1 4 th Quarter 2008 4 th Quarter 2008 Vertical Integration Product Diversification Global Geographic Dispersion CMC – Business Model 4 th Quarter 2008 Current Market Conditions & Outlook Global Liquidity Crisis has Paralyzed the Steel Markets Vicious Downward Spiral of Confidence Insufficient Funding Leads to Order Delays or Postponements and Inevitable Claims Campaigns Talk Down the Economy; Psychological Recession Sets in Supply (Inventories) Exceed Apparent (or Willing) Demand Reduction in Material Purchasing Leads to Lower Prices Customers Holdback Looking for the Bottom Supply Exceeds Current Orders; Prices Lower Cycle Repeats Itself 4 th Quarter 2008 Current Market Conditions & Outlook Up and Down Supply Chain Watchword is Inventory Reduction and JIT Lack of Demand Leaves no Viable Pricing Mechanism for Ferrous Scrap No Price Will Clear the Market, so Prices Freefall Scrap Backup at Dealer Level Including Nonferrous Ferrous Export Market Weak
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4th Quarter 20084th Quarter 2008
Vertical Integration
Product Diversification
Global Geographic Dispersion
CMC – Business Model
4th Quarter 2008
Current Market Conditions & Outlook
Global Liquidity Crisis has Paralyzed the Steel MarketsVicious Downward Spiral of ConfidenceInsufficient Funding Leads to Order Delays or Postponements and Inevitable ClaimsCampaigns Talk Down the Economy; Psychological Recession Sets inSupply (Inventories) Exceed Apparent (or Willing) DemandReduction in Material Purchasing Leads to Lower PricesCustomers Holdback Looking for the BottomSupply Exceeds Current Orders; Prices LowerCycle Repeats Itself
4th Quarter 2008
Current Market Conditions & Outlook
Up and Down Supply Chain Watchword is Inventory Reduction and JIT
Lack of Demand Leaves no Viable Pricing Mechanism for Ferrous Scrap
No Price Will Clear the Market, so Prices Freefall
Scrap Backup at Dealer Level Including Nonferrous
Ferrous Export Market Weak
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4th Quarter 2008
Current Market Conditions & Outlook
Market Conditions Difficult for Earnings ProjectionExpected 1st Quarter Earnings Range - $0.35 to $0.45Rapidly Falling Prices and Inventory Levels will Result in Significant LIFO Income; Anticipating Minimum $50 Million Pre-Tax for QuarterMaterial Flow Between CMC Vertical Units Will be EmphasizedRecycling Scaling Back Flow into PlantsAmericas Mills Volumes Down, But Margin HoldsAmericas Fab Find Relief From Margin CompressionPolish Results Drop as Finished Good Prices Drop Faster than Scrap; Billet Exports EndInternational Marketing OK; Working Off Backlog
4th Quarter 2008
North AmericaRestricting Recycling Flows Will Bring Lower Prices, Lower Utilization Mill Backlogs in Usual 40-50 Day Range, But Heavily Weighted Towards Highway WorkService Centers Living Hand to Mouth; Merchant Tons OffOur Mills Will Take Downtime for Inventory ControlFabrication Will do Better in Falling Market, But Backlog is not Being Replaced as Quickly as ShipmentsMany Small Jobs (200-700 tons) Being Bid, But Larger Jobs Scarce
4th Quarter 2008
North AmericaStrong U.S. Dollar and Declining Freight Rates Do Not Attract Imports Customers Do Not Want to be Exposed and Committed to Import Lead Times in Falling Market Nonferrous Exports to China Nonexistent in Current Market; Turn to European OutletsDomestic OTCG Imports Still GoodCopper Tube Hurt by Rapid Price DeclinesRaw Material Markets Still Strong
4th Quarter 2008
Europe / Middle EastBank Contagion Roils RegionPolish Economy Still Strong, But Price Declines Squeeze MarginsGood News is European Inventories are LowArab States Have Significant Tonnage on the Ground or in TransitTurkish Import Offers to U.S. Find No BuyersCroatian Volume Building; Production is Key
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4th Quarter 2008
Asia / PacificChinese Have the Foreign Reserves and the Central Control to Maintain 8-9% GDPChina Initiatives Include– Lowering Taxes and Interest Rates– Increasing Export Subsidies– Increasing Public Housing Spending– Fund Major Infrastructure Work– Curtail Steel Production
Other Asian Markets Quiet; No Turnaround Until Chinese New YearAustralian Market Still Exhibiting Strength
4th Quarter 2008
Project ReviewArizona Micro Mill
– All Required Permits Received in August– Expected Commissioning Date September 2009– $155 Million Cost– 280,000 Tons of Rebar
Polish Wire Rod Block– First Bars Produced in October– Will Significantly Upgrade Wire Rod and Coiled Rebar Offerings– $40 Million Total Cost– 40-50,000 Additional Tons of Production in Fiscal 2009
Polish Flexible Section Mill– Ground Broken; Construction Underway– $190 Million– 650,000 MT– Increased Product Range; Higher Quality Wire Rod / Larger Sizes– Expected Commissioning January 2010
SAP– Third Wave Rollout Now Complete– First Rebar Fab Plants Now Running SAP– Next Rollout – Two Domestic Mills and First Recycling Plants
4th Quarter 2008
CMC Steel ArizonaMesa, Arizona
Melt ShopMelt Shop
4th Quarter 2008
CMC Steel ArizonaMesa, Arizona
Roughing Mill Foundation
Roughing Mill Foundation
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4th Quarter 2008
CMC Steel ArizonaMesa, Arizona
Fab ShopFab ShopCooling BedCooling Bed
4th Quarter 2008
Liquidity
$500 Million 10 Year Bond 7.3% Completed in August$400 Million Commercial Paper Program$200 Million Domestic A/R Securitization Agreement$340 Million International A/R Sales ProgramsUnsecured Bank Credit LinesFavorable Debt Covenants
4th Quarter 2008
What Will Break the Cycle?
Government Intervention Programs Must be Shown EffectiveGet the Election Over WithPossible Capital / Infrastructure StimulusRestore Confidence
Average Selling Prices*Americas Fabrication& Distribution
*Excludes Stock and Buyout Sales
4th Quarter 2008
21.7
63.0
$0
$20
$40
$60
$80
4Q07 4Q08
($ in Millions)InternationalMills
CMCZ (Poland)Adjusted Operating Profit
11
4th Quarter 2008
-$10
-$5
$0
$5
$10
1Q08 2Q08 3Q08 4Q08
($ in Millions)
CMCS (Croatia)Adjusted Operating Loss
InternationalMills
(4.5) (6.4) (8.5) (5.9)
4th Quarter 2008
68%37%% Domestic
309424Total Tons Shipped*
56177Billet Tons Shipped*
99125Wire Rod Tons Shipped*
154122Rebar Tons Shipped*
727740Metal Margin (PLN)
8931,351Cost of Scrap Utilized (PLN)
1,6202,091Avg. Selling Price (PLN)20072008
*Tons in thousands
CMCZ Mill Margins4th Quarter FY Comparisons
InternationalMills
4th Quarter 2008
8,508Seamless Tons Shipped
27%% Domestic
624Drawn Tons Shipped
10,425Welded Tons Shipped
19,557Tons Shipped
21,161Tons Rolled17,596Tons Melted
CMCS Mill Stats4th Quarter FY 2008
InternationalMills
4th Quarter 2008
24.3
35.7
$0
$10
$20
$30
$40
$50
4Q07 4Q08
($ in Millions)
LIFOExpense: 3.7 3.9
International Fabrication& Distribution
Adjusted Operating Profit
12
4th Quarter 2008
This written and verbal presentation may use financial statement measures considered non-GAAP financial measures
by the Securities and Exchange Commission (SEC). In compliance with the SEC’s Regulation G, we have
provided on our web site at
a reconciliation to the most comparable GAAP measure and other information that may be of interest to investors.
www.cmc.comwww.cmc.com
Non-GAAP Financial Measuresand Regulation G
Investor Information
4th Quarter 2008
Forward-Looking StatementsThis written and verbal presentation may contain forward-looking statements regarding the outlook for the Company's financial results including net earnings, product pricing and demand, production rates, interest rates, inventory levels, impact of acquisitions and general market conditions. These forward-looking statements generally can be identified by phrases such as the company or its management “expect,” “anticipates,”“believe,” “ought,” “should,” “likely,” “appears,” “projected,” “forecast,”“outlook,” “will” or other words or phrases of similar impact. There is inherent risk and uncertainty in any forward-looking statements. Variances will occur and some could be materially different from management's current opinion. Developments that could impact the Company's expectations include solvency of financial institutions and their ability or willingness to lend, extent of government intervention and its effect on capital markets, construction activity, difficulties or delays in the execution of construction contracts resulting in cost overruns or contract disputes, metals pricing over which the Company exerts little influence, interest rate changes, increased capacity and product availability from competing steel minimills and other steel suppliers including import quantities and pricing, court decisions, industry consolidation or changes in production capacity or utilization, the ability to integrate acquisitions into operations; global factors including political and military uncertainties, credit availability, currency fluctuations, energy and supply prices and decisions bygovernments impacting the level of steel imports and pace of overall economic activity, particularly China.