CMC’s international operations
We analyzed the US operations of Commercial Metals Company (CMC) in the previous part of this series. We will now look at CMC’s international operations.
CMC has international operations through its steel mill in Poland. The company also has an international trading arm. The ongoing economic slowdown in Europe is affecting CMC’s Polish operations.
ArcelorMittal (MT), which gets more than half of its revenues from Europe, is also feeling the pinch. The slowdown in Europe has been the major reason behind ArcelorMittal’s lackluster performance. US Steel Corporation (X) also has operations in Europe. The Vanguard FTSE Europe ETF (VGK) can give you exposure to the European equity markets.
The chart above shows the financial performance of CMC’s operations in Poland. Revenues from the Polish steel mill make up close to 10% of CMC’s total revenues. However, the Polish mill contributed about 5% of the company’s total operating income last quarter.
Despite the slowdown in Europe, Poland is growing at a decent pace. Analysts expect the Polish economy to outpace the average growth rate in the EU (European Union) by almost two percentage points. Poland will receive $143 billion in infrastructure funding from 2014 to 2020. This is the highest funding for any EU member nation.
Higher infrastructure spending in Poland should help CMC’s operations. CMC gets most of its revenues from the construction and infrastructure sectors. Nucor (NUE) is another steel company with high exposure to these industries.
Marketing and distribution
The marketing and distribution sector is another aspect of CMC’s business. The company benefits from higher global trade in steel. We will discuss this further in the next part of this series.