Commercial Metals Co
NYSE:CMC
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Commercial Metals Co
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Hello. And welcome everyone, to today's Commercial Metals Company Second Fiscal Quarter of 2018 Earnings Call. Today's call is being recorded. After the Company’s remarks, we will have a question-and-answer session, and we’ll have a few instructions at that time.
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 key macroeconomic drivers that impact our business, our margins, refinancing plans, the exit from our International Marketing and Distribution segment, the Company's future operations, the Company's planned new steel mill in Oklahoma, capital spending and the Company's planned acquisition of certain U.S. rebar assets of Gerdau S.A.
These statements generally can be identified by phrases such as we, the Company, CMC, or management, expects, anticipates, believes, estimates, intends, plans to, ought, could, will, should, likely, appears, potential, outlook or other similar words or phrases. These and other similar statements are considered forward-looking within the meaning of federal securities laws 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 expectations and 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, and the Company believes that such expectations and beliefs are reasonable. CMC offers no assurance that events or facts will happen as expected, and we caution those listening to this call to not place undue reliance on any forward-looking statements.
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 discussed or 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 Web site. Unless stated otherwise, all references made to year or second quarter are references to the Company's fiscal year or second fiscal quarter, respectively.
And now, for opening remarks and introductions, I will turn the call over to the Chairman of the Board, Chief Executive Officer and President of Commercial Metals Company, Ms. Barbara Smith.
Thank you, Phil. Good morning, and welcome to everyone joining us to review the results of our second quarter 2018. Today, I'm joined by Mary Lindsey, Senior Vice President and Chief Financial Officer. I will review highlights from the quarter and then Mary will cover the quarter financial information in more detail. Afterwards, we will conclude our prepared remarks with some comments on our outlook for our 2018 third quarter after which we will open the call to questions.
Before covering the results for the quarter, I want to recognize the significant progress that CMC has made in ensuring our employees’ safety at all time. Over the past few years, our incident rate has decreased and now approaching what we believe our world class level. While any one incident is one incident to many, improvements like this are built on a foundation of strong safety oriented culture and employees looking out for each other. I congratulate the CMC team in all our different operations, for all the work in this area and continuing on our path to zero incidents.
Now turning to the results. As announced in our earnings release this morning, we reported net sales of $1.1 billion for our second quarter 2018 and our net earnings from continuing operation of $9.8 million or $0.08 per diluted share. For our second quarter of 2018, our adjusted earnings from continuing operations were $31 million or $0.26 per diluted share in comparison to $23 million or $0.20 per diluted share in the same period of the prior year. Mary will comment further on this non-GAAP in her financial overview.
Also noted in our press release on March 21st, our Board of Directors declared a regular quarterly cash dividend of $0.12 per share of common stock, CMC common stock, for stock holders of record on April 04, 2018. The dividend will be paid on April 19, 2018. This cash dividend reflects CMC 214th consecutive quarterly dividend.
Now, I will cover trends and conditions in the markets in which we operate. Synchronous economic expansion in almost all regions of the globe has resulted in increased global steel consumption and prices on a year-over-year basis. More specifically in our markets, we see continued optimism of growth in the United States and Poland that led to the strong volume of shipments during our second fiscal quarter.
In the U.S., private business capital spending as reported by the U.S. Census Bureau a proxy for how much businesses are investing in their own operations, increased in comparison to this time last year, bolstered by the newly enacted tax reform legislation, which lowers the corporate tax burden and incentivize investment and growth. We see this trend continuing, resulting in strong demand during the upcoming construction season.
For 2017 on a calendar year-to-date -- 2018 on a calendar year-to-date basis, non-residential construction starts increased almost 7% in comparison to the prior year. Additionally, the Architectural Billings Index, a leading indicator of construction activity, continues to be strong registering about 50, for 10 over the past 11 months, providing confidence that construction growth should continue.
Original equipment manufacturers of farm, industrial and construction equipment and energy products, are also seeing growth in their market, supporting continued strength of our merchant business. During the most recent quarter, we continue commissioning activities and started commercial production at our new Durant, Oklahoma micro mill, which will also support the strong demand growth we are seeing. We will be ramping up the production at this facility through the remainder of the fiscal year. In addition, we look to commission the production of spooled rebar during the spring of this year. As a reminder, CMC will be the first producer of this product in the U.S. And finally, at the end of our fiscal year, we anticipate the start up of a highly automated depot shop, which will also operate on the Durant, Oklahoma site.
Turning to the European markets. The Polish market is also experiencing significant steel demand growth. For calendar 2017, GDP for Poland is estimated to have been 3.8%. And while forecasted to be slightly less in 2018, expectations are for continued growth to be about 3% for the next several years. In addition, our operations serve customers in Northern Europe, which is also experiencing a rebound in economic growth. We are leveraging our capabilities in this market and are producing fantastic results in Poland by optimizing our product mix between rebar merchant and wire rod products.
As we announced at the beginning of January, we signed a definitive agreement to purchase certain rebar assets from Gerdau S.A. Integration planning activities with Gerdau are progressing on track. We look forward to the Gerdau employees becoming part of the CMC team. The two companies have each recently received a request for additional information from the Department of Justice in connection with the proposed transaction. We anticipated this regulatory staff would take place and still anticipate closing of the transaction will occur before calendar year end 2018.
In June of 2017, we announced our decision to exit our international marketing and distribution operations. Today, I am pleased to report that we have substantially completed this by either selling or liquidating our investment in these operations. We are redeploying the proceeds from the exit to strengthen our balance sheet and invest in our core steel manufacturing business.
We are continuously reviewing our portfolio to ensure the continued strategic fit within our business. As a result of these activities, we decided that are structural fabrication business no longer supported our core operations and has entered into an definitive agreement to sell the business, including operations in South Carolina and Texas. We anticipate that this transaction will close during our third quarter.
With that as an overview, I will now turn the discussion over to Mary Lindsey, Senior Vice President and Chief Financial Officer.
Thank you, Barbara and good morning, to everyone joining us on the call. As Barbara mentioned for our 2018 second quarter, we reported earnings from continuing operations of $9.8 million or $0.08 per diluted share, which compares to earnings from continuing operations of $23 million or $0.20 per diluted share for the second quarter of prior year. We are introducing a non-gap measure this quarter, adjusted earnings from continuing operations, which eliminates the effect of acquisition and integration costs, operational startup costs, impairment losses, gains and losses related to debt restructuring and other infrequent items of income and expense from our earnings from continuing operations.
Additionally, we include the impact of material non-recurring income tax items, including the impact from the Tax Cuts and Jobs Act of 2017. We believe that this measurement is useful to investors as an additional way to analyze the underlying trends in our business consistently across the period presented. A reconciliation of this measure is included on page 12 of our press release issued this morning. Included in the result, are pretax costs of $5.9 million of acquisition related cost associated with the Gerdau transaction, $8.7 million of losses stemming from the start of production at the Durant Oklahoma micro mill facility and $12.1 million related to an impairment on the sale of the structural fabrication business.
To obtain a true picture of our core EBITDA performance, the above expenses should be added back to the corporate and Americas’ mill segment respectively, resulting in core EBITDA of $77.5 million. In addition, as noted in our press release, we recorded a provisional charge of $10.6 million in the second quarter to reflect the estimated impacts of U.S tax reform, including the tax on deemed repatriated earnings of non-U. S. subsidiaries and the write-down of net U. S. deferred tax liabilities at lower enacted corporate tax rate. Offsetting this, additionally, we recorded $9.2 million benefit of $0.08 per diluted share related to a reorganization of certain international operations. Currently, we estimate that our corporate tax rate will be approximately 25% for the full fiscal 2018. As Barbara mentioned, our belief is that the indirect benefit that the tax reform will have in providing general economic confidence will in fact be greater than the lower effective tax rate to CMC.
After taking into consideration the previously noted special items, the adjusted earnings from continuing operations were $31 million or $0.26 per diluted share. It should be noted that as a result of the completion of the wind-down of the marketing and distribution segment, substantially all of the operations result in this segment have been reflected as discontinued operations in both the current and historical results.
Summarizing our results by segment. We really saw the benefit of our vertical integration, which provide some natural stability to our results despite some of the sharpest increase in ferrous pricing that we have experienced in recent years. During the quarter, the Americas Recycling segment did very well in an environment of rising ferrous prices. However, the Americas fabrication segment saw margin compression as a result of the rising raw material prices and consequently posted disappointing results. Each segment plays a very important role in our portfolio of operations. But having this integrated network of operations ensures we can deliver solid results despite the volatility in raw material prices.
The 2018 second quarter Americas recycling segment results were very strong, resulting in $12.2 million of adjusted operating profit for the quarter. This is the highest quarterly profit in this segment in five years and exceeded the very strong results we experienced in our first fiscal quarter. Strong demand for ferrous scrap and an increasing price environment for both ferrous and non-ferrous material contributed to the results. On a sequential quarter-over-quarter period, ferrous prices increased approximately 11% from the first quarter of 2018, while non-ferrous prices increased approximately 3%.
Our Americas mill segment recorded adjusted operating profit of $31.5 million for the second quarter compared to adjusted operating profit of $51.3 million for the same period in 2017. Included in the current period results are $8.7 million of costs related to the start up of the new Durant, Oklahoma micro mill. The strong end market demand that Barbara referred to resulted in shipment volume increasing by approximately 4% when compared to the same period of the prior year.
Our manufacturing costs, including alloys, electrodes and energy, increased by approximately $10 per ton in comparison to second quarter of fiscal 2017. While selling prices increased in response to raw material price increases they lag the timing of increases in raw material pricing. However, we believe that the announced selling price increases, once realized, will restore margins.
Our American fabrication segment recorded adjusted operating loss of $27.1 million for the second quarter. This compares to adjusted operating profit of $0.5 million for the second quarter of 2017. Included in this segment, operating loss was $12.1 million of impairment charges related to the disposition of the non-core structural fabrication business as previously discussed. Excluding these items, decrease in adjusted operating profit was primarily due to the margin compression caused by increases in raw material steel used by this segment in comparison to second quarter of fiscal 2017.
Bidding activity for new jobs remain strong and in fact the market is seeing rising prices over the past year with the increase in demand. However, the lapse between when jobs are bid, booked and actually shipped, has resulted in the compression in margins as we are shipping against certain contracts entered into six to 18 months ago. The strong bid activity has resulted in significant growth in our backlog and provides us optimism for continued strength for steel demand in the U. S.
As Barbara mentioned, we had another strong quarter in our international mills segment with second quarter 2018 adjusted operating profit of $24.5 million versus the adjusted operating profit of $9.5 million for the second quarter of 2017. This approximately $15 million improvement in adjusted operating profit was primarily due to an increase in the volume of over 10% in comparison to the prior year and higher metal margins, driven by more merchant products and a strong demand for construction steel.
It is worth noting that this segment currently has a higher selling price than our U. S. mills segment, which reflects the significance of the increase in global steel prices, which has occurred during fiscal 2018. At the beginning of the year, U. S. prices were $50 per ton higher than the Polish operation prices.
Turning to our balance sheet and liquidity. As anticipated, we generated approximately $65 million of cash during the quarter, primarily related to the liquidation of our international marketing and distribution operations and earnings. Our balance sheet remains healthy and provides us with significant optionality. As of February 28, 2018, cash and cash equivalents totaled $195.2 million and availability under our credit and accounts receivable sales facilities totaled approximately $615.8 million.
During the quarter, we amended our credit agreement to, among other things, provide for delay draw term loan facility, a maximum aggregate principal amount of up to $200 million, the proceeds of which are required to be used to finance the purchase of the rebar assets of Gerdau S.A. It should be noted that as a result of the cash that we have on hand currently and additional cash we expect to raise from the liquidation of the international marketing and distribution segment, we currently anticipate that we will borrow less than $600 million purchase price to fund the acquisition.
Capital expenditures were $41.3 million for our second quarter 2018 compared to $47.8 million in the prior year's second quarter. We estimate that our capital spending for 2018 will be in the range of $175 million to $225 million, which includes expenditures related to the construction of the new Oklahoma mill.
Thank you very much. I'll now turn it back over to Barbara for the outlook.
Thank you, Mary. We are very confident as we look to the second half of our fiscal year. Demand has been very strong for the first half of our fiscal 2018 and our key en markets continue to show the fundamental strength in both the U.S and Poland. To meet this demand, our Durant facility could not have come online at a better moment to take advantage of the strong demand.
The upcoming construction season is poised to be very busy, inventory levels throughout the system have moderated and global prices have risen in response to increased demand. As you can appreciate, we do not know exactly what the impact of Section 232 trade action will be due to the uncertainty around what countries will be excluded and the duration of any action is taken. However, we’re very pleased that the President has agreed that the U.S steel industry is a matter of national security. Despite the uncertainty, we believe that the final measures will be positives in creating a level playing field against imports. In this scenario, we are very confident that we can effectively compete on a cost perspective against anyone in the world.
Thank you for attention. At this time, we will now open the call to questions.
We will now begin the question-and-answer session [Operator Instructions]. The first question comes from PT Luther with Bank of America Merrill Lynch. Please go ahead.
The first one I want to start with was actually the Polish mill. You had another nice strong result there and that was despite the typical seasonal slowdown that we see there in terms of construction in Poland. So just trying to get a sense, what you think run rate or sustainable earnings levels might be in that operation. Do you think things could actually even get better from here as we head into the construction season?
I think a couple of things that are worth noting in terms of the second quarter. You’re absolutely correct that normally just like the U.S. is our seasonally slowest period largely due to holidays and weather related incidents that impair construction. But in Poland I would say as winters go, maybe this is a little milder than some that they’ve seen. And of course they probably don’t declare winter being over. At this point in time, they could still see some inclement weather. But there’s also the element of the longer term strategy that we’ve been implementing in Poland to increase the product range that they make, increase their merchant capability, diversify their portfolio of products. So that it dampens these seasonal effects.
And so we went through a series of investments, first in the rolling mills and the new furnace and then the new caster. And all of those investments are now reaching their full potential so to speak in terms of the cost structure and this richer product mix. In terms of where we go from here in Poland, I think they’ll suffer from the inflationary pressures of electrodes and alloys, and see more the full effect of that as we move through the second half of the year. But we do think that demand will be quite strong and margins will remain very good. And so I think you can expect to see the following two quarters be similar to what we saw in the first half.
And then if I could jump over to Gerdau, I get that you can’t say much about the deal as it’s still in process. But I am wondering if you can share a little bit of color about risk of potential divestitures just given the DoJ process and what it can mean in terms of market concentration domestically. Is there potential that we could see some assets look to get divested or do you think the risk of that is small?
I think what I would say is that all along we anticipated receiving the second request for additional information. And so that was just part of the process that we were anticipating. I would also say that as you saw in our financial results, we are investing heavily in preparation for the integration of these assets. And so we’re moving forward full steam ahead to comply with the additional request for information, with the anticipation of closing the transaction in its original contemplated form.
The next question comes from Martin Englert with Jeffries. Please go ahead.
Within the rebar fabrication business with rebar prices rising now early this year. Should we expect losses to be increasing near term before they get better in subsequent quarters?
I don’t think we’re going to see increasing losses. We are finally seeing some movement in the bid prices. And so hopefully what we’re going to see is we’re going to see some moderation in the backlog, the volume in the backlog is remaining very, very good. And what we’ve really have seen in this last quarter was the effect of significant scrap price increases, which have totally offset the opportunities that we’ve had for price increases. So I don't expect that the fabrication business is going to deteriorate any further. But we do expect that again depending on scrap prices, we’re going to see continued pressure on this segment until these currently higher bidding prices actually roll into our backlog and begin to have some effect on final selling prices for delivered products. So I don’t think it’s going to get worse, but I don’t think it’s going to get better probably for the next quarter or two.
So may be to the three quarters before you start to see some reversal in the loss making trend there, right?
I think that’s fair exactly.
And if you could comment on how the utilizations are today at the new Durant micro mill and should we expect any further startup cost near term?
So the commissioning activities are going very well and as we had expected. I think it should be noted that we will begin commissioning activities of the new spooling equipment. And so that will have an impact on our total output as we begin the commissioning of the spooler. But our production today is on the same curve that we originally guided to the market. And we would expect to by our year-end that we will be producing at or around an annualized rate of around 300,000 tons a year. So everything is progressing as planned. In terms of the financial results, we would expect to get to positive of EBITDA by our fiscal fourth quarter.
The next question comes from Chris Terry with Deutsche Bank. Please go ahead.
First one I had, you talked about a little bit in that last answer that around the cost environment. You mentioned electrodes I think in the release. Can you just talk a little bit about the cost other than just scrap that you’re seeing in a rising pricing environment?
I would say on the alloy front, we're seeing about $5 increase that's been filtering through the cost structure over the last period of time. And we would expect that to level out from here. And on electrode side, maybe it’s another $3 to $5 a ton and that will probably fully be baked in by the second half of the year.
And then on the pricing, the recent $50 a ton rebar hike. What feedback you’re getting from customers on that and is that price actually sticky?
We generally don't comment on pricing for obvious reasons, there's plenty of demand out there.
And then in terms of the divestment of international trading, just looking at these assets held for sale and liabilities on the balance sheet. Is it safe to assume that the cash and working capital benefit comes through in the third quarter?
We’ve got a couple of large components left to materialize into cash. We did complete the sale of the Australian business at the very, very end of the second quarter. And so the cash from that will enter the balance sheet on the third quarter, as well as we’re collecting some working capital remaining in the business that will hit the balance sheet in the third quarter, hopefully all of it in the third quarter, exactly.
The next question comes from Michael Gambardella with J.P. Morgan. Please go ahead.
Just have a question regarding the pending acquisition of the Gerdau facilities. And what if any impact do you think the recently announced Nucor micro mill in Florida will have on the facilities post acquisition?
Of course we would prefer that they didn’t have that capacity. But the Jacksonville facility, if you recall, we’ve been a host with Gerdau, you and I took a road trip up there and visited. And so they have a mix product range there and they produce some rebar, wire rod, coiled rebar. And so there’s some optionality with that facility even with the capacity coming on or the potential announced capacity that Nucor is contemplating. And I should remind you too that it will take them a couple of years to construct the facility and get it ramped up. So we have a bit of time to adjust our strategy there.
And then another question just in regard to Section 232. Are you hearing any noise about Turkey looking for some -- negotiate some type of exemption on rebar?
Mike, we’re trying to stay plugged in as best we can, but this is very fluid and we’re in the early days. And I would expect that almost every country will make a plea. And I think that the President was pretty clear in his intent and there’s going to be a process where those exemptions that will be under the purview of Leitheiser. And I think at this point, we’re going to just have to watch it and watch it play out, but hopefully most of it will stay intact.
I mean, I would imagine even countries that get exemption there’ll be certain discussions about stopping circumvention through those countries as well?
Yes, from what we know, there are provisions in it that will prevent I’ll call it, gamesmanship that we’ve seen around the numbers. And there’s also discussion I think that’s been reported around even when an exemption is granted that there’ll be some quota based on historical and that any existing orders will also stay in place. So we’re watching it very carefully. And of course we will respond with our views and the whole coalition of steel companies will work really hard to maintain a level playing field that was the intent of the President’s action.
[Operator Instructions] The next question comes from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.
The $10 a ton that you outlined in terms of conversion cost impacts relative to last year. How much of that bucket was some of these stringent weather energy related impacts versus the other consumables?
The weather related was a couple of million buck it's not significant. And there's always -- it's hard to quantify, because it would not only manifested itself in higher energy cost but shipments were impacted. And then after that the release of the weather, you do all kinds of special things to service your customer. So if you just look at the hard costs related to higher energy it was a couple million of bucks. But there are all the indirect things that are hard to quantify.
And the Durant ramp, I know you said that is going to be moving about 300,000 ton run rate in a few months. Any way to provide us some color in terms of what Durant may have contributed from a volume perspective this quarter and may be what you think it could be in the May quarter?
So external shipments were around 4,000 tons for the quarter and we’ll see that go up significantly. We’re anticipating that going up significantly in the third quarter, maybe 30,000 ton, that will be somewhat impacted by the time we need to set aside for the commissioning of the spooler. So I would just caution that, because the spooler is a new product and the market is clamoring for it. And we do need to take the proper time to commission that. And we would expect that commissioning to be largely complete by the end of third quarters. So then fourth quarter will be more representative of where we stand.
And the last question here I just have is on the merchant bar market. What do you think has been the struggle there in terms of seeing the spread dynamics improve relative to may be rebar, looks like rebar spreads at least in our view are going to be expanding moving forward, but merchants been a little bit more stuck. What’s been the struggle there over the last several quarters?
I think it really goes back to that reset that occurred at $60 down reset and then just trying to raise prices due to the raw material increases. So I think it’s coming. Merchant demand is strong and service centers have been disciplined in terms of their inventory level, so there’s not a lot of excess inventory. I think and I can’t remember the timing exactly but when the reset occurs, the tax reform hasn’t been enacted yet and I think that’s a new development that’s really going to energize investment and then of course 232 follow, so stay tuned. Again, it’s dynamic and I think there’s certainly plenty of support and opportunity for those margins to recover.
The next question comes from Piyush Sood with Morgan Stanley. Please go ahead.
Couple of questions from me. The way you described start up costs of the trending for the year, any thoughts about the Gerdau transaction costs for the year and then other biggest costs behind at this point?
Yes, we did have a big quarter in terms of spending quite a lot of money on the integration efforts, as well as you can imagine we were concluding negotiations with them. So for the balance of the year, it’s not going to be quite as heavy as it was this quarter, so could be down by a couple of million dollars, that’s our current thinking.
I would further add, in addition to the integration costs, the legal burden to comply with the Department of Justice, which is a regulatory requirement, is always significant. And we were prepared for it. We were preparing for it prior to receiving and we’re going to try to comply as quickly as possible, but there’s significant legal costs associated with just combined with that requirement.
And second question the sale of the non-core structural fab operations. It wasn’t connected in any way to the Gerdau transaction, that’s just completely separate?
No, part of what we evaluate on -- well, first of all, we look at the profitability and return on invested capital and what are the long term prospects for generating a satisfactory return, but our business model is built on -- on the fabrication side there’s just be some pool of products that we manufacture. And in the structural business, there’s not a significant pull from our mill operations, because we don’t make the products that are the input to that business. And so that was really the factors we were weighing. And there are others in that business that have that pull through or they have that expertise. So we just really felt like that was we needed to reallocate that capital to other areas that generate higher returns and fit that integrated business model.
And I’m just going to make one other comment, Piyush, regarding the acquisition cost. And not directly related to the acquisition cost. But as you know, those costs do show up on our SG&A line. And we’ve discussed the fact that the company is working hard on SG&A. And I think it's important to point out that leavings aside these extraordinary costs associated with this acquisition, as well as the $12.1 million of non-cash impairment cost related to the structural business, our SG&A has gone down quarter-over-quarter by about 5% and we anticipate that run rate for the balance of the year. So our efforts are paying off in that area. And unfortunately for us do offset to some degree some of these extra expenses that we’re going to bear as every company does as we move forward with such a transformational transaction as this one.
The next question from Charles Bradford with Bradford Research. Please go ahead.
Could you talk a bit about what profitable impact may have on you of the reopening of the Georgetown steel? I know it’s a wire rod maker but they’re in the market apparently now buying scrap. Is that having an effect on your scrap availability at all and price?
I think, Chuck, I would probably point you to the acquisition we made to acquire some recycling facilities from Omni to further support our scrap needs in the southeast. And whenever you have a reopening, it mixes up the dynamics a little bit but I don't think it's having a significant impact on us. And we now have a bigger network to support our needs.
How was the cost of that acquisition relative to what you’re paying for Gerdau?
I don't recall the numbers but I would further point out that exporter scrap is down, so on balance were not really seeing an impact yet. And that's another interesting one to analyze as it relates to 232. And again, we’re going to have to see how this plays out. But if the export market drives up, so to speak, because Turkey is not going to require, because they’re not going to have access to the U.S. market to the degree that they did historically, that could make available more scrap for the domestic market. So there's a lot of puts and takes here. And right now, we don’t think it’s going to be a major impact.
[Operator Instructions] The next question comes from Aldo Mazzaferro with Mazzaferro Research. Please go ahead.
Congratulations on all the growth that you guys have been generating and going forward. On that topic just firstly Barbara, the fact that they’ve been relative absent from the market for the last say five months or so, three or four months, and they seem to be continuing that with the less aggressive purchases of scrap. How much you think -- if you were to gauge the impact on the rebar market you’ve seen over the last three months. Do you think the assets in Turkey or the increase in demand from the market is causing the improvement more than the other? Do you have a feeling for whether that asset of Turkey is overwhelmingly helping you or is there other things as well?
Again, Aldo and you’ve been in this business for a long time, it’s never any one thing. I think that just the synchronous global economic recovery and growth is providing an opportunity for Turkey to find markets closer to home. Turkey incurs a lot of cost to bring product into the U.S. And I am sure they would much prefer to keep that product closer to home and in their natural home markets. And global prices in some instances have been higher than U.S. prices and that’s another incentive for Turkey to find the best market for their products. So there’s just a whole lot of puts and takes and I think -- and certainly one of the things that I missed a few quarters ago was just this recovery in a lot of the major markets around the world, which is taking the pressure off of looking at the U.S. markets for an outlet for some of these countries.
Barbara, on a separate question, not that Nucor seems to have embraced the micro mills technology. Do you see yourselves going forward with another micro mill at some point?
I think it’s a little early for us to declare our strategy and certainly we wouldn’t share that. But Nucor is a fine company. We have tremendous respect for them. And I think they realize that this is wonderful technology that is very, very low cost and efficient and it just speaks to those of us in the electric arc furnace industry who are constantly reinvesting to be very, very low cost.
And I can say with strong conviction that Commercial Metals Company is on the low end of the cost curve on a global basis. We have access to the raw material. We can get that raw material very efficiently to our operations. We don't incur tremendous amount of transportation costs to do that. We have low cost energy in this country. Labor is not a major component of the overall cost of producing steel, raw material is the largest cost. And we have the cheapest and lowest cost access to raw material of any country in the world and great steel makers that are constantly reinvesting.
We just get more throughput for the dollar of investment, and Arizona is a beautiful example of that, where the original nameplate capacity of 280,000 tons and through our knowledge and experience and operating that equipment in our bright engineers and their ingenuity and creativity and finding ways to get increased throughput just put those in a very, very strong low cost position on a global basis. And if you have a level playing field where you're not having to fight subsidies and dumping, no one else in the world can compete with us and Nucor has long-standing history of doing the same things of investing in and being very low costs.
Can I ask one more question, a little bit off the wall, no pun intended? But I watch President Trump's conference call or news conference when he was discussing the value of technologies to use in building a wall in Mexico. Are you staying in any interest from those wall suppliers that would consume rebar? Is there actually some activity going on in terms of people preferring to construct sections of the wall from what you can tell?
You saw it and there have been I mean the President requested a series of prototypes. And those prototypes were of all types and forms and use different products. When I watched it, he was impressed by the concrete walls, because they were very, very difficult to scale those walls and breach those walls. And I think, first of all, there needs to be funding, which hasn’t occurred yet but if there is funding regardless of the design that is selected, there will be a rebar component to it.
The next question is a follow-up from Philip Gibbs with KeyBanc Capital Markets. Please go ahead.
Mary, can you give us an idea of the cash, I would say cumulative cash proceeds from the structural and fab business and the remainder of the asset sales and net working capital wind down of IM&D? Just what we should be anticipating as cash to you?
Between the further wind down of IM&D and structural, it’s between $100 million and $120 million.
They come over the reminder of the year?
Additional to collect that hasn’t been already reflected.
And then last one for me is just the philosophical question on infrastructure overall. Barbara as we look out over the next couple years and the question to you point was funding. Do you think as we look forward that more that infrastructure bill with more private spending is better for a bigger collective buy-in of the country or do you think more federal spending relative to whatever that outlay is a better idea?
So first and foremost and we said this many times, the evidence for infrastructure renewal is overwhelming. And both sides of the aisle are supportive of refreshing our infrastructure. And it was a major platform in President Trump’s agenda. And I think that issue is now moving to the forefront of things that he is working on. And of course we’re very encouraged and supportive of that. The issue has always been funding and a couple of observations. I think progressive states have already been preparing for their matching portion, and I think that will continue. And so it comes back to what exactly is Washington going to do and then tied up in all of this budget stuff. And I know there was developments overnight and unfortunately I didn’t get to read all of that.
But I would also point out that federal receipts are at record levels. They’ve been increasing. And if we can get the government to adopt a budget that’s fiscally responsible and that is the way we run our businesses, you can't just keep increasing spending if money in is less than the expenditures. It’s an equation that can’t work. And so the debate will go on. I think the President will find a solution here and I think the solution will be a multi-pronged solution. It will be a combination of federal support and state and other ways, public-private.
But some of these states in the absence of Washington doing anything, they’re taking matters into their own hands, and Texas is a great example. And they have enormous sums of money allocated to improve the infrastructure in the State of Texas. And Texas takes a real proactive approach. They don't wait for it to be gridlocked. They plan for it and they build it ahead of is becoming a massive problem. And you only have to visit Dallas to see that in action. So I think it’s going to be multi-pronged. I think the agenda item is moving to the front of the line and I think something will get done here. And it will be great for steel demand.
At this time, there appear to be no further questions. Ms. Barbara Smith, I’ll now turn the call back over to you.
Thank you, Phil. Thank you 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. Have a great weekend.
This concludes today's Commercial Metals Company conference call. You may now disconnect.