Fitch Ratings – New York – December 18, 2020: Fitch Ratings has affirmed Commercial Metals Company’s (CMC) long-term issuer default rating (IDR) at ‘BB+’. Fitch has also affirmed the company’s senior secured revolving credit facility at ‘BBB-‘/’RR1’ and senior unsecured notes at ‘BB+’/’RR4’. The rating outlook is stable.
CMC benefits from its exposure to regions with strong construction demand
The ratings reflect CMC’s low cost position and the flexible operating structure of its electric arc furnace (EAF) steel production. CMC benefits from its exposure to regions with strong construction demand in the U.S. and the European Union, which provides geographic diversification.
The ratings also reflect Fitch’s expectation that total debt/EBITDA, which was below 2.0x in fiscal 2020, will generally remain below 3.0x. CMC has maintained total debt/EBITDA below 3.5x over the past five years in a highly cyclical steel industry that experienced a significant downturn in 2015-2016.
Commercial Metals business model an advantage
Fitch believes CMC’s vertically integrated business model supports capacity utilization, underpins its low cost position, and provides some protection against price volatility, resulting in relatively stable margins over the cycle compared to other steelmakers.
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