 will be in the range of $160 million to $185 million.

As we look forward, our capital allocation will continue to place debt reduction as a priority.

Finally, as you'll note on our balance sheet and in our Form 10-Q, to be soon filed, CMC adopted the new lease accounting standard this quarter, which resulted in an opening balance sheet adjustment to gross up our assets and liabilities by approximately $115.8 million.

This concludes my remarks, and now I'll turn it back to Barbara for the outlook.

Thank you, Paul.

We remain confident in the underlying strength of construction-related demand for the remainder of fiscal 2020.

Our backlog is strong, and our customers also indicate that their backlogs are healthy.

However, we do expect typical seasonality to impact our second quarter given that holidays and winter weather conditions tend to slow activity.

We expect metal margins to remain above past cyclical averages, but decline from first quarter levels.

Recycling should benefit from recent upward movements in the price of ferrous scrap, and fabrication is poised to continue contributing positively given the solid backlog.

While demand remains strong, margins within our Polish operations will remain under pressure from imported products.

We're proud of our company's excellent first quarter results.

Our team is working hard to maintain this positive momentum with a focus on network optimization, customer service and enhanced product capabilities.

Thank you, again, for joining.

And at this time, we'll now open the call to questions.

(Operator Instructions) Our first question comes from Matthew Korn of Goldman Sachs.

Happy New Year, Barbara, Paul.

Great way to start off the new year.

Congratulations.

Thank you, Matthew.

We couldn't agree more.

A couple from me.

First, given the increase in scrap costs that we saw in December and now seemingly anticipated for January, what kind of success are you seeing right now in achieving higher rebar pricing in the market?

And then maybe you could remind us, how much of a lag is there before any higher rebar costs would start to flow into the material costs for the fabrication segment?

Yes.

Maybe I'll take the first half, and then I'll let Paul comment on the lag effects.

There have been some recent adjustments in the marketplace, Matthew.

So I think prices are starting to firm, and you will see the -- part of that scrap price increase that we've seen over the last couple of months start to make its way into the market.

With respect to the second part of the question, we transfer material from the mills to the fab segment at market pricing, so really the lag is just with respect to the volumes of inventory that we have at the fab locations, which is somewhere less than 30 days on average.

Okay, great.

Let me follow up then on fabrication.

I saw your volumes did show a downturn quarter-to-quarter.

And from your commentary, it appears that you're anticipating a seasonal decline in the 2Q for fab as well.

How do I put that in context of the strength in order rates, the strength in backlog that you highlight?

Does this reflect any frictions as you've closed, I think, some of the acquired facilities?

When we look at 2Q volumes, should we -- can we expect them to be lower year-over-year?

Should they be kind of flat?

How would we think about that?

Yes.

I think, Matthew, we tend to get the beginnings of holiday impacts in November with the Thanksgiving holiday, and I think the volume is really reflective of that holiday.

And then second quarter, you have the same phenomenon, and then you have winter weather that can also contribute to differences or changes in your shipping levels.

So second quarter is always, I think, the hardest for ourselves to forecast and for The Street because you have the Christmas holiday and then, of course, February is a short month.

But there wasn't anything unusual that was affected by our decisions to consolidate facilities.

Our next question comes from Martin Englert of Jefferies.

So within Americas Mills over the past couple of quarters, the ASPs seem to be benefiting from a richer mix versus history.

And you provided a little bit of context in the introductory remarks, but can you provide a little bit more color on what exactly is changing there or has changed?

And if this is expected to sustain?

Well, we're always looking at ways to optimize the product mix.

And as you know, we've introduced some higher value-add products recently, the most notable being the spooled rebar.

And it is a product that can garner a premium to other straight rebar.

But then we have our merchant product line that we also are always looking for ways to serve our customers better, and that can change our product mix depending upon demand in industrial markets versus demand on the construction side.

The acquisition opened up a lot of opportunities for us, now that we have a much larger amount of available capacity.

And so I think you're going to see us just continuously try to enhance that product mix as we move forward.

Okay, thanks for the color there.

That's helpful.

And as a follow-up there, within fabrication, EBITDA was generated over $40 per ton for the quarter.

Can you remind us where you believe normalized profitability is?

And then your thoughts on the near term, if we might see an incremental step-up from here and maybe some over-earning relative to this quarter over the subsequent quarters?

Thanks, Martin.

I'll take this question.

I think what we have guided in the past is a normalized through the cycle margin of $40 per ton, which essentially we saw, as you pointed out, in this first quarter.

And as we look for the full 2020, that's really where we think things will be, obviously dependent on any sharp changes in rebar input pricing.

But I think where we see our backlog, we really see that the selling price will be within a relatively narrow band of what we saw in the first quarter for the balance of the year.

Okay.

Thanks for all the detail there and congratulations on the results.

Thank you, Martin.

Our next question comes from Seth Rosenfeld of Exane BMP.

I have a couple of questions.

If we go back to the outlook for the American Mills segment and with the conversion costs, please.

Conversion costs did seem to become a bit below our expectations in Q1.

I know, obviously, you've now integrated the legacy Gerdau assets and the legacy CMC assets, but can you provide a bit more color on what the drivers of the sequential improvement have been?

And in particular, are the Gerdau assets now operating in line with the CMC facilities on a conversion cost basis?

Or is there incremental kind of post-synergy upside there that we could look forward to?

I'll start there, please.

Okay.

I'll make some comments, and then I'll let Paul add any color he would like.

I think if you look at the last 2 or 3 quarters, conversion cost has been hovering around $250 a ton.

And we, at this point, believe we can sustain that on a go-forward basis.

That obviously is impacted to some degree by product mix.

If we were to have a heavier product mix of merchant product, that could affect that number.

But anyway, we think it will be sustained at that level.

And we don't give specific mill conversion cost numbers, and I don't want to -- for obvious competitive reasons, so I'm not going to make any comments there.

Only to say that one of CMC's key strengths is to continuously work on improving our cost structure.

And our decision around Rancho Cucamonga, while a very difficult decision because it impacted some of our workers out there, was a decision that was carefully thought through, and all aimed at lowering our overall cost to service our customer.

The only piece I would add to that, Seth, is that as we look forward to the second quarter, we've got some outages coming that we'll likely see an increase in our manufacturing costs to the tune of $10 to $15.

We take the opportunity during these slower periods to do some of these maintenance activities.

And now that we have 9 mills in the U.S., it's a significant opportunity to address some of these issues.

And separately, on the Polish outlook, please, you continue to talk about the strong import pressure within Europe.

I was wondering if you're seeing any incremental improvements on the horizon.

With regards to the safeguard measures, obviously, they haven't done a great deal to date.

But our understanding is that the import quotas have now been fully exhausted for Turkey, will be shortly exhausted for Russia and Ukraine as well.

Is there any shift in buyer behavior as some of the key historic sources of imported material begin to dry up or face incremental tariffs?

Yes.

Thanks, Seth, you've been on the ground over there, so you know that market well.

I guess I want to say a couple of comments about your statement that the safeguard measures have been not effective.

I think initially, the initial safeguard measures, which were -- basically mirrored the 232 measures did have a similar effect on the market in Europe, although some of the importing countries are closer to the European market.

And so they've redirected some of the U.S. material to Europe.

I think initially, they were effective.

It was when the EU converted to the quota system that started to disrupt that market more.

And as you know, they have adjusted that quota system to take into account some of the abuses they were seeing as they transitioned to the quota system.

And as you point out, the quotas have been met for the year.

I think it was in July.

And that material is working its way through the system.

And I guess we would rather wait and see the -- how that flows through and the effect that it has on the market.

But certainly, one would expect, as that material flows through, that it would give the domestic producers more opportunity, and we certainly would look to take advantage of that.

(Operator Instructions) And our next question will come from Chris Terry of Deutsche Bank.

Barbara and Paul, and congrats on a great quarter.

Just one question from me.

I just wanted to follow up a little bit on fabrication and the $40 per ton margin that you're already at versus the historical level that's around there.

Going forward, obviously, rebar potentially moving back up for that business could be a headwind.

But just trying to understand why you won't earn above that in some quarters for the rest of this year, just thinking about the move down in rebar and the lag on the contracts and as you start to reset some of those.

So just wanted a little bit more detail, if I can, please.

I'll open it up, and Paul can remark.

I think, Chris, certainly, that opportunity always exists, right?

And with the trend that prices have been on, that's been a positive for our fab.

And as I indicated earlier, prices look to be firming.

But that backlog is a -- it's a mix of a wide range of projects at varying pricing and varying duration and schedules of shipments.

So again, taking the longer view of the year, we think for modeling purposes it would be appropriate to start with that $40.

And certainly, if there is opportunity for upside, we're going to chase it as hard as we can.

Our next question comes from Michael Gambardella of JPMorgan.

Happy New Year, Barbara and Paul, and congratulations on the continued success.

Thank you, Mike.

Thanks, Mike.

I have a couple of questions.

One on trade.

Have you seen any change in trade patterns coming out of Mexico and into your U.S. markets since the 232 was eliminated for Mexico?

Yes.

We have seen an increase of products flowing from Mexico into the U.S. We monitor all these flows on a consistent basis.

I don't think that it's at a concerning level at this stage, Mike, but we certainly monitor that carefully.

And you may have remembered that there was a circumvention case that was brought to Commerce a few months back.

This case was based upon actually a product that was shipped prior to the changes in 232 sanctions against Mexico, where they were marking the material as fabricated, and it clearly was not fabricated.

And so we had to produce the evidence, and we took it to the Coalition, the Coalition has taken it to Commerce.

And Commerce has agreed with us that there is a case to be looked at here.

So we do look forward to Commerce's conclusions.

We think that, that is a very clear case of circumvention.

And when that conclusion comes, that will affect, I think, the flows out of Mexico and could bring some needed sanctions against Mexico for trying to circumvent the system.

So as you know, it's always something that you have to monitor.

And a lot of these countries tend to find workarounds, if you will.

All right.

And how do you track or try to prevent circumvention or transshipping of just steel mill products through Mexico?

It's always challenging.

But we have pretty good intelligence, and we also follow what's going on with other products.

And there's just a lot of -- we've come to learn all the loopholes that these other countries try to exploit.

Can you be 100% sure that we're catching all of these?

No.

But I think the good news is that we have an administration that is committed to stopping these abuses when they see them.

And I think that the actions, thus far, have been pretty effective.

And I should also point out, there have been some changes to the existing trade, I don't want to say laws, but the rules associated with administering those laws that are more helpful to when we do find situations of abuse, and it will be helpful in future trade cases on a go-forward basis.

So it's just a process of being extremely diligent, and that's where working together with our peer companies and the SMA and our trade attorneys try to share all of that good intelligence that we get with each other.

Okay.

And then final question.

Just in regards to the consolidation with the Gerdau assets.

Any more updates on maybe some strategic moves or additional cost savings there?

Well, Mike, we look forward to everything that we executed on last year, flowing through this year.

And I think the big opportunity for 2020 is really -- we're going to be focusing on optimizing the network and that could free up working capital, which could give us more flexibility for strengthening the balance sheet or more flexibility to look at other growth opportunities.

But we do see some nice opportunity there.

But that optimization also is producing the product at the lowest cost across the system.

And then also optimization to us means trying to maximize the product mix that we can produce across our network of mills based upon all of the regional market demands.

And as you know, we not only produce rebar, but we produce merchant product.

And prior to the acquisition, we were really capacity-constrained because many of our mills were running at very, very healthy utilization rates.

And with the expansion of our footprint that has freed up opportunities for us to really allocate more capacity to our merchant customers who have wanted to buy more from us over time, but we just didn't have the capacity to commit to them.

That's where our efforts are in 2020, and then we'll always be looking for cost reduction.

But there's not going to be the, I'll call it, huge cost reduction numbers like we were able to capture last year.

It will be more just, "Now that we have it, how do we optimize?"

Our next question comes from John Tumazos of John Tumazos Very Independent Research.

I apologize, I might be asking the same question over again in a different way.

In October and December data, rebar imports were around 60,000 - 62,000 tons.

Do you expect that they will fall even more as your new cores, new mills produce more?

Or do you think that they're going to rise back with the Mexican action or $50 to $100 domestic price hikes with higher scrap prices?

Thank you, John and Happy New Year.

I guess, I'm not going to speculate.

We are monitoring all of those situations carefully.

The only thing I would say is there is not a real big incentive at this point in time for buyers to prioritize imported product over domestic product.

And if that situation remains, then import levels should remain muted as they've been for some period of time.

But I really can't speculate at this stage.

Our next question comes from Alex Hacking of Citi.

Happy New Year, Barbara and Paul, and let me add my congratulations.

It sure seems like you guys delivered on everything over the last 12 months that you said you were going to.

Thank you.

That's our commitment, that we try to do.

So thank you.

So in terms of questions, I just have a couple.

The first one is you mentioned the opportunity to ship more merchant bar out of your legacy mills.

Haven't really seen that so far.

When you -- if you're able to realize that opportunity, does that change your mix of EBITDA per ton?

Or is that just simply an opportunity to increase throughput?

Alex, if you look at market share, I think what we would find is we're actually gaining market share, which is fruition to the efforts that we're taking in expanding the merchant footprint.

The overall merchant market is down on a year-over-year basis.

And so that's, I think, probably where you're seeing some of the lack of growth.

But overall, as far as market is concerned, we are gaining market share and really taking full advantage of the opportunity of starting to shift material around with the new group of mills.

And I think that, as you also know, Bayou shuttered operations, which that has opened up opportunity for us on the merchant side as well.

But I would point out, I mean, service centers have been destocking.

Last numbers I looked at, their inventory levels were really low, and that's normally what they do at the end of the year, when they have to pay personal property tax and those sorts of things.

So we do look forward to industrial markets potentially picking up here and also service centers beginning to restock a bit.

Thanks for the clarification on the market dynamics.

I guess, through the cycle, would you expect the EBITDA per ton to be similar in merchant bar to in rebar?

Or is there a structural difference there?

Historically, there has been a difference.

There is additional cost of production associated with merchant, obviously, with the various sizes and grades and more change over time to produce the full range of merchant products.

Though the premium of merchant to rebar will fluctuate through the cycle depending upon market dynamics.

And there's less of a premium today than what there has been historically, but we would expect to see those trends to moderate back to historical trends, given the right set of market conditions.

Okay.

And then just to follow up on the legacy Gerdau assets.

I think you've already answered this effectively.

But when we look back -- you've had them for a little bit more than a year now running them.

When we look back before you bought these assets, the EBITDA per ton sure seemed like it was quite a bit lower than what CMC's EBITDA per ton in rebar was.

But now when we look at your financial results that you've delivered over the past few months, it's very hard to see any kind of margin dilution at all.

In fact, it almost seems like -- it almost seems like the opposite.

So do you believe that -- I mean, have you effectively closed that gap in those Gerdau assets, and now running to the standard that you would expect of CMC mills?

And therefore, the incremental opportunity is, as you described earlier, in kind of the network stuff?

Or is there still work to be done to get those Gerdau assets up to the standard of your legacy commercial metal mills?

Well, thank you, Alex, for acknowledging the work that we've done.

And I know that when we initially concluded this, of course, folks, as John pointed out, tried to speculate what we can and can't do with the assets.

So I'm very, very proud of what our team has been able to accomplish in really a very short period of time.

The integration was flawless, not only from integrating the new mills in, but not dropping any balls at our existing operations, and it just speaks to the history of CMC of being very, very good operators.

And so I'm incredibly proud of the progress that we've made, and I really appreciate you acknowledging that.

What I would say is we have a portfolio of assets from our 2 state-of-the-art micro mills, which are, by far, from a rebar production vantage point, are best in the system.

So there is a range.

However, you can see that, as a portfolio, we're managing that quite effectively.

And so the progress is not going to stop in terms of finding ways to continue to improve not only the new mills, but also our existing operations, and that's something that's been a core competency of CMC and what's allowed us to be successful.

And as you all know, a very challenging environment, steel industry is cyclical and volatile, and we are working every day to be low-cost and to provide our customers differentiated service and manage the best results and the best returns we can with all those dynamics.

At this time, there appear to be no more questions.

Ms. Smith, I'll turn the call back to you for closing remarks.

Thank you.

I want to thank you, again, for joining us on today's conference call.

We look forward to speaking with many of you during our investor visits in the coming weeks.

This concludes today's Commercial Metals Company conference call.

You may now disconnect.