Commercial Metals Company Stock

Good morning, and welcome to the Commercial Metals Company Fiscal 2026 Fourth Quarter Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I would now like to turn the conference over to Andy Larkin, Vice President of Investor Relations. Please go ahead.

Hello, and welcome to the Commercial Metals Company Fiscal 2026 Fourth Quarter and Year-End Earnings Call. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer; and Paul Lawrence, Senior Vice President and Chief Financial Officer.

Today's materials include the press release and supplemental slides that accompany this call. which can be found on the CMC's Investor Relations website. As a reminder, today's call is being recorded. Peter will begin our prepared remarks with a high-level overview of the year and fourth quarter and comment on the progress against our strategic objectives. Paul will then provide a detailed discussion of our quarterly results as well as capital allocation. Peter will wrap up with our view on the path ahead. We will then provide instructions for the question-and-answer session to follow.

Today's discussion contains forward-looking statements, including with respect to economic conditions, effective legislation and trade actions, U.S. steel import levels, construction activity, demand for finished steel products and precast concrete products. The expected capabilities benefits costs and time line for construction and commissioning of new facilities, the expected performance and integration of our recently acquired Precast platform, the company's operations, the company's strategic growth plans and its anticipated benefits of the company's ability to achieve its stated deleveraging targets within the anticipated time frame, legal proceedings, the impact of tax credits on future results, the company's future results of operations, financial measures and capital spending including expected share repurchase activity.

These statements reflect the company's beliefs based on current conditions that are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-K and other filings with the U.S. Securities and Exchange Commission contain additional information concerning factors that could cause actual results to differ materially from those projected in forward-looking statements. Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release supplemental slide presentation 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. With that, I would like to turn the call over to CMT's President and CEO, Peter Matt.

Thank you, Andy, and good morning to everyone joining us for today's call. We will discuss many accomplishments today, but none is more important than safety. I want to thank our employees for their continued focus and commitment to our most important company value. Our total recordable incident rate for fiscal 2026 remain near a historic low point and better than industry averages. During the year, we put significant effort into embedding CMC's safety-first culture across our newly acquired precast operations and strengthening safety performance throughout the organization. While we're proud of that progress, our standard is higher. Our goal is 0 harm, and we will be relentless in striving for it.

Now stepping back fiscal 2026 was a defining year for CMC. We made significant progress executing the strategy we laid out at our Investor Day, strengthening the quality and durability of our earnings profile expanding margins, reducing leverage, enhancing free cash flow generation and positioning the company for sustained shareholder value creation. For the full year, core EBITDA increased to approximately $1.4 billion, up from $837 million for fiscal 2025, while core EBITDA margin expanded 80 basis points to 14.5%.

These results reflect meaningful progress across each of our strategic priorities, including the execution of our Transform Advance and Grow program the advancement of key growth investments and the ongoing successful integration of our precast acquisitions. Just as importantly, we have strengthened our balance sheet, since completing our precast acquisitions, we have reduced leverage as adjusted for acquisitions to below our target range, providing greater financial flexibility to invest in growth while returning capital to shareholders.

Our momentum carried into the fourth quarter with core EBITDA increasing 35.1% and year-over-year to approximately $394 million, while core EBITDA margin expanded to 14.8%. Results in the quarter were driven by strong North American steel group performance, where execution against strategic priorities has created clear value for our business. Segment margins increased 220 basis points sequentially driven by strong tag contributions, including operational and commercial excellence initiatives. We are also seeing that as the market and our customers pursue larger and more complex projects in energy, industrial reshoring, data center and institutional sectors CMC scale, capabilities and network are increasingly making CMC a preferred partner.

Our downstream expertise with its customized solutions and customer-focused approach has us positioned to win in this increasingly complex environment. Downstream product volumes grew 8.5% year-on-year in the fourth quarter with expanding margins reflecting this dynamic. At the same time, our Arizona 2 micro mill is enhancing our merchant production capabilities to support growth and demand. Shipments for merchant bar increased 27.5% year-over-year, demonstrating the capabilities of the Arizona 2 plant and the flexibility it provides to optimize product mix to capitalize on strong market conditions and balance supply with demand.

For our Construction Solutions Group, fourth quarter results were below our expectations due primarily to our precast business with residential softness in certain Southeastern markets. Notably, we have seen the same regional softness in our fabrication book though it is not visible externally, given the geographic diversification of our fab footprint. As residential activity moderated lower volumes and regional margin mix headwinds and weighed on adjusted EBITDA performance. Precast generated adjusted EBITDA of $57.1 million during the quarter. And excluding the purchase accounting impact has contributed roughly $150 million of adjusted EBITDA since our acquisition.

The leading indicators for the business remain positive. The demand environment especially in nonresidential and infrastructure remains healthy with strong bidding activity in key markets like Atlanta picking up in recent months. Bookings were up year-over-year and increased 12.6% sequentially. Backlog levels are up roughly 3% versus the prior year and 4% versus Q3. While average backlog pricing has also trended higher. These factors position the business for solid performance in the year ahead. Strategically, as we closed 2026 and look ahead to fiscal 2027, we are highly confident in our direction and in the 3 powerful drivers of value creation we laid out at our Investor Day.

First, we will continue capturing the full potential of our business through TAG. Second, we will begin harvesting returns from significant growth capital deployed over the last several years. And third, we will continue reshaping our portfolio as a leading provider of early-stage construction solutions. Together, these initiatives, which are within our control, will power a stronger CMC, both operationally and financially. We have made significant progress in fiscal 2026 as TAG continue to evolve from a program into a core operating system for CMC. Across the enterprise, we realized meaningful productivity gains through yield improvements, scrap optimization, logistics efficiencies and manufacturing excellence initiatives and an increasing focus on commercial excellence.

Looking ahead, the opportunity set remains substantial with a full pipeline of initiatives that will drive additional earnings growth and margin expansion. We exited fiscal 2026 with more than $250 million of gross run rate benefits achieved and a clear line of sight to an additional $100 million of run rate benefits by the end of fiscal 2027. We view TAG as a durable source of margin expansion and an increasingly important competitive advantage for CMC. Turning to growth investments. fiscal 2027 will mark an important transition. For several years, we have invested significant capital to strengthen and modernize our asset base.

Nearly $1.5 billion of capital has been deployed to modernize and complete our coast-to-coast mill network, both improving our competitiveness and providing network flexibility. As we enter fiscal 2027, those investments increasingly shift from consuming capital to generating returns. At Steel West Virginia, commissioning and start-up activities continue to progress well. The team is executing a disciplined commissioning process, keeping its focus on safely increasing production developing the workforce and realizing the full potential of the mill. As production increases, Steel West Virginia will strengthen the flexibility of our whole network enabling us to flex and optimize production costs and product mix to better serve customer demand for different products across our footprint.

Before moving on, I'd like to recognize the team leading the construction and commissioning of our West Virginia Micromill. Their efforts have been outstanding and reflect the disciplined approach to capital deployment and project execution that defines CMC. At Tensar, the new geo grid line in Black Oklahoma is well into its startup and will increase geogrid production capacity enhanced service levels and fuel growth in higher-value nonresidential and infrastructure applications. We are equally encouraged by the construction progress at Galvabar, Tennessee where we expect first production of our Galvabar corrosion-resistant product beginning this November. The facility is expected to more than double our Galvabar production capacity, expanding our presence in this attractive higher-margin market segment.

Beyond our organic growth investments, we are reshaping our portfolio and diversifying our earnings profile most recently with our precast platform investments. Turning to our precast business. Integration activities remain on track and synergy capture is meeting or exceeding expectations. A great example of this is where through best practice sharing across our network, we have implemented several new operational practices that will improve our safety performance and eliminate millions of dollars of waste from our supply chain. To date, we have substantially completed the functional integration of the platform, creating a strong foundation to drive value creation.

Utilizing a tag approach and mindset we are advancing a broad range of operational excellence and commercial excellence initiatives and have identified further opportunities across operations, procurement, footprint optimization and commercial execution that will enhance growth over time. Precast plays a critical role in strengthening CMC's position in early-stage construction solutions. The business enhances our portfolio with leading positions in attractive growth markets and in-demand infrastructure applications. It brings compelling financial characteristics, stronger, more durable margins lower capital intensity and attractive free cash flow generation.

Precast also expands our growth runway through both organic opportunities and acquisition opportunities in a highly fragmented industry. With sound execution, we expect Precast to play a vital role in building a stronger CMC. Let's shift from our three value creation levers to the current operating environment. Regarding demand for early-stage construction products, the direction of travel remains unchanged. We see constructive conditions for all of our product categories across the majority of the markets we serve. Beginning with infrastructure, demand remains elevated significant federal and state funding continues to support a multiyear pipeline of projects and with a substantial portion of available funding yet to be spent, we have strong visibility into future activity.

Nonresidential construction demand varies by market, but remains a source of strength for CMC. Activity related to areas like data centers, power generation utility infrastructure, semiconductor manufacturing and institutional markets is solid. And the Dodge Momentum Index remains near record levels, suggesting a robust and extensive project pipeline. Many of these nonresidential projects are larger, more complex and increasingly requiring diverse solutions. As noted earlier, this plays directly to CMC's strengths. Our vertically integrated network, downstream capabilities and broad early-stage construction portfolio are differentiators and position us to meet the complexity and scale of these mega project opportunities better than ever before.

While residential remains mostly muted, particularly in new single-family construction, we remain optimistic for this market over the long term where the housing shortage in the U.S. will be a meaningful source of multiyear demand. On the steel supply side, our low-cost and flexible North American steel network is well positioned to win in this environment. The domestic rebar market remains highly consolidated, and the import landscape has materially improved compared to just a few years ago. Existing Section 232 measures have proven both effective and durable while recently finalized trade cases against unfairly traded imports have effectively removed hundreds of thousands of tons from the market. Importantly, rebar imports are beginning to show signs of moderation as arbitrage opportunities diminish.

Notably, South Korean imports decreased in September as we have been expecting and the imports from other sources continue at a fraction of prior year levels. Meanwhile, we continue to see heightened focus across the industry on trade enforcement and ensuring that imported material competes on a level playing field. Taken together, we believe these dynamics support a more rational and sustainable competitive environment where CMC can reap the benefits from its investments made and more fully capture the value we bring to the market.

Now before providing our outlook, I'll ask Paul to go through the quarter in more detail. Paul?

Thank you, Peter. I'll pick up on Slide 13. Briefly, at the consolidated level, CMC reported fourth quarter net earnings of approximately $213 million or $1.91 per diluted share. Similar to the third quarter, we incurred approximately $26.8 million of pretax expenses excluded from adjusted earnings, including $19.8 million of noncash amortization related to acquired backlog. Adjusted earnings increased 21% sequentially. The Core EBITDA margin remains an important indicator of the progress we are making. The benefits of our portfolio diversification strategy and tag initiatives are becoming increasingly evident in this metric.

In the fourth quarter, core EBITDA margin increased 100 basis points year-over-year and 60 basis points sequentially, and capping a very strong fiscal year in underscoring the enhanced earnings power of the business. Within the North American Steel Group, adjusted EBITDA increased 25.2% sequentially to $317 million, driven by tag benefits, metal margin expansion and growth in merchant bar shipments. Metal margin increased $42 per ton sequentially to $652 driven primarily by a $32 per ton increase in average selling price. The improvement in average selling price benefited from a richer product mix, including higher merchant bar volumes, which currently carry a meaningful premium to rebar prices.

Meanwhile, scrap costs declined $10 per ton sequentially. Regarding scrap, we expect a relatively stable environment with some upward pressure in the near term correlated to the higher diesel costs we're incurring. Finished steel shipments increased 7.1% sequentially with strong growth across merchant products as well as downstream and rebar volumes. Our downstream backlog increased 15.5% year-over-year and 5% sequentially, demonstrating the value of our differentiated capabilities, particularly on large, more complex projects. North America Steel Group adjusted EBITDA margin expanded to 16.4%, an increase of 220 basis points sequentially and 160 basis points compared to the same period of the prior year.

For the Construction Solutions Group, net sales increased 94.5% year-over-year. Adjusted EBITDA more than doubled, and adjusted EBITDA margin expanded 80 basis points. Besides precast, which Peter discussed earlier, delivered results that were largely consistent with both the prior quarter and the year ago period, capping a strong fiscal 2026 in which profitability increased approximately 50%. This performance reflects solid commercial execution and healthy activity levels across its core end markets. Construction Services and Impact Metals also delivered strong year-on-year revenue and EBITDA growth during the quarter. Performance reinforcing steel results were lower due to an unplanned outage at our Galvabar facility that affected shipments during the period.

The outage is now resolved and customer demand remains robust with bookings, backlog and pricing trends continuing to support a positive outlook for the business. In Europe, adjusted EBITDA comparisons were affected by CO2 credits received in prior periods. We received credits totaling $30.7 million in the fourth quarter of fiscal 2025 and $20.4 million in the third quarter of fiscal 2026. While the current quarter did not benefit any credit. Excluding these impacts, underlying business fundamentals in Poland continue to improve. Metal margin expanded $32 per ton year-over-year, supported by strengthening steel prices. Average selling prices increased $44 per ton versus the prior year and $15 per ton sequentially in the fourth quarter, offsetting a portion of this benefit with energy costs increasing approximately $10 per ton in the quarter.

We anticipate energy costs to remain elevated in the first quarter and could potentially increase by a further $10 to $15 per ton. Market conditions in Europe are becoming increasingly constructive. The implementation of the C BAM and enhancements to the tariff rate quota framework are helping create a more favorable trade environment, combined with gradually improving demand fundamentals, these developments reinforce our confidence in a continued recovery toward mid-cycle profitability over time. Lastly, A few comments on the balance sheet and capital allocation and key modeling considerations for fiscal 2027. Starting with the balance sheet.

In less than a year, we have successfully reduced net leverage adjusted for acquisitions to below our target of 2x. At 1.9x, this represents significant progress from post-close levels and position us to pursue our long-term balanced capital deployment priorities of growth and shareholder returns. We expect the balance sheet to strengthen further in fiscal 2027, supported by improving cash flow as capital expenditures moderate. In fiscal '26, total capital spend was approximately $580 million.

For fiscal '27, we anticipate capital expenditures to decline by nearly $200 million to roughly $400 million as we cycle past the elevated investment levels associated primarily with the West Virginia Micromill project. Roughly 1/4 of our anticipated 2027 spend is associated with growth CapEx that we expect will further decrease in 2028. As a result, free cash flow and free cash flow conversion is expected to improve in fiscal '27 and again in fiscal '28. This increased financial flexibility creates opportunity to further enhance shareholder returns and reinforces a topic we first discussed at Investor Day.

At that time, we announced a significantly expanded share repurchase authorization, which currently has approximately $700 million remaining. Since then, our conviction has only strengthened. With our strong cash-generating capabilities and the opportunity we see in the current share price, we intend to accelerate our pace of activity under the program. This action reflects our confidence in CMC's outlook and our conviction that investing in our own shares represents a compelling value creation opportunity.

As you think about your fiscal 2027 models, there are two items worth noting. First, we have just over 1 quarter remaining of the acquired backlog amortization. This will amount to approximately $20 million in the first quarter and roughly $2 million in the second quarter. Second, CMC will continue to benefit from meaningful cash tax savings associated with the 48C program. Bonus depreciation related to our West Virginia mill investment and accelerated depreciation on assets acquired through the precast acquisitions. As a result, we do not anticipate paying significant U.S. federal cash taxes through much of fiscal 2027.

For modeling purposes, we expect our effective tax rate to be approximately 24% for fiscal 2027. With that, I'll hand it back to Peter for our outlook. Peter?

Thanks, Paul. As we look ahead to fiscal 2027, we are encouraged by both the external environment and the opportunities within our control. Domestic steel supply remains disciplined demand for early-stage construction products is supported by strong backlogs at attractive prices, and our value creation initiatives continue to gain momentum. TAG remains a significant source of earnings growth. Our recent growth investments are transitioning from capital deployment to return generation and our evolving portfolio is enhancing both the quality and the durability of our earnings.

Together, these factors support our confidence that fiscal 2027 will be another solid year for CMC. Specifically for the first quarter, we continue to expect healthy operating performance across the portfolio, though normal seasonal factors and cost will impact results sequentially. Within our North American Steel Group, improved pricing is expected to largely offset higher scrap costs, start-up expenses and a slight seasonal decline in shipments resulting in adjusted EBITDA that is expected to be nearly flat in comparison to the fourth quarter. Within our Construction Solutions Group, adjusted EBITDA is expected to be down sequentially, reflecting typical seasonal trends impacting the end market activity in this segment.

In Europe, adjusted EBITDA is expected to meaningfully increase sequentially, benefiting from the improving operating conditions and a CO2 credit. All in all, we remain confident in the operating environment animated by our priorities and above all, eager to deliver on the financial and strategic opportunities ahead of us in fiscal 2027.

With that, I'll ask the operator to provide instructions before fielding your questions. Thank you very much.

[Operator Instructions]. The first question today comes from Samuel McKinney with KeyBanc Capital Markets.

Good morning, Peter and Paul. After a relatively soft third quarter, you said it was challenged by weather. The fourth quarter precast EBITDA number came in about $20 million short of the number you intimated on the last call. Just given the residential market challenges, is annual run rate EBITDA around that $240 million, $250 million still the right way to be thinking about this business before you make any more acquisitions?

Sam, thank you very much for the question. We believe it is. And we think that it's a good target for this year. When we look at the backlogs in the business, when we look at the progress we've had on integration, and kind of overall momentum, we feel like we can achieve that. We will have some near term. And by near term, I'm talking Q1, we will have some seasonal weakness. And that seasonal weakness probably leads to a Q1 that's going to be down mid- to high single digits from where it is in -- but overall, we remain very positive on this business.

I think one thing that's interesting about this is that as residential has declined, it's been filled in by a strong slug of nonres and infrastructure. And so again, that's what's supporting our backlog and giving us a lot of confidence in this. And pricing remains very strong in the business. We continue to see pricing rising across the portfolio. So I guess, all in all, we remain very confident and we see this as a continuing strong contributor to our portfolio.

Okay. And then you did mention that the South Korean long product imports finally took a big step down in September. How do you think about the sustainability of these trends? And do you expect any sort of government action now that South Korea has also made itself a meaningful importer of flat products this year?

Yes. Well, I won't speak to flat products, but I'll kind of keep my comments on the products that impact our business. Yes, we did see the significant decrease. We expected it to be a little sooner, but it did happen. And I think the reality is, is that when you kind of stack up the costs in the current environment of getting rebar to the U.S. from South Korea, it's not competitive with where our pricing is even with the current price increases that we've just recently put in place. And so I think economics are it's taking care of the issue for us for the short term. As I've said in prior calls and engagements and at the Investor Day, where we see that someone is violating our trade laws, we are not going to be shy about going after them.

But right now, I think we're going to monitor the situation, and we're comfortable with where things stand. I think it's also a further note that if you look at the countries against whom we are against which we filed these antidumping and countervailing duty cases, they have effectively kind of gone away from the import market, right? So we're not seeing any material imports from any of those countries, which I think kind of goes to support the point that I made at the Investor Day and I've made on calls before this that this is durable supply management that we're working on.

And again, I'll just remind the audience and you -- I know you know this, but those antidumping and counterval-duty cases and the duties that come from them, they have a duration of at least 5 years and generally $10 million.

The next question is from Sathish Kazinathan with Bank of America.

Yes. Thank you. Congrats on the strong finish to the year. yes. My first question is on the guidance for the first quarter. Can you maybe walk us through some of the moving parts, especially like how much CO2 credits do you expect in EU? And what is the magnitude of start-up costs you're assuming for Design mill.

Yes. Satish, as we look at Europe, I think we mentioned really two factors. The CO2 credit. We are expecting at this stage somewhere between $10 million and $15 million of CO2 credits. Offsetting that in Europe will be the higher energy costs that I cited. We've seen those so far throughout the quarter around $10 to $15 a ton. And so that will erode a little bit into the earnings of the business. So those are the two drivers of the Europe space overall, expect, as we said, a meaningful increase in overall results, but guided by those two factors.

And then on the start-up costs for West Virginia mill.

Sorry, yes. On start-up costs, we're -- as Peter said, we're making good progress on the commissioning space. We anticipate that in the first quarter, we'll probably incur extra $3 million to $5 million of incremental cost. So what we've incurred in the fourth quarter was in the $9 million, $10 million range. So it's just a slight uptick from that as we start the operation up.

Maybe one follow-up on the West Virginia mill. So can you maybe give some additional color on how you see the cadence of ramp-up. So when do you expect the first commercial shipments? And then are you still on track for maybe 250,000 to 300,000 tonnes of volumes from the mill that you previously guided to?

Yes. I think -- so again, remember on this, we did have some construction weather delays. So but we are kind of making great progress on the hot commissioning at this point. We have rolled our first billet and we are progressing with the start-up. I think it's fair to say that we expect the startup to occur over kind of a 12-month period. and we should be breakeven after about 6 months. I think the -- when we look at the overall project, we're super pleased with the fact that we've been able to bring it in kind of effectively on time and effectively on budget. And I think that's a testament to the -- as I said on the -- in the prepared remarks, the great job that the team has done and the capital discipline that we have as a company.

So overall, to your question of the volume, Satish, I think it will be a little less than what you indicated just given the commissioning is ongoing, and really, we'll expect to start the true commission. The start-up activities near the end of the first quarter. So we'll probably be a little under 200,000 tons of production in the current year.

The next question is from Bill Peterson with JPMorgan.

And again, a really strong finish to the fiscal year. I wanted to come back to precast if I could. So I guess from a -- if you took the quarterly numbers and annualize that, you were ahead of, let's say, where you were or what you had talked about at the time of acquisition in terms of sales, but actually behind in terms of -- so I'm just trying to get a better sense of what's going on. Maybe you can characterize it relative to the markets you're operating in. It sounds like it's primarily residential, but also -- it sounds like your pricing is fine, but is there some cost pressures to call out? Is there some mix related areas to call out, especially on the profitability side?

Yes. Great question, Bill, and we'll try to fill in some of the detail here. So as we said in the prepared remarks, this is really about weakness in residential and in the Southeast, and it's really about volume weakness in that region in residential. And what I think is interesting to note is that the volumes are actually, if we look at the CPMP portfolio, volumes are up and actually almost offsetting all of the volume decline in the Southeast. So what that leads to is that you'll remember when we announced these transactions, that there was a pretty sharp discrepancy between the margins on the FOL portfolio and the margins in the CP&P portfolio.

Again, this is one of the opportunities in CP&P that we saw is to bring those margins up. But as we're working through the integration, we haven't completed that yet. And so losing volumes in the Southeast was kind of painful from a just magnified the EBITDA impact of the lost volume. As I said, the price is not the issue. The price has been going up. We have quarter-over-quarter price increases and year-over-year price increases. So it's very disappointing. It's kind of not how we would have written the script. But what I want to be categorically clear about is that we are not overly concerned. As retail -- as the residential has slowed, the nonresidential and the infrastructure have filled in the backlog. Our margins in spite of that volume loss remained at 30%, which is -- again, this is -- remember, we're on the front end of an acquisition.

So we've got some of the integration costs before we get the benefits of integration. And a lot of the business indicators, I think, point us to confidence here. So bookings, as we noted, up 12.5% in the fourth quarter and have continued to rise in the month of September. Pricing, again, as I noted, up backlog up 4% year-over-year, 3% in the fourth quarter. with growth in September. And the other thing I would say is that the integration has proceeded in a really nice way. I would say we are, if anything, ahead of plan or synergy, as we look at the business more, we see more opportunities to do things with it that are going to lead to kind of higher growth synergies.

So on balance, this is a -- yes, there's some softness in the market. But one other final point that maybe I'll leave you with is that the residential portion of our portfolio is running at about 50% to 60% of kind of what a normal environment would be. So we feel like we've taken much, if not all, of the pain on the residential side. So I'm sorry, that's a long explanation, but there's a lot to get in there.

No, SP1 That was good insight. I appreciate that. Very helpful. So my next question is on North American steel. You commented about MBQ, the mix is rich. It looks like shipments are at least at a 5-year high I'm trying to get a sense of is there further opportunities to shift more of the next MDQ and I guess, how to take that into account as we look at this fiscal year in terms of the cadence of rebar versus as especially with West Virginia ramping, which is rebar. So does that mean more A2 goes to MBQ, things like that?

Yes. No, great question. And we see there's a nice opportunity in MBQ. And remember, one of the things that we've talked about over time is the fact that the portfolio that we have gives us latitude not only to control supply demand by producing fewer rebar tons but also by producing other products. And this is a perfect example of what we're able to do here. with the demand on merchant, which is really kind of a broad-based response to overall strength in the economy.

And so we are -- we have been shipping materially more merchant bar. And as we start West Virginia, what that will do is it will free up South Carolina, for example, to produce more merchant products. So as we said in the Investor Day, we believe that as a starting objective, we think there could be more over time. But as a starting objective, we can get up to 1 million tons of merchant shipments. And that would imply about 150,000 to 200,000 tons of incremental merchant shipments. So again, it's a nice margin opportunity in the current environment, and it's a nice way to keep the rebar market tighter.

Just one thing to add to Peter's comment. When we disclose merchant bar and other, that's got our merchant bar and the wire rod principally that we produce out of our Florida facility. So there's about 150,000 tons of wire rod that we're shipping on an annualized basis. So that supplements to the 1 million-ton target for merchant buyer that we have.

The next question is from Timna Tanners with Wells Fargo.

Wanted to touch base on the recent move up in October for #1 heavy melt scrap, it looks like $27.50. Does that get fully passed through with the recent increase in rebar prices that you announced? And any thoughts on the timing impact there into the November quarter?

Yes. So thank you, Tim, for the question. it will. And we feel confident that as we go into the November quarter, you're going to see a kind of a gradually improving top line from an ASP perspective. and gradually improving metal margins. So we will -- we believe will outpace the move in scrap as it filters through our portfolio.

Okay. That's helpful. And then secondly, I wanted to shift over to Europe, and I know you talked about some recovery there from low levels. A couple of moving parts. Of course, you talked about better demand, but also several favorable trade policies. Like what are you seeing there in terms of how much of that is volume driven? And how much of that might be because of better demand? And how much of that might be of the tariff actions?

So what I'd say is that the demand is good, and it's been good in Poland, right? So -- and we've said that on several prior calls, the challenge has been really on the supply side. And that's where we've been optimistic about the impact of some of these trade policies. What we've seen, however, is that -- so -- and just kind of rewinding the clock to the beginning of the year, you had CAM but then kind of in front of CBAM, everyone imported a lot of steel into Poland. So we had this 2- to 3-month period where we had to kind of deal with that -- and then the market started to tighten up and we saw pricing and margins improved. So we felt pretty good about that.

And then the safeguards, which took effect in July, same impact happened where people are kind of bringing material into Poland or into Europe in advance of that. And so we're kind of working our way through that, but we are optimistic that we are on the way to seeing an improving environment. It would be it would be great if we could see some general improvement in the European economies, the fact that the German economy has not improved the way we expected it to is maybe a little cautionary note. But we are optimistic that we can get this business back to $100 million or our through the cycle number.

Timna, just to add a little color. It really is a margin growth that we're looking for to get us to that $100 million level. within TAG, a good portion of that, both in North America and in Europe is commercial excellence. There's a strong commercial excellence process going on in Europe. To really be selective around the volumes that we want to sell that drive the greatest margins for the business. So this is about us realizing a margin enhancement as opposed to a volume growth.

The next question is from Nick Cash with Goldman Sachs.

Just stepping back to the Analyst Day for a second. Can you help us bridge, I guess, the 26 core EBITDA of, call it, $1.4 billion versus the 29 target of of $1.65 billion to $1.8 billion. And can you also remind us, I guess, how much was West Virginia, precast tag and other? And does the precast weakness that you're currently seeing in the mix shift change that mix at all?

Yes. Thanks, Nick. Great question. We're -- we believe that we are, I think, demonstrating the capabilities of the business the fourth quarter aligned to the targets that we have for 2029. The math of the organic growth projects, whether that be West Virginia, whether that be through the merchant bar expansion that Peter said, whether it be the Galvabar line or the Geogrid line that we're constructing. All of that is close to $200 million of incremental EBITDA that we've talked about there. We've got the ability or the strength in Arizona to continue to enhance the contributions.

We've got the growth in the precast business, obviously, from where it was in 2026, the full year impact, but also the growth that we anticipate in that business as well as the mid-teens growth in the rest of the Construction Solutions group. So we think the $1.4 billion that we earned in the fourth quarter, recognizing that the scenario we laid out was a 25% tariff environment, but there is -- we're well on our way with all of that growth opportunities to achieve that or in today's environment, far exceed the low end of the range based on the way we're performing now in the markets that we're seeing.

And Nick, can I just jump in on that to say you asked the question about does the precast softness change at all. And I want to categorically say it does not. If anything, as I said earlier, we have more conviction in precast. And by 2029, we're confident that we're going to get to where we thought we could get to.

The next question is from Richard Garchitorena with Barclays.

I believe in the prepared remarks that you mentioned that CapEx for fiscal 2017 would be $400 million with 25% of that being growth CapEx. I was wondering if you could provide some color in terms of what are the key growth projects that you're going to be working on this year, particularly in the CSG and pre castings. And then how should we think about that impacting potential growth in fiscal '28 and beyond.

Yes. Thanks, Richard. The vast majority of the $100 million growth is West Virginia. There's a few payments related to performance targets that need to be made, and we expect to make those in 2027. So that's well over half of the spend. And then the spend on the Geo grid line and the GalvaBar line, both those will -- well, all 3 of those will be in start-up mode in 2027.

So their EBITDA contribution will be limited as far as the long-term capabilities of those plants, we expect the Galvabar facility to begin commissioning late in calendar and the GEO grid line is continuing to be in the start-up and commissioning time now. So that one is most likely to contribute in '27. As Peter said, we expect West Virginia to ramp up nicely and within 6 months of the start-up being breakeven from an EBITDA perspective, so into Q3 for us on that one.

And we expect -- just to put a bow on that, again, as we think about maintenance, we've talked about maintenance in the past is $275 million. So going forward, if you think about kind of million of growth investments, that's the type of range we would be in for kind of ongoing CapEx. And again, I think that one of the things that's really important that we're trying to do across the company is look for opportunities to invest in projects that make our operations more efficient and generate kind of high returns from that. So you'll see that's where we'll devote most of the growth, too. As we've said before, we're not building a new steel mill, anything like that. It will all be investments in efficiency.

Great. And maybe just thinking to capital allocation, congrats on getting leverage down below your target level. As you move forward, obviously, CapEx coming down as well. How should we think about share repurchases, is that going to be the bulk of the target? Or are you looking to keep some dry powder for M&A? How should we think about that?

Yes. I mean I think, look, we are definitely going to keep some dry powder for M&A. If we think about, we have built a kind of pretty active M&A dialogue across the priority areas. We don't have anything that's significant to do right now. So -- but we're -- that works fine because we've got a lot of work to still do on integration and optimizing the precast platform. But again, returns to shareholders are an important piece. And as we -- you heard what Paul said in his prepared remarks about increasing our share repurchase.

And I think looking at our free cash flow and seeing the strength of it and also looking at the share price, and it looks like it's a very compelling investment at this price, it seemed like it made sense to accelerate the share repurchase. We had a -- we announced an authorization of -- or we increased our authorization to about $700 million with the -- we increased it by $600 million, but to get to about a $700 million total authorization. We said we intended to do that over 3 years. What we're saying today is we're going to pull that forward. We'll see how that progresses, but I think you should expect a meaningful increase in the amount of shares that we're buying.

Next question is from Tristan Gresser with BNP Paribas.

The first one is on North America. If we put everything together, West Virginia, the product mix you just mentioned as well. And I don't know if there's some leftover from Arizona two for fiscal 2027. But you able to share the percentage volume increase you have in mind for the fiscal year for the division. And if you have any -- if there's any difference between steel products and -- or downstream products?

Well, I guess what I'd start out with is demand, right? And so far this year, we've seen demand growing year-to-date. I think it's over 4%. And so the good news is that we have the capability to flex our production to meet increased demand. And yes, there is additional capability in Arizona, and there's obviously additional capability in West Virginia. But again, I want to come back to remind everyone that our objective is to kind of keep supply and demand in balance. And the flexibility of our network given it's a high variable cost network allows us to do that. So I think we'll have to see how the market grows, but assuming that it continues at this pace, something of that order could be what we'd expect SP-8 I don't know, Paul, if you would add anything to.

I think what we're particularly proud about because I think if you look, as Peter said, the market is up 4% to 5% in terms of rebar consumption, our downstream business in which we have executed and demonstrated strong, strong commercial discipline in terms of really only looking to take on margin-accretive work for the business. And yet we're up 7% on a year-over-year basis. That speaks to the capabilities and the ability for us to do these large mega jobs that are really sustaining the construction activity right now. And those are projects that are not just being done in 2026, but we'll be multiyear in length. And it gives us confidence as we look forward that those capabilities will be rewarded in terms of lower risk to the contractors, lower risk to the project owners of contracting with CMC and continue to feel a real sense of opportunity for us to grow margins and continue a strong downstream pull.

All right. No, that's very clear. And the second question is on Europe. A bit of the same question to start with on the volume book. If you -- if you expect to continue to gain market share and what we can expect for the year? And also just trying to understand a bit the margin development. You sound pretty constructive, but when I look at rebar prices and maybe I should look at Polish rebar prices and just general European prices, but they've been pretty flat over the past couple of months and energy costs are through the move. So and other long steel producer in the regions have been forced to shut down. So what you're doing differently? Can you remind us how you procure your electricity, natural gas and maybe some of your hedging strategy you have in place? Or maybe there's something different, it's just about mix or something else that makes you a bit more resilient.

So thanks, Tristan. So I'm going to start and then Paul can walk you through what we're doing in terms of energy procurement. But in terms of volumes, we've said demand is good. And we've been running at, I would say, a pretty high rate of utilization in our Polish operation recently. So we -- and I would say we expect demand to be kind of stable, maybe modestly better in that marketplace. Pricing, you're right, has been -- well, we saw -- as I said earlier, we saw in the wake of C-band, we saw a nice rise in pricing to the tune of $100 a ton.

But then we saw, obviously, scrap kind of went up along with it. And with the safeguards coming in and the pre-buy there, you've seen us give some of that -- a little bit of that back. So we are still optimistic, though, that as the inventory prebuy related to the safeguards filters through that you're going to see margins expand in that market. So we're -- and again, expand gradually in that market. We're not expecting any sea change, so to speak. But maybe, Paul, you can talk about the energy side.

Yes. On the cost side, earlier I spoke of the focus that the team is doing on commercial aspects of TAG. Operationally, the team has done a phenomenal job of rightsizing and driving costs to where it needs to be from a competitive perspective in the tight market that exists in Europe. And one of those areas that the team has always been focused on is electricity consumption. But also having the foresight to enter into longer-term energy contracts. And so we have around 50% of our electricity hedged through long-term purchase agreements. These were entered into prior to the Ukraine or prior to energy costs taking off in Europe. And so really competitively situate the mill in a positive environment.

So combination of a strong hedging process through those agreements as well as a focus on consumption that drives a significant competitive advantage. And hence, why we're able to withstand the costs where they are. As I said, we do anticipate energy costs continuing to rise, but expect to continue to be a strong position economically from a margin perspective with those increases taken into consideration.

And Tristan, the last thing I would just say is just remember, as you kind of think forward the next couple of quarters, we're coming into the difficult part of the year in terms of kind of the ultimate demand, right? So there's going to be some -- likely some seasonality to the numbers over the next couple of quarters.

All right. No, that's very clear. And one quick follow-up. This inventory overhang, you mentioned, would you see that clearing up already before year-end? Or it's going to take a bit much longer than that.

Well, again, if we think about -- I would say what we saw in CBAM, it took longer than what we expected to clear up. So -- and I would say, to the tune of probably 4-ish Yes, 4 to 6. So I think we might see the same here.

So by the end of the calendar year, we would expect the benefits really of BAM and the tariff rate quota to start being realized in a more meaningful way.

This concludes our question-and-answer session. I would like to turn the conference back over to Peter Matt for any closing remarks.

Well, thank you for the thoughtful questions and for joining us today. every CMC employee should be proud of what we have accomplished in fiscal 2026 and even more excited about the opportunities ahead. enabled by their efforts and our collective performance and a clear vision we believe fiscal 2027 will be another great year for CMC. To our shareholders, we thank you for your support, and we look forward to continuing the conversation over the weeks and months ahead. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Good morning. Welcome to the Commercial Metals 2026 Investor Day. I'm Andy Larkin, Vice President of Investor Relations. On behalf of our entire leadership team, we're so excited to have you with us today. Whether you're joining via the webcast or live and in person here at the beautiful and iconic New York Stock Exchange, we have an outstanding program for you.

If I were to frame up the purpose of today's event, it's simple. A deeper look at our company, at our strategy and critically the people that are charged with executing that plan each and every day. We hope you leave here with a deeper understanding of the opportunities we have in front of us as well as a deeper conviction in our ability to drive long-term shareholder value.

Now while it's my honor to open today's festivities, it's also my tremendous burden to try to keep our auditors and lawyers happy. So, I urge you to read our safe harbor statement and know that our team will be making some forward-looking statements. These statements reflect our current expectations and views and actual results may differ due to a variety of risks and uncertainties. And for more information on those factors, please refer to our form -- our most recent Form 10-K and other filings with the SEC.

With that out of the way, and if you follow the CMC story for any amount of time, you'll know that safety is our top priority. So, in the event an alarm were to sound, please wait and listen to instructions from safety personnel. And in the unlikely event of an evacuation, please also listen to the floor wardens for instructions and exit via the stairwell, but not the stairwell in outside of Freedom Hall.

Okay. Now let's turn to our agenda. Our President and CEO, Peter Matt, will begin by telling the CMC story and outlining the value creation levers that will drive growth and value creation. Ty Garrison will talk you through our TAG Program, our operating model that's fundamentally enhancing every aspect of our enterprise.

Brian Halloran will walk you through our North American Steel Group, how we're reaping the benefits of prior investments, how we're benefiting from a constructive demand environment and how we're delivering profitable growth. After half time, Keith Haas and Mike Doucet will take us through our Construction Solutions Group, first with a look at the precast business, followed by a look at opportunities within our emerging businesses portfolio.

Paul Lawrence, our CFO, will tie things together by outlining our financial targets, capital allocation priorities and valuation framework. Peter will conclude with some brief remarks. And you'll also note that we have 2 dedicated Q&A sessions today. So, if you're following via the webcast, please submit your questions via the web portal.

For that first Q&A session, we ask that the content stay contained to the first half of the presentation. So, Ty, Peter and Brian's presentations will be fair game. That second Q&A session, everything will be on the table. And before I forget, if you haven't already, please silence your cell phones.

Hopefully, I've set the stage for what to expect today. And as I invite Peter on to the stage, we'd like to share a short video with you that captures the energy of our business and the momentum behind CMC. Enjoy.

[Presentation]

Okay. Thank you, Andy, for the introduction, and welcome, everyone. It's great to be here today, and I have been looking forward to this for some time. Today, I want to talk about a couple of things that I saw when I first came to CMC, and then we're going to get into the transformation.

When I first came to CMC, this is about 3 years ago now, what really caught my attention was I could see there was tremendous untapped potential in the company. And secondly, I could see that we could build on CMC's strengths and reinvigorate a long-term growth strategy. And today, as I noted, we're going to talk about the transformation that's underway and introduce you to a number of the folks that are leading the way.

I am very excited to share some of these details with you. I want to start with 4 compelling messages that I think will pique your interest in CMC. First message, we are a diversified early-stage construction supplier. And with the transformation that's underway, we will drive higher margins, lower volatility and stronger growth.

Second, CMC is capitalizing on strong multiyear construction demand created by years of underinvestment. Third message, CMC has 3 powerful levers of value creation that will drive earnings and cash flow over the next several years. Lever #1 is capturing the full potential of our business.

Lever # 2 is harvesting the benefit of capital that we've already deployed.

And Lever #3 is reshaping our portfolio through portfolio optimization and disciplined M&A. Fourth message. Today, we are introducing some compelling 2029 mid-cycle targets. And these, combined with our capital allocation strategy that Paul will outline, will underwrite significant shareholder value creation.

I am very excited to share our story with you today. So, let's jump in. For those of you that are less familiar with CMC, we are a 111-year-old Texas-based company with revenues and EBITDA of $8.8 billion and $1.3 billion, respectively. We operate through 3 segments, each with strong market positions, leading market positions and difficult to replicate business franchise.

Our North American Steel Group is the #1 producer of rebar in the U.S. Our Construction Solutions business is the #1 producer of Precast in the Southeast, #3 overall in the U.S. and the #1 producer of Geogrid Solutions. And our Europe Steel Group is the #1 producer of merchant products and a leading player in the Polish rebar market. In the middle of the slide here, you can see that Construction Solutions represents 28% of our adjusted EBITDA, our core EBITDA. Our goal over the next 3 years is to take that to 40% plus. That will include some acquisitions. Those acquisitions are not in the targets that we're sharing today.

We are going to focus our conversation today on our U.S. business. That's because the U.S. is the bulk of our business and the heart of our transformation. Europe remains an important piece of our company. And as we've talked about in recent calls, there are a number of green shoots in Europe, and we'd be happy to take questions on Europe in the Q&A sessions.

I want to start by digging in on early-stage construction. I say we are an early-stage construction supplier in an evolving construction market. Why do I say that? Well, over 90% of our products go into early-stage construction applications. And by that, we define that as everything from construction planning through structural framing.

And decades, decades of providing reliable products and great service have created the strong and resilient CMC that you know today. And I want to just take a quick moment to thank our customers for the trust that they've placed in us over all these decades. However, as projects grow larger and more complex, our customers' needs are evolving.

I've spent a tremendous amount of time with our large customers and a lot of small customers as well. And I can tell you, the conversation is changing. Increasingly, CMC is being asked to partner with customers or to dedicate capacity to this or that project. This is new, and this is something that is a significant opportunity for CMC. It's a differentiating opportunity for CMC.

It will bring us for a portion of our business, so this will complement our existing product-led strategy and bring us to a strategy where we're providing enterprise-level solutions where we might be providing multiple solutions to a job site.

It's a significant opportunity for CMC, as I said. And the earnings potential is enormous, and it goes well beyond any of the targets that we have today. You're going to hear about a number of examples of this through the business leaders as they go through their presentations. I said we're on a transformation journey. It's one that we started 3 years ago with a strong culture and a tactically exceptional team, a series of good businesses that have the potential to be great businesses and a strong foundation in early-stage construction to build on.

And what I can tell you today in 2026 is that we have made tremendous progress in this transformation. And what's most gratifying for me is that all of the pieces that we need to achieve our 2029 targets are in place. We just have to execute. We just have to execute. So, what will we become in 2029? We will be a best-in-class company addressing critical construction challenges with a steel company delivering consistently higher margins and a scaled construction solutions business delivering higher margins and growth with lower capital intensity, together generating materially higher returns and bringing a capital allocation strategy that balances growth for the company and return of shareholders -- return of capital to shareholders.

This is our transformation. It's the mission in this company, and it's making it a very exciting time to be an employee of the company, and I submit it's an interesting time to be a shareholder of the company. Let me just say a few words about demand. Demand is strong, and our backlogs are growing. What's common to each of our core construction end markets is a multiyear demand profile created by years of underinvestment.

And let's just look at some of the key markets. Infrastructure, multiyear demand profile. You all know about the IIJA. There's a follow-on infrastructure bill that's being worked on. I just spent some time in Washington. I can tell you there is bipartisan support for a continuation of the infrastructure bill.

Nonresidential construction, we have talked about, again, multiyear demand profile. We have talked about literally trillions of projects, trillions of projects across energy, across data centers, across other industrial applications, institutional applications. And we have a Dodge Momentum Index that remains at elevated levels, suggesting that there is a pipeline of additional projects coming on over the next 12 to 18 months.

Multiyear demand profile. And even residential, where things are weak today, but there's also a multiyear demand profile created by the 2 million to 5 million homes that need to be built across this country. And CMC is uniquely positioned to meet this. Our scale, our leading market positions, the broad capabilities we bring, the very deep local market positions that we have and our strong track record on both easy-to-execute projects and difficult-to-execute projects create a differentiated market position that makes CMC hard to beat.

In summary, the demand is good, and we're very well positioned to capture it. So, how will we create value in our company? We have 3 powerful levers of value creation. Lever #1, capturing the full potential of our business. This is about making the most of what we have. It's about TAG. TAG is our Transform, Advance and Grow initiative for those of you that don't know. Lever #2, harvesting the benefit of growth capital that we've already deployed, $1.5 billion of it.

And Lever #3, reshaping our portfolio through portfolio optimization and disciplined M&A. Each of these levers will drive durably higher margins and growth with lower capital intensity. So, let's dig in on each of the 3 levers.

I want to Lever #1, capturing the full potential of our business. I want to start with safety. It all starts with safety. Safety is our #1 priority. The best companies are the companies that have safe financial performance, they also have best financial performance. That's been our experience in our operations and safety will remain our top priority. It's good for our people, and it's good for our business.

So, what's TAG all about? Well, Ty is going to talk about TAG in a lot more detail, but let me introduce it. And I want to -- and there are really 2 key elements to TAG. Number one is driving operational excellence to create structural cost advantage.

And Lever #2 is building commercial excellence to capture the full margin potential of our business. I say TAG is our foundation. And the reason why I say that is because as a company, I firmly believe we need to earn the right to grow. Our goal with TAG is durable margin improvement. That means we raise our top line, we reduce our costs, we create incremental margin that more than offsets any inflation in our business, and we do it on a sustainable basis.

TAG has been a tremendous success, tremendous success. By the end of fiscal year 2026, less than a month from now, we will have achieved over $250 million of run rate EBITDA benefits on a gross basis. And I will tell you that involves very little capital coming back to the capital-light point. By the end of next year, fiscal year 2027, we will have achieved over $350 million of gross run rate EBITDA benefits from TAG.

60% of that will fall to the bottom line as durable margin improvement. That's over 200 basis points of margin improvement from TAG. And I'm telling all of you today, we are not done. The beauty of this program is the more we dig, the more we find. And I am so proud of what our company has done. This started as a framework, it has become a mindset, and it has changed our company, and Ty will cover that in a lot greater detail.

The best example that I can give you of making the most of our -- of what we have and TAG is in our North American steel business. And Brian is going to talk about this in some detail. But as a prelude, I thought I would highlight some of the work that we are doing and have done to strengthen our industry and CMC's position in it.

I know the steel business can be difficult. I've spent the last 40 years of my life working first with it and now in it. But I submit to you, there are a number of factors in our business today that suggest that the outcomes should be better.

Factor number one, our business is certainly our corner of the steel market is largely consolidated. CMC is a leader, and we are determined to drive better outcomes for our business. Factor number two, the imports picture is materially better. With the work that we've done on fighting unfairly traded imports, we have reduced the volume of imports coming into this country by 500,000 to 1 million tons. And we've done it on a durable basis.

When I say durable basis, I mean these antidumping and countervailing duties block those imports for 5 years and oftentimes 10 years, a minimum of 5 years.

Third factor, in the context of multiyear demand and lower imports, supply is balanced. And we at CMC are going to work by all of our means to support that balance of supply and demand in the market. We are managing for profits. We are not managing for volume. You hear us say this all the time, value over volume.

To complement this, we are working to build a stronger and more resilient steel business. And this is where TAG comes in. We are working on operational excellence to ensure that we are low cost, and we will be low cost. We are working on commercial excellence to ensure we capture the full potential margin in our business. And we are just starting to scratch the surface of this. This is a huge opportunity for our company.

And as you will hear from Brian today, we are restructuring different parts of our business to improve the return profile. The fab full potential is a great example of this. So, we are strengthening our industry, and we are strengthening our company.

Let's talk about Lever #2, harvesting the benefits of capital we've already deployed. As I said earlier, we spent $1.5 billion over the last several years investing in our assets. That is in the denominator of our return on invested capital calculation. The earnings are not in the numerator.

Over the next period, we will ramp up -- fully ramp up our Arizona 2 micro mill, and we will launch and ramp up our West Virginia micro mill. Those -- with those 2 mills, we will have completed our mill network. We will not need to build another mill.

We will have the network we need. We will also realize the earnings from our lower capital intensity construction solutions investments. And here, I'm talking about investments in the precast operations in Colorado and Florida, our new geogrid line in Oklahoma and our soon-to-be GalvaBar 2 line in Knoxville, Tennessee.

And, going forward, we will continue to invest in lower capital intensity opportunities that strengthen our market position, build our capabilities and/or reduce our costs. And, in the area of cost reduction, I'm talking about things like process technology and automation and AI, which you'll hear about from several of the folks today is a big opportunity for our company.

There's another really important aspect of our lower capital intensity strategy. And, that is the inflection of free cash flow. That will start in 2027. And, as you can see on the right-hand side of this chart, and this is using a simple free cash flow definition that the peers use of EBITDA minus CapEx, our free cash flow will grow to $1.4 billion to $1.5 billion.

And, to put a point on that, that's $1 billion a year after interest and taxes are factored in. I believe this is a grossly underappreciated valuation consideration for CMC.

Let's talk about our third lever, reshaping our portfolio through portfolio optimization and disciplined M&A. We have done an in-depth review of every asset in our portfolio. And, we've done this with a view towards what fits with our strategy, what doesn't fit with our strategy. And, where assets do not fit with our strategy, we will divest them at the right time and until then, they will remain core.

We will also reshape our portfolio with disciplined M&A. We will be very strategic in what we look at. We will look for businesses that add to our existing early-stage construction capabilities. They will have a U.S. focus. They may build local or regional market share. They will certainly sponsor our early-stage construction or support our early-stage construction work.

They will bring synergies, and they will build out around the financial profile that we're articulating today. And, they will not stress our balance sheet. In the near term, we're likely to be talking about things that enhance existing capabilities. You know we did these 2 precast acquisitions, something in the precast area could be interesting. We would love to grow Tensar, these types of things.

Longer term, we will open our aperture a bit and look for other areas within early-stage construction that complement what we're doing today and ideally find areas that are underpenetrated where we've got kind of growth parameters that support them. This is a very exciting lever for our company. It's an opportunity to reposition the company. And, in doing this, we can create tremendous value for all of our shareholders.

Our precast acquisitions are a great example of the -- of Lever #3. This is an exciting new area for CMC, and it's a terrific addition to our portfolio. We love the value-added product that it's bringing into our portfolio. We really like the complementarity with our existing businesses. We like the scalable market leadership position that it brings. And, of course, we like the financial profile that it brings to CMC. We have heard really universally positive comments from our customers about this move and the connectivity around early-stage construction.

And, our integration is proceeding on pace. We're very happy with where we are. Our synergies are -- we have line of sight on all of the synergies that we are trying to get out of this. And, I am confident in saying that Precast will make CMC a stronger and more resilient company. This has been a great success so far, and Keith is going to talk about it in a lot more detail.

One more point on Precast. I talked about -- or I mentioned scalable market leadership position. We -- when we look at acquisitions, we look at addressable market. And, in this instance, Precast increased our addressable market by $20 billion. And, that, combined with the very fragmented nature of the market, creates an exciting growth runway for our company.

We are very excited by what we've achieved, and we are eager to deliver on what's ahead. And, today, as I said at the very beginning, we are introducing some compelling mid-cycle financial targets for 2029. I'm going to highlight a few of them. Paul will talk about a few of the others, and we'll be happy to take questions on the financial targets in the second Q&A session.

Our core EBITDA target of $1.65 billion to $1.8 billion assumes a stable environment. It assumes a 25% tariff at the low end of the range, and it assumes no additional acquisitions. That's a CAGR of 10% to 13% on -- comparing to our TTM EBITDA.

Our free cash flow, I already noted, will inflect to $1.4 billion to $1.5 billion starting in 2027 and the inflection will start in 2027. And, again, noting after interest and taxes are factored in, that's $1 billion per annum. And, our ROIC target of 13% to 14.5% is well above historical performance and certainly well above the company's cost of capital.

I think these targets speak strongly to the transformation that's underway at our company. And, I am very confident that we can achieve them. An important piece of our transformation is the growth of Construction Solutions. As I noted earlier, today, it's 28% of our portfolio. Our goal is to grow that to 40% plus. And, that -- again, that 40% plus will include some acquisitions that are not in the targets we're setting today.

And, as we do that, I think it's a fair question to say, who should we be compared to? And, of course, what are the implications for our multiple? Well, CMC today trades at about 7x EBITDA. Our steel peers trade at 8 to 10x EBITDA. And, our Construction Solutions peers trade at 11 to 13x EBITDA. Paul is going to present some comparative financial metrics, and we invite you to draw your own conclusions.

But one thing I think is perfectly clear. CMC is a much stronger company today than it was just 3 years ago. And, 3 years from now, it will be even stronger. The most important ingredient of our transformation is our team. And, I have an outstanding leadership team, and they're all here. Each leader brings something different to the party. And, I thought I'd just highlight about the speakers, some of what's special about what each of them are bringing to the party. Ty, who you're going to hear from next, brings a deep, deep knowledge of the company from his long tenure at CMC and has been relentless in making us better. He's the right man for the job on TAG.

Brian brings also a deep, deep knowledge of the company, also from a long tenure with the company and is 100% committed to creating a world-class steel company.

Keith is a seasoned precast executive. He's the newest member of our team. He came with the Foley acquisition and has tremendous experience both in precast and as you'll hear in broader construction materials over decades.

Mike has had a number of experiences, a good tenure at CMC and a number of experiences outside of CMC, a great commercial mind and has a great track record of building businesses.

And, Paul, a strong finance partner to me and to the other business leaders and absolutely committed to improve performance. I would be remiss if I didn't also give a shout out to the broader CMC team. This transformation is touching every corner of our company. I mean every corner of our company. And, I can tell you, our team is all in. And, in my -- I just -- I told you before, 40 years of experience, I have never seen an execution force like this.

I could not be prouder of what they have achieved and what we have achieved thus far. It's very exciting. So, as I wrap up my comments for now, I just want to say I am super excited about what's transpiring at CMC. And, I really believe this is an extremely compelling opportunity.

We are an industry leader. That's indisputable. We have a significant transformation underway. That is highly visible. We have durable margin expansion that's going on in this company. That's observable. We are executing an exciting growth strategy. That's also observable. And, we will drive the returns on invested capital in this company to a level that is hundreds of basis points above historical performance. That is powerful. So, you're going to hear some great presentations from the rest of the team. And, with that, I'd like to thank you, and I'd like to welcome Ty Garrison to the stage. Ty?

Good morning, everyone. It's a pleasure to be here. My name is Ty Garrison, SVP of Operational and Commercial Excellence. As Peter noted, I've been around a while. I've been in multiple roles throughout the company, commercial roles, operational roles and functional roles. And, I think that gives me a unique perspective on the strengths that we have as a company.

It also gives me an honest assessment of what needed to change in order to achieve the vision that Peter laid out for you this morning. In the past, we were successful with strong local execution and deep customer relationships. And, while that won't change, that's core to what we do.

On top of that, we're building an operating system to drive more consistency and discipline in the organization. That's TAG. So the story that I'm going to tell you today is one of self-help. Everything that we're going to talk about is completely within our control. And, I think that's what makes it our story is so exciting.

So there's 3 main things I'd like for you to take away today. One, our transformation is already underway. Our execution is paying off. As Peter showed you, TAG, our execution engine is delivering fantastic results already and much more to come in the future.

We're building a new operating system and new commercial and operational capabilities to improve margins, to generate higher cash through every cycle. That's the key to make this durable. And, capital discipline is becoming a real edge for CMC. We're deploying a -- every dollar earns its place mentality going forward.

Better projects, better planning, better execution will improve our return on invested capital. So all of those 3 messages I'd like to share with you today have a common theme. And, that was for us to reach our full potential, we had to make some changes in the organization. CMC has a track record of being very successful, over 111 years of success. But we're not the same company we were even a decade ago.

We're larger, over 250 locations. We have a broader portfolio with the addition of Tensar and Precast and other various businesses. And, as you heard Peter say, our customer requirements are changing and their expectations are changing. That presents real upside for us, but only if we operate with more consistency and more discipline to achieve our full potential.

In the past, we had a very decentralized model, and that worked when we were a smaller company. But it failed to capture our scale, the vast expertise we have in the company or our tremendous value proposition we now have for our customer base. So our intent is pretty simple going forward, use our scale, use our expertise, embrace technology to close the performance gap that we have between our facilities.

In other words, our best-performing sites become the standard, not the exception. That's what TAG is. That's what TAG does. And, I'd like to share an example with you. We have a performance gap in our melt shops between the best-performing mill and the lowest performing mill. And, we've never had a standard operating model to be able to drive the best practices through our mill fleet.

TAG has changed that, and it's important because the 1% increase in melt shop yield in our company is equivalent to a $20 million to our company. That's impressive. That's exciting. So I think if you were to take that example, and drive it through the entire company, all of our lines of business, all of our business units, you could come to the conclusion that we have real upside for our margin potential.

So what TAG is doing is it has moved us from plant-wide excellence to enterprise-wide excellence. And, we think that's the key to transforming a larger, more complex CMC into a stronger, higher return CMC. And, the engine behind that is TAG. I'm really excited to share more about TAG with you. I get very passionate about it. It's been wonderful for our company. And, it's -- it was created to do 2 things: one, unlock financial value that we just talked about, but build capabilities to ensure that those results are sustainable. That's the key to TAG.

I want to be clear about something. It's not a onetime cost-out program. It's not a program that exists outside of the business. In fact, it's fully embedded in the business, and it's owned by the business leaders that you will hear from today. We built TAG 2 years ago with our employees, not for our employees. And, I think that's key because the employees closest to the execution, the ones that are owning the results help build the program.

We think that will make this program very, very sustainable. So we had -- we started with 150 initiatives. Some were simple optimization. Others were more transformative in nature. But one of the interesting things about this was that there weren't a lot of brand-new ideas.

We simply had never had a mechanism to be able to drive the change through the entire organization. And, I think that's what's so exciting moving forward. The results are undeniable at this point. As Peter said to you, by the end of this month, we will deliver $250 million of gross run rate EBITDA. And, with new existing initiatives coming into the pipeline and the growth of existing initiatives, by the end of FY '27, we will deliver $350 million of gross run rate EBITDA.

It's very impressive. Equally impressive to me is it's come with very little to no capital deployed. Our investment has been in our people. We put our best people on the toughest projects. It's come with investing in a very structured and disciplined system behind TAG, a stage-gating system that ensures accountability and ensures that the results are sustainable.

And, it's come in investing in change management, changing the mindset changing the expectations of our company. So what I'm most proud of, I think, is that TAG has become sort of a language at CMC, synonymous with change and transformation and continuous improvement. It's not uncommon today to walk the halls of corporate or be on the shop floor and hear someone say, that sounds like a great TAG opportunity. That's fantastic for me because that tells me that this is embedded in our culture. This is sustainable. It's the way we operate now.

So while I have the pleasure of giving you the overview of TAG, what I'm excited about is for you to hear from the business leaders when they give you real tangible examples of the impact that TAG is having on their business. So while TAGs generated great results, it's also done a couple of other things.

It's galvanized our go-forward priorities. And, it's also helped us understand the new capabilities we have to continue to build. Operationally, we are committed to world-class safety, world-class productivity and world-class cost. As you heard Peter say, we will be relentless about our pursuit of being low cost.

Commercially, build on the relationships we already have, accelerate our growth and capture the full margin potential of the products and solutions that we bring to the market. We realize this will take continued investment. The journey is underway, but it's not concluded. We'll continue to invest in our people, standardize processes, and you'll hear a lot more about how we will embrace AI and technology going forward.

So let's talk a little bit more about operational excellence and what we're doing to build a structural cost advantage. CMC has a strong operating history. So operational excellence is not inventing something new at CMC. As you heard me say earlier, it's simply taking what we do best in certain facilities and scaling it across the enterprise. And, that starts with safety.

Safety is at the foundation of all we do. It's the core of our operating discipline. We had a remarkable safety record in FY '25, the best in the company history with a 1.0 incident rate. FY '26 is on pace to be another remarkable year. So I want to thank all of the CMC employees for their commitment to working safe every day.

We want to drive the same discipline and rigor that we have towards safety to be a low-cost producer. How do we do that? We use our scale more effectively. We use technology and AI to enhance our reliability of our facilities to increase our throughput and our efficiency and really important to optimize this very valuable network that we have.

We've made great progress, and I'd like to share a couple of examples with you. In the fabrication business, you'll hear more from Brian, he'll talk about fab full potential. But in the fabrication business, we have a difficult time getting a full truckload to ship to the customer. It's just the nature of how bars are bent and shaped.

But our fab group through the TAG process, established a very simple metric, and they drove it through the entire enterprise. And, that metric was an increase in tons per load. Since we started TAG, we've increased our tons per load by 2.4 tons per load. It doesn't sound like a lot. It saved us over 11,000 deliveries since we started this, over $7 million.

I'll stick with TAG for a moment. In TAG -- I'll stick with fab for a moment. In fab, we have an operating system where we share rebar, and we try to optimize that through technology. And, we had pockets of where we were using this, but it wasn't standardized. Not all of our footprint was using it. Through TAG, we drove that standardization, and we improved our yield by 0.5%. That's $3 million savings for CMC.

So while those numbers might not seem like a lot in the grand scheme of things as you look at the overall CMC, when you stack those wins together, it's a meaningful financial uplift for CMC. That's what TAG is. But where I think we have the best example of the TAG playbook in action, where we see a team coming together with great leadership.

Standardizing the process and using AI is in our scrap optimization initiative. So as most of you know, scrap is one of our highest cost inputs in our mills. Any small movement in scrap mix can have a meaningful impact to the financial results of our steel mills. And, the mix decisions that we've made have generally been made at the local level, subject to local training, local expertise and often local judgment. We use TAG. We saw this as a real opportunity for TAG. And, we use TAG to bring a team together, create an AI-enabled solution to standardize how we optimize scrap across the organization.

The results have been remarkable. $20 million in annual run rate savings from this one initiative. And, while I'm excited about it, I would love for you to hear from the initiative owner, Jacob Selzer.

[Presentation]

I love that video. I think it's just so exciting to see the passion with Jacob. And, I think you see that run through our entire organization. There's a lot of momentum with TAG right now. People understand the value that it's bringing to our organization, and we have a long runway ahead.

So we've talked about operational excellence and how we will win on cost. I want to switch to commercial excellence and talk a little bit about how we're going to win through our commercial approach. And, we start from a place of strength. We have deep relationships. We have great market knowledge and our customers trust us.

You heard Peter say this. Our customers trust us because we spend time investing our resources, our time to make them successful. We listen. We listen to their pain points. We listen to their problems and the customers' problems are changing, more complex projects, faster, more risk.

So we're building capabilities and bringing new products like Precast on board to solve those customers' problems. So the one point I want to make very clear is that commercial excellence for us begins with the customer. We're a very customer-centric organization, but we're also looking at this from 2 additional angles, 2 fronts, I would say.

One, improving the commercial execution and discipline in our company. We're doing it by deploying new technology and new tools, such as a Unified CRM. So we have a 360-degree view of our customers. by utilizing data, being much more data-driven than what perhaps we've been in the past for deep margin analysis and segmentation.

But maybe more importantly, changing the expectation of our commercial team. You heard Peter say this earlier. The expectation of our commercial team is that they will make decisions that add value to our customer, value to CMC, not just simply in the volume that they can move or the products that they sell.

I can tell you as someone who has spent a lot of years on the commercial side of this business, this is the most meaningful change that I have seen in my career is how we're approaching the commercial aspect of the business of our market and how we're acting in the market. The other front is on our portfolio reach and leveraging our new portfolio that Peter talked about early-stage construction.

We need to make our size and our reputation an asset. We're on hundreds and hundreds of job sites with our individual products throughout this country. What we're trying to do is build new capabilities and new products so that we earn the right to win more on every project. That's what you're going to hear from Mike and from Brian and from Keith today.

Real examples of how we're doing this. So ultimately, the way we view it is the relationships get us in the door. The new portfolio we have built helps us win more. So just as I shared an example about how we're using AI and scrap optimization, I want to show you where the 2 fronts that I talked to you about are coming together, deploying new technology and building on our early-stage construction portfolio.

One of the things that we've run into, I would say, as we begin to grow the company is the challenge on being able to get all the commercial opportunities in the hands of the commercial decision-makers. What we've now done is we've built this system where we take all of the bids that we have in the company, project bids, project plans and specs, and we put them into a data lake. We're also pulling in information from external sources like Dodge and ConstructConnect. So it gives us this vast opportunity pool. And we're using AI to scrape the top of all of this and look for keywords and key phrases like concrete reinforcing or ground stabilization or box culvert, things of that nature.

When it identifies that, it then routes it to the appropriate decision-maker with a potential lead. We're early innings on this, and we've only been -- we've only deployed it for larger projects. But we think there's huge upside. By the time we get this fully built, and we have 15,000 bids going into this, we think it's just exponential opportunity for our commercial teams.

So, if I had to give you One formula for what commercial excellence is for us. It's relationships plus better commercial execution plus our new early-stage portfolio. That's what's going to help us win. So, we talked to operational excellence. We've talked to commercial excellence. And, I think a theme you've seen there has been in discipline. Let's finish up this morning with my section talking about what we're doing from a capital discipline standpoint. Traditionally, a lot of our capital decisions were made locally. The planning the decisions were made locally. We've replaced that with 3 fundamental things that I think are very important. One, we built an enterprise-wide framework that you will see on the screen here, a very rigorous stage-gating system from planning through execution.

Two, we've implemented a new technology, a new capital expenditure platform throughout our entire organization. So, we have more visibility into what we're spending and a better ability to do postmortem so that we're continuously learning how to deploy capital in a more effective way.

And third, we've established a capital investment committee to ensure that we're deploying the right capital at the right time to the right projects. And these 3 things have had a meaningful impact. 95% of our projects in FY '25 were on budget or below budget. That's a significant step-up from the past.

And we estimate since we put this into place several years ago, we have avoided over $180 million of capital due to this very disciplined approach that we've taken. And I'll give you a couple of brief examples. We need to replace an EA,F, electric arc furnace in one of our mills. The scoping was done by the local team. When we put it through our process, we refined the scope, we reduced overdesign and we reduced the overall spend by 40%.

Similar example in West Virginia, we implemented really strong value engineering and a new contractor optimization strategy for dealing with our contractors. And on that greenfield mill, we avoided significant capital that we would have otherwise spent. So, the bottom line is, as I said earlier, better planning, better projects, better execution is going to be our key to improving our return on invested capital.

So, I'll wrap up this morning with this. Transformation is underway. Our execution is paying off. You've seen the results from TAG. They're real, and we've got more upside. We're building new capabilities in a new operating system to improve margins and make sure it's durable through all cycles. And capital discipline is now a strength as evidenced by $180 million of avoided capital.

That's how we're transforming CMC to reach the full potential. I'm so excited to be able to share the story with you this morning. With that, I'm going to welcome the SVP of North American Steel Group, Brian Halloran, to the stage. Thank you for your time.

Good morning, everyone. I am Brian Halloran, as Ty just said, SVP of North American Steel Group. I've worked with CMC for 28 years now. That's given me a lot of opportunities to work in various capacities in our recycling mills, fabrication businesses. And I have to say this might be one of my best assignments yet because today, I have the privilege of updating you on the impressive progress that the team in the North American Steel Group is making to unlock the full potential of our business. And we've been working hard as Peter said, last 111 years to build our business and reputation. And now we find ourselves in the enviable position of having an unmatched long products franchise and being the preferred partner with our customers.

Our success is driven by an amazing team with this can-do culture, and we're now focused on improving our business by optimizing what we already own. And to do that, we're taking advantage of an improved industry structure, a more supportive policy environment. We're improving, as Ty just talked about, commercial and operational excellence through TAG to reinforce our low-cost position and unlock durable margin improvement. And then also, as I'm going to talk about, we have a huge opportunity, especially in the North American Steel Group to reap the rewards of substantial growth capital that we've invested over the last few years.

So let me start with the foundation of our business, which is we have an unmatched franchise with a nationwide capability to serve customers. As you know, we operate as a vertically integrated steelmaker. We have recycling. We have mills, we have fabrication. That gives us this distinct advantage. We control supply, production, delivery. In recycling, it represents this low-cost source of secure raw materials for our mills. And our mills operate a nationwide network of low-cost operations. And then fabrication represents that direct access into the end-use markets that we serve. And as far as the products, we have leading positions in all the major products that we produce.

Peter mentioned #1 in rebar. We're also #1 in fabricated rebar. We are the only producer to offer a full portfolio of corrosion-resistant products, including epoxy, GalvaBar, ChromX. So I think the question here becomes how have we organized our capabilities and our footprint to earn the right to win. Our competitive advantage, it starts with the national scale. I can tell you, it's amplified by our local execution. We have a strategic mill and fabrication footprint. It's purposefully focused on key demand centers, large metropolitan areas. We have deep -- we're a 111-year-old company. We have deep long-standing relationships with our customers. Some of those have been built over decades on a foundation of trust and reliability.

And as I just talked about, it's vertically integrated. It's also flexible EAF platform that I'm going to talk about more in just a minute, ensures low cost, ensures supply chain security. So collectively, it is these capabilities that are the core of our competitive advantage that's driving our leading market position. But also in our story, we're benefiting from a significantly improved operating environment, that's driven by consolidation, supportive policy and also disciplined execution.

Back in 2018 now, we cemented our leadership position in rebar when we acquired Gerdau's rebar assets. And that gave us an extensive mill network, made us the leader in fabrication that I just mentioned. More specifically, geographic coverage of all the major markets, low-cost position. And this last point is super important. It's a highly variable cost operating structure. It allows us to flex up and down based on market demand. On the trade side, we have been actively advocating for supportive trade policy for years. We and the industry are making significant progress. Trade actions that are either completed or underway now address 80%, more than 80% of the rebar imports over the last 5 years. It represents about 1 million tons.

So when you're talking about a 9 million to 10 million ton market, it's significant. And we're also focused on commercial execution. Ty, Peter, both referenced that. And it's really been a focus as opposed to market share and moving tons, let's focus on value over volume. We think that's good for CMC. It's good for the industry. So when we think about the operating environment that has significantly improved. It is the consolidation. It's a supportive trade policy and the disciplined execution that are all combining to support the higher and more stable returns that you're seeing in our performance.

So going forward, our focus is clear. We're going to capture the full potential of our business. We have a great opportunity to harvest the growth capital that we've invested over the last few years, and we're reshaping our portfolio by optimizing our asset base, all with the goal of creating durably higher margins, growing our bottom line and reducing capital intensity to increase our returns. And TAG, and you've heard a lot about TAG, you're going to hear more. That is the process. It's the framework that we're using to execute on these opportunities.

Let's talk about our mills. And mill operations, the team is focused on utilizing TAG to scale best practices to reinforce our low-cost position. And last year, with the goal of speeding execution, we moved from what was a regional operating structure to a line of business operating structure. So now we have one leader over all of our mills, coupled with a -- supported by a transformation director, the leader of our mills, Carlos Zanoelo, happens to be here. Carlos, raise your hand. Great guy, 30-plus years of steelmaking experience. If you want to corner him after our presentation today, a wealth of information in steelmaking.

But we could not be happier with how the organization is leveraging this new line of business org structure to take advantage of our collective expertise in making steel. And the number on this slide here is super impressive. What they've already been able to line out as a run rate in savings opportunities, over $130 million. And it's a lot of small initiatives and bigger ones stacked on each -- on top of each other. Ty talked about scrap optimization. That is a big opportunity. And there are many more. Across the North American Steel Group, we now have 70 initiatives that we're executing on, but I'll highlight a few here.

So in our rolling mills, we're focused on improving yield through process stabilization. We're reducing the cost of alloys in our melt shops by doing deep regression analysis to come up with the lowest cost melt mixes, and we're improving maintenance through preventative maintenance, improving best practices. So a lot of progress in a relatively short period of time with still much more upside and similar efforts underway on the commercial side of our mills business. We're a recognized leader when it comes to commercial excellence in the industry. And our team is now focused on capturing more of the value that we deliver by improving consistency across regions and products.

And with that disciplined execution and consistency in mind, within the last year, the team implemented a consistent commercial operating system, supported by a unified CRM and again, as with the ops side, making great progress, more than $30 million of run rate benefits have been lined out, and we only see that number growing from here. I'll highlight just a few. Size and grade extras cost our mills significantly more to produce. And by aligning on market competitive premiums, we're capturing that value. We're reducing freight costs. We have a nationwide network. We're using advanced logistics management to make sure that we're optimizing for the lowest cost to serve every customer, resulting in freight savings. And we continue to grow key accounts in critical geographies and products.

So when it comes to our mills, it's this can-do culture that I'm talking about. It's the systems and organizational changes and tag. And all of that together is unlocking the significant value that I've shown here on the last couple of slides. On the fabrication business that we operate, another great example of how we're rethinking the business, restructuring the business to optimize returns. Within the last year in our Fab business, they've implemented, as I state here, Fab Full Potential. It's a long-term strategy focused on operational and commercial excellence to improve through the cycle returns in this business. A key aspect of the business is that it's more balanced.

So in addition to being focused on the upstream benefits with our mills, we're also focused on making sure we get a healthy stand-alone return that we're capturing the value of the products and services that we're delivering to early-stage construction. And within the strategy, we're raising the bar on commercial execution and discipline and managing risk. And I'll highlight one thing we're doing there, risk mitigation tools. We're leading the implementation of risk mitigation tools in the industry to reduce the margin compression that we've historically seen during periods of rising rebar prices.

The team, again, is making tremendous progress. It's a big aspiration there. And we are completely convinced now that executing on the goals that we've set for Fab Full Potential, we will double the through-the-cycle performance of this business. In fact, we're so encouraged by what the Fab team is doing, we're using the same process and framework to rethink what we're doing in our recycling business, and that's rolling out as we speak. So that is an overview of what we're doing in the North American Steel Group to recognize our full potential. I'll now talk about how we're working to harvest the significant -- the benefits of the significant growth capital that we've invested over the last few years. Naturally, most of that has been in our steel mills.

With the completion of Arizona and West Virginia, we will have completed the build-out of our nationwide steel network. Let me tell you, these 2 steel mills are state-of-the-art. They represent the future of steelmaking. I hope that some of you, at some point, get to see one or both of them, and we could not be prouder of our modern steelmakers who constructed. They're now operating these mills. And I'll offer a few comments on how we operate our mills network. and what these mills mean to our network. And first, they're going to help us realize our ambition of having nationwide merchant and spool capabilities that our customers demand in their higher-margin products.

So a big win-win there. And again, we operate our network utilizing advanced production and logistics management to create lowest cost to serve every customer. And it's a highly variable cost operating structure. So we can flex up and down. But I'll also highlight, it's not just rebar. We also -- I showed on that one of the earliest slides. We're #3 in merchant. We also produce SBQ, Wire Rod, Fence Posts, and other products not listed here. So we have this a lot of flexibility built into this franchise that we can adjust to market different levels of market demand across geographies, across different products.

So the key takeaway here is that these 2 mills, they not only complete our network, but they also permanently improve the operating efficiency and lower the cost of our steelmaking network. Going forward, as Peter talked about, with these major investments behind us, it's going to be more of a capital-light focus. And it's going to be heavily focused on AI and automation. And you might not think AI and automation when you think steel industry, but I can tell you there are many, and we're just getting started, many opportunities where we're employing AI, we're employing automation to improve the safety and the efficiency of our business.

I'll mention a few in our rolling mills. We have bundling and tagging robots in the melt shops. So we have sampling and temperature taking robots. And in recycling, we even have robotic arm sorting materials. And in every one of those cases, it's improving the safety of our operations. It's improving the efficiency of our operation. The other thing we'll continue to focus on naturally as we have done for many years now is upgrading existing facilities, and that's regardless of recycling mills, fabrication. If we're operating it, we want it to be latest technology and lowest possible cost and efficiency for that best efficiency for that operation.

The last thing that I'll highlight for you today is very exciting growth opportunity for the company is early-stage construction, as we've talked about and how we're leveraging North American Steel Group, specifically Fabrication to grow our early-stage construction platform. Our Fab group bids more than 15,000 construction jobs per year. And what we've realized is we've continued to build out this early-stage construction platform as many of those jobs have other opportunities for C&C well beyond fabricated rebar. There's opportunities for Tensar, Construction Services, Precast, and the list is growing. And each of those represent opportunities not just for deeper customer engagement, but multiple revenue streams.

So where there was 1, maybe there's 3, maybe there's 4 now. And it's this ability to not only capture the information, but convert it. That's another example of our unmatched value proposition. And to really underscore my point here, I'm going to -- I'll share with you what this looked like on a real-life mega job. So within the last couple of years, we helped build out a $17 billion Phase 1 of a chip fab facility in Texas, massive job. We've been in rebar fabrication for more than 60 years. This is one of the largest jobs we've ever undertaken, 60,000 tons of rebar, typical fab job to put it into perspective for you is like 500 or less. And if you think of a major structure in this area, you might think of, I don't know, MetLife Stadium, this is multiples of that. So this is massive.

So the other thing with this job is it had this expedited construction schedule, less than 1 year. So most companies, no way, we're staying away from it. Our team recognized that because of our scale, our expertise right in our wheelhouse. And so not only was our fab facilities, the production facilities able to leverage our network to keep pace with the construction schedule, the production schedule, but our logistics team was able to organize just-in-time delivery of more than 300 truckloads per month during construction to meet the needs. And in addition, we're on the site, we're able to leverage that to do GalvaBar, Tensar, an assortment of products in our construction services business.

And so I highlight this for you because it is a great example of the unmatched value that we're bringing to these construction sites and how we're leveraging the North American Steel Group to grow the early-stage construction platform that Mike and Keith are going to talk to you about in just a minute. And here's the other thing is that by performing like we're able to, by bringing this additional value, it positions us as the preferred partner on future phases and projects. And as case in point on this particular job, we were just awarded Phase 2. So really, really excited about the way that we're bringing more value to our customers.

As I wrap up, I'll leave you with just a few key takeaways. The heavy lifting for the North American Steel Group, heavy lifting on positioning and investment, it's behind us at this point. It's really about execution. We have an unmatched long products franchise. We are the preferred partner with customers. We're benefiting from an industry structure and improved policy environment. We're improving commercial and operational execution through TAG. And we are super excited about the opportunity in front of us to harvest the benefits of the growth capital that we've invested over the last few years. And the proof, it's in our results, which demonstrate we're a business with growing earnings power, higher returns and improving through-the-cycle performance. With that, I'd like to welcome Andrew Larkin back to the stage, VP, Investor Relations. Thank you.

I'll invite Peter and Ty back up as we get the stage set up for our first Q&A session. And as a reminder for those on the webcast, if you want to submit your questions via the Q&A portal, we'll try to weave them into the discussion this morning. We will have a couple of microphones floating around for those in the room that would like to ask a question. We would ask that you state your name and the firm you're with before stating your question. Great. I think we're all set. Raise them high, please.

Carlos De Alba with Morgan Stanley. First question is, how would you break down the contribution of each of the 3 drivers of value creation that you elaborated? I think those were capturing the full potential of the business. the harvesting of benefits of growth capital already deployed and the reshaping of your portfolio. I mean, what is the percentage contribution of that value creation, high level? And how should we measure that value creation? Is that increase in EBITDA that you are forecasting? Or what is the number attached to those? And my second question, if I may, very quickly is the European business is going to be, I think, 6% of your portfolio. Why would you keep that given everything that you are trying to achieve and accomplish in the Americas or in the U.S.?

Okay. Well, thank you very much for the question. Maybe I'll start and you guys can jump in. So as we think about the contribution of the different pieces, the first point to make is lever #3 is 0 in our targets. We haven't assumed any acquisitions, okay? So between the first 2, what we've talked about today is 200 basis points plus of margin improvement from capturing the full potential of our business. And I think when we did the precast acquisitions, we also talked about a 200 basis point margin improvement coming from Precast, right?

So I think as we think about the kind of the impact of the 2 pieces, I think it'd be fair to say that they're roughly comparable, right? When you think about $200 million of TAG benefit. And then if you sum up all the different projects that we have, it's probably another couple of hundred million dollars of EBITDA, rough numbers. And to answer your question on Poland, Poland is a very important asset in our portfolio. And I've said this on earnings calls, but let me just reiterate the point. When you operate in an environment like our Polish team has operated, it forces you to make different decisions and to be even more frugal than we are, in many cases, in operating our North American system.

And let me just give you an example of that. Energy costs in Europe are double what they are here. And so the poles have been incredibly creative about lowering energy costs. And what we're doing is through our TAG framework is we're utilizing that to look at what precisely are we doing and how can we apply it in North America as well. And remember, when we apply it across North America, we get a 10x benefit from it. So Poland is -- we acknowledge the fact that it's a different market and Europe has been difficult. There are some green shoots, but I think it's really important to acknowledge the value that they bring to our portfolio. Thank you for the question.

Alex Hacking from Citi. A couple of questions. I guess first one for Peter. When you talk about more acquisitions in CSG, is that going to be opportunistic? Or are you targeting something specific like more precast and so on? And then second question, I guess, for Ty or Brian. TAG has a lot of components, but part of it is standardization, centralization. How do you balance the upside from that with the sort of risks of taking away autonomy from the mill GMs because you think about the history of mini mill steelmaking and Ken Iverson's philosophy and all that, it's always been about decentralization, not centralization.

Thanks, Alex. Good question. So -- with respect to your first question, when we think about M&A, by definition, these are opportunistic. So -- and we need to have a willing party on the other side that is -- that wants to transact with us. In terms of the areas that we're focused on, we've opened up this lane in Precast. I described it in my presentation as it's a big addressable market and one we've really just put our feet down in the Southeast in. So we would love to grow that business. But I would also say that we would love to grow our Tensar business.

So I think it depends a little bit on kind of what comes our way. But what I can tell you is that in the near term, there is enough -- there are enough opportunities in areas that we're already in existing capabilities that, that will be our near-term focus. I don't think in the near term, of course, we'll update you if that changes. But I don't think in the near term, we'll be opening up a new front, so to speak. I don't know who else...

I'll start with that. And I love the question because it's -- when we started to design TAG, that's one of the things that we had to wrestle with. As I noted in my prepared remarks, we've operated very decentralized in the past. But that's one of the reasons that we brought in the operators to help build the program. And I think if you look at what our operations are doing now, we will take a mill director from Florida, and he'll have an impact in Arizona at this point. And some of that comes down to that local -- that vast expertise we talk about. So I think early on, there was some hesitation, Alex. There was hesitation that are you taking decision rights away from me. We're not.

We're supplementing best practices. We're supplementing enterprise-wide capabilities to come help you be better in your business. And there's nothing like good results to get people on board. And as you start to see the results improve mill by mill, the operators got on board with this because as I said, they've helped build it. So I don't think they feel alienated whatsoever.

Yes. And some additional color on that is most of what's in TAG, I said we have 70 initiatives in North American Steel Group that are underway in all 3 lines of business. Most of that, these plant managers and mill directors and fabrication superintendents, they've been working on this for a year. And when I was talking about how we are super pleased on how the teams are utilizing the new org structure across the line of business. That's what I was referencing is that they now we're bringing to bear more resources to help them execute on the things that they know are important to drive the performance of their business. So it's -- the way that we've gone about it, it's more of a supplemental expertise and help to help them do the things that they want to do anyway.

Timna Tanners with Wells Fargo. I wanted to ask about TAG. When I hear the descriptions, to me, it's a lot of cost cutting. It's a lot of taking costs out of the business, which is great. But costs are running hot, right? Energy, machinery, et cetera. How is TAG not more than just offsetting some of those costs? So that's my first question. And the second one, just simply following up on something Peter said about divestitures. Can you give us a little more color about that? I mean I think CMC historically has had a lot of little businesses like copper wire, I forget about some of the other ones that don't get lumped -- don't get called out as regularly. Are there some other like legacy businesses maybe that you don't talk about that could be better in other hands?

Yes. Thanks, Timna. I'll start on the TAG side and then these guys can supplement what I say. But in the prepared remarks, I said this is not a onetime cost-out program. And what I mean by that is the goals that we have set and what you have seen today for 2027, I consider that more of a milestone because we're going to continue this program. And the reason it's not just a cost-out program is the EBITDA was actually translated from the improvement in metrics in the organization. So if you were to take a tons per load, as I said, or a melt yield and you said we want to improve that yield from X to Y, we just simply then converted that to what that EBITDA uplift would be. So we didn't go in and say, cut these costs, take this out. It's truly improving the process, which naturally costs will fall out of that.

But the other thing I might mention is when we look at the breakdown of the current TAG road map, about 70% of it is operations and about 30% of it is currently in the commercial realm. And those operation initiatives, it's more tangible more quickly than what we would see on the commercial side. So we're maturing on the commercial side right now. And I think as we march towards that $350 million, you see kind of more upside on the commercial side than you did early in the program. So I don't know if that's helping or not, but it's really in the basis of what we built and how it's more metric driven, not just EBITDA driven, cost driven.

I think it's also maybe helpful to think about and this maybe goes back to the earlier question about decentralization. And one of the things that's been so great about what Brian and Ty have brought through this TAG program to the North American Steel Group is it's been a concerted effort among all the mills to work together to be their best. And I've been in this industry long enough to know that if you were the mill superintendent, you're the king of the jungle, right? And no one challenges you. Well, that's not the mentality in our company right now. And that is a very exciting opportunity because each mill is different, and they all have strengths and they all have weaknesses. And when they get together to bring their weaknesses to the table, you can address some really critical issues.

The other thing too, Timna, that I think is an important point, and as Ty said it in his presentation, but I'll just reiterate it, is that what we are committing to -- first point is we believe there is more beyond the $350 million, right, that we have of gross takeout so far that we will achieve by the end of next year. However, at some point, we are going to get to certainly on the cost side, an optimization level that is kind of where we can get to with our portfolio of assets. What we are committing to is to sustain that net benefit.

So in other words, when we -- when our cost takeout start to -- or stop exceeding inflation, we will at least take out the inflationary impact on our costs. That is durable margin improvement. And that's where -- that's what we are committing to do going forward.

To your second question on divestitures, what I can tell you is that, again, you are right. There are a number of smaller businesses. Some of these -- the copper business, for example, is no longer in the portfolio. Those -- that one is gone. But there are some smaller businesses in the portfolio. And I guess at this point, I would just say we have -- we know which businesses are core and which ones are not core. And at the right time, we will make a move.

We're very focused on kind of creating value for all of you. We don't want to sell assets when it's not a good time to sell assets if there are assets that we should sell. And so we're going to be measured in how we do it. But we are focused on that. And what I will say is we are not about accumulating assets. In a lot of instances, these assets that are hanging around are lower return assets that actually retard our ability to improve our return on invested capital. And if you hear one thing from us today, we hope you take away the fact that we are committed to driving returns sustainably higher in our business. Thank you for the question.

Sathish from Bank of America. My first question is on the fabrication side. So you mentioned that you're implementing a number of TAG initiatives that should double the profitability over the next few years. Can you maybe talk about where are you today in that road map? And when do you expect that to be achieved and maybe share what the magnitude of EBITDA improvement that we should expect from that business side?

And then the second question is on the import picture. If you can talk about how you see the current import situation. Obviously, with all the trade cases that we have seen over the last 5 years, the mills have been successful in limiting some of the countries. But then if you look at the current situation, we are on track to annualize to 2023, '24 levels, high levels. So any thoughts on how you see the import situation today?

So Peter, maybe I'll take the first question, and then we can talk more about the import situation. Fabrication, specifically, we don't comment on segment level reporting. Let me tell you this. We set a 3-year goal for the TAG goals of Fab Full Potential. That's how we're executing this Fab Full Potential strategy. And this team came out of the gate sprinting. So within a little more than a year, we'll be on pace to achieve the 3-year targets that we set. That's why we're so incredibly encouraged by what the team has been able to do.

And for more detail on that, today, we have Stephen Pinney here. He's the Transformation Director for the Fabrication business, has been very instrumental in implementing the Fab Full Potential and making it so successful early on. But the expectation, I would tell you without specific numbers, is that this -- as I mentioned, we expect a fair return on this business. It provides a lot of value in the early-stage construction supply chain. So we -- by achieving these goals, will create returns in excess of our cost of capital. So really excited about this.

Yes. And on the trade cases, we were really pleased with the final rulings that came out. Of course, it's got to be finally approved by the ITC. There's 45 days for that to happen. But again, as I said in my remarks, this is -- if you take the average of those 4 countries, it's 500,000 tons that are out of the market. And I think when you look at the tariff levels, they're really out of the market for the next 5, 10 years, right? Because it's a -- I think everyone knows that it's -- the first period is 5 years and then there's an extension and typically, it gets extended for another 5. So that is a durable barrier.

If we look at the imports this year, I know it's been the talk of a town because South Korea has obviously brought a lot of material into this country. And we believe that, that's going to trail off in the second half of the year. We're confident it will. When we look at the economics of bringing the material here, we don't think it makes sense to do that.

But I'll say 2 things. One is that we are not going to be shy about pursuing countries that violate our trade laws. And we've been very successful over the last several years at doing this. And we must protect our domestic industry. We will not be shy. That's the whole point of our level the playing field. You're seeing that wind in through the USMCA negotiations, where the U.S. government is basically asking Mexico to adopt trade laws that are similar to ours. And that is -- that you can be assured that you're hearing our voice and other voices in that position.

Great. Thank you. That will conclude our first Q&A session. I want to make sure everyone has the time for a break. We'll resume at around 10:45. So it's a little bit less than 10 minutes, try to be back in your seat in about 10 minutes. Thanks.

[Break]

All right. Welcome back. Halfway through, and you've heard Peter reintroduce a transforming CMC, Ty brought TAG to life, and Brian shared with you the exciting prospects for our steel franchise. Next up is a deep dive into our Construction Solutions Group. Paul will then cover all financial matters, and then Peter will wrap things up with some brief concluding remarks. We'll have an extended Q&A session at the end. So those -- again, those on the webcast continue to submit your questions via the Q&A portal. I'll do a better job of weaving those into the discussion.

All right. With that, let me now invite to the stage our Senior Vice President of our Precast Group, Keith Haas. Keith?

Thanks, Andy, and welcome back again, everyone. I hope you enjoyed the morning session. I know I certainly did, and look forward to working with Mike and Paul to complete our session and get into Q&A later on.

As Andy said my name and Peter mentioned earlier, my name is Keith Haas. I am the SVP of our new Precast Group. I came to CMC via the acquisition of Foley Products in December of last year. Having been the CEO of that business for a few years beforehand. So I'm relatively new to CMC, new to the management team, love the people that I get to work with. It's a fantastic business and operation.

But I do have, as Peter mentioned, deep history and experience, not only in precast, but in various types of building products, probably about 30 years in different products, different end segments, different geographies in North America and other parts of the world as well. So while I'm new to the team, I have deep experience in the industry and love concrete products and what they do for the economy and the kind of businesses that we can build around them.

So what I'm going to do is I'm going to kick off the introduction to the Construction Solutions Group and then later hand it off to Mike and then do a bit of a deep dive on our Precast business. It's new to the company, so we'll take some time to explain what it is and then where we're going with it.

But before I get into much detail, I just want to hit on a few key messages. And these key messages are not just about the precast business. I'm up here to represent Precast, but it's really to kick off and frame the larger discussion around Construction Solutions. And these are messages that will flow through my part of the presentation and through Mike's as well about the key aspects of our business.

And I think first and foremost, what I want to talk about is we're a portfolio of high-margin, high-growth businesses. And we are building scalable leadership positions in the early-stage construction market. And our -- the role we play in that is we really bring to those markets the ability to solve problems and address the challenges in early-stage construction. And we do that by bringing mission-critical essential products and solutions to that market that solve problems for contractors. And we'll talk about a little bit later on what those problems and challenges are and how our solutions, our products and our people meet those challenges.

And even though we're high-growth businesses and we're high-margin businesses, we also are pursuing a relentless an aggressive process, as Ty outlined through TAG and the principles of TAG on improving our businesses. So optimizing our operational performance, optimizing our commercial performance and really finding the ways that we can continue to grow through expanding our addressable market and our penetration of those markets.

And that's backed up by, I think, a long-term view toward a growth pathway, both inorganic by going out and adding new products or new companies to our portfolio, but also organic growth where we find -- continue to find challenges where our products and our solutions can address the needs of customers that will continue to allow us to grow and take market share in the broader early-stage construction business.

As I mentioned, the Construction Solutions Group is really based on 2 businesses now, Precast, which I run, which, as you know, is new to the group; and the Emerging Businesses Group, which later on, Mike will give details around a number of our businesses inside of that.

So before I really kick off and talk about the Precast Group, I kind of want to frame it a little bit and kind of like how did we get here in a bit because, again, we're new, and I want to give you a bit of the background. So as you know, CMC acquired 2 businesses in December of last year. First was a company called CP&P, and CP&P was the market leader in pipe and precast products, kind of call it in the Mid-Atlantic region. So think sort of Washington, D.C. metro area down through the Carolinas, #1 player, very great, strong company.

And then shortly thereafter, acquired a company that I was running, Foley Products, which had a similar market positions, but in complementary states in Georgia, Alabama, Tennessee, Florida and with some seed corns for growth out west of the Mississippi. And what I think is super interesting about it is having run the Foley business for a number of years and being involved in the industry even before that, it was clear to me that one of the best opportunities not only for growth, but for realization of market and operational synergies would be the combination of Foley and CP&P.

They're complementary geographies, a little bit of overlap, but same products, same customers, same sort of focus on delivering quality, exceptional customer experience, operating at scale and being the best in the industry. So my dream kind of had always been for the 2 companies to be able to come together. And thankfully, and I'm just delighted that CMC and the team here that preceded me was able to put that together and make it happen because it's an unbeatable combination of businesses. And we'll go through kind of what that means for the market and what it means for synergy delivery as we move through -- in the presentation.

But I'm honored to lead it and just very excited about the opportunities it holds for the businesses that were acquired and the people in those businesses the value it delivers for our customers and also the value that it will deliver to CMC and its shareholders.

So in terms of the presentation about Precast Group, I'm going to kind of -- I'm not going to break. It won't be a hard separation, but the first part will be about framing kind of who we are because it is new and kind of where we are today. And the second part will build on the strategic themes that Peter and Ty and Brian have already talked about, which kind of lays the road map of where we're going in the group before I turn it over to Mike.

So kind of first and foremost, what and who are we in Precast? So what do we do? If you had a chance to stop by our booth outside, you saw small-scale versions of the products that we manufacture. But what we do at its essence is we provide products that are structures that that protect and contain critical infrastructure for the economy. And these products, as you've seen, are typically made out of concrete. They're buried underground. So you don't see them every day. You might buy drive by a construction site and see our pipes or our structures there, but they're soon installed underground.

And as you've seen, they can range in size from a box is 3 foot by 3 foot to structures that might weigh 50,000 pounds. So a wide variety of things that we do. Many things we do are standard, but more often than not, we customize them for applications for the job site. So the size, the number of outlets, the configuration is often highly customized to the needs of a particular project or a particular job site. The key markets that we serve, I talked about critical utilities.

So really, our business is driven by the needs of water infrastructure, energy infrastructure, data and communication infrastructure and transportation infrastructure. And if those look familiar, they are because they are the essence of the drivers of our early-stage construction strategy across CMC. So basically, all the products we make are going to contain or convey those end market segments, but again, if you step back from it, are well aligned not only to our strategy but to the growth drivers in the economy, energy investment, data and technology investment, investment in our transportation networks and key investment in our water management capabilities as climate change and the needs of storm water management grow over time. So we're really excited about how Precast fits into CMC and how it allows us to expand our execution in a broader early-stage construction strategy.

So why Precast? I mean, what do we bring to the table? What do we mean in terms of the overall sort of Construction Solutions Group? And again, as I mentioned before, what we do and what we feel our businesses do in Construction Solutions is they provide solutions to customers' challenges. And our customers tend to be contractors. So we make our product in factories. We ship it relatively short distances. We sell it to site development contractors.

And what are they dealing with? Typically, their challenges are around workforce. These projects are complex, and they need a lot of labor. They're dealing with schedule. Am I going to be able to get my portion of the job on time so that I can get off the site and I can get paid? Are they're dealing with quality. Am I going to have a product that's going to install easily work in the field? Or is it going to fail in the field? And what about certainty? Can I depend on the supplier of the products that I need to be able to do my job on time?

And so in the precast world, we take job site construction and we move it to a factory. And we have heavy products. They are not easy to ship long distances. So we have lots of factories. So you'll see when I put the dots on the map. So the value we bring is we address some of those challenges that contractors have. Because our products are made in a factory, there's labor savings on the job. Labor savings mean time savings where our products come out ready to install.

They're made in factory control conditions, so the quality is higher than if they had been fabricated and poured in the field. We can manufacture year-round. We're not subject to like weather delays and it doesn't rain inside our plant, right? So we're able to produce year-round. And that allows us to give supply chain certainty to our customers that when the product is needed, it's going to be available from our yard to be delivered to the job site. And because we're using concrete, which is a highly durable material, we're able to have a lower life cycle cost through the entire project life because our products are there really for the duration. So that's the advantages that Precast plays, and I think it's a compelling value proposition for CMC as we move forward.

So who are we in the Precast Group? We're new, but we're already a scale player. We have 35 plants already talked about being the #1 player in the Southeast and the #1 player -- the #1 player in the Mid-Atlantic and the #1 player in the deep South part of the markets. That as I said, there's a lot of dots on the map. We have to have a lot of factories to cover the markets and to have leadership positions.

And we are a strong contributor already to CMC's financial performance as evidenced by the numbers that you see on the right-hand side. So a great start. We're #1 in certain markets, but we've planted seeds to be #1 in other markets. And as you can tell, a lot of white space on the map to fill out over time.

And just to touch again a bit on this, and Paul will talk more about it later. We have -- we're bringing to the company a strong financial performance, but it is having an effect just beyond just the level of EBITDA that it brings. We feel like we'll have less earnings volatility as precast is part of the portfolio, mainly through a stable price environment.

So as you can see, that blue -- dark blue bar on the left is sort of just generalized pricing for precast products over the last decade and cycle. And so we've seen this consistent ability to get more revenue value based on what we bring to our contractor customers and the value delivered through the cycle.

We have structurally higher margins as evidenced here, and they, again, have been very durable over the last cycle and a very high cash conversion rate. And we'll talk a little bit why that is. It's primarily because we have high margins and relatively low ongoing CapEx needs in the business. So it results in a high degree of cash being generated from every dollar of EBITDA. And again, as I said before, Paul will kind of detail more what that means for our long-term financial projections that we've already presented.

And maybe to wrap up this little mini part of kind of the presentation on sort of status of where we are in Precast, just a reminder that we compete in a large market. So you heard Peter talk about early-stage construction addressable market, $150 billion, we're $20 billion of that. And that was meaningful in terms of expansion of CMC's opportunity, but think about it in terms of the opportunity that we have. It's a $20 billion market. As you saw before, our revenue is less than $1 billion. So we've got a long runway to grow both organically and through acquisitions over time.

So moving forward, you've seen this chart before. This is the foundation of what we're doing at CMC globally and CMC in every business that we participate in, and Precast is no exception for that. So we have a clear focus going forward, and I'll talk in detail about each one of these about capturing the full potential of our business, harvesting the benefits of the capital already deployed. There have been significant financial commitments made by CMC in the precast industry, and I'll kind of give some examples on how we're leveraging that to continue to grow with just a limited amount of capital back in the business. And finally, our portfolio. What are we going to do to shape and grow our portfolio going forward?

So first, around capturing full potential of our business. For us, right now, you heard a lot of talk about TAG and the principles of TAG, both operationally and commercially to drive improvement in the business. The first order of business for us in Precast is capturing the value of the synergies of the acquisitions that were made. So they've been well documented and well communicated out in terms of the magnitude of what we're going for. And I'll talk a little bit about how we're going to achieve the synergies targets that have been set out.

First is really about our manufacturing best practices and our network optimization. You saw we have 35 plants there. Every single one of those plants can get better at something. And I think Ty put it very well earlier around TAG, which was our best operation becomes the benchmark operation for the group. And that's the principle and the idea that we're applying inside the Precast Group.

So we -- even within Foley and within CP&P, these oftentimes were companies that were built up through acquisition. So there's still a lot of opportunity to take the very best of what we do in a pipe operation or the very best of what we do in a wet-cast precast structure operation and set that as those benchmarks in terms of productivity, in terms of material usage, in terms of everything that we do inside that fence line and make that our standard and lay out road maps to achieve that level of performance and production at every one of the facilities to the largest extent possible.

And we're also looking at our network. We bought companies that I wouldn't say really competed against each other, but there were some opportunities to make some changes in our network in terms of both manufacturing and logistics to ensure that the products were made at the right, most economical plants and at the right place and at the right time and the jobs were shipped from the most economical plants, so that we're capturing value, not paying logistics partners to move product past plants.

So we've made a lot of changes to that so far. We're getting early benefits to that. I think Peter talked about integration and quick wins, and that's where we feel we're ahead because we have great teams. They're super willing to understand what's going on beyond their immediate realm of responsibility and work together to drive value for our customers. And when you can drive value for your customers, it drives value for your shareholders.

Along with that, we're evaluating targeted implementation of automation and technology. The ability to apply automation and AI and other tools that are emerging in manufacturing now is really relevant nowadays to the precast industry. If you'd probably talk 10 or 20 years ago, maybe not as much, but things are changing so rapidly that there are real opportunities for us in plants where we've identified gaps to optimum performance to, in a very smart and disciplined manner, apply automation and technology to improve both our productivity, but importantly, improve our output because if we can improve our output in an existing facility, that gives us the ability to grow without having to go build new plants. And that's really important for our strategy going forward.

Third, we're looking at everything we do. all our processes, sales, pricing, estimating, everything we do to find best practice, implement best practice so they're most effective at what we do for our customers inside the business. And fourth, our simplification and reduction in SG&A. We've got 3 sort of integrations going on, CP&P, Foley and in CMC, there's opportunities there to reduce and eliminate redundant tasks and activities.

So when you take all that together, it's going very well. We're ahead of schedule, and I can kind of recommit today that our target is achievable by the end of year 3, which is $30 million to $40 million of run rate gross synergies, as I said, by the end of year 3.

So what does it look like in practice? So I'll just kind of do a couple of a case study real quick. This is a case study of a job that happened a couple of 3 months ago, where we had a customer who wanted to buy a job from us south of Charlotte. The legacy team there at CP&P was going to have a bit of trouble being able to supply the whole job. The customer was known to our team and Atlanta, Foley. I won't go into great detail here. But in essence, what happened was the teams figured out that we had an addressable problem with our customers, and we didn't want to lose the job.

So we had the ability with this new network of plants to supply one set of products, the precast products from our CP&P team, different set of products, the pipe products from our Foley team in a market that was just in the middle of our strike zone, and we were at the risk of losing that job if we didn't work together as 2 teams. And if we had been 2 separate teams, it probably would have been lost and it would have gone to somebody else.

But at the end of the day, we were able to capture a $3 million job and a $3 million job is important in the pipe and precast industry, let me tell you, have a very satisfied customer and it built the muscle that we're going to use going forward of leveraging this new network of plants that we have for our customers who are increasingly as they grow, they're crossing over traditional sort of state boundaries. So we need to be able to work together as a connected and coordinated network of plants to satisfy that level of demand and those customer needs.

But it's not just the integration of CP&P and Foley that matters, it's the integration of these businesses into CMC. And we talked about -- I think Brian mentioned it before, that fab is sort of the tip of the spear for you in terms of early-stage construction. Well, our products and our businesses flow directly into that. So if you think about it, the overlapping footprints we have between fab and precast and Tensar and some of the other businesses, broader footprint, better ability to serve complex problems and projects.

We're going to coordinate on lead sharing, project bidding and access to key decision makers. That's that commercial engine and coordinated commercial approach that Ty talked about before. And all of that's going to leave us the ability to value engineer, have better discussions with our customers, get more at fabs as a company and be able to close more jobs as a company. I want to give you a quick example of what that can look like as we move forward based on what's happened in the past.

So the second case study you want to look at is a major project that was taken on in Atlanta. Some of you might be familiar with the north side of Atlanta and the traffic challenges that are there, but it was an expansion and improvement of a major interchange. And while this project was commenced before CMC owned Precast, you can see the opportunity for us to replicate this and grow and do better as we move forward.

I think, Brian, you mentioned the complexities of the project that you had. Well, this is extremely complex and the challenges in the marketplace and a lot of people wanted no part of it. But we were able to, both in Precast, supply a range of pipe and precast products as well as rebar and performance steel into it as different teams back then. And think about the scale of this. We were picked as vendors separately because of the technical expertise we brought, the redundant manufacturing and fabrication network that we brought to it to be able to compete at scale. And we delivered 23,000 tons of precast. Again, our average order size is less than 200 tons. So think about that kind of scale into a project.

10,000 tons of rebar. Very valued by our customers in both respects. And they -- we have become a preferred partner to all the people in the chain, engineers, specifiers, contractors. And what that means for us going forward is our teams now, our precast teams, our fab teams and others throughout the CMC portfolio are working together now years in advance of some of these projects. And just in Georgia, there are major projects like this that are coming up in the pipeline, and our teams are talking about those and coordinating on how we're going to execute against those literally years before they go out for a hard bid. So we feel that the ability to work together is going to provide, again, much more opportunity for us and a much greater ability to capitalize on those opportunities together rather than separately.

When I kind of look -- changing from sort of optimizing and realizing the full potential of the business into quickly talking about how are we leveraging the capital already deployed. And I mentioned a couple of things already. But I'll give 3 very quick examples that really are an investment of about $35 million. We hope for -- and we're really targeting and feel certain about less than a 3-year payback.

One, a brownfield expansion in Colorado. Peter mentioned it earlier in the presentation. We only made pipe. We want to sell a package. We want -- we deliver our best value and our best pricing when we sell a package. So we had extra space in the plant. We had to reconfigure some things, but we're now in the precast business. So it was a relatively modest capital investment now to have a full product line. And the reception that we've got from our customers is, thank you for being in the marketplace. We've been on it for a long time, and we're ready to do business with you.

And Brad Gammill, who's sitting here, he's the General Manager of those operations, amongst many others for us, and you guys are doing a great job, and thank you for that and look forward to a great future as a full-line provider in that marketplace.

In Florida, it's a strong market. We had a small pipe plant. We bought a precast plant. Again, to offer the full package, we had extra land and we had the ability, we believe, to grow that business aggressively. So on that extra land, we're building a new pipe plant. It's a significant investment for us, but there's huge opportunity for us to capture share in that marketplace.

And one further synergy from precast being part of CMC, as Ty mentioned earlier, there's a capital projects management team inside of CMC that is now managing that project for us. And what that does is it frees up our local team to start working now to avail ourselves with the available capacity and capture share. So Ty, thank you for your team stepping in and helping us with that. But that's just, again, part of the great fit and the synergy by precast being part of CMC and vice versa.

And finally, talked early in the day and maybe a few people had questions about dry utility products. We converted a plant from a noncore product into making dry utilities for the I-95 corridor, if you will, kind of through the Mid-Atlantic and down into the Carolinas. And that's really important for us because it's a super growth area being driven by energy and data center demand. And we just very quickly in a very low capital way was able to convert capacity to put to that market. And our backlogs are building. We're going to have great success there going forward.

And finally, as I kind of wrap up is kind of what's the runway ahead of us in terms of growth. So I mentioned before, we compete in a very large market, $20 billion. The attractive thing about that large market is it's still very fragmented. So the top 10 players, including us, only have about 25% market share. So we see the ability with our knowledge of the market, the synergies that we bring. We have a low-cost operating model. We can bring immediate synergies to acquired companies, a long runway to fill in the map and to increase our presence in the precast industry.

And really, I think the question might have been asked earlier, but we see it in 3 ways. They can be bolt-ons to our existing operations where we have -- already have market strength that we can expand that incrementally or solidify it where it need be. It could be the acquisition of other regional leaders, companies like CP&P, companies like Foley or even and maybe just as importantly, extensions of our product lines where we can buy technology or we can buy products that allow us to have a greater set of products for customer solutions. That, in fact, probably does even expand our addressable market going forward.

So when you put that together with a focus on long-term growth areas and areas that need infrastructure and are sort of in favor of the kind of products that we bring to the marketplace, we see a long runway of growth and a repeatable growth model for the Precast business over the next many years. And we look forward to being a bigger part of CMC's business and the value that CMC brings to the marketplace, mostly for our customers and again, as we talked about to our shareholders.

So I hope you can tell I'm excited about it. I hope you guys share my enthusiasm for this. I couldn't foresee a better owner of the businesses that have been acquired than CMC, and we are going to be set up for a fantastic future.

So with that, I'm going to turn it over to Mike Doucet, our Senior Vice President for the Emerging Businesses Group, and thank you very much for your time.

Thanks. Well, hello. As Keith said, I'm Mike Doucet, I'm the Senior Vice President of the Emerging Businesses Group. I've been with CMC a little over 20 years in various operational and commercial leadership roles. And I'm really excited to talk to you about the Emerging Businesses Group today and why we think it represents a compelling growth platform for the company.

So as we dive into this, there are 3 things I'd really like you to remember from today's discussion. One is that these businesses are a group of capital-light, high-margin businesses with diversified products and solutions that can grow faster than the markets they serve.

The second thing is that these businesses and their products and solutions position CMC earlier in the construction life cycle where we can influence design and specification and address our customers' most critical challenges and create value for the customer and the company.

And the third thing is that these businesses are more valuable as a platform than they are individually by being connected to the broader CMC capabilities.

Let's jump into the Emerging Businesses Group. And you'll hear me refer to this as EBG. I apologize for that, but that's how we say it internally. And so I'll use that instead of saying Emerging Businesses Group over many times.

As we get started, I really want to take a step back and look at back to 2023. We're delivering our third year of results. So we were formed in 2023 as a portfolio. And the vision was simple then, which was to organize and invest around businesses that could be the next chapter of growth for the company. And so it was built on these businesses that were highly diversified that connected us to early-stage construction and that could expose us to where we wanted to be and where we wanted to compete. So in year 3, I'm happy to say that we're delivering double-digit top line and bottom line growth. Our revenue increased by 12% year-over-year to $809 million, and our adjusted EBITDA grew over 19% and while delivering 19.1% adjusted EBITDA margins.

Today, we're highlighting 3 of the businesses in the -- 3 of the 6 businesses in the portfolio that represent around 85% of the portfolio revenue. Tensar is our ground stabilization and ground improvement business. We have an exhibit out here. John Henderson, who runs that business is here. Raise your hand, John. So if you have questions about that business, he'll be able to talk to you about that. They hold the #1 position in geogrid solutions, as Peter said.

The next business is Performance Reinforcing Steel. If you want to see an example of what that looks like, there's some shiny rebar out there called GalvaBar, you can take a look at. But this is our group of proprietary rebar products such as GalvaBar, ChromX, and CryoSTEEL, and that holds a #1 position in corrosion reinforcement products when you combine it with epoxy.

The third business is our Construction Services business, which is our distribution business for concrete-related products that holds the #3 position in that space. And so this is a unique combination or this portfolio is a unique combination of market leadership, customer access, and connectivity to the broader CMC and the capabilities within it.

And you can see that capabilities -- that connectivity within Performance Reinforcing Steel. ChromX is manufactured in our steel mill in South Carolina. GalvaBar starts with material that's made out of our Oklahoma steel mill, and we will soon be using steel manufactured in our Knoxville, Tennessee mill. And 60% of our Performance Reinforcing Steel products are sold through our rebar fabrication network. At the same time, Tensar, Construction Services participate on many of the same projects and same relationships as our rebar business and our precast business, as Keith mentioned earlier.

The other thing I'd like to note about these businesses, they share a common go-to-market model and common stakeholders that includes engineers, EPCs, general contractors and subcontractors, even asset owners, public and private asset owners. And so that common go-to-market and common stakeholder audience actually creates commercial synergies that we're going to talk about a little bit later, and you've heard some themes of that with commercial excellence throughout the presentations today. We're going to hit on that as a driver for how we capture the full value of the portfolio, not just within the Emerging Businesses Group but from the enterprise.

And so when you think about year 3 for us and the double-digit top line and bottom line growth, I submit to you that this is a platform with real scale, real momentum, and significant runway ahead. So as we look at our historical performance over the last 3 years, I first want to talk about how the portfolio was built intentionally over time through strategic investments.

With the acquisition of ChromX and GalvaBar, we rounded out our portfolio to become the #1 provider in corrosion-resistant rebar. With the acquisition of Tensar, it gave us access to an earlier entry point in early-stage construction earlier than any of our other businesses on the design and specification side.

The acquisition of our Anchoring Systems business gave us access to the transmission and distribution market that we didn't have access to before. And then within the last couple of years, we actually have a start-up within the portfolio called Bridge Systems. It actually gives us access to deliver turnkey bridges for reinforced concrete bridges in a modular pre-engineered form to address some 33,000 bridges that are deficient in rural America.

And so each one of these investments follow the same discipline criteria. These are value-added products and solutions. They connect to our core business and our early-stage construction strategy. They're scalable and they're value accretive.

And so as you look at our performance over the last 3 years, a 6% CAGR in revenue with really the most of that momentum coming in this last year. And you can see that the organic growth strategies that we set in place in year 1 and year 2 are starting to bear fruit in year 3. At the same time, our adjusted EBITDA grew by 9% from $130 million to $155 million, while improving EBITDA margins by 100 basis points. And so we gained share through market penetration and product innovation really by creating value for our customers.

And so as we do that, every time we expand the platform, every time we've added new capabilities, we actually create more opportunities to leverage our commercial synergies, strengthen relationships with our customers, and capture more value at the project level. So when you think about this, we're not simply growing the business, we're actually compounding future earnings. Every time we've done this, it's created a bigger platform for us and more opportunities. So each investment strengthens the platform. Each improvement creates a larger base to drive future earnings. This is the power of a connected portfolio of capital-light, high-margin business with a highly diversified portfolio that can solve our customers' problems.

And so as we look at the sizable opportunity ahead, seen this slide, different versions of it for the Emerging Businesses Group, this is a $25 billion service addressable market for us. And we think we can grow faster, continue to grow faster than the markets we serve. And the reason is simple, we're addressing those customer challenges earlier in the cycle where project risk is the highest, schedule risk is the highest. And so our customers, as you've heard before, are under pressure to deliver projects faster, lower cost, highly complex, build more resiliency in the projects, and mitigate execution risk.

So our solutions, as you'll see throughout the presentation, hit that head-on. We reduce costs, reduce labor costs, accelerate schedules, and mitigate execution risk. This is particularly important in the energy and transportation markets where the products in our portfolio bring tremendous value. And so we gained share -- since we gained share from traditional construction methods by creating value for our solutions, we have a lot of confidence in our ability to continue to grow faster than the markets we serve.

So as we look at the slide you've seen a few times today, I won't go into each one of these again, but we're going to jump into each category. And for the Emerging Businesses Group, this is really about building a larger capital-light growth platform that can consistently deliver above-market growth at an attractive return on invested capital. So let's jump into how we're capturing the full potential of the businesses.

So heard a lot about -- you heard a lot about the lead generation and lead sharing today. I'm going to give you a little bit bigger look at this whole commercial engine. And so one of the ways that having the common go-to-market and a common stakeholders, one avenue that's open to capture full potential is through commercial excellence.

And with the Tensar acquisition came this really unique commercial capability, at least it's unique to our industry. And they call it a commercial engine. You've heard that terminology a little bit because Tensar's product is disruptive and competes against traditional construction methods. They built a commercial engine that systematically educates and builds awareness of their products, drives -- creates demand, and then drives market penetration. And so the exciting thing for us, as you heard today, we're starting to extend that capability well beyond Tensar into the entire portfolio, not just in the Emerging Businesses Group, but across the enterprise.

We're in the early stages of this or early innings, as Ty said earlier. But this goes back to that third kind of takeaway I asked you to remember for the day, which is the platform value really exceeds the value of the individual businesses when we can leverage capabilities more broadly across the portfolio. I mean each new contact creates opportunities to sell their products and educate, each new project creates opportunities for revenue. So an example of how we're doing this today is around building awareness for our engineered products.

So Tensar has had a strong history of delivering high-quality technical content to the engineering community has put them in the position to be a trusted adviser in that space. And so we're replicating that same model from demand generation through nurturing to demand capture and how that's having an impact today on our Performance Reinforcing Steel products. Prior to leveraging this model, our attendance for our webinars was somewhat anemic. It's increased by 15x using this model.

At the same time, as we think about building demand and leveraging building awareness, we've captured over 15,000 new contacts in the past 12 months and identified 5,000 new project opportunities. That's 15,000 opportunities to tell someone about Precast, about Bridge, about Tensar, about rebar, about whatever. So we're really cross-pollinating these. So this engine, again, in early innings, but we have a lot of confidence that this is an accelerator and driver to capture the full potential of the portfolio as we go forward. We're really excited about this and that we believe it has a lot of promise.

The other way that we're driving and capturing the full potential you heard today is from TAG. And for us, and again, going through the EBG lens, this is -- and you heard a little bit from Keith, but this is about having a process to systematically improve the value of the businesses, not only that are in our legacy businesses, but the ones we've acquired and then we will acquire. And for me, this is a pretty simple formula. Commercial excellence is about how we create and capture value and grow our top line and our bottom line from a margin standpoint.

And then the operational excellence side, this is really about how we lower our conversion cost and improve reliability, increase reliability. So in EBG, we've identified initiatives that will drive $35 million of value when they're fully realized. And so some examples of this right now on the commercial excellence side in our lead generation, leads are up 27% year-over-year with the volume associated lead generation in our geogrid business up 34%. At the same time, we have line of sight in our distribution business to increase EBITDA about 12% through lead sharing and cross-selling.

On the operational excellence side, we have line of sight to drive -- improve our manufacturing cost by $10 million. We're improving our yield. And you can see -- when you see a piece of geogrid out there, you'll see a sheet that's got a lot of holes in it. So yields means a lot of dollars for us and then lowering conversion costs. At the same time, one of the things that is a benefit of this is as we go in and improve these businesses and invest in operational excellence and our employees see this, we actually drive higher engagement and lower turnover. We've seen this happen in Tensar. Our turnover is down 15% in that business.

So we have become a right -- it's a right to own. And I think Keith said CMC is a good owner of these businesses, and we are because we actually go and improve and invest and we're able to use this framework to create more value. So this is -- these are structural improvements that strengthen the earnings power of these businesses, which again, gives us confidence in the ability to deliver attractive returns consistently with really modest capital requirements.

So as we go into how we're harvesting the benefits of capital deployed for us, this is really about supporting and sustaining the growth that we see in the businesses, Tensar and PRS in particular. And so in Tensar, we're actually right now commissioning our second Blackwell -- our second geogrid line in Blackwell, Oklahoma, at that plant. It's capable of producing 20 million square yards of our InterAx product family. Now if you go, you'll see some InterAx product out in the hallway. This is our most recent product. It's the most advanced. It's the highest performing and it has -- it's in really strong demand right now. And so this Blackwell line is timely for us.

The other area that we're capturing the other harvesting benefits is through Performance Reinforcing Steel. And this fall, we will be commissioning our second GalvaBar plant in Knoxville, Tennessee, right next to our Tennessee steel mill. And so this plant is capable of producing 40,000 tons of GalvaBar that is really supporting the demand for a resilient infrastructure like bridges with a 150-year service life. So again, these are capital-light investments. The total investment here is about $65 million between both of these, and it's going to deliver about $35 million of EBITDA at full run rate. So again, supporting the sustained growth while delivering these results at attractive returns.

And then as far as reshaping the portfolio for us, this is about strengthening our leadership position that we mentioned earlier in these 3 businesses. So our priorities, as Peter mentioned earlier, and I think maybe in the Q&A, we have a lot of runway organically in these businesses. And really, that's our priority. And you've seen the results in our growth over the last 3 years, where this is really starting to take hold right now with momentum. These are all organic growth strategies. And so -- and you saw through our service addressable market, we have plenty of runway there. And so that's our priority right now is to scale these businesses.

At the same time, we are looking for inorganic growth opportunities in 2 particular areas. One is through expanding our capabilities. So if we have an opportunity to look in the white space between Tensar, which is kind of the earliest part of the early-stage construction and maybe a structural frame and there's white space in there, we're going to look at opportunities to round out our portfolio where we have a right to win. And then the other piece is where we can expand geographically and address more of the service addressable market. And so each one of these investments will follow the same criteria we mentioned earlier. These will be value-accretive, value-added products and solutions, connecting to our core, connecting to our early-stage strategy, and contribute to our scale.

So as we move forward, we're about to go into the last part of my section, but this is kind of exiting the EBG. And I just want to say that I'm really excited about what we delivered over the last 3 years within Merging Business Group. And I just want to say thank you to our customers and our employees. But I'm telling you, I think the next 3 years are going to be better than the last 3 years. And so as we move over to the early-stage construction and really construction solutions to kind of wrap up the portion -- this portion of the day.

We talked about why CMC has a right to win here. And we talked about this today about the customers' challenges that they're facing. And I think one of the biggest ones on the page is the labor constraints. The most recent study said there's 500,000 worker shortage in the construction industry right now with more retirements looming and less people coming into the market. This is a real issue in the space. Other thing is the rising cost, and I would say the volatility of input costs is another issue. And then, of course, we've talked a lot about schedule risk and delays in performing, mitigating execution risk. And there's the growing need for reliable engineering solutions.

Well, the CMC solutions, we address each one of these by lowering cost, improving reliability, becoming a good vendor on site or being a good vendor on site and being reliable. And there's 2 areas I want to really highlight here that really drive this home. One is on Precast and the other one is on Tensar. In the Precast business, as you heard Keith talk about, these are components are manufactured off-site. So they become ready to install on site. Because of that, we can reduce on-site labor by up to 30%.

In addition, because these are manufactured and the forming and the steel placement and the concrete pouring and curing happens in the plant and doesn't happen in the field, you can reduce the construction schedule by up to 30 days. Tensar can also contribute to this by lowering total life cycle cost for pavement by using up to 65% less aggregate and 33% less asphalt, while increasing design life by 3 to 6x. So these are real tangible results and advantages versus traditional construction methods. And again, these businesses grow because they gain share not just by market growth, but by market penetration versus traditional construction methods. That's the key value driver for us is really that value that our products and solutions bring to the customer and to the company.

And so there we go. So as we take a look at a case study here, I'm really proud of this case study. This is -- really shows the full value that CMC can deliver to a project. This is an LNG plant in Louisiana. It's a $28 billion plant, over 1,100 acres, has a really tight time frame, a 24-month construction schedule and multiple contractors working on site at once in different areas. And to put this kind of the scale of the project in scope for you all, a typical Geogrid project may take around 16,000 square yards. This one took 4.7 million square yards.

A typical rebar project, as you heard from Brian earlier, is about 500 tons. This one is over 50,000 tons and included CryoSteel, which is our proprietary bar within PRS for LNG tanks. And then for our Construction Services business, we would sell about $250,000 of product to a project. This one took over $5 million. And for Precast, as you heard from Keith, about 150 tons of Precast for a project. This is over -- well over 50,000 tons of Precast. And this is a great project. But it demonstrates something that I think is more important, which is how CMC as a One CMC can create value at the project level for the customer.

See on this project, we engaged early as One CMC, brought multiple capabilities to bear to address our customers' most critical challenges and created more value as a company than we could individually. In addition, as you -- as Peter talked about, the pent-up demand as these infrastructure energy projects and manufacturing projects emerge out of the pipeline, this One CMC approach can scale across all different types of opportunities. And this isn't just about a mega project either. We can scale up and down from a size range, small to mega. And so this is not just a project for us. It begins to be a proof point for how our scalable growth model works across the portfolio of businesses.

So wrapping things up, I'll kind of end where we started, which is Construction Solutions is a capital-light portfolio of businesses when you look at Precast and the Emerging Business Group, a capital-light portfolio of businesses with diverse products and solutions that can grow faster than the markets they serve. The connectivity -- and I'm sorry, that -- and these businesses position us earlier in the cycle where we can influence design specification and address customers' critical challenges and create more value for the customer and the company. And then the connectivity of these businesses actually strengthens our competitive advantage.

Now when you combine this with the North American Steel Group, you get a differentiated early-stage construction platform that's really difficult to replicate. It has substantial runway for growth, will continue to deliver attractive returns and create long-term shareholder value. It's been a pleasure to be able to speak with you today about EBG and Construction Solutions. Thank you for your time. I'm going to hand it over to Paul Lawrence, our CFO. Thanks.

Well, thank you, Mike, and thank you all for investing the time to hear about the transformation that we are undertaking at CMC. You've heard from Peter, from Ty, from Brian, from Keith and Mike around the opportunities that we have in front of us. My goal is to relate those to financial outcomes that together with our capital allocation framework will drive towards shareholder value. You've heard them before, but there's 3 key data points that I want to reiterate. It's been a little bit since this morning's session. We've got a mid-cycle 2029 EBITDA -- core EBITDA target of between $1.65 billion and $1.8 billion. We have free cash flow target of between $1.4 billion and $1.5 billion, and we'll deliver returns on invested capital of between 13% and 14.5%.

Clearly, this represents a materially different CMC. We believe this represents the financial profile of a high-performing construction materials company. The levers you've all heard throughout the morning around what's going to drive these opportunities. It starts with expanding our margin. It starts with TAG. This is not a cyclical enhancement to our margins. This is a structural, durable enhancement and repeatable process to our margins to maintain a different profile from where we are today. This is about getting value from the capital that we've already deployed.

This is about the end of our mill investment cycle and the benefits we will reap from a cash flow perspective. This is about the continuation of a disciplined capital allocation strategy that's focused on delivering shareholder value. And finally, we'll provide a little bit more insights in terms of the financial targets and the peer group that we think most represents the end market profile as well as the financial profile of who we see ourselves being. The exciting thing is -- about today is you're not hearing new things. This is not a new launch. The transformation is already well underway. You see it in our results.

If we look at -- and I ask most of you sort of what was CMC's capability from an EBITDA perspective, sort of the post industry consolidation post 232, so the 2019 to the 2025 period, excluding the '22 and '23 years. I think there'd be near consensus that it was somewhere between $900 million and $1 billion. So we sort of plugged the middle point, $950 million. Today, we're already operating at 30% above that level. The foundation of the transformation is well established. It starts with the strategy, the strategy that Peter outlined. It's evolved over our 111-year history.

Today, the strategy is focused on performance and it's focused on growth. TAG, everybody has talked about TAG. TAG within the organization, talk to all the people here from CMC, the maturation of TAG over the 2-year period that it's been in place is phenomenal. It's demonstrating results. We've executed the Precast acquisition, providing a much larger addressable market for us to go forward. And as Brian outlined, we've invested a tremendous amount of time and effort in trade and have a much more supportive environment going forward. The transformation is well established and the transformation will deliver long-term shareholder value.

You can see clearly why today represents the right day to do an Investor Day. There's a lot of exciting messages to deliver and tangible proof of those results. If I spend a moment to talk about each one of our segments and how they drive towards this vision towards growth. We haven't talked much about Europe. It's been a difficult environment in Europe for the last couple of years. However, we're very confident that we're at a point of improved earnings going forward. Effective January 1, the Carbon Border Adjustment went into place. Effective July 1, the strengthened safeguard measures that doubled the tariff and halved quotas went into place.

Finally, the EU is addressing the global overcapacity of steel, something the U.S. market has done many years ago. The combination of a more balanced playing field, strengthening demand and the institution of the TAG benefits focused on further optimizing the cost structure while driving further commercial benefits, we're very confident in the path of the Polish operations to improve results. Our best known segment clearly is our North American Steel Group. That's what most customers know us for. It's that modern, low-cost network of facilities that span across all of the U.S. that really provide us this position of growth and harvesting from 2 aspects.

One is from a cost perspective, a relentless pursuit of low-cost manufacturing as well as ensuring we get the value capture for the leadership position that we have in the industry. It's also critical that we get the value for the benefits of the capital that we've deployed. So as we end the mill investment cycle, as we look forward, what we envision is a much lesser capital intensity environment in the North American Steel Group, one much more focused on productivity, cost efficiency and strengthening the core offerings of the North American Group.

And the final segment, the Construction Solutions Group, you've heard from Mike, you've heard from Keith. This is about a portfolio of value-enhancing products that have a tremendous growth runway in terms of -- these are high value-generating solutions for customers,. low market penetration. So our opportunity here is to deepen the market penetration, expand the geographies in which they serve as well as extending the offerings. These segments really do position us from a position of great strength to go forward. If we look at how we see our results driving towards superior performance, I think I've provided the breadcrumbs already.

It starts with our profitability enablers. It starts with leveraging the scale that we have to drive enhancements that others cannot. That's TAG. The second growth enabler -- second enabler is growth. It really is around the strong tailwinds of demand that Peter outlined that are not just for 2026, but will fuel demand for the coming years ahead. It's about getting the benefits of the capital that we've deployed as West Virginia ramps up. That will drive growth. And it's about, as we've recently completed the Precast acquisition and ensuring we get the synergies from the Precast acquisition, bringing that into our overall early-stage construction model.

From a financial perspective, our margins today are far more stable than where they've been in the past. The lower capital intensity of our business going forward helps drive cash flows. And all of that supports a very strong balance sheet that we have today. So the results -- this results in a business that's going to drive higher margins, higher free cash flows, driving towards enhanced returns on invested capital. And I think you'll all believe and all agree that those are the key aspects to driving shareholder value.

So let's dive into a few of those key enablers and I'll start with TAG. As Ty said, end of this year, run rate of $250 million, end of next year, goal is at least $350 million. Two critical factors. One, this has been achieved with little to no capital that has been deployed. And secondly, this is far in excess of any inflation that we've seen in our business. We've done detailed analysis of our various costs and metrics. And what we have concluded is out of the $350 million goal, we believe $200 million of that will be durable, sustainable margin improvement over and above inflation.

So to say that more clearly, that's $350 million of gross benefits offset by approximately $150 million of inflation. Going forward, as has been said many times, we expect to continue to improve to offset inflation. As I said on a recent earnings call, the benefits of TAG can really be seen throughout our financial statements and our KPIs in metal margins, from enhanced value capture on the revenue side, from a lower cost scrap mix used in the furnace, from an operating cost perspective from better freight utilization, from lower alloy consumptions, from higher yields in our operations and also in SG&A in terms of efficiencies that we're gaining as well as able to scale as CMC continues to grow.

But the other key aspect is that when we talk about TAG benefits, we talk about things that are within our control. And as stated in the Q&A, we really benchmark back to things from 2024. So as an example, if the cost of scrap were to decrease, as an example, that would not be a TAG benefit by itself. What drives the tag benefit is, as Jacob said on the video, we're using a lower cost scrap recipe or lower cost mix. That is a durable, sustainable benefit that will -- no matter what the economic environment, will be something that we can continue to deliver better than we did in the past. That is a TAG benefit.

Talked a lot about how Construction Solutions Group is certainly additive to our financial profile. The benefit is incredible. The Construction Solutions Group today represents around 30% of our business. It drives higher margins, higher cash flows and lower earnings volatility. If we look at these 2 metrics here from a profitability perspective, you guys have all seen historically the EBG business -- thanks for defining that, Mike. I can now use it. The EBG business has always had a high-teens EBITDA margin. The Precast business that we bought, the combined businesses in the mid-30%. So overall, those businesses on a weighted average basis will be just south of 30% in terms of an EBITDA margin.

From a free cash flow perspective, EBG is in the 80% range, Precast is around 90%. Midpoint, around 85%. So you see the free cash flow conversion and the impact that from what the Construction Solutions group does as a percentage of CMC, but also as we end the mill investment cycle, the overall financial profile of our cash flow will change dramatically. And what this segment does is it really materially strengthens the consistency and durability of our financial performance at CMC. And the last detailed dive I'll do with respect to the enablers is the balance sheet. It truly does represent an asset for CMC. We have no maturities for 4 years.

Our average cost of debt is around 5%. When we announced the transaction, our net leverage was around 2.7. Happy to report that by the end of the fiscal year, we will achieve our goal of 2x net leverage. That has been achieved far faster than what we anticipated at least 6 months and give us a position back to what we committed to. We will use the balance sheet as needed to take advantage of great opportunities to lever up as long as we have a path back to our target of 2x within 18 to 24 months. The strong balance sheet also gives us great confidence. You see with the liquidity of $1.7 billion, we can operate and execute our strategy in any economic environment with the strength of the balance sheet that we have.

So now let's move on to the financial targets. We have 4 levers in terms of the growth of our EBITDA reflected here on this bridge. But it starts from a position well grounded in terms of our trailing 12-month May results. What's included in this bridge or more importantly, what's not included in this bridge is this bridge does not reflect a major economic expansion from where we are today. It doesn't reflect, as Peter has said a couple of times today, any further acquisitions. It doesn't reflect new investments in mills or frankly, for that matter, capital that needs to be deployed.

The items reflected here are from initiatives already well underway, capital already deployed. In other words, things that are very much in our control to deliver. So if we start with each of these, starts with the first lever, which is simply the trailing 12-month balance includes a little under $100 million from the Precast business. What we bought with the Precast acquisitions was around $250 million. So it's the annualization of the acquired Precast businesses. You've heard this morning from everybody around the organic growth projects that we have going on. And most, let me tell you, are well underway.

What's included in this bar are the benefits from Steel West Virginia, the benefits from GalvaBar and the Geogrid line that Mike spoke of, the synergies from the Precast acquisition to name just a few. But again, these are initiatives that are well underway and very much will deliver results in the coming quarters. And the last bucket represents incremental TAG savings. Again, starting from the trailing 12, there's just under $100 million benefit of TAG benefits, net benefits in the trailing 12. So this is an incremental $100 million or so for what's to come in the next 3 years.

Again, our TAG benefits are really focused on getting to that finish line for the initial committed phase in 2027. So if we look at the first 3 bars on this bridge, I said they're within our control. It's also important to say there is no market expansion in this. We've talked about how our business is driving towards solutions for customers in an increasingly complex construction world. That's not reflected in any of these 3. What we have is in the last bar, a market-related factor. What's critical is the low end of our range reflects a 25% steel tariff environment. So this growth over the 3-year period represents a CAGR between 10% and 13%, very exciting and ultimately, the culmination of a tremendous amount of work that's been done over the last few years to get us to a stage where we have the confidence to deliver this as a commitment to you going forward.

The value that we will unleash as this earnings growth continues is exciting for us to talk about. While earnings growth is exciting, the cash flow change, the inflection is probably the real story that you will -- you should take away from today. Much of the last decade, we've been investing in our business. Now looking forward, we will be reaping the benefits of those investments. The time that we have an increase in our earnings and a significant decrease in our CapEx spend will generate, as Peter said earlier, almost a 2x increase in our free cash flow defined as EBITDA less CapEx to make it comparable to how others disclose this number.

It's also important to note that while we're providing 3-year targets, we anticipate this ramp-up of free cash flow to be much more front-end loaded. CapEx related to West Virginia will drop dramatically in the coming quarters. So this increased free cash flow really provides us a couple of things. It provides us a tremendous opportunity to drive value for shareholders, but it also provides us tremendous flexibility as we operate our business going forward, knowing the cash that we are going to generate from this portfolio of assets that we have put together.

And just to provide a little bit more insight in terms of the Construction Solutions Group. As I said earlier, it is a key contributor to the overall improvement in the financial profile. As we've said, with the organic growth that we anticipate from this business, that's the GalvaBar and Geogrid line, the capture of the synergies with the market growth that we anticipate, we expect this business to generate around $500 million of EBITDA within the existing assets.

Incrementally, we do expect inorganic growth. However, you never can tell those in order to include them in financial targets. But we see a clear path to being -- seeing this as at least 40% of our business by fiscal '29. We look at the margins, high 29% or so EBITDA margin and the free cash flow that I spoke of earlier. This will provide a tremendous influence on our financial profile, also helping us from a stability perspective in terms of the margin profile in relation to the steel environment.

If we move on to capital allocation, both our historical performance on capital allocation as well as our philosophy is one that's very balanced. Our top priority is reinvesting in the business, looking at low-capital intensity, high-return projects. We're looking to invest in M&A. You've heard from Peter and others this morning around what we're looking for is businesses that strengthen the portfolio and drive synergies. We're committed to providing attractive returns to our shareholders in the forms of dividends and buybacks, and I'll click into this in a following slide. And we're committed to maintaining the strength of the balance sheet.

As I said earlier, as we are approaching our target leverage -- net leverage level, we will be reverting back to a longer-term capital allocation priority as laid out here as opposed to what we've been doing over the last 9 months since the transaction took place, which focused on reducing our net leverage. And so looking for prioritizing growth and shareholder returns going forward. If I do a double-click in terms of the M&A framework, Peter set this out very well. We're looking to extend the portfolio, increase our addressable market, looking for businesses that we have a clear path towards leadership positions that have synergies and deepen relationships with our customers.

But from a financial perspective, just to clarify a few things. We're looking for businesses that grow at at least 1.5x GDP. As Mike said, we're looking for businesses that solve customers' problems like labor shortages or stormwater management. Those are the types of trends we want to invest in that will give us that sort of growth level. We want to invest in businesses that drive value for our customers. That means businesses that have higher margins. We're looking for businesses that deliver at least 20% EBITDA margins. And we will be financially disciplined when it comes to these acquisitions. We are looking to ensure that we have a path towards a return on our invested capital greater than our WACC within the third year.

And as I said earlier, and as we've done in the past, we will leverage our balance sheet if the right opportunity comes up as long as we have the path back to our target level within 18 to 24 months. I think looking at the criteria, both in terms of the nature of the businesses as well as the financial metrics, you can appreciate why the investments in the Precast businesses were so attractive to us. While growth is our priority, shareholder returns is also very important to us. It starts with our dividend. We've been paying a dividend for 247 consecutive quarters. And like we did earlier this year, we're looking to increase that dividend on a regular basis.

Hopefully, you all saw earlier this morning that we also increased our share repurchase authorization by $600 million. This is a sign and a signal of confidence from our Board that not only do they believe in the value of the business that we have put together, but also the cash flow generation that we will provide as well as our commitment to a balanced approach to capital allocation. It is our intent to execute this program over the 3-year financial target period. So here's a list of all of the financial targets, and most of these I've provided a deeper dive into earlier.

But there's 2 I just want to touch on in a little more depth. On EBITDA margin. If we look historically, company probably had 12% EBITDA margins. Where we are with these, a 200 basis point improvement from TAG, 200 basis point improvement from the Precast business. Simple as that. We're not baking other things into these forecasts. And with respect to return on invested capital, as we drive towards the benefits from TAG, if we drive towards ensuring we get the synergies from the Precast acquisitions, if we drive towards, as Ty talked about, the capital discipline going forward, those are amongst many levers that we will focus on in terms of driving that return on invested capital to a much more attractive level than where the steel industry has been historically.

If I look at CMC and the targets that we are projecting going forward, I take a lot of confidence in terms of what we've delivered in the past. If we look at ourselves in comparison to the top quality steel peers and we look at the EBITDA growth that we have demonstrated over the past 10 years at 13.5% and where our margins are today, those compare very favorably to the best-in-class steel peers. However, as we look forward, we think investors will see CMC as a larger company, a company with higher margins, a company with a growth story and have end markets very aligned with the construction materials group of companies. And so there will be a much stronger comparison against that group of peers that we've outlined here.

What's impressive is the value of what we have built already within the Construction Solutions group compares very favorably with the best-in-class construction material companies. And if we look from a valuation perspective, we clearly see a disconnect in terms of where CMC stock trades versus where others trade. We think as we continue to execute on what we've talked about today, deliver on TAG, deliver on the Precast acquisition synergies, deliver on the higher free cash flow, that those actions will ultimately allow that disconnect to go away and result in tremendous shareholder value creation opportunity for you, our shareholders, going forward.

So to wrap things up, the message today is very simple. We're a company that is looking to grow earnings, that's executing on the initiatives that we have launched. We are a company looking to improve the quality of those earnings, and that's the investments that we've made. We're looking -- we're a company looking to reap the benefits from the end of the mill investment cycle and really see an inflection in our cash flows. What does that mean from a shareholder perspective? That means a company that has exciting growth opportunities. That's a company that's got an exciting opportunity to drive accelerated or advanced returns on invested capital. It's a company that has the cash flows to make attractive returns to shareholders.

Those, we believe, are 3 drivers of providing incredible value for our shareholders. So with that, I'll call Peter back to the stage to wrap things up. But again, thank you for the time that you've invested listening to the story of what's ahead for CMC.

Thanks, Paul. Really great presentation. And I want to thank the whole leadership team for the really incredible case that they've made for CMC. There were many gems throughout the course of today, and maybe I'll just kind of highlight a couple of them. From Ty, we heard how we are leveraging TAG to create value through low-cost operations, commercial execution and capital discipline. From Brian, we heard a focus on best-in-class operational and commercial execution about capturing the value of the investments that we've made and about how the North American Steel Group is supporting our move into early-stage construction.

From Keith, we heard that the Precast business is an excellent business with growth characteristics and favorable other financial characteristics in its own right and that it supports and nicely enhances our move into early-stage construction. From Mike, we heard about our attractive EBG portfolio, which has nice margins and growth characteristics in its own right and complements and brings capability and connectivity to our early-stage construction initiative. And of course, from Paul, you just heard about higher durable -- durably higher margins about the roadway for the road map from where we are today to our '29 targets and how that is really mostly in our control. And lastly, you heard about the inflection of free cash flow that is going to fund the capital allocation priorities that we have as a company.

We are incredibly excited about where we are as a company. And as I said before, I really believe that CMC represents a compelling investment opportunity. We are transforming this company, transforming this company. We have made great progress, great progress. Our path is clear, and it's largely in our control. And the result is going to be a company with higher margins, strong free cash flow, compelling growth and higher returns on invested capital. And that will create tremendous value for our employees, for our customers and of course, our shareholders as well. So today, we say come invest with us. We have a great story, and thank you very much for taking the time to hear it today. We appreciate it. I'd like to call the leadership team up here, and we'll do our second Q&A session.

As we're getting set up, we'll follow the same kind of format that we had before. Please raise your hand, and we'll get the microphone over to you, state your name and your firm and then follow up by your questions, and I'll try to weave in the questions that we've received from the webcast. We had allocated about half an hour for Q&A. We'll try to stick to that. So we may run over for those keeping track of time. We have a question over there.

Richard Garchitorena, Barclays. Thanks for the detailed presentation today. My first question is in terms of the strategy going forward, you talked a lot about how M&A is going to be part of that, but you also have organic growth that is going to drive that as well. But if you could talk about maybe the synergies that you might see between the North American steel business and Construction Solutions Group and where the focus is going to be, particularly on the Construction Solutions side, what areas you want to really add to, whether it's geographically or on the product basis?

So maybe we ask kind of Brian and Keith to respond to this one. Brian, you can start.

Yes, I can start. And I hope the example that I highlighted of the mega job that I gave, gave you an indication of the potential here. We're literally just getting started here. So we're on the job sites, and we're seeing that our customers need additional early-stage construction products and services. And now we're increasingly over the last few years, able to give more and more of that on the job site, provide more value. And it's happening at this point, I would say, initially, it was organically. It's happening because our employees want to do the right thing. They want more CMC products on the job site. As we go forward and we have more opportunities, we're going to have a much more structured way, as Mike was showing, of sharing and coordinating. So it will be much more formalized. We'll continue to build out. And there's a lot of upside here.

Yes. If I could just pick that up a bit like for the Precast business, our main priority, and I think our biggest opportunity for us, at least in the next several years is just expansion of our footprint. We've got very strong positions as we laid out in the Mid-Atlantic and the Southeast. And our goal is to -- as best we can to match the footprint of the rest of CMC's business. So that as we talked about, the value comes from density. And so that's our main focus, just kind of growing our footprint. And once we've settled in and delivered on synergies and build the right foundation to be able to extend that franchise in the areas that are open to us, primarily where it overlaps with Brian's business.

It's interesting just to jump in there, one last point. We're already hearing from customers in regions where we don't have the Precast presence, are you going to get Precast presence in this area, we'd love to do that business with you as well.

Mike Dudas, Vertical Research Partners. Maybe continuing on the M&A front for maybe Keith and Mike, what are the mood of your potential partners in the acquisition pipeline? How are they feeling about the consolidation, what -- what CMC is doing in the market? And who are you competing against for those assets in the marketplace? And how -- are there other players -- CRH, of course, has made some very big moves into the marketplace, but there are other players that you'll be seeing as you're trying to move through this inorganic opportunities in the future?

Precast?

Yes, I'll start maybe with that. So I think, as I said before, I view and I think the market views CMC as an excellent player in the Precast industry. Our customers are telling us that. The industry is telling us that. And we're investing heavily in it to be responsible and active players in the industry in and of itself. And so I think the mood is very positive. I think we bring something different to potential sellers than CRH does or some of the other players that have been heavy consolidators in the industry over the past decade or 2.

And I think importantly, the runway that we see is -- the aperture is probably bigger for us because we have a smaller position from which to grow from. And then there's probably areas where we have the opportunity to be the acquirer of choice because others can't because their footprints are fuller than ours. And when sellers would look to it, they'd say, I want to partner up with that team because they have the ability to grow and to be a place where I can grow my career, I can grow my business and really scale it up and compete fully on a nationwide basis. So overall, very positive. Mike?

Yes. On the Emerging Businesses Group side, we have this portfolio of businesses, and we're looking kind of this early-stage construction life cycle from kind of early to late and what's the white space there. So we're looking at different technologies, things that are disruptive, things that have opportunities to create value through traditional -- from traditional construction methods as well as add to capabilities we already have. So like I said before, our priorities right now are organic growth around Tensar, PRS, and Construction Services. But there's opportunities that are either bolt-on to those or new capabilities in general within the portfolio.

I'll take one from the webcast. What -- and maybe for Paul, what milestones should we be tracking on progress in the periods between now and fiscal '29, specifically in the areas of margins? And will they be linear as you think through that time period?

Yes. Thanks for the question. As I said, we really believe that these targets will be more front-end loaded. And in the environment that we're in today, it's an environment which should allow us to certainly be on the upper end of the ranges that we provided today. Just to reiterate, the economic environment that we outlined in the targets is a mid-cycle economic environment with the low end representing a 25% steel tariff environment. So we believe if you look at our trailing 12-month results and if you added in the benefits of the Precast acquisition, you're very close in terms of the margin to already being there. So I believe that the margin will continue to be stable. And I think the key attributes will be stability in the margins, the enhancement in our cash flow. Those are the 2 drivers towards a -- to see in terms -- incremental to the growth areas.

I had another one. That's Timna Tanners with Wells Fargo. So my one question is why is -- on the Slide 86, where you talk about your trajectory from trailing 12 months to 2029. Why is trailing 12 months a good starting point if you're looking at mid-cycle? Because if you look at the last 12 months, you've got 50% tariffs. You've got already baked in and impacted additional countervailing and antidumping that's already been in effect, even though they're finalized recently. So it's a really great environment for margins. You've got scrap staying unusually low, and you have yet to see the impact of additional steel capacity coming from you guys, CMC, Nucor, Hybar and the other ones you know about. But why is this the right starting point? And how -- because it's 50% and you say the low end is 25%. So I'm just trying to reconcile how this is a good starting point for what's a mid-cycle.

Yes. Thanks, Timna, for the question. And internally, we debated a lot around do we define what mid-cycle is and go through that and try to educate people and get them aligned as to, okay, what is mid-cycle or do we start with where we are. Conversely, the other way to look at this is, obviously, we present things in a simple to understand way. But if you go back to what I was saying earlier, $950 million EBITDA was what people understood us to be as our core capability in the 2019 to 2025 period. What have we done since then? Added $250 million of Precast, added the full $200 million in this case of TAG benefits, added the benefits of the organic projects, and that would put us around $200 million as well. That gets you without any market growth from sort of that through-the-cycle view to where we expect our mid-cycle to be in a representative 25% margin environment. So we triangulated this in many different ways. But ultimately, we thought most clear for most people is to start with where we've demonstrated over the last 12 months.

Carlos De Alba with Morgan Stanley again. My question is on capital allocation. Clearly, M&A is going to be a big part of your strategy. And in the past, based on the chart that you presented, about 1/3 of the excess cash or cash available was used to return money to shareholders. How should we think about it going forward? And would potentially the Board and the company think about a capital allocation that more clearly defines how much of that excess cash or cash available will be coming back to shareholders? And maybe complementing that capital allocation framework, have you thought about a ballpark amount of cash that you would use to grow the Precast business, a range of ballpark? That will help us handicap how much money can come back to shareholders.

Thanks, Carlos. A great fully loaded question. So let me make sure I -- hopefully, I cover all the bases. I think if we take what we alluded to in terms of our free cash flow, EBITDA less CapEx, at $1.4 billion to $1.5 billion range, reduce that, Peter outlined that probably net of interest, net of taxes, that's probably close to $1 billion. What we have committed to is executing the increased authorization within a 3-year period. In addition to that, we have our normal dividend. And so you can see over a 3-year period, what that amount would represent in relation to 3 years' worth of cash flow. It's around 1/3. That's ultimately our expectation is that that's around the level that we would allocate to shareholder returns in the environment that we anticipate, which is that there will be opportunities for organic growth projects.

That is the assumptions that are baked in that the majority of our cash will be towards growth. Now how things play out, we can't sit here today and proclaim that. But ultimately, we do believe that it will be somewhat balanced in relation to how we've done things in the past, which is relatively equal, but with a higher priority towards growth, which with those numbers, hopefully, that provides you a little bit of a framework to appreciate what we're outlining.

Maybe just to jump in a little bit on that. So with a little more specificity. So if we were to say, let's say, we did all the acquisitions in Precast, but again, it could be across Construction Solutions generally. If we add $300 million of EBITDA, that's going to get us up to that 40% plus level, right? So just -- it's simple math, but it hopefully is helpful.

Alex Hacking from Citi. I guess a follow-up for Keith on the Precast. You talked about growing the footprint there to overlap more with CMC Steel business. Obviously, a portion of that could be M&A driven. But is some of that going to be organic? And for that portion that's organic, what's the capital intensity of that? And are you entering regions there that are underserved? Or this is somewhere where you're going to have to displace other people?

Yes. Good question. I think our preferred route would be through acquisition because there's a stability in the market. But sometimes that's either not possible or the time delay is too long. So I wouldn't rule out the possibility of targeted investments in certain markets whereby in some ways like what Peter was referencing before, our customers, especially in very large projects where they need a dependable partner across multiple product lines, it gives a sort of a baseline expectation of entry into a market that could be new.

And in that case, I don't think it's necessarily about having to displace incumbents because we're bringing capabilities that maybe the local players there aren't necessarily participating in. So I'd say we prefer to acquire and acquire at scale. But if not, we're not opposed to making investments to expand capacity. I talked -- just to give a brief point, we talked about the changes we've made in our footprint in Littleton, Colorado. I think there's opportunities for us to do that in other places as well to expand our product portfolio and our capabilities in important markets.

And the capital intensity is materially lower.

We go back to the 3 examples that Keith outlined, $35 million for $15 million worth of benefit in those 3 facilities with a less than 3-year payback, very nice investment opportunities.

Another one from the webcast. Commercial excellence programs are going in a marketplace that's fairly strong. How durable are these programs in the event of a down cycle? If times get difficult, will you see behaviors from the past reemerge?

How about I'll start, Andy, and then the business guys can jump in. I actually think commercial excellence best serves us in a downturn because some of the things that you heard us say today should paint a different picture of what CMC has been from the past. I referenced in my prepared remarks, the commercial execution and discipline. And the expectations that we've set with our commercial teams that every decision should be based on the value, not the volume. And that's not to discount the volume. We're in a volume business. We're in a highly capital-intensive business when you think of our steel business. But it's really a mindset shift that I think if we stick to the discipline that we have shown that you've heard Brian talk about in Fabrication and you heard the other business guys talk about, I think it actually serves us better in a downturn. But anything you guys would add?

Yes. Since you mentioned Fab, I think that's an excellent example. because as we're performing on these job sites and we're providing more products and services, it does create a stickier relationship. It's that unreplicable franchise that we've talked about. And it makes that relationship less price sensitive. It's more about execution. It's more about the value that we're delivering.

I'll stick with the pricing conversation. What's the embedded pricing environment in the long-term guidance in terms of rebar pricing as well as scrap pricing?

I think that goes back to sort of the answer to an earlier question around the environment that we've established is framed around that 2019 to 2025 environment. Given, I think as put earlier in the business has seen a lot of inflation. Most traditional specific guidance towards pricing is not really relevant in terms of what it was today versus what it was. But from an EBITDA per ton that the operations earn, I think that's more relevant. And I think that's taken from that 2019 to 2025 period, which, as I stated earlier, is the consolidation in the marketplace and the 232 tariffs being in place at the 25% level.

Okay. Maybe I'll just take one more question, and then if there's no others, we can wrap up pretty much on time. So for the last question, I guess, stick with pricing, this one just came in from the webcast. The market doesn't seem to want to give you credit for your shift yet. It seems overly focused on the spreads in steel. Maybe talk more about your pricing discipline and maybe your estimate of market growth absorbing additional capacity increases would be helpful.

I can start with that. And we have seen increasing supply, and it's driven by a need in the marketplace. So we have these strong demand drivers in technology. It's not just data centers, but technology in general, it's energy, it's infrastructure, it's reshoring. And so we have seen an increase in supply. It's needed. We're seeing from at least peak levels, reduced imports. And if this past year is a good indication of how the industry is approaching that, the supply has been very manageable. And in fact, in a year where we had multiple parties, including ourselves, increasing supply for the reasons I stated. And we saw a higher level of imports, higher than expected. We've seen improving pricing and improving margins. So it's a strong indication that the industry is approaching pricing in a much different way than perhaps in the past.

Maybe I'll just jump in for a second here. I think in terms of the market's reaction to kind of our story, I think there's really 2 things we have to show. Number one is, as Brian is saying, we have to show that our steel business is different and it's differentiated. And I think we're well on the way to doing that. I think the challenge that we face, and we're going to keep at it is the fact that there's a long history the other way. But we can see when we talk about consolidation, when we talk about all the work we've done on imports, and we talk about the discipline that we're having commercially and the way we're managing capacity.

Remember, it's not just about rebar coming into the market. We have the ability to make other products to take some of our rebar out of the market, right? And as Brian said, we have a highly flexible system that allows us to flex up and down and still maintain a really good level of profitability. So I think that kind of what we need to stay at and prove to the market, and I think we're well on the way to do this is that our steel business is different.

Secondly, I think we need to prove that we can integrate and successfully run a Precast business. And we hear that from investors all the time. They want to show me, show me that you can do this. Well, I think it's fair to say with what Keith described today, we are showing it. We are very confident we can run this business. And if I had to say -- if I had to tell you how I feel about Precast today, I'd say, I feel more confident that Precast is a great fit for our company today than I did when we did the acquisition, and I felt really good at the time of the acquisition. So I think if we kind of get those 2 things under our belt, then I firmly believe that this equity will rerate. And that's -- when I say we're a company in transformation, that's what I mean. We are in this for the long haul to get this right.

If there aren't any other questions, I think, Peter, you'll have some brief.

Okay. Yes. So first of all, we have lunch. So we hope everyone will stay for lunch. There's plenty of room. If there's a dining room that we're set up in, if we exhaust that space, we can use this space and there's a buffet right outside the door. And then secondly, we really value your input on this event and your input on how we're telling our story. We've engaged [ Corbin ] Advisors to help us in that regard, and they're going to be circulating a survey. And if you could just take a few moments to give us some feedback, it would be very helpful for us. And I think you know us well enough to know that we'll be responsive. So thank you very much for coming today, and please stay for lunch.

Thank you. Hello everyone and welcome to the fiscal 2026 third quarter earnings call for Commercial Metals Company. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer, and Paul Lawrence, Senior Vice President and Chief Financial Officer. Today's materials, including the press release and supplemental slides that accompany this call, can be found on CMC's Investor Relations website. 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'd like to remind all participants that today's discussion contains forward-looking statements, including with respect to economic conditions, effects of legislation and trade actions, U.S. steel import levels, construction activity, demand for finished steel products, and precast concrete products, the expected capabilities, benefits, costs, and timeline for construction of new facilities, and expected performance of our recently acquired precast platform, the company's operations, the company's strategic growth plan and its anticipated benefits, the company's ability to achieve its stated deleveraging target within the anticipated time frame, legal proceedings, and company's future results of operations, financial measures, tax credits, and capital spending. These statements reflect the company's beliefs based on current conditions but are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-K and other filings with the U.S.

Securities and Exchange Commission contain additional information concerning factors that could cause actual results to different material from those projected in forward-looking statements. Except as required by law, CMC does not assume any obligation to update, amend, or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release, supplemental slide presentation, or on the company's website. unless stated otherwise all references made to year or quarter and our references to the company's fiscal year or fiscal quarter And now for opening remarks and introductions, I will turn the floor over to Peter.

Good morning, and thank you for joining today's conference call. Before we get started, a quick but important housekeeping note. After more than six years of outstanding leadership in investor relations, Jason Brocious is transitioning into a strategy and corporate development role within CMC. has been instrumental to CMC's success and a trusted partner for the investor community. We are grateful for all of his contributions and look forward to his continued impact here at CMC. Joining us to lead our IR efforts is Andy Larkin, who comes to us most recently from his roles leading investor relations at Anglo Gold and Summit Materials, and who brings a decade of IR experience across construction materials, metals and mining, and consumer staples. We are excited to welcome Andy to our show. and confident he will further strengthen our engagement with investors. Now, during our fiscal third quarter, we continue to execute our strategic plan.

Core EBITDA increased 78.6% year-over-year to $353.6 million, and our core EBITDA margin increased to 14.2% due to metal margin expansion, solidification, and the increase in the amount of capital we have. on our TAG initiatives and the addition of results from our recent precast acquisitions. In addition, we continue to make good progress de-levering our balance sheet. Despite the significant increase in results, our financial performance in the quarter could have been even better and is not indicative of our full potential. I am pleased with the progress we are making against our strategic agenda. We are advancing CMC towards structurally higher margins, reduced earnings volatility, and more sustainable growth. Underpinning this transformation is a disciplined operating approach that extends across the enterprise. Our Transform, Advance, and Grow program, or TAG, remains a core driver of performance enhancement with initiatives spanning our operations, our commercial organization, and our support functions.

We are tracking well ahead of our targeted 150 million run rate annualized benefits for fiscal 26, amplifying existing initiatives to unlock further upside and replenishing our pipeline with new initiatives. Our results reinforce our confidence that TAG is a durable lever for March. and improved quality of earnings. Meanwhile, integration of our precast acquisitions is tracking on plan. We are seeing early operational and commercial benefits, and most importantly, strong alignment between our teams. Starting with safety, we are rapidly rolling out best-in-class tools and practices. across our precast operations to embed a strong safety culture. I am pleased to report that we are already seeing dramatic improvement. Commercially, we are leveraging the broader network of facilities between the two acquisitions to better serve our precast customers while utilizing the VAP CMC network to share leads and strengthen existing relationships.

Operationally, we are applying best practices, taking advantage of the collective expertise and capabilities across the precast and broader CMC portfolio. One example of this is the sharing of precast forms across facilities to improve production efficiency and better meet customer demand. On balance, we could not be more pleased with how the integration is progressing. At the same time, our organic growth investments are bearing fruit. Our Arizona 2 micromill saw a step change in operating performance reliability during the quarter, increasing to over 75% of capacity utilization, producing a broad product range of both merchant bar and rebar product. Meanwhile, progress at Steel West Virginia is continuing, and we look forward to hot commissioning our newest micro mill later this summer. Together, these investments will finish our network of modern, highly efficient, and low-cost mills and position us to serve demand across the board. cross our key markets for years to come.

In parallel, we are also bringing our new geogrid line in Blackwell, Oklahoma online and are making steady progress on our second Galva Bar line in Knoxville. which is scheduled to start up late in calendar 2026. Turning now to headline financial performance. In the third quarter, we generated 353.6 million of core EBITDA, the highest level in three years, but with more upside potential. Paul will walk you through the period But in summary, a challenging sequential quarter in the North American Steel Group was offset by sequential improvement in the Construction Solutions Group and the Europe Steel Group. Our North American Steel Group third quarter performance was impacted by three temporary factors. First, planned maintenance of the steel. outages at seven of our 10 mills negatively impacted results by approximately 20 million in the quarter and affected available inventory for customers. In fiscal 2026, planned outages were particularly elevated with a concentration in the third quarter.

Annual planned maintenance activities in 2026 have run at roughly twice normal levels. Second, metal margins were squeezed by the unexpected strength in scrap costs driven by by war-related higher fuel costs. And lastly, weather-related disruptions curtailed construction activity across a number of key markets, including Texas, which delayed customer consumption of rebar. For our precast business, pockets of regional softness and stretches of wet weather also resulted in performance that was below our expectations for the third quarter. Importantly, these factors impacting our third quarter results have proven temporary. Plant outages are now behind us and our mills are running well. Previously announced steel price increases are in the market taking hold and yielding higher metal margins.

Weather conditions have normalized thus far in Q4. and our steel and precast shipments are seeing strength. Underlying business fundamentals remain firmly intact and in many cases are improving. Downstream bookings grew by more than 9% on a year-over-year basis in Q3. The value of our precast backlog was up low single digits versus the prior year period. forward pipeline indicators in our TENSAR business point to healthy demand. As related to end markets, the outlook continues to be positive. More than 50% of the IIJA funding is yet to be spent supporting highway construction and general infrastructure spending across our core markets remaining steady. While residential demand remains broadly subdued, pockets of resilience persist in markets such as Charlotte and parts of the Mid-Atlantic.

Multifamily construction continues to outperform and is expected to remain stronger than single-family. For non-residential markets, demand is increasingly being driven by a growing pipeline of large-scale megaprojects. Investments across data center, semiconductor capacity, and energy networks are driving a multi-year pipeline of construction activity with a significant concentration of these projects in our Sunbelt and East Coast footprints. Importantly, the impact extends well beyond the core facilities themselves. The associated build-out of supporting infrastructure, particularly the power grids, stormwater systems and utilities, create incremental demand across our steel ground stabilization and precast solutions. Moreover, institutional spending to replace aging facilities and accommodate market growth is also very strong. The value customers place in our differentiated capabilities to perform on the complex megaprojects across all different construction end markets is showing up in our pipeline and in our backlogs.

Customers know they can reduce risk by partnering with CMC and the service and scale and solutions. On the steel supply side, we view the market as balanced with incremental domestic capacity being absorbed while prices are trending higher. While imports year-to-date have been somewhat elevated, we expect them to remain at manageable levels as a result of effective trade policy initiatives, which most recently have been have led to final or preliminary anti-dumping and countervailing duties against producers in four countries that together imported approximately 500,000 tons of rebar in calendar year 2024. These duties, once imposed, will be in place for a minimum of five years and provide dual-use. durable trade protection against unfairly traded imports from countries that subsidize and overbuild their domestic industries. It is of further note that elevated ocean freight costs continue to provide an additional buffer for domestic producers. We will remain vigilant on steel supply dynamics and will continue to do so. to work towards achieving fair trade and a level playing field. These efforts, together with our increased commercial discipline and focus on value over volume, sets CMC up to more fully capture the value we deliver to the marketplace.

A similar more constructive supply demand dynamic is beginning to emerge in Europe. Demand is strengthening driven by steady economic growth, accelerating investment, and the early stages of EU-funded infrastructure deployment. At the same time, supply dynamics are tightening. With the carbon border adjustment mechanism in place, and further EU-enhanced trade protections set to take effect July 1st that should create a more level playing field against imports. With that, I'll hand it to Paul to cover details on the quarter.

Thank you, Peter, and good morning to everyone on today's call. CMC reported third quarter net earnings of $173 million, or $1.55 per diluted share. During the quarter, we incurred approximately $25.5 million in pre-tax expenses that were excluded from adjusted earnings. Of this amount, 19.8 million was non-cash amortization of the acquired backlogs, and 2.5 million was incurred to support our integration activities. both of which related to these recent precast acquisitions. Including these items, adjusted earnings increased 142.4% year over year to $193 million, or $1.73 for diluted share. If you recall, as we discussed in March, purchase price accounting impacts combined with higher interest expense tied to the financing of the pre-cast acquisitions will continue to widen the gap between core EBITDA and earnings before income taxes by approximately $60 to $65 million per quarter. for each of the next two quarters. Approximately one third of that quarterly amount will be related to the amortization of backlogs, which will conclude in fiscal 2027.

Third quarter consolidated core EBITDA grew 78.6% from the prior year to 353.6 million and core EBITDA the margin expanded to 14.2%, an increase of 440 basis points year over year. North American Steel Group segment adjusted EBITDA was up 41% year-over-year to $253.5 million, or $234 per ton of finished steel shipped. Year-over-year growth was driven predominantly by metal margins, which expanded by $111 relative to third quarter 2025, and ongoing contributions from our TAG initiatives. It is important to note that the TAG benefits are captured in most all of our business KPIs. In metal margin improvement, we see the results of our commercial discipline capturing top line growth as well as initiatives like our scrap optimization driving lower scrap costs. In our manufacturing costs, we see the results of initiatives like lower alloy consumption or yield improvement. Our SG&A costs benefit from efficiencies of our scale and enhanced technologies.

As Peter previously mentioned, adjusted EBITDA margin of 14.2% in the North American Steel Group was up 270 basis points versus the prior year period. For the construction solutions group, net sales nearly doubled year over year to $394.6 million, with $175.7 million contributed from the acquired precast businesses. adjusted EBITDA increased by 56.5 million or 138% to 97.4 million, including 52.9 million contributions from the precast and additional growth from the PENSAR business. Adjusted EBITDA margin expanded 400 basis points to 24.7%, with the inclusion of CMC's precast business contributing 4.4 percentage points of accretion during the quarter. Based on year-to-date performance and our visibility into the fourth quarter, we continue to expect fiscal 2026 adjusted EBITDA for our precast business, excluding purchase accounting adjustments, to be in the range of $165 to $175 million. In our precast business, shipments in the Mid-Atlantic and I-95 corridors demonstrated solid strength, while the Southeast experienced weather-related shipment delays during the quarter. selling prices for pipe and precast products and backlogs increased modestly on a year-over-year basis. Outside precast, Tensar profitability accelerated both year-over-year and sequentially on strong demand conditions, driven by the value generation of our Interax product serving mega projects. in the energy and data center areas. Adjusted EBITDA performance for all other businesses within the construction solutions group was relatively stable.

According to our Europe Steel Group, adjusted EBITDA for the fiscal third quarter was $34.7 million, representing a significant increase versus the prior year. While the results benefited from a $20.4 million CO2 credit, underlying market conditions also improved meaningfully. Metal margins expanded by $37 per ton year over year, driven by a $34 a ton increase in selling price and a $3 per ton increase in sales. per ton reduction in scrap costs. And as Peter noted, market fundamentals supported by both the CBAM and the upcoming strengthening of the EU safeguard frameworks gives us confidence that this momentum will continue. With respect to our balance sheet, we continue to make progress in reducing net leverage and remain very confident in achieving our target of below two times by mid-2027 or sooner. As shown on slide 14, net leverage adjusted for acquisitions is now 2.1 times based on adjusted but including an estimated run rate annualized contribution from our precast platform. This marks meaningful progress from the net leverage estimate that we provided at the time of the acquisition.

Our path to further delevering is underpinned by a step down in capital spending levels as we finish our micro mill investments, strong free cash flow generation from our precast platform itself, meaningful cash tax savings associated with the 48C program and the one big, beautiful bill. We also maintain significant financial flexibility with total liquidity of nearly $1.8 billion and no near-term refinancing requirements. Together, our strengthened balance sheet, ample liquidity, and improving leverage profile position us to return to our long-term capital allocation priorities of supporting strategic growth investments while maintaining an attractive and disciplined approach to shareholder returns. Regarding CMC's capital spending outlook, we anticipate investing approximately $550 million in fiscal 2026. Of this amount, between $300 and $350 million is associated with completing construction of our West Virginia micro mill. balance will be for maintenance and other growth projects, including $25 million for our new precast business. and the high return growth investments within our construction solutions group that Peter mentioned. CMC's effective tax rate in the third quarter was 8.4% and on a year-to-date basis was 7.9%, in line with our fiscal 2026 effective tax rate expectations of between 7 and 9%. As a result of several factors, including our 48C tax credit, bonus depreciation on the West Virginia mill investment, and accelerated depreciation on the assets acquired in CMC's precast acquisitions, we do not anticipate paying any significant US federal cash taxes in fiscal 2022. and not much for fiscal 2027 either.

With that, I'll turn the call back to Peter to discuss our fourth quarter outlook and provide some closing remarks.

Thank you, Paul. Turning to our outlook for the fourth quarter, we expect a meaningful sequential increase in core EBITDA driven by several factors. For the North American Steel Group, the absence of third quarter mill outages is expected to provide an approximate 20 million uplift to adjusted EBITDA, with a significant increase in core EBITDA driven by several factors. benefit from higher volumes and margin expansion. We anticipate improving pricing conditions with scrap costs remaining relatively stable. We expect sequential mid-teens adjusted EBITDA growth in our construction solutions group, driven by increased contributions from precast and solid underlying momentum across the broader platform. And in Europe, we anticipate modestly higher adjusted EBITDA performance, excluding any impact from CO2 credits. These drivers are underpinned by a healthy demand environment and strong backlog visibility, taken together with strong execution and continued contribution from our and our TAG initiatives, we are confident in closing fiscal 2026 on a strong footing. Stepping back, our business remains firmly supported by durable, long-term demand drivers across our end markets.

At the same time, we have taken actions to improve the margins of our business and to reshape our portfolio to be more resilient, less volatile, and better positioned to compound growth. over time. This is translating into stronger cash flows and a steadily improving balance sheet, providing us the flexibility and the confidence as we undertake capital allocation priorities that appropriately balance growth and returns. Thank you. All in, we believe these elements firmly position CMC to deliver superior long-term value for our CMC shareholders. Finally, I'd like to call attention to our upcoming Investor Day on August 5th. Our leadership team looks forward to providing a deeper view into CMC's evolution as a leader. leading early stage construction solutions provider and the steps we are taking to drive the next phase of growth and value creation. The half-day event will chart our strategic trajectory, establish our operational priorities, and articulate our long-term growth outlook. We hope you can join us.

I'd like to close by thanking our employees for their continued dedication and our customers for their ongoing trust and partnership. With that, I'll ask the operator to open the line so Paul and I can field your questions.

We will now begin the question and answer session. To ask a question, you may press star and 1 on your touchtone phones. If you are using a speakerphone, we do ask that you please pick up your handset before pressing the keys. To withdraw your question, you may press star and 2. In the interest of time, we do ask that you please limit yourselves to one question and one follow-up. Please note you may rejoin the question queue if you have additional questions. Follow-ups will be taken as time permits.

At this time, we will pause momentarily to assemble the roster. Our first question today comes from Nick Cash from Goldman Sachs. Please go ahead with your question.

Hi, team. Thank you so much for taking my question. I just wanted to walk or talk a little bit about the puts and takes within North America in the quarter and then to next. there's probably a few moving pieces here from maintenance averages to weather, price increases, et cetera. from maintenance, but could you help us quantify the impact from the other moving pieces in the quarter on the results? And then I guess as it relates to 4Q26 guide, you mentioned sequentially stronger EBITDA reflecting a 20 million supply in 3Q and then pretty much similar in terms of growth and margin benefits. So I'm kind of reading that as a sequential 40 million increase.

sound about right and yes, I'll leave it at that. Hey, Nick. Well, thanks for the questions. Great question and we will respond to it. I'll ask Paul to walk through the bridge. What I'd like to say to start this is that Q3 was a good quarter for us. It could have been a lot better. And importantly, we're really happy with the strategy and the progress that we're making and the long-term value that that's going to deliver.

And we're really looking forward to Q4 and what the implications are in terms of increased profitability. But with that, let me hand it over to Paul. Thanks, Peter. And Nick, yes, a little further detail on the,.

items. As you mentioned, the mill outages at seven of our ten mills, the direct costs associated with those were around $20 million. The The weather impact, and I'm going to combine sort of the weather impact, the impact of having lower inventory coming out of the outages as well as commercial discipline. probably all in cost us around 50,000 tons in the North American Steel Group. So all in cost of around $10 million associated with the volume. All of those items very temporary as we mentioned in the script and expect those to reverse in the fourth quarter. And then our expectation going forward, into the corridor was stable metal margins. As you can see, they were compressed slightly in the quarter. And with the price increases that took effect during the quarter, we really see that we'll reestablish those metal margins consistent with where they were prior to this past quarter.

So overall, I think your assessment that the North American Steel Group is on track for about a $40 million quarter over quarter improvement from those items. the opportunity just to talk a little bit about the other segments as well. You know, it wasn't the only confined to the North American Steel Group. Both our construction services group as well as our precast business were impacted by weather, probably to the tune of around 5 million in the CSG. segment. And then, you know, just don't want anybody to overlook the European Steel Group having 20 million from a CO2 credit that is now received on a semi-annual basis. So we would expect to receive another one in the first quarter, but will not obviously receive that in the fourth quarter. So, put all of that together, we are expecting a quarter-over-quarter improvement in our overall results. in the 40 to $50 million range for Q4. Awesome, thank you so much, I'll pass it on.

Thanks, Mark. Our next question comes from Samuel McKinney from KeyBank. Please go ahead with your question.

Hey, good morning, Peter and Paul. Hey, Sam. Morning, Sam.

Given what you've done so far this year, maintaining the full-year precast EBITDA outlook at 165 to 175 implies a pretty heavy lift in the fourth quarter. What are you seeing that gives you the confidence that you can reach this goal for the August quarter?.

Great question, Sam, and thank you very much. So, the answer is we are very confident we can reach the goal, and let me tell you why. I think it's fair to say that our volumes were a little bit light in the third quarter, and importantly, when we look at our precast business, the timing of shipments and given the regional concentration weather events, can affect the results in a quarter. And if we look at Q3, what we saw is that project releases, and by that I mean the time from the order to the first shipment, were delayed by about two weeks. And that was compounded by really wet weather in the southeast, in Georgia in particular. What we've seen as we go into the fourth quarter is that things have started to normalize, and that combined with the strong backlog, our backlog is at a record level, give us confidence that we can hit the guidance that we have originally given. Let me also say that the team has done just a fantastic job.

And so from an integration standpoint, that gives me additional confidence that we're going to get there. As I've said on previous calls, this team, working incredibly well together. There's a tremendous affinity to the CMC team in terms of the people and so it lends itself to working together. We are seeing more opportunities every day in this business to make it better and make it stronger and so I would say you know looking at this today I feel stronger than I did even at the acquisition date. And you know I felt very strongly about this at the acquisition date, that this is a great acquisition and it's going to kind of be a fantastic part of our portfolio. So yes, we're very confident in the ability to pull this together in the fourth quarter, but more importantly, We're very confident in the long-term impact that this business will have on our portfolio in increasing margins, reducing earnings volatility, and increasing returns across the portfolio.

All right. Thank you. Thank you, Sam.

Our next question comes from Satish Kassinathan from BOA. Please go ahead with your question.

Yes, hi, good morning. Thanks for taking my questions. My first question is a follow up on the construction solutions guidance. So you maintain the full year guidance for pre-cast business, which probably would imply like a 20 to 30 million improvement in EBITDA for Q4. And then additionally, tensor and other businesses should also see a strong seasonally better quarter. Can you maybe walk us through some of the different moving parts because it appears the guidance guidance for mid-teens growth is conservative and there seems to be some upside to that guidance.

Yes, well, so what I'd say is, no, we're confident in the guidance and, again, as I just responded to the prior question, we do believe the precast business is going to land in the original guidance that we gave. Our TENSAR business is performing very well. Our fourth quarter tends to be a strong quarter. We did just have a very strong third quarter. But again, I think the estimates that we have in there incorporate a nice performance in TENSAR in the fourth quarter. And then the rest of the businesses in the EBG business should perform kind of in line with our expectations. So I think that guidance is, we feel comfortable with where we are.

I think the only thing I would add to that, Satish, is just remember that the segment results included in the second quarter, the purchase accounting adjustment, that is not reflected as part of our guidance. So you need to reflect that as part of what the... the construction services group has provided for the full year to get to that guidance for the full year.

Okay, thank you for the color. Maybe one question on the US rebar market in general. On the demand side, with the recent shift in Fed's interstate outlook and then the potential for rate hikes, are you seeing any change in leading indicators suggesting any delay or slowdown in projects being awarded. And then maybe on the supply side, with imports up 20% year to date, mainly from South Korea, How should we look at the near-term supply-demand balance, and could we expect some potential trade action against South Korea?.

Thank you. Yes, let me just start by saying demand, and if I heard you, you cut out for a second, but I think your question was about infrastructure demand. Infrastructure demand remains very robust, but for the rains that we had in the central Texas region, we expect that to continue to be very robust. If we take a step back on your broader question of demand and supply, and this is a really important question, Satish, so I'm going to spend a minute on this. So, on the demand side, demand is good, right? And we're seeing the apparent consumption in the U.S. is up 3.2 percent. percent this year. So we have a very good demand tape. And from our perspective, if we look at the long-term drivers that we've been talking about consistently across infrastructure, non-residential spending, and ultimately residential spending, there's the potential for demand to be great. So that's an important backdrop. Now let's switch over to the supply side.

I think the supply side conversation has to start with CMC. And here I want to be categorical about the fact that CMC will not disrupt the supply demand balance. And what I mean by that is we operate a network of highly efficient micro-mills and mini-mills that are very flexible. and we are going to work to keep supply-demand in balance and maximize the profitability of our network. That's a very fundamental piece of this. If we look at the new domestic capacity, But the domestic capacity as we understand it is in the market and I think there's a super important proof point here which is that that domestic capacity is in the market and we are increasing prices. And we've said this for now actually a number of years that this capacity is manageable. continue to feel that it is manageable. If we shift to imports, imports I think it's important to say, imports we expect them to go down in the second half.

That's a very important point for people to hear. If we look at kind of where the imports have come from, the big increase in imports has come from one country. South Korea. And importantly, when we look at the economics of bringing material from South Korea to this market, it doesn't appear that it's competitive to do so at current prices. So, we think there's going to be a natural inclination to reduce the supply in the the market from that source. I will also say that we have initiated discussions with the US government about supply from that country and from other countries. And the point being there that we are going to pursue all remedies that we have available to us to ensure that the imports that do come here are fairly traded imports. think it's really important to note the progress we've made on our strategy vis-a-vis unfairly traded imports. We filed four cases. We've got final duties against one of the countries, that's Algeria, at 200%, and we've got preliminary duties against the other three countries.

And if the levels of preliminary duties get settled into final duties, we believe we will have effectively knocked that tonnage, which amounted to about 500,000 tons, out of the market for about five years at a minimum. at the minimum of five years and potentially 10 years. That is significant and it's durable. And I think it goes to our broader strategy at CMC. We are going to, as I said before, pursue all remedies to neutralize the impact of imports in our market. And that starts with enforcing our trade laws. It goes on from there to kind of the to advancing further progress in our trade laws through level of playing field that will allow us to combat these unfairly traded tons in the future. Bringing this all together, and again, I apologize for the long answer, but I think there's a lot of moving pieces here that need to get put on the table.

This leaves us very comfortable with the supply-demand balance and the ability to sustain it going forward.

Thanks, Peter, for the excellent color. Thank you. Thank you.

Our next question comes from Timna Tanner from Wells Fargo. Please go ahead with your question.

Yes. Hey, good morning, guys. I guess I could follow up with the last question, and maybe, Peter, just to put some numbers to them. Like, you're bringing on 500 plus 500,000 tons between aerosols. Arizona too and West Virginia, not all rebar. The rebar market's 10 million tons in the US, give or take. High bar is adding 700. Next year we're supposed to get, I forget how many, 500 to 700,000 tons from Pacific Steel. And then another quantity, probably the next year from high bar too, So, I mean, is there enough demand and how do you run your new mills in light of that magnitude of additional supply? Okay.

Well, it's a good question and I guess I'd kind of follow on the answer that I gave to the prior question. Demand, number one, we think demand is going to grow, and I think that's an important point of view here because again if you go back a while when we were talking about what demand could potentially be it was significantly bigger than the market is currently and and we're seeing demand growth in the market this year as i pointed out 3.2 percent In terms of the new capacity that's coming into the market, again, as I said before, I think for a player like us, we're going to be rational and we're going to operate it on a network basis. So that means flexing up and down to meet the supply in the market. And again, value over volume is is what's going to drive us. And as to the new production in the market, again, with the import strategy that we have and with the, if we think about the trade policy that's been in place, it's bipartisan in terms of 232. And as we see offenders and we update our trade trade laws to be able to respond more quickly to bad actors, we think we're going to be able to take out the capacity that will make room for these new domestic entrants. So on balance, again, this is going to play out over a couple of years, but so far I would argue we've been right. that the conditions are going to remain in a balanced place.

And today, as we look at the situation, we've been hearing about HIBAR for years now. And here we are. They're in the market. They've ramped up, and we're raising prices. So again, let's- we're confident that this is going to play out in a good way and we're going to be very deliberate about how we execute our strategy to make sure that that's the case.

OK, appreciate it. And we'll see what happens. I think on the, if you could give us an Arizona 2 and West Virginia update on how those are progressing, that'd be great, please. Thank you. Yes, absolutely. So as you heard in the prepared remarks,.

In Arizona, we made a lot of progress in the quarter. We got up to 75% utilization. We still have the objective to demonstrate full utilization this year, and I would say it's one thing that's very gratifying is that today we are producing the vast, vast majority of the... volumes of merchant products that we expect to produce there. So this is not a situation where we're running at higher utilization just because we're producing the rebar. The rebar is we're able to produce that no problem on the mill. And again, I think we continue to believe that that mill is going to be a workhorse in our organization for the next several decades. really optimistic about it as a tailwind to our 26 or sorry, to our 27 earnings. If we switch to West Virginia, again, super proud of the team there on a couple of fronts.

Number one is if we look at the project overall, we're coming in right where we expect it to be from a capital standpoint. And I know I've talked so much on this call, and I'm going to say it again. Capital discipline is critical to what we're trying to do here, and this team has done a masterful job in terms of keeping this project on budget. If we look at all the projects that are out there in the marketplace, I think it's pretty exceptional what we've been able to do. Super proud of the team on budget. as well. Now we're going to start this up in the later part of the summer. And again, that is, we are probably a little bit behind our original expectation.

I think originally we talked about something like June. But again, we've had 100 days of weather delays. And if we remove the weather delays, we're right on time. So again, I want to just say hats off to the team in West Virginia. We are ready to go. We've got the operational team hired. It's a phenomenal team of folks from across the CMC network and some new folks that have come in to join the team there and we're super excited about it. I will remind everyone that this mill is a standard rebar micro mill.

It looks a lot like what we have in Oklahoma. That mill runs like a top, so we We should not have the challenges that we had in Arizona where we were commercializing some new technology. And in terms of the timeframe to ramp it up, I think 12 months is a reasonable estimate. So, but very excited about that. I think just one thing I would add, as we said throughout the script that the quarter could.

have been even better and doesn't reflect our full potential keep in mind to two things you know we're we're carrying the West Virginia project and the costs associated to that that has been you know between four and five million a quarter it will ramp up this quarter to probably double that before we get any real sales product out of there. So that's built into our outlook for the quarter. And I think Peter mentioned it, but it needs to be stated again. You know, Arizona, from a performance perspective, we look forward. There's tremendous upside to our earnings capabilities once we continue to enhance our utilization. of that asset and fully realize the capital we've deployed. Okay, great. Thanks again.

Thank you, Timna. Our next question comes from Albert Rilini from Jefferies. Please go ahead with your question.

Hi, all. Thank you for taking my question. Absolutely. Just wanted to touch on maybe capital allocation with the leverage target likely to head of schedule, possibly in the near future. I guess, how are you guys approaching maybe growth versus excess returns? I think you had previously stated that further bolt-on acquisitions in the pre-cast space were possible, but is that more of like a further out strategy until maybe you fully integrate and realize synergies from the first two acquisitions? And if that's maybe the case, I mean... There are any type of organic growth on the steel or downstream kind of product side versus maybe upside to capital returns. Thank you.

Yep, thanks for the question. And I'll start and then Paul can enhance my answer here. So the way we think about it is that two times is kind of a fulcrum point, right? So at two times, when we get to two times, which we're rapidly approaching, as you noted, The green light goes on for the ability to consider new growth opportunities. And at the same time, it also turns the green light back on for shareholder distribution. So, we would fully expect to kind of return our share repurchases to a more elevated level kind of post-Hidden milestone. Now, having said that, we bought two companies, as you know, not one company, and we're in the middle of integrating those two companies. And we've said in the past, and I'll continue to say, that we are going to get our integration to a place that we're comfortable with in terms of its progress before we really entertain another sizable acquisition. We will consider and we have considered much smaller tuck-in acquisitions and we'll continue to do that.

That won't be really visible to you. We'll report on that as we progress, but that be really visible to all of you. What I would say in terms of acquisitions is that we do want to grow the precast business. We do think there's a good path for us to do that, and we're still focused on building a number one position in that business over time, over time. If we look at kind of other places where we might deploy capital, organic growth, we have a number of projects. We just finished our Blackwell, Oklahoma plant that's starting up right now. That's a geogrid line. As I said, our Galva Bar project is finishing up this year.

That's an organic growth project. We have some organic growth across the rest of the portfolio, it's much more capital light than the mill investments. So, as we said in the past, we do not intend to make additional mill investments. The capital we're going to spend in an organic fashion is going to be smaller things. that are roundouts to our portfolio and improve our margins, improve our returns.

So with that, maybe Paul did I miss anything? Yes, the only thing I will add to that is really we're on the precipice of a cash flow generation inflection point here. We've talked about the investments. look back in our history, we've been building mills now for a number of years, probably going back into the 2015-16 period. Most of the years between then and now, we've been investing in our fleet of low-cost modern mills. As we look forward, CapEx for 2027 is likely to be 200 million less than this year, and that's going to continue to have the final parts of West Virginia spend in it. So that's probably a $75 to $100 million. So with the enhanced EBITDA coming from the West Virginia mill, coming from enhanced AZ-2 production coming from TAG combined with a lower level of capitalization Apex really will generate a significant amount of cash flow from this business, which gives us a lot of flexibility in terms of our capital allocation and gives us an ability to grow, to return cash to shareholders while maintaining a very healthy balance sheet.

Very, very detailed, helpful answer. Thank you. And then, Paul, just if I may, just want to make sure I didn't mishear you, on the European outlook for 4Q, did you say incremental EBITDA growth of 50 million, or that could be maybe a range where you guys see yourself at current levels?.

Just to be clear, Europe quarter over quarter will likely see a reduction in EBITDA. If we pull out the CO2 of 20 million, we're likely to see somewhere around 3 to 5 million in chance operational EBITDA from Europe. from enhanced margins, but overall, because pulling out the CO2, the European operations will be down quarter over quarter. So net-net, I think my comment was meant to articulate that CMC's EBITDA likely is up $40 to $50 million quarter over quarter.

Understood. Thank you. Thanks, Albert. Our next question comes from Bill Peterson from J.P. Morgan. Please go ahead with your question.

Yes, hi, good morning. Thanks for taking the questions and nice job on the quarter and guide. I'm going to miss it, but you mentioned that the TAG program is tracking above the $150 million. target. I guess maybe just coming to the topic of what where you've seen the most success but also looking ahead where you see the greatest opportunity.

Yep, that's a great question and again I'll just reiterate I hope you all come to the investor day because we're going to talk a lot more about TAG and share some of the details that I know you've all been looking for in terms of the scope of the program. But yes, it's been a tremendous add to our company. And it's for the financial benefits, but also for the mindset change that it's created in the company and the organizational difference discipline around going after improvements in our business. But to date, I would say most of the benefits have been operational. And we've talked across many calls, Bill, about optimization and melt-chop yields and rolling mill yields and logistics savings and so forth, those have been tremendous. And they continue to pile up. And what's interesting about it is that this is one of these things where every time you go through a door, you see that there's more opportunity.

And that's really the secret of of TAG, and when I talk about a mindset change, it's really what we've seen. commercial excellence is the other part of TAG, and we've gotten some real significant wins in commercial excellence, but it's not as big a piece so far as operational excellence. And yet, what I would say to you is that I think that the opportunity for commercial excellence excellence in our business and in our industry more broadly is outstanding and will outweigh the operational benefits that we're getting. So we see significant opportunities in commercial excellence and we're working hard on that. And again, I think I mentioned this a couple of calls ago. It started with reducing basic leakage. There's a lot of leakage in our business, and we've really done a good job of reducing leakage in the business on the price side. And then it moves to tools and, you know, tools that help us make better decisions in the marketplace.

And thirdly, it moves to having the organization work together and one of the things that's been so gratifying to see is with this new precast platform, the way the kind of the lead sharing is working, we're getting visibility on projects earlier and earlier. And what that allows us to do is it allows us to engage, and particularly on some of these mega projects, it allows us to kind of be at the table and have a kind of a point of view and influence on what's happening in the project. And again, we call that value engineering. And typically, when we're able to value engineer a project, we can save a lot of money for the owner, the contractors, et cetera, and it creates more opportunity for CMC. So So again, commercial excellence we see as a big opportunity. We have lots of chances to deploy AI to help us there, and we're really excited about what that can be.

Yes, thanks for that. Sounds like a good sneak preview for what you're going to expand on in August. But second, I want to move on to Europe. And maybe two-parter there. So, you know, you talked about various tailwinds forming, whether it be CBAM, enhanced protectionism, infrastructure funding. How should we rank these in terms of the likely benefit to the market and CMC? And then just more of a housekeeping. Last quarter, I think you talked about a potential $10 to $15 per ton incremental cost. Ted Wynn from the EU Energy Needs. Where does this stand today? Is this sort of already coming off?.

So let me start on the tailwinds and then I'll flip it to Paul to talk about the cost experience that we've had. But on the tailwinds, we're really optimistic about what we're seeing in Europe. Again, I guess there's probably room for some caution in the sense that we've been waiting for some of this for some time. But if you think about from a regulatory perspective, the CBAM is now in place. We've said and we continue to believe that properly enforced, that should be €50 per ton. impact on the price of steel. The safeguards that the European Union has now supported have reduced the quota levels by 50% and increased the tariffs above the quotas to 50%. That will be kind of in place, Jill, going forward, and we believe that should have a positive impact.

What we've seen is that imports already from non-EU countries have come down, and even within the EU, and I'm pointing to Germany specifically because they've been one of the bigger importers into Poland, we've seen a decline in those imports. So the supply side of the equation, I think, is improving. And again, the demand side of the equation in Poland was always really good. And there you've got infrastructure spending, you've got these recovery and resilience funds, all the things that we've talked about.

in the past that are pretty exciting. But maybe I'll flip it over to Paul to talk about the cost. Before I get on to the cost, just one other data point on the demand side and what we've realized is if we go back from December through till the end of May, we realized around the $75 a ton price increase. product mix and that's more heavily weighted towards rebar, which is really impacted by the imports and the CBAM measure. So we're starting to see those benefits. Over that period of time we've seen around a $25 a ton increase in scrap, but for the most part, that is margin enhancing result from number of factors. It's hard to exactly pinpoint which one it is, but what's exciting is as we look forward, the safeguard measures really should provide further benefits for the business. On the cost side, yes, we've been pleasantly surprised in terms of the energy costs in Europe.

In the third quarter, really didn't see any increase in energy costs to our business. And now with the hopeful end to the conflict in the Middle East, things will stabilize and we'll get through this without any adverse increased energy costs. But I think as we sit here today, we're cautiously optimistic, but on on guard to ensure that if we do, that we'll have to address that in our costing situation. We're also benefited from the fact that in Poland, we're around 50% hedged on the electricity side. So for the most part, these sudden shocks, we're protected from those impacting our business.

Thanks for all the details, guys. Thank you, Bill. Our next question comes from Richard. Garcha Tarina from Barclays, please go ahead with your question.

Great. Thanks. Good morning. In the interest of time, I'll just keep it to one question, but I'm just wondering, if you can maybe talk about your expectations for raw materials and metal margins heading into the fiscal fourth quarter. as we saw scrap costs up $28 per ton sequentially in fiscal 3Q. And you also had a number of outages that were planned. So how should we think about sort of net net.

as you go into the fourth versus the third quarter? Thanks. Yes, Richard, thanks for the question. You know, as we look at scrap today, we see a lot of stability for the balance of our fiscal year. Really the scrap costs that we saw increase in the quarter was really the flow through effect of the increased costs coming through from the winter period. and then remaining high because of the correlation of scrap costs generally to diesel costs. And the costs associated with collecting that scrap maintained a higher than anticipated cost of scrap, but at this point forward, we see things fairly stable. As far as other costs are concerned, the maintenance costs really were fully absorbed and incurred only in the Q3, so we expect those to not continue into the fourth quarter. Otherwise, we see relative stability in our cost structure as we look to the fourth quarter and continue to drive improvements. in our operations and efficiencies through TAG.

Great, thanks. And then quickly,.

The pricing side, I think one of the competitors had sort of pushed back on pricing in North America last. month. Are you seeing any changes in the competitive landscape when you're trying to price rebar or is that, do you think, a one-off type thing? Yes.

market should be relatively stable. Yes, thanks, Richard, for the question. So we have been increasing prices, and I would say we're very pleased with the progress that we've made on price increases. We are aware that there has been some discounting in the market. But again, given the demand picture, we don't see the need to move in that direction. And I think what you'll see is that... or what I'll say is that we are realizing increased pricing across the country, and you will see in our fourth quarter that our prices are higher and our metal margins are higher. So, again, we feel very comfortable with where we are. And again, it's supported by the demand profile that we see in the market, and particularly some of these big projects where I think they really lend themselves to a company like CMC that can provide more than just the you know kind of rebar so in any event we're we're very pleased and very comfortable with where we are.

Great. Thank you. Thank you. And our next question comes from Tristan Gresser from BNP Paribas. Please go ahead with your question.

Yes, hi, thank you for taking the questions and all the best to Jason in his new role. The first one is a follow-up on West Virginia. Could you share a volume target for fiscal 2027 or maybe an exit utilization rate? I think you mentioned a faster ramp up than for Arizona too, but any.

any additional color you can share there? Well, we expect to be fully ramped over the course of 2027. I guess a volume. So if we assume a linear volume, which won't be the case, but it should – approximate your question. We would expect around 250,000 to 300,000 tons next year. That counts for a little bit of an inventory build that we would need before we commercialize much of the operation.

And Jason's not going too far. We keep our claws on him. All right. No, that's clear. I appreciate the color. And maybe on Europe, I mean, yes, you had that strong volume performance in fiscal Q3. Was it a bit of a one-off or some restocking? Maybe, I think for the fiscal Q4 guidance, you don't discuss too much volumes, but how we should think about it. And given, yes, the strong volume performance is there, do you think you can get back to full utilization in the coming quarters on the back of the CBAM and the quarters? We do, we do. We're very confident in the volume.

And as I just said in the,.

in response to one of the earlier questions. The demand in Poland has never been the issue. The demand is really good. And what's happened is that there's been a curtailment of some of the supply, and that's allowed us to, in a price-efficient way, sell more tons. So as Paul said, we've increased prices three times already this year, and we're, you know, successfully – placing those tons but we don't think this is a one-off and we expect it to continue.

Okay, very clear. Maybe a quick last one on CSG. You provided some good guidance for the Q4 level. Would that be a good run rate moving forward in terms of profitability for the division If you could just remind us the synergies you expect for fiscal 2027, that'd be great. Thank you. Yes, so...

Yes, so when we bought this business, we talked about an annual EBITDA for the business of 250. And of course, top line growth in this, we talked about mid single digits. And that continues to be our expectation for the base business. Synergies, we talked about between the two businesses, a number that's, I think, $35 to $40 million combined. And we expected to earn that over kind of a three-year period. And year one is going to be more dis-synergy as we kind of absorb the business and bring it up to CMC standards. I think you'll start to see some synergies in year two.

And in year three, we'll get the full synergies. And as I said before, We are, I think, even more confident in the synergies that are going to come from these acquisitions than we were on the date that we first announced them. All right, perfect. Thanks a lot. Thanks, Prashant.

And with that being our final question for today, I would like to turn the floor back over to Peter for any closing comments.

Thank you, Jamie. At CMC, we're excited about the opportunities ahead. Our strategy is working, our markets are remaining supportive, and our disciplined execution continues to position the business for sustained value creation. that, I'd like to thank you for your time and continued interest in CMC. We hope you can join us on August 5th for our Investor Day. You don't want to miss that. And we look forward to speaking with many of you in the coming days and weeks. Have a good day.

And with that we'll be concluding today's conference call and presentation. We thank you for joining. You may now disconnect your lines.

[Call has ended.]

Hello, and welcome, everyone, to the fiscal 2026 second quarter earnings call for CMC. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer; and Paul Lawrence, Senior Vice President and Chief Financial Officer. Today's materials, including the press release and supplemental slides that accompany this call can be found on CMC's Investor Relations website. Today's call is being recorded.

[Operator Instructions]

I would like to remind all participants that today's discussion contains forward-looking statements, including with respect to economic conditions, effects of legislations and trade actions, U.S. steel import levels, construction activity, demand for finished steel products and precast concrete products, the expected capabilities, benefits, costs and timeline for construction of new facilities, the expected performance of our recently acquired [ Precast ] platform, the company's operations, the company's strategic growth plan and its anticipated benefits, legal proceedings, the company's future results of operations, financial measures and capital spending.

These statements reflect the company's beliefs based on current conditions but are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-K and other filings with the U.S. Securities and Exchange Commission contains additional information concerning factors that could cause actual results to differ materially from those projected in those forward-looking statements. Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release, supplemental slide presentation 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 Peter.

Good morning, everyone, and thank you for joining CMC's second quarter earnings conference call. The CMC team delivered another excellent financial performance this quarter, propelled by solid operational and commercial execution, a favorable market backdrop in most regions and the addition of our newly acquired Precast platform. For the quarter, CMC reported net earnings of $93 million or $0.83 per diluted share. Excluding certain charges, which Paul will take you through in more detail, adjusted earnings were $130.1 million or $1.16 per diluted share. CMC's consolidated core EBITDA of $297.5 million grew by 114% from a year ago, while our core EBITDA margin of 14% increased by 610 basis points. Cash flow from operating activities likewise improved significantly over the same period. While the domestic market environment remains supportive, and we are pleased with our results, I would note that profitability was impacted by abnormally disruptive weather conditions that temporarily reduced production and increased energy costs.

Absent these factors, we believe performance would have been even stronger. Overall, our impressive second quarter results were built on the strategic foundation we laid over the last 24 months, including the launch of our TAG program, organizational realignment in critical areas, the addition of key talent and resources to support growth and of course, the establishment of our new precast platform, which is a regional leader and one of the largest in the United States. These self-directed actions are driving bottom line improvement and generating value for our shareholders and we are confident that there is much more to come as we continue to transform our company into an even stronger organization with higher, more stable margins, earnings, cash flows and returns on capital.

The second quarter marked CMC's entry into the Precast concrete business following the closing of both the CP&P and Foley acquisitions in December and the first 100 days have been a success by any measure. I would like to take a moment to provide an update on our integration efforts to date. Paul will share some financial highlights from the second quarter later in this call. We developed our integration plan with the goal of maximizing value creation potential for CMC's new growth platform. Our aim is to provide our new businesses with the support they need while standardizing key practices, delivering synergies and developing an optimized operating model that positions the business for future growth.

Overall, progress against our plan is on schedule, and we have already achieved critical near-term goals. The strong cultural fit and the quality of the teams charged with completing key tasks has helped our integration efforts tremendously. We have found that employees across CP and Foley are excited to join forces and build a clear industry leader as part of CMC. They also share our view of significant commercial, operational and logistical upside created by combining 2 geographically contiguous leaders.

Turning to our on-the-ground efforts. We have retained a strong management group of proven industry veterans who are fully engaged in operating the business and executing on our performance and synergy targets. We are centralizing several support functions, a move that will assist future coordination and free up resources at the acquired assets. We have also made good progress on several critical elements of our plan to realize synergies from the transactions, including the in-sourcing of rebar supply, benchmarking of key performance metrics centralizing procurement of certain common items and aligning on a plan to execute a number of small capital, high-return operational excellence projects.

I am also pleased with our progress on the commercial front. Thanks to the work of our teams, we have scored several early wins with immediate financial benefits. A few of these are highlighted on Slide 7 of the supplemental earnings presentation. One worth noting is the development of a unified go-to-market strategy in overlapping geographies, which will ensure an improved customer experience, enhanced service capabilities through coordination and a consistent pricing approach. We are also capitalizing on opportunities to strategically expand product lines to better address market demand.

Dry utility structures used heavily in data center construction is one example of this. Zooming out a bit we have already engaged in a handful of initial commercial opportunities between CMC's legacy solutions and our new precast offerings, an effort which has been met by very positive customer reception. Though we are only just beginning conversations with customers, we view the delivery of a more complete early-stage construction solution as a significant potential source of value creation and one that will set CMC apart in the marketplace.

While it has only been a few months, we are very encouraged by what we have seen within our new Precast platform, a good workforce culture, strong leadership, a solid customer value proposition and attractive industry fundamentals, all of which support our investment thesis.

Now I will touch briefly on our progress in executing TAG. This is our enterprise-wide operational and commercial excellence program aiming to drive a durable step change improvement to our margins, earnings, cash flows and ROIC. Fiscal 2026 is a pivotal year in the delivery of TAG as execution broaden throughout the organization and the expected level of EBITDA benefit increases meaningfully from fiscal 2025.

After focusing primarily on domestic mill operations and logistics during 2025, TAG is now being executed in every line of business across each segment. These efforts include an increasing emphasis on commercial opportunities and targeted efficiencies in our SG&A spend. I am pleased to report that through the first half of fiscal 2026, we are seeing solid and broad-based momentum in delivering the benefits to the bottom line. What is particularly exciting is the TAG continuous improvement mindset is in several instances, driving initiative outcomes that far exceed our initial expectations.

A good example of this is the success our logistics team has had in improving fleet utilization and volumes per load, helping to ensure that we are using capital invested in CMC's logistics assets more efficiently. Another success story is the margin improvement being achieved across much of our recycling network through better commercial coordination and targeted efforts to address low-margin accounts. Based on the progress we are making, I am confident we should reach or exceed our ambitious goal of exiting the fiscal year at an annualized run rate EBITDA benefit of $150 million.

Turning now to the early-stage construction market environment in North America. We continued to experience healthy solid underlying demand for our major products. Finished steel shipments were virtually unchanged on a year-over-year basis despite challenging weather conditions that temporarily slowed shipments. Good demand in combination with a well-balanced supply landscape supported volumes and margins in the quarter. Consistent with our guidance, metal margins on steel products were stable sequentially, ticking up by $2 per ton and reaching the highest level in 3 years. We were able to capitalize on the November and January price announcements to offset the impact of rising scrap costs.

Downstream bid volumes, our best gauge of the construction pipeline, remained at levels consistent with recent quarters. Strength continued in several key market segments, including public works, institutional buildings, energy projects and data centers. Needless to say, data center construction has been red hot, and we believe we are positioned both geographically and commercially to capitalize on this growth. New data center sites have been concentrated in the Mid-Atlantic and the South Central U.S. which are regions where we have leading market positions and can leverage our broad suite of early-stage construction solutions.

Slide 10 of the earnings presentation highlights how our products are utilized on a data center construction site and includes estimated consumption intensities of several core offerings. In addition to direct data center expenditures, CMC is well situated to capitalize on the build-out of energy infrastructure to support forecasted growth levels, which is expected to require significant investment.

More broadly, we continue to have encouraging conversations with many of our largest customers who see a robust project pipeline based on inquiries related to energy generation, LNG infrastructure and re-shoring opportunities. Our own downstream bidding and contract award activity supports this view. Bookings during the second quarter were the highest since late fiscal 2022, helped by several energy projects and a large advanced manufacturing facility. We are encouraged by the preliminary outcomes of the rebar trade case filed with the International Trade Commission, or ITC, back in June, alleging exporters located in Algeria, Bulgaria, Egypt and Vietnam, have violated trade rules and damaged the U.S. market. The Department of Commerce has made its preliminary ruling on each nation named in the case and set both antidumping and countervailing duties to be applied on all subject material.

As you can see on Slide 11 of the earnings presentation, the combined impact of the duties range from around 50% in the case of Bulgaria to up to 200% for Algeria. Remember, these levies are in addition to the Section 232 tariff assessment. This finding, if confirmed, is important for the domestic rebar industry for several reasons: one, it establishes durable protection with an initial term of 5 years and a mandatory sunset review that could add another 5-year term. Two, it directly addresses predatory behavior by 4 leading exporters that have the ability to negatively influence the U.S. market. For example, at its peak, Algeria shipped nearly 0.5 million tons into our domestic market; and three, it acts as a deterrent to other bad actors that oversize their industries for purposes of dumping material here.

Though we are very encouraged by the preliminary findings we would note that they may change in the final determinations scheduled for this summer. I would like to commend the Department of Commerce for its defense of fair trade and more importantly, for protecting the hard-working men and women of CMC and the broader steel industry from disruptive and unfair trading practices. Our Construction Solutions group is exposed to similar market trends as our North American steel business. Therefore, current conditions are consistent with those I just described. Activity is steady across most construction segments punctuated by a few hotspots like data centers and large energy projects. Our commercial teams continue to see encouraging signals regarding future activity, including healthy quoting levels and positive customer commentary. We remain confident that the positive structural drivers, including investment in U.S. infrastructure, re-shoring industrial capacity, growth in energy generation and transmission the build-out of AI infrastructure as well as addressing a U.S. housing shortage will support construction activity over the short, medium and long term.

As noted on Slide 9 of the earnings presentation nearly $3 trillion of corporate investments were announced across related areas in calendar 2025. Commencement of even a handful of these mega projects could provide a meaningful demand catalyst for CMC in the quarters ahead. Market conditions for the Europe Steel Group were mixed during the quarter. Demand for merchant bar remained resilient. However, the large quality of rebar imported ahead of the January 1 implementation of the Europe carbon border adjustment mechanism, or CBAM, temporarily disrupted the supply-demand balance. The underlying consumption of rebar in the Polish market was seasonally affected by cold weather conditions, but continues to be healthy based on robust economic growth and solid investment levels for infrastructure and residential construction. Despite the overhang of imported rebar, the average selling price for CMC's rebar increased during the quarter in anticipation of the supportive impact of CBAM, and reduced availability of new import offers.

Encouragingly, the average price on new orders for each of our major products trended upward throughout the quarter and exited well above the period average. We are monitoring the market environment for potential effects of the war in Iran. To date, our primary markets have not been meaningfully impacted, though this could change in the case of a prolonged conflict. There has been a general increase in the cost of natural gas and natural gas-derived electricity across Europe.

As a reminder, the electrical grid in Poland is heavily coal dependent, which compared to other EU countries minimizes the disruption we experienced from the volatility in the price of gas. We do consume natural gas in our reheat furnaces and based on current spot pricing levels, we estimate a potential increase to our cost of production in the coming months of approximately $15 to $20 per ton. Despite this increase, we believe we are among the least exposed steelmakers in our Central European market potentially offering an energy cost advantage while gas prices remain elevated. The green shoots that we have noted in recent earnings calls continue to mature. Recent market developments include signals of an emerging recovery in residential construction activity driven by declining mortgage interest rates and the need for new housing stock.

We are also optimistic about the prospect of CBAM benefiting long steel pricing once current inventories of imported material are consumed. We also believe the steel action plan that will come into effect in the middle of the calendar year 2026 has the potential to meaningfully restrict import levels of CMC's core products. Quotas are expected to be significantly reduced, while the volumes over the quota will be subjected to a 50% tariff.

The policy as currently written, is the most supportive measure taken by the European community in years and has the potential to meaningfully benefit steel pricing. It is worth mentioning that our team in Poland has continued to do an excellent job managing costs in a dynamic environment. This experience is adding value in Poland, and in North America as we define and execute our tag initiatives. Before turning the call over to Paul, I would like to recognize the efforts of our world-class employees. We have asked a lot of the team as we execute our ambitious vision and strategy, and I am truly inspired by all that they have accomplished so far. Their efforts have been instrumental in laying the groundwork for years of success ahead, and I look forward to maintaining that momentum. And with that, I'll turn the call over to Paul.

Thank you, Peter, and good morning to everyone on the call. As noted earlier, we reported fiscal second quarter 2026 net earnings of $93 million or $0.83 per diluted share compared to net earnings of $25.5 million or $0.22 per diluted share in the prior year period. During the quarter, we called out $47.2 million in pretax expenses, $45.1 million, of which was associated with our recent acquisitions of CP&P and Foley. Of that amount, $20.6 million was incurred as transaction fees and costs supporting the integration efforts, while $24.5 million reflects noncash adjustments related to purchase accounting of inventory and order backlog. During the quarter, we also recorded $4.1 million for interest on the judgment amount associated with the previously disclosed PSG litigation as well as $2 million related to an unrealized gain on undesignated commodity hedges.

Excluding these expenses, which amounted to $37.1 million on an after-tax basis, adjusted earnings for the quarter totaled $130.1 million or $1.16 per diluted share compared to $35.8 million or $0.31 per diluted share, respectively, in the prior year period. Purchase price accounting adjustments for our acquisitions of CP&P and Foley are reflected in CMC's second quarter financial statements. These adjustments relate to the allocation of the estimated fair values of the assets and liabilities acquired and placed into CMC's balance sheet. On-hand inventory was adjusted to fair value, resulting in a write-up of $6.7 million.

This entire amount was recognized in the quarter in adjusted EBITDA, but removed in our core EBITDA adjustments. Several of the balance sheet adjustments will be depreciated or amortized over time, which will not influence core EBITDA but will impact net income and EPS. These include property, plant and equipment, which will be depreciated on a straight-line basis as well as customer intangibles in the acquired margin in the backlog, which will be amortized over their respective useful lives. During the second quarter, depreciation acquired property, plant and equipment amounted to $6 million and is estimated to be approximately $25 million annually for the next several years. Amortization of customer intangibles was $5 million in the quarter and will be annualized to a roughly $23 million level. Majority of the acquired intangible assets will amortize over a 10-year period.

I also mentioned the amortization of the acquired margin in backlog. This has a more finite life and will be -- will result in amortization expense of approximately $60 million in 2026 with $18 million recorded in the second quarter. Remainder of the $79 million asset will be amortized in 2027. For financial modeling purposes, the impact of the purchase price accounting adjustments in combination with higher interest expense related to the debt raised to help fund the Precast transactions broadens the gap between core EBITDA and pretax income by approximately $60 million to $65 million on a quarterly basis for the next 3 quarters.

This amount includes about $20 million quarterly related to the amortization of backlog, which as I just mentioned, will terminate in fiscal 2027. During the second quarter of fiscal 2026, CMC generated consolidated core EBITDA of $297.5 million, equating to a 14% core EBITDA margin. CMC's North American Steel Group generated adjusted EBITDA of $269.7 million for the quarter equal to $257 per ton of finished steel shipped. The EBITDA margin of the segment was 16.8%, supported by our TAG efforts, which contributed meaningfully to the financial results as key commercial and operational initiatives continue to gain momentum.

In addition, higher margin over scrap costs on steel products in comparison to the prior year supported the business. However, as Peter mentioned, challenging weather negatively impacted profitability during the quarter. We estimate that reduced production and higher energy costs associated with grid stress linked to the winter storms reduced second quarter segment adjusted EBITDA by between $5 million and $10 million. The Construction Solutions Group second quarter net sales of $314.4 million grew by 98% on a year-over-year basis. Adjusted EBITDA of $53.4 million increased by 127% on a year-over-year basis, driven by the addition of the Precast businesses. This new growth platform exceeded our expectations in the seasonally weak period by contributing $33.6 million to our Construction Solutions Group segment adjusted EBITDA.

Excluding the inventory purchase accounting adjustment mentioned earlier, Precast generated EBITDA of $40.3 million on revenue of $145 million. Shipments were solid across the core Mid-Atlantic and Southeastern regions and increased on a year-over-year basis despite suffering temporary disruptions due to the inclement weather. Average selling prices for pipe and precast products also ticked up from a year ago and demonstrated the attractive stability we have discussed previously on our conference calls. Value in the backlog at the end of the quarter was up by high single-digit percentage compared to February of 2025, which allowed for opportunistic price increase on new bookings in certain geographies and positions the business well ahead of the upcoming construction season.

Hence, our financial performance remained stable on a year-over-year basis. In its seasonally weak second quarter with positive contributors from targeted commercial initiatives and continued InterAx product adoption, offset by weather delays from the winter. Profitability of our performance reinforcing steel division remains historically strong, but declined compared to a year ago due to project timing delays.

Adjusted EBITDA margin of 17% for our Construction Solutions Group segment improved by 2.2% as compared to the prior year period. The inclusion of CMC's Precast business was 5.3 percentage points accretive to segment adjusted EBITDA margin during the quarter. Our Europe Steel Group report an adjusted EBITDA loss of $1.4 million for the second quarter of 2026, which was little changed from a prior year period.

Looking at the primary drivers of performance compared to a year ago, lower shipments and associated reduction of fixed cost leverage roughly offset the positive impact of the higher margins over scrap. As Peter mentioned, the elevated level of import flows prior to the implementation of CBAM, acted to depressed rebar volumes during the quarter. We saw this factor, along with harsh winter conditions experienced as temporary and expect shipments to rebound in the quarter ahead.

Turning to our balance sheet and liquidity position. As outlined on Slide 13 of the supplemental presentation, our cash and cash equivalents at February 28 totaled $504 million. In addition, we had approximately $1.2 billion of availability under our credit and accounts receivable facilities bringing total liquidity to just over $1.7 billion. As illustrated within the table on the left-hand side of the slide, CMC made meaningful progress against our goal to rapidly delever following the acquisition of CP&P and Foley. Adjusted net leverage now stands at approximately 2.3x based on using adjusted EBITDA for legacy CMC and the estimated run rate annualized EBITDA of our newly acquired Precast business.

This is lower than the 2.7x illustrative figure shared at the time of the Foley acquisition with the reduction resulting from increased CMC profitability. We continue to be confident in our ability to return to our net leverage target of 2x or below within the time commitment we made at the time of the acquisition. This effort will be aided by strong free cash flow generation from the Precast platform itself, the wind down of capital expenditures for the construction of Steel West Virginia and significant cash tax savings related to the 48 seat tax credit associated with Steel West Virginia and One Big Beautiful bill. Additionally, during the period of leverage reduction, we have reduced our share repurchase activity to a level aimed at offsetting the dilutive impact of our annual share issuances under our compensation programs. We anticipate returning share buybacks to level similar to recent quarters once we are below our net leverage target levels.

Our Board of Directors demonstrated its confidence in CMC's strong free cash flow outlook and ability to rapidly delever by its decision yesterday to increase the company's quarterly dividend by $0.02 per share. This will bring our quarterly payout to $0.20 per share, representing an 11% increase over the company's prior quarterly dividend. CMC's effective tax rate was 15.2% in the second quarter. This is higher than our first quarter effective tax rate due to the fixed dollar impact of the 48C tax credit on Steel West Virginia in comparison to our earnings level. Looking ahead, we anticipate the full year effective tax rate of between 7% and 9% for fiscal 2026, in line with the guidance we provided in the first quarter. As a reminder, we do not anticipate paying any significant U.S. federal cash taxes in fiscal 2026 and for much of fiscal 2027 due to the factors mentioned earlier.

Turning to CMC's fiscal 2026 capital spending outlook we expect to invest approximately $600 million in total, a slightly lower guide than provided in January given the impact of the harsh winter slowing construction of Steel West Virginia. Of the $600 million, approximately $300 million is associated with completing the construction of our West Virginia micro mill as well as a handful of high-return growth investments within our Construction Solutions Group segment. We anticipate capital expenditures of approximately $25 million in our new Precast business, which will be split between maintenance spend and high-return growth opportunities. This concludes my remarks, and I'll now turn it back to Peter for additional comments on CMC's financial outlook.

Thank you, Paul. Turning to our outlook. We expect consolidated core EBITDA in the third quarter of fiscal 2026 to increase meaningfully from the second quarter levels due to normal seasonal improvement within our key markets and the continued margin strength across our North American footprint. North America Steel Group adjusted EBITDA is anticipated to rise modestly on a sequential basis on higher seasonal volumes, the impact of which will be partially offset by annual maintenance outages across the mill network that are expected to add approximately $15 million to $20 million in costs during the quarter.

Financial results for the Construction Solutions Group are expected to nearly double compared to the second quarter of fiscal 2026. Europe Steel Group adjusted EBITDA should substantially improve on higher seasonal volumes, modestly improved metal margins and the anticipated receipt of an approximately $20 million CO2 credit. I am confident that CMC is well positioned to drive further growth during the second half of fiscal 2026. Solid market dynamics, additional benefits from our TAG program and effective operational execution are generating momentum in CMC's existing businesses which will be supplemented by contributions from our newly established Precast platform. For the full fiscal year, we continue to anticipate the Precast business will generate between $165 million and $175 million in EBITDA.

Longer term, we remain focused on creating significant value for our shareholders by continuing to execute against our strategic plan, delivering meaningful and sustained enhancements to our margins, earnings, cash flow generation and return on capital. I would like to conclude by thanking our customers for their trust and confidence in CMC and all of our employees for delivering yet another quarter of very solid safety and operational performance.

[Operator Instructions]

The first question will come from Albert Reline with Jefferies. Albert?

So I want to just touch on the 3Q guidance for the North American segment to have some offsetting negative impacts from some annual maintenance outages. Maybe if we could just get some more detail there. I don't believe in previous years, maintenance activity was called out during 3Q. So I just wanted to see if that was related to maybe some of the scheduled activity during 2Q being deferred given some of the more extreme weather we have seen? Or is maybe some of this on the voluntary side given the anticipated supply coming out of the market?

No. I think -- thank you, Albert, for the question. There are a couple of things going on there. Some of the maintenance outages are normal maintenance outages that we would put into that quarter. Some of them were deferred from Q2 just given some of the weather challenges and also some of the challenges in getting contractors to support those maintenance outages. So it's -- it wouldn't be our preference to have quite as much as we have in this quarter, but that's the way it fell this year. And obviously, we will work in the future to spread them out more evenly.

The next question will come from Bill Peterson with JPMorgan.

I appreciate the color on the [ ADCD ]. [indiscernible] Your year-to-date annualized rebar reports are tracking in line with sort of 2022, 2024 levels and given some countries like South Korea have been stepping in the market. So trying to get a sense on your view on non-duty impacted countries still in the import flood and whether this may be a persistent trend. And maybe more broadly, how would you characterize the sort of supply ramps from your North American competitors and you're still seeing some discipline in the market?

Yes. So let me start there, and I'm going to -- let me start with your -- or your -- the second question you asked. We are seeing supply and demand, I'd say, a relatively balanced place at this juncture. The North American capacity increases are entering the market. We can see them they're manageable at the current levels. And so given the demand profile. In terms of imports, it is true that you have seen some elevated imports, but we don't think that those are likely durable. And as a consequence, we expect that number one, just given the fact that we haven't learned anything about South Korean imports coming in that are -- that make us believe that they're going to be more than the 150,000 tons of people have spoken about. We think that's manageable.

In Turkey, given the war, I think, is going to be facing higher energy costs that -- and higher transportation costs that I think for Turkey and for other importers are going to make it more challenging. So I'd say we have quite a sanguine view of where imports are going to be this year despite the 2 months that I think you're referring to.

Appreciate that comment. You characterized this sort of cost impact, I think, for Polish operations, if I caught it correctly, maybe potentially $15 to $20 a ton. Is there a way to characterize any potential risk for North America, whether it be energy prices or perhaps on concrete, which is kind of an energy-intensive part of the market? Are there other pass-through mechanisms here? And is there any sort of key risks we should be thinking about if the conflict is prolonged?

Yes. At this juncture, we are not seeing material cost challenges to our operations. Things like fuel surcharges, we are working to pass those through. so that we expect to recoup that. And we'll have to take the -- any other inflationary impacts as they emerge and adjust accordingly. But so far, we haven't felt that at all.

And Bill, I would just add with respect to Europe, we are confident that because of the situation that Peter outlined on the call that it competitively better positioned that we will be able to pass along price increases to offset the costs. We've seen that. We've announced price increases. So I think overall, while we're seeing the cost increase from an overall performance perspective, we're confident that it won't impact the margins.

The next question will come from Sathish Kasinathan with Bank of America.

My first question is on the outlook for shipments in the North American segment. So you mentioned that the backlogs are up year-on-year and are at the highest level since 2023. You also had some weather issues in Q2 and have scheduled some maintenance outages in Q3. So -- and then at the same time, you have Arizona 2 ramping up and potentially first Virginia mill, which will start up soon. So given all the moving parts, can you maybe give a sense of a potential volume uplift that you will see in Q3 and into Q4?

Yes. I think so for Q3, I think we should expect a normal change in shipments. If we look at what we saw in Q2, we did have the weather impacts, but they actually impacted the production from a cost perspective more than they did the shipments from -- so we expect kind of a normal move moving from Q2 to Q3. Into Q4, we will be just starting up West Virginia. We would expect, I would say, again, kind of a normal transition between Q3 and Q4 given the fact that it's the early days of the start-up. And so I wouldn't expect those volumes to really heavily impact the market.

Okay. Maybe one question on the pricing side. So the downstream product pricing saw the first uptick in nearly like 3 years based on some of the more recent project awards and the current bidding activity, can you maybe talk about how the pricing for new fabrication orders today compared to what it is on the -- in the backlog. In other words, I mean, like does it -- I mean, is the pricing covering the recent $150 to $200 increase in rebar price that we have seen?

Yes. So let me start on that and then maybe Paul can jump in. So first of all, the current pricing -- the backlog is already reflecting the business that we're putting into the backlog. So in fact, I would say today that the booking price is higher than the backlog backlog price in our backlog. So -- and we see strong level of bookings. So as we kind of look forward here, I think over the next couple of quarters, you should see the pricing impact turn into a tailwind. Remember that the pricing that you are seeing in our data sheet is the backlog that we're executing that we booked, say, 9 months ago. So I think over the next couple of quarters, you should see kind of the pricing translate into a tailwind in margins and margins improve in that downstream business.

The only thing I would add, Sathish, is I think we've talked recently about the discipline on the commercial side in the fabrication of ensuring we get value for the service that we bring and ensure that we're getting the necessary margin on the downstream business that we think is warranted. And so that has certainly had a positive contribution to how the backlog is up at this time of the year. Recall that it was May, June, July last year, that rebar pricing really started to increase. So for us to already realize that here in the second quarter is accelerated versus historical time frames.

The next question will come from Katja Jancic with BMO Capital Markets.

Maybe going back to the cost, especially on the power side. Can you remind us what is the percent of your total production cost that is accounted by power or driven by power?

Yes. Katja, if we exclude scrap from that calculation, Electricity is in the 15% to 20%. Natural gas is generally a pretty small number. And I will also, from a Polish perspective, share that we've talked certainly in the energy crisis at the beginning of the Ukraine war, how we were better positioned. We are around 50% hedged with long-term power purchase agreements in place in Poland. So while the cost of electricity has the potential for increasing dramatically, we're well protected. And again, back to what Peter said during the call, Poland, because it's self-sufficient with a lot of coal, it's not as susceptible as other European nations are to the electricity price increases.

And is the percentage similar in the North American operations, I would assume?

Yes. Yes, that's fair.

And then maybe just quickly on the TAG. What is the current run rate EBITDA benefits that you have achieved so far?

So what we've said, Katja, on that is that at the -- by the end of the year, we expect to exceed $150 million and we are on track for that. In fact, I'm highly confident we're going to end up being ahead of that number. So we have not given any further updates to that. But the project is very successful in the company and not just for the initiatives, but as we've said in the past, it's really creating a new mindset in the company about improving ourselves from both an operational and a commercial perspective. So we feel very good about where we are with TAG.

The next question will come from Andy Jones with UBS.

I just wanted to dig into the recent index price decrease on rebar and what you're seeing. I mean I've I'm curious to what extent that's high bar linked? Or I mean, basically, how much of an effect are you seeing from those volumes ramping up in the market and potentially on the [indiscernible] price? Just curious for your thoughts on what's happening in the market there.

Yes. Thanks, Andy. I would say, again, as I said before, we -- supply/demand today, in our view, is pretty balanced. And so we feel that the new capacity coming into the market is pretty manageable. And in terms of a price impact, I would say that, again, pretty manageable. And there are -- it's fair to say there are a few pockets of weakness, but I think a lot of those are attributable to some of the winter conditions that we've had and the slowing business in that harsh winter that we've had. But we expect as the demand comes into the construction season that we are going to see prices firm up, and we feel comfortable about where they are.

The next question will come from Tristan Gresser with BNP Paribas.

So the first one is how should we think about the profitability of steel products versus downstream into Q3 and Q4? I think you mentioned steady margins for North America. Is that fair to say that we should see the downstream profitability increase and offset those lower margins for steel products?

Tristan, thanks for the call. Yes, there's a number of moving pieces that will impact the North American Steel Group in the third quarter. First and foremost, we'll see the volume rebound, and that's what one would expect, as Peter said earlier, from a seasonal backdrop. One key aspect to recall is what we saw in the second quarter were successive increases in scrap costs. And while we saw the selling price increase, what we will see flow through our earnings will be that higher cost scrap. So our metal margin statistic is likely to be very stable. That's our outlook. But the earnings will be slightly impacted by that lag effect of the scrap in Q3 versus Q2.

In addition, we have the maintenance outages. And as you mentioned, for the downstream business, which is roughly 1/3 of our volumes in North America, we'll see a margin pickup from the continued rise in the selling prices or the realized selling prices.

All right. That's clear. And my second question, if you could give us an update on the rebar micro mill, Arizona 2, West Virginia? And more specifically, I was looking at the U.S. rebar volumes. On fiscal 2026, would you expect some growth for rebar?

Yes. So in terms of the West Virginia mill, we're on path for a start-up beginning in June of 2026. And so -- and that's pretty much right on time. We have been -- in prior calls, we've talked about the fact that we've had over 100 days of weather delays in the construction of that project. So really proud of the team for kind of getting us to a place where we are today and with insight of the start-up. In terms of the market growth, we expect modest market growth this year on rebar -- or sorry, from probably in the range of, say, 1% to 3%. I think, is a good number.

At this time, there appears to be no further questions. Mr. Matt, I'll now turn the call back over to you.

Thank you. At CMC, we remain confident that our best days are ahead. The combination of structural demand trends, operational and commercial excellence initiatives to strengthen our through-the-cycle performance and value-accretive growth opportunities create an exciting future for our company. Thank you for joining us on today's conference call. We look forward to speaking with many of you during our investor calls in the coming days and weeks. Have a good day.

This concludes today's CMC conference call. You may now disconnect.

Hello. Welcome, everyone, to the fiscal 2026 First Quarter Earnings Call for CMC. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer; and Paul Lawrence, Senior Vice President and Chief Financial Officer.

Today's materials, including the press release and supplemental slides that accompany this call can be found on CMC's Investor Relations website. Today's call is being recorded. [Operator Instructions]

I would like to remind all participants that on today's discussion that will contain forward-looking statements, including with respect to economic conditions, effects of legislation and trade actions, U.S. steel import levels, construction activity, demand for finished steel products and precast concrete products, the expected capabilities, benefits, costs and time line for construction of new facilities, the expected benefits of recent acquisitions, the company's operations, the company's strategic growth plan and its anticipated benefits, legal proceedings, the company's future results of operations, financial measures and capital spending. These statements reflect the company's beliefs based on current conditions but are subject to risks and uncertainties. The company's earnings release, most recent annual report on Form 10-K and other filings with the U.S. Securities and Exchange Commission contain additional information concerning factors that could cause actual results to differ materially from those projected in forward-looking statements.

Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release, supplemental slide presentation 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 Peter.

Good morning, everyone, and thank you for joining CMC's first quarter earnings conference call. I hope each of you had a wonderful holiday season and a happy New Year. CMC had an exceptional start to our fiscal year as we built on the strategic foundation laid in fiscal 2025, continuing to meaningfully and sustainably enhance our financial profile. The first quarter was one of the best in our company's history, serving as validation that our ambitious strategy is bearing fruit.

Strategic actions taken over the last 12 to 18 months, including the launch of TAG, organizational realignment in critical areas and the onboarding of key talent and resources to support growth areas are directly driving bottom line improvement. We are confident there is much more to come, particularly with the addition of CMC's large-scale precast platform.

Our strategic focus remains on transforming CMC into an even stronger organization with higher, more stable margins, earnings, cash flows and returns on capital. Now let's jump into the first quarter results. For the quarter, CMC reported net earnings of $177.3 million or $1.58 per diluted share. Excluding certain charges, which Paul will take you through in more detail, adjusted earnings were $206.2 million or $1.84 per diluted share. Our consolidated core EBITDA of $316.9 million grew by over 50% from a year ago and nearly 9% sequentially, reaching its highest level in 2 years. Our core EBITDA margin of 14.9% likewise expanded both year-over-year and compared to the prior quarter. As outlined on Slide 5, this occurred against a good market backdrop with stable demand, limited imports, rising long steel metal margins and attractive project opportunities within certain construction segments.

Though CMC certainly benefited from these constructive conditions, our results were meaningfully enhanced by solid execution that allowed us to capitalize on the opportunities we are seeing across our North American footprint. Let's review some highlights, starting with our North America Steel Group. CMC's mill network had a strong operational performance, which was critical to supporting customers in a relatively tight domestic supply environment and maintaining high levels of customer service.

TAG initiative efforts, including the scrap optimization initiatives launched in fiscal 2025 contributed nicely to metal margin expansion. With the program now rolled out across all domestic mills, we are using less scrap per tonne of steel produced and utilizing lower-cost scrap blends, increasing the metal margin on each tonne. Last quarter, I discussed new commercial rigor in the way CMC approaches opportunities within its downstream fabrication business. The positive impact of this change is only just beginning to be reflected in our financial results, but we are seeing it more significantly benefit our average price in backlog, which represents the work that will be shipped in future quarters. Encouragingly, despite enhanced selectivity in the projects we accept, the volume in CMC's downstream backlog increased modestly year-over-year and sequentially.

We believe this is at least in part related to CMC's ability to leverage its unique and comprehensive portfolio of capabilities to win projects, particularly those that require specialized reinforcing solutions for large-scale resource deployment. A recent example has been the success we have had in the LNG space, which requires highly specialized cryogenic steel, the reliability of a large fabrication and logistics network and expertise in project management, all of which we provide.

Strong execution helped our Construction Solutions business, formerly known as our Emerging Businesses Group, achieved a record first quarter adjusted EBITDA. Similar to our North America Steel Group, underlying market conditions were supportive, but our efforts to capitalize on these drove results to new heights. At Tensar specifically, we are seeing several important commercial and operational initiatives gain traction. Our team has moved to deepen relationships with key customers, improving our visibility into their upcoming product demand.

We have also positioned ourselves to better address market demand across a full spectrum of Geogrid solutions. Our highest value products are experiencing strong demand from mega projects such as LNG investments. but we are also capturing more opportunities in mid- and lower-tier portions of the market. Operationally, the Tensar team is doing an exceptional job managing costs and increasing production reliability, ensuring that we have the product available where and when needed at a cost that optimizes margins.

Our CMC Construction Services business achieved strong results during the quarter with revenue growth outpacing the broader market due to several impactful initiatives to acquire new customers, gain share of wallet through more proactive outreach and standardize pricing and service levels across the footprint. This is just a sampling of the initiatives that we are undertaking to drive our business from good to great. Our success reflects the strategic efforts of CMC's leaders to push their businesses to new levels of performance. I mentioned earlier that we capitalized on a supportive environment in the quarter. Let me provide a bit more color on what we saw. In North America, we experienced healthy, stable underlying demand for our major products. This, in combination with a well-balanced supply landscape, supported volumes and margins during the quarter. Shipments of finished steel were virtually unchanged year-over-year and down less than 1 percentage point from fiscal Q4 compared to a more typical 4% to 5% seasonal sequential decline.

Consistent with our guidance, metal margins increased sequentially as we were able to capitalize on the summer price announcement. Downstream bid volumes, our best gauge of the construction pipeline remained healthy and were consistent with recent quarters with continued strength across key market segments, including public works, data centers, institutional buildings and energy projects. We continue to see substantial pent-up demand, particularly within nonresidential markets, a view supported by historic strength in the Dodge Momentum Index, or DMI, as well as recent conversations with many of our largest customers who are increasingly bullish as they experience a large inflow of project inquiries related to energy generation, reshoring, advanced manufacturing and LNG infrastructure. The DMI leads construction activity by 12 to 18 months and increased by approximately 50% on a year-over-year basis in November. with the Commercial segment growing by 57% and institutional by 37%. Even excluding data centers, a hot bet of growth in North America, commercial showed solid expansion, rising 36% from a year ago.

We remain confident that emerging structural drivers, including investment in U.S. infrastructure, reshoring industrial capacity, growth in energy generation and transmission, the build-out of AI infrastructure as well as addressing a U.S. housing shortage will support construction activity over the long term. As noted on Slide 10 of the earnings presentation, nearly $3 trillion of corporate investments were announced across related areas in calendar 2025.

Commencement of even a handful of these related mega projects could provide a meaningful demand catalyst for CMC in the quarters ahead. Before I move on to our other segments, I would like to briefly update you on the status of the rebar trade case filed with the International Trade Commission, or ITC, back in June, alleging exporters located in Algeria, Bulgaria, Egypt and Vietnam are guilty of dumping material into the U.S. market. In December, the Department of Commerce provided a preliminary ruling against Algeria, finding that producers based in that country are guilty of dumping and subjected them to the maximum duty sought by the domestic rebar industry, which is 127%. While this margin rate could change once the Department of Commerce finalizes its investigation on Algeria in March, we are encouraged by the preliminary results and applaud the Department's Defense Affair trade.

Preliminary rulings are expected in March for antidumping duty investigations covering Egypt, Vietnam and Bulgaria. Turning to our Construction Solutions Group. Current conditions are similar to those just described with steady activity across most construction segments punctuated by a few hot areas like data centers and large energy projects. Our commercial teams continue to see encouraging signals regarding future activity, including healthy quoting levels and improved velocity of quote conversion to backlog. In addition to these broad indicators of potential demand, we are seeing an increase in attractive individual opportunities that require specialized reinforcement solutions, particularly among bridge and energy projects. Conditions for our Europe Steel Group softened modestly from the fourth quarter. Demand remained resilient on solid Polish economic growth, providing an outlet for healthy shipping volumes, but average price and margin levels were negatively impacted by the import flows. A portion of the price pressure experienced during the quarter may have been related to buyers of foreign material seeking to import product ahead of the European Union's Carbon Border Adjustment Mechanism or CBAM taking effect on January 1, 2026. We view this as a temporary overhang and expect prices in our primary markets to benefit from the launch of CBAM, which should increase the cost of some imports, particularly those that have historically been most aggressively priced.

The green shoots we have noted in recent earnings calls continue to mature with more emerging. Recent market developments include signals of a coming recovery in residential construction activity driven by declining mortgage interest rates and a need for new housing stock. We are also more optimistic about the prospect of CBAM benefiting long steel pricing. With greater clarity regarding the terms and implementation now available, our team in Poland believes the program could increase the cost of some imported long products by at least $50 per tonne and help support overall market price levels. Wrapping up my comments on the quarter, let me dive more deeply into TAG. This is our enterprise-wide operational and commercial excellence program aiming to drive a permanent step change improvement to our margins, earnings, cash flows and ROIC. Fiscal 2026 will be a pivotal year as execution further permeates the organization and as the expected level of EBITDA benefit increases meaningfully. During fiscal 2025, TAG initiatives were primarily focused on domestic mill operations and logistics. This year, we are focused on operational initiatives in every line of business across each segment and are increasing our emphasis on key commercial opportunities.

We are also targeting meaningful efficiencies in our SG&A expenses while maintaining our high level of performance. We are pleased with the execution on new initiatives so far in fiscal 2026 and have maintained solid momentum on programs launched in fiscal 2025, including the scrap optimization, mill yield, alloy usage and logistics benefits that delivered approximately $50 million of EBITDA last fiscal year. Looking at fiscal 2026 and beyond, commercial excellence is a major opportunity where we see significant upside potential through achieving better margins and fuller value realization for CMC's industry-leading capabilities and service levels. For the mills, this comes in a variety of forms, including enforcing grade and size extras, applying appropriate premiums to pricing on special orders and addressing areas of margin leakage such as delayed price implementation and freight recovery. It will also mean more definitive segmentation of our customer base with clear value propositions to the different customer segments and related commercial terms to ensure that all accounts generate acceptable margins. Through our downstream fabrication business, we are pursuing enhancements to our margin structure through increased price discipline, a willingness to decline work that does not reach a suitable profit threshold and improve terms and enforcement mechanisms in contracts.

At the heart of our efforts is the ability to leverage CMC's unique capabilities and scale to achieve better margin outcomes on complex jobs that only a few fabricators can perform. Based on progress we are making across operational, commercial and SG&A initiatives, I am confident that we will reach or exceed our ambitious goal of exiting fiscal 2026 with an annualized run rate EBITDA benefit of $150 million. In December, subsequent to the end of the first quarter, CMC closed on the acquisitions of CP&P and Foley Products, and we are now operating one of the largest precast concrete businesses in the United States. This platform is transformational for us, broadening CMC's commercial portfolio in a way that increases our value proposition to customers, meaningfully enhancing our financial profile and extending our growth runway. Based on our initial observations over the last few weeks of owning these businesses, I am even more confident regarding their potential to strengthen CMC and create meaningful value for shareholders. Both CP&P and Foley are excellent cultural fits for our company and have talented teams in place at every level of their organizations. including very strong leadership groups that will remain in place and are fully aligned in executing CMC's strategic vision and delivering meaningful synergies.

Discussions with precast leadership regarding the business outlook for fiscal 2026 have been positive. Backlogs are at good levels, featuring solid volumes and attractive average pricing, which should support healthy shipment levels as we enter the spring construction season. The outlook for underlying demand is positive for our core Mid-Atlantic and Southeastern geographies, bolstered by the expected growth in data centers, manufacturing facilities and stormwater management systems. We look forward to providing further details on our second quarter earnings call, which will include financial results for our precast business within CMC's Construction Solutions segment. Having mentioned our Construction Solutions Group a few times, I would like to highlight the reasons for renaming the segment. First, we believe that the title Construction Solutions better reflects the business composition of the segment as more than 95% of the EBITDA will be derived from providing high-margin solutions to the construction market. Additionally, the new name more closely aligns with the strategic priorities of CMC, in particular, the aim to profitably grow our role in early-stage construction and build a commercial portfolio that makes us the preferred partner by our customers.

Before turning the call over to Paul, I would like to recognize the efforts of our world-class employees. We have asked a lot of the team as we execute our ambitious vision for the future, and I am truly inspired by all that they have accomplished so far. Their efforts have been instrumental in laying the groundwork for years of success ahead, and I look forward to maintaining that momentum. With that, I'll turn the call over to Paul.

Thank you, Peter, and good morning and Happy New Year to everyone on the call. As noted earlier, we reported fiscal first quarter 2026 net earnings of $177.3 million or $1.58 per diluted share compared to a net loss of $175.7 million and a net loss per diluted share of $1.54 in the prior year period. During the quarter, we incurred approximately $36.7 million in pretax expenses with $24.9 million related to the acquisitions of CP&P and Foley, $3.7 million for interest on the judgment amount associated with the previously disclosed litigation as well as an $8.1 million unrealized loss on undesignated commodity hedges.

Excluding these expenses, which amounted to $28.9 million on an after-tax basis, adjusted earnings for the quarter totaled $206.2 million or $1.84 per diluted share compared to $86.9 million and $0.76 per diluted share, respectively, in the prior year period. As a reminder, the prior year period included an adjustment for an estimated net after-tax charge of $265 million to reflect an adverse litigation verdict accrual.

During the first quarter of fiscal 2026, CMC generated consolidated core EBITDA of $316.9 million, representing a 52% increase from $208.7 million in the prior year period. CMC's North American Steel Group generated adjusted EBITDA of $293.9 million for the quarter, equal to $257 per tonne of finished steel shipped. Segment adjusted EBITDA increased 58% compared to the prior year period, driven primarily by higher margin over scrap costs on steel products, resulting in an EBITDA margin of 17.7% compared to 12.3% in the prior year period. Financial results also benefited from continued improved operational performance at Arizona 2 as well as contributions from our TAG efforts. As Peter mentioned, we are driving continued gains from TAG initiatives launched during fiscal '25 and have more recently rolled out commercial initiatives to improve margin capture.

The Construction Solutions Group first quarter net sales of $198.3 million grew by 17% on a year-over-year basis. Adjusted EBITDA of $39.6 million significantly increased by 75% year-over-year, driven by strong results from Tensar and CMC Construction Services as well as some improvement at CMC Impact Metals from the depressed levels of a year ago.

Tensar achieved its best first quarter financial performance under CMC ownership, benefiting from solid project demand, the positive impact of the sales initiatives mentioned by Peter and strong cost management efforts. CMC Construction Services likewise profited from self-help measures that drove EBITDA improvement on both a year-over-year and sequential basis. Contributions from our Performance Reinforcing Steel division remained historically strong, but declined modestly from recent elevated levels. Construction Solutions Group adjusted EBITDA margin of 20% improved by 6.6 percentage points compared to the prior year period. Our Europe Steel Group reported adjusted EBITDA of $10.9 million for the first quarter of 2026, down from $25.8 million in the prior year period. The decline was driven by a lower CO2 credit, which amounted to $15.6 million during the first quarter of 2026 compared to $44.1 million received during the year ago period.

The reduction in the CO2 credit was the result of the credit generated for calendar 2024 being separated into 2 tranches, one of which was received during the fourth quarter of fiscal 2025, while the remaining amount was received in the first quarter of fiscal 2026. By comparison, results for last year's first quarter reflected the entirety of the 2023 annual CO2 credit. Excluding the impact of energy cost rebates, adjusted EBITDA improved on a year-over-year basis on stronger shipping volumes and higher metal margins.

Shipments grew by approximately 16% from the first fiscal quarter of 2025 as a result of continued Polish economic expansion and reduced import flows from Germany. Metal margins expanded by $37 per tonne, largely driven by the same factors. During the quarter, our Polish mill underwent an annual maintenance outage, which incurred approximately $10 million of costs. Team did an excellent job starting up efficiently following the planned downtime and similar to recent quarters, continues to effectively manage costs across the organization. I will now discuss CMC's balance sheet and liquidity position as outlined on Slide 13 of the supplemental presentation. As of November 30, cash, cash equivalents and restricted cash totaled $3 billion.

This amount included approximately $2 billion in proceeds raised through a senior notes offering in November, most of which was earmarked to fund the company's purchase of Foley products. In December, we closed both the CP&P and Foley acquisitions and payments of approximately $2.5 billion were made. The table on the left-hand side of Slide 13 provides an illustrative view of CMC's cash balance, net debt and net debt to EBITDA, assuming both transactions had closed on November 30.

As you can see, net leverage stands at approximately 2.5x using combined adjusted EBITDA for legacy CMC and our newly acquired Precast business. This is lower than the 2.7x pro forma figure shared at the time of the Foley acquisition with the reduction resulting from the increased EBITDA generation of our business. We continue to be confident in our ability to return to our net leverage target of below 2x within 18 months and will prioritize delevering in the quarters ahead. This effort will be aided by strong cash flow generation from the precast platform itself, the wind down of capital expenditures for the construction of Steel West Virginia and the significant cash tax savings generated by the 48C program and the one Big beautiful bill. Additionally, we have reduced our share repurchases during this period of leverage reduction to amounts approximating our annual share issuance under our compensation programs.

Subsequent to quarter end, CMC increased the capacity of our revolving credit facility from $600 million to $1 billion this will ensure a strong liquidity position to support the execution of strategic goals going forward. Using the same adjustments to our November 30 balance sheet to give effect to the precast acquisitions and also giving effect to the upsized revolver, estimated available liquidity would have been slightly over $1.7 billion. CMC's effective tax rate was 3.1% in the first quarter. Looking ahead, we anticipate a full year effective tax rate between 5% and 10% for fiscal 2026. As a result of several factors, including our 48C tax credit, bonus depreciation on our West Virginia mill investment as well as accelerated depreciation on the assets of the acquisitions of Foley and CP&P, we do not anticipate paying any significant U.S. federal cash taxes in fiscal 2026 or for much of fiscal 2027. Turning to CMC's fiscal 2026 capital spending outlook. We anticipate spending approximately $625 million in total. Of this amount, approximately $300 million is associated with completing the construction of our Steel West Virginia micro mill as well as a handful of high-return growth investments within our Construction Solutions Group and approximately $25 million in our newly acquired precast businesses. This concludes my remarks, and I'll turn it back to Peter for additional comments on CMC's financial outlook.

Thank you, Paul. Turning to our outlook. We expect consolidated core EBITDA in the second quarter of fiscal 2026 to decline modestly from first quarter levels due to a normal level of slowdown within our key markets. This will be partially offset by the addition of CMC's recently acquired precast businesses. The company will recognize several acquisition-related expenses during the second quarter, including transaction fees, debt issuance costs and customary purchase accounting adjustments, each of which will be excluded from core EBITDA. Segment adjusted EBITDA for our North America Steel Group is anticipated to be lower sequentially due to normal seasonal volume trends and the impact of planned maintenance outages, while steel product metal margin is expected to remain relatively stable. Financial results for the Construction Solutions Group should improve compared to the first quarter of fiscal 2026 with the contribution of the Precast business more than offsetting seasonal weakness across the segment's other divisions.

Europe Steel Group adjusted EBITDA is expected to be approximately breakeven with margin growth potential later in fiscal 2026 when the carbon border adjustment mechanism takes full effect. The first quarter marked an excellent start to fiscal 2026, and CMC is well positioned to deliver strong results for the remainder of the year. Solid market dynamics, benefits of our TAG program and effective operational execution are generating momentum in CMC's existing businesses, which will be supplemented by $165 million to $175 million of EBITDA contributions from approximately 8.5 months of ownership of the precast businesses in fiscal 2026. Looking out longer term, I am confident that CMC will continue to create value for our shareholders as we remain focused on executing against our strategic initiatives, which we expect to deliver meaningful and sustained enhancements to our margins, earnings, cash flow generation and return on capital. I would like to conclude by thanking our customers for their trust and confidence in CMC and all of our employees for delivering yet another quarter of very solid safety and operational performance. Thank you. And at this time, we will open the call for questions.

[Operator Instructions] And the first question will come from Sathish Kasinathan with Bank of America. .

Congrats on the strong quarter and as well as the closing of CP&P and Foley acquisitions based on what you have seen in the past 3 to 5 weeks since the closing of these acquisitions, can you maybe talk about some of the positive or negative surprises you have seen so far? And do you see any potential for acceleration of the 3-year time line to realize the announced $30 million to $40 million in synergies?

Yes. Thanks, Sathish. Great question. Again, with the preface that this is early days in our ownership of this business, I would say that we have been really very pleasantly surprised with everything that we've seen. And I wouldn't say there's anything that's really come up that we weren't expecting on the negative side. And I'd say there are a number of things that are on the positive side that we've seen. And let me just give you a little story from one of my trips.

I went to a CP&P off-site, and it was a gathering of probably 100 folks from CP&P and then a couple of product experts from CMC. And 2 remarks I'd make that were, I think, super gratifying as the kind of new owner of the business. First is in the room, you could have been in a room with CMC folks. The cultural affinity is outstanding. And that was super helpful to see because I think it's going to make our integration efforts go well. Second was I noted that we brought a couple of CMC product experts, and there was a tremendous amount of discussion around kind of different opportunities that we and CP&P have together and a lot of excitement around that. So that was also super encouraging because it kind of validates the part of our investment thesis. In terms of the synergies, we are -- I would say the work we've done so far leads us to believe that we're very confident that we can get the synergies. What I would say is that it's early to speculate on the timing, and I wouldn't want to accelerate what we've said in the past. But we're very confident that the synergies are there, if not more.

Okay. Maybe my second question is on the North American metal margins, which are currently at 3-year highs. Can you maybe talk about how you see this margin sustain or improve in the coming quarters given the context that we expect some new supply to come into the market?

Yes. Maybe I'll start on this going backwards and commenting on the new supply. So there's been a lot of talk about the new supply. And yes, there is new supply coming into the market. I think we've been consistent in saying that we're not overly concerned by the new supply. And that's particularly true in the current context where you've got much lower imports than we've had in previous years. So based on the level of demand as it is today, we feel comfortable that the marketplace can absorb the new supply as it comes in. And if demand gets stronger, which we believe it will, then I think it's fair to say that there's going to be plenty of demand to absorb any new supply that comes into the market. So we feel good about that. Getting to your question on margins. So in Q2, we would expect mill margins, so our steel product margins to be flattish. And that is taking into account the fact that we do expect to realize all of the November $30 price increase.

And -- but we also have seasonally stronger scrap in this period, and that will offset some of that. And in our downstream, we could see -- I think we think it's going to be flat to -- could be slightly down given the kind of the raw material pass-through to the fabrication business. But as we go forward, I think the shape of the margins is really going to depend on a couple of factors. One is obviously the supply/demand that emerges in the marketplace. And the second is really our TAG initiative. And I think this is an important point to make on TAG because TAG is all about growing margins in a sustainable way across our business. And what -- and we expect that some of that TAG contribution is going to come in the form of benefiting metal margins as we go forward. So we're very excited about that. And I think as we go into the back half, there's been a merchant price increase of $50 a tonne. We should see a little bit of that in the second quarter, but really, most of it is going to be in the back 2 quarters and any other pricing actions will really set us up for a strong back half of 2026.

Next question will come from Katja Jancic with BMO Capital Markets.

Happy new year to everyone. Maybe staying on the more near-term, so you expect seasonally volumes to be impacted by seasonality. But can you talk a little bit about what that actually means? Because it seems that so far, we haven't really seen a material impact from seasonality?

Yes. It's a great point. We did have stronger volumes than we honestly than we expected in the first quarter. But going into the second quarter, we are expecting kind of typical seasonality. And remember, in the second quarter, we've got the winter conditions, construction slows down. And typically, there's been a going Q1 to Q2, there's a 5% to 10% decline. And we'd expect to be in that range. But I will acknowledge that the volumes have been stronger heretofore.

And then maybe on the West Virginia mill, can you update us what the plan -- the ramp-up plan there is?

Yes. We're super excited about that. Were you start one of these projects, and it seems like a long way off and now kind of were within 6 months of the start-up. So we've actually started some of the cold commissioning already. The hot commissioning, which is the official start-up, as Paul noted, likely to begin or will begin in June of this year. And we feel really good about it.

And just to comment on West Virginia, given the market conditions, we couldn't be bringing that on at a better time. But the other thing, I think, that really bears note is the fact that we are bringing this project in on budget. And I have to say hats off to the whole West Virginia team for the incredible capital discipline that they've shown in this project.

These are big dollar expenditures. You know, we're spending over $600 million on this project. And there's a lot of examples of projects that are kind of over budget. And thanks to the discipline that everyone has shown, we've managed to bring it in. And ultimately, that helps us from an ROIC perspective, which you know is a critical objective for us to improve.

Got you. The only thing I would add to Peter's comments is just recall from a start-up perspective, this is a rebar only mill, different from Arizona 2. And so typically, based on our other rebar only mills and the fact that this is not near the degree of new technology being introduced as with AZ 2. We would expect to ramp the operation up over the following 12 months once we meet that hot commissioning start-up.

The next question will come from Tristan Gresser with BNP Paribas.

Yes. The first one is on the old division. If you can talk a little bit about the outlook for fiscal Q2. Also more specifically, what kind of seasonality usually do you see on the precast business? Is it fair to assume a normalized EBITDA quarterly run rate for precast and had a bit of -- I mean, because Tensar has been pretty strong as well. So I would assume maybe a bit stronger on that division, but yes, I would love to have your thoughts on that.

Yes. So thank you for the question, Tristan. So EBG, typically, there is -- as we've said before, there is absolutely seasonality in that business. As we noted in the prepared remarks, a substantial portion of that, most -- the lion's share of that is going into construction markets. So seasonality is definitely a factor in our Q2 is the weakest period. And I should note that Tensar in particular, with ground stabilization is kind of the most seasonal as we look at that business from year-to-year. So I think you can expect normal Q2 seasonality in that. Precast, so in our precast business, we think that will largely follow the seasonality that we have in our business overall.

And what I mean by that is our steel business overall. Typically, you've got -- in the winter months, you've got a reduction in the amount of activity that you see, and we expect that to be the case, too. So this is maybe not part of your question, but I'll go to it directly to say we expect in the second quarter, the precast business to contribute about $30 million of EBITDA, roughly speaking, which will seem lighter, and that goes entirely to seasonality. And as Paul noted in his comments, the backlogs that we're seeing are very strong. They're stronger than last year. And so we feel very good about the prospects for that business going into our ownership in '26.

All right. No, that's very clear. And going back to your prepared remarks on scrap sorting, how much of a benefit it's been? And can you give us some numbers in what you've been doing? And how has it changed today versus what you used to do in the past in terms of using less scrap and varying the quality of the scrap? Any color there would also be great.

Yes. We -- I mean, we -- I'll start and then Paul can jump in with any additional comments. But I guess what I'd start by first saying is that in the past, we talked about the scrap optimization being, I think it was a $5 million to $10 million opportunity. And that has grown substantially.

And I think the key point is that we started out in a couple of mills and now we're pushing it to other mills. So we're getting the benefit across our broader footprint.

And there are two points, as you said. One is in the quality of the scrap. We've done a tremendous amount of work in the quality of the scrap and we've identified places where, for example, we're using a lot more shred than we need to use. So we can cut back on the shred and that obviously kind of reduces scrap costs and so forth.

We've also done a tremendous amount of work on yield. And that has helped us a lot in terms of obviously using less scrap to produce the tonnes that -- and sell the tonnes that we want to produce and sell. Paul, anything?

The only thing I would add, Tristan, is, as we've noted, what we achieved last year was approximately $50 million from TAG. And I would say those two initiatives, just given the dollars involved that Peter outlined, probably we're near half of the realization that we had last year. And as Peter said, those were piloting the initiatives in a few locations and growing throughout both '25 and '26 and incremental number of mills to get it across the entire platform. And so we are very excited about the opportunity of those initiatives to continue to contribute well to our business.

One thing that's maybe worthy of an additional comment vis-a-vis TAG is, and this goes for a lot of our TAG initiatives. What we found is that on something like scrap optimization, it started out in one mill. And then you start to see these real benefits in the mill. And of course, every mill manager wants to run their mills as well as they possibly can. So there's been this kind of compounding effect as more of the mills take it on and bring it into full bloom.

So -- and that's, I think, a characteristic of the TAG program in general. And one of the things that we're super excited about. We see new initiatives coming in and sizable new initiatives coming in. And we got to build the charters and plans around these different initiatives, but you can see how this can be really a game changer.

And as we've talked about in the past, again, the goal is long-term sustainable margin improvement over what we would be otherwise, right? So if X was our historical margin, we want to be at X plus Y. And we're working internally on some tools to help you all define that. But we believe that there is through TAG the opportunity to make our business durably better? And I think that will be a really important contributor to value.

The next question will come from Alex Hacking with Citi. .

Happy new year, everyone. I guess, first question, you mentioned increased commercial selectivity in rebar fab and part of that was about reducing risk. Has counterparty risk been rising? And is there a reason why?

Why reduce -- let me just make sure I understand your question, why we're addressing that point?

Sorry, the question was has counterparty risk been rising and why is counter party risk been rising if it has been rising?

Yes, I wouldn't say it's been rising. I would say this is a risk that we have taken historically that we are looking to reduce in the portfolio. And where it manifests itself is, Alex, is in our fabrication business and some of the contracts will be asked to do longer-term jobs. And a lot of times, those longer-term jobs can be at a fixed price. And of course, our raw material inputs can change. So you can get out 2 years or 3 years, and there have been some instances with this company in the past, and I'm sure others where you get -- you can get upside down on a project.

And what we're trying to do is to reduce that risk by making sure either through proper escalators, proper indexing that we are being compensated for that risk so that, again, it goes back to the ROIC point that in any environment, we are generating a good return on the capital that we put in, which is substantial in a business like this.

And I just to reiterate and make sure it's clear, counterparty risk, we have historically never had an experience of significant counterparty risk and nor do we see that really going forward with the structure of how the construction contracts are written. This is all about reducing the risk, as Peter said, around margin preservation and ensuring we're getting a good margin on the job.

I get it. I guess I misinterpreted. And then on our, as you mentioned, the importers have been getting ahead of CBAM. How -- I mean do you have any idea like how long it could -- how many quarters it could take for prices in Europe to stop benefiting from CBAM?

Yes. So again, it took effect January 1. And our read on the situation is for certain importers, the average impact on them could be EUR 50 a tonne. And for many of them, it could be higher initially because they have to be qualified to get to the EUR 50 a tonne. And before they're qualified, there's a default rate that's even higher. So this is going to play out over the course of calendar 2026. I think it's fair to say you've probably noted in the import numbers that there was a large -- there was a kind of a large pre-buyer of incremental tonnes coming into Europe that probably -- before CBAM, excuse me, that will probably delay the impact of the CBAM credit that we should be getting. But I do believe in the -- by the time we get to the -- we'll get a little bit of it in our second quarter and in our third and fourth quarters, we should see a substantial portion.

And certainly, over the course of the year, the calendar year, it should roll in. The other thing to note is that in addition to the CBAM there is also this safeguard mechanism that was renegotiated by the EU. And the safeguard mechanism, remember, that's effectively a quota system. And in the revised safeguards, the quotas are reduced by 50% and the tariffs for being above the quotas are increased by 50%. That should come into effect in the middle of the year, and that should be only additive to the situation in Europe. And just to frame it a little bit for you, if you think about our production capability in Poland and you think about the $45 million of CO2 credits we get, that's about a ton above our breakeven operational performance today. And then add EUR 50 to that, all of a sudden, you start to get to numbers where we are running at levels at or above our through-the-cycle performance. So again, this is not something that's going to happen overnight. But in addition to all the other catalysts in Poland, I think it's reason for some real optimism.

The next question will come from Timna Tanners with Wells Fargo.

I wanted to car in my questions to trade. So you talked about the CBAM implications helping pricing. But I think another aspect of CBAM is that it helps domestic producers in Europe perhaps take some market share. So curious about what volume impact you might see there? And then I have a follow-up on the U.S. trade side.

I think that it's a fair point that you're making, and I think there are some volume opportunities.

We have been running at, I would say, a relatively good rate of production recently. So I think there is some volume opportunity for us, but I wouldn't say it's huge at this point.

Okay. Great. Second question. On the U.S. side, I know you mentioned, of course, Algeria, Bulgaria, Egypt, Vietnam. But if you look at the latest trade data, actually imports are coming again from Turkey and from what I think Portugal and Spain.

So just any thoughts on the Turkish side and also maybe Portugal and Spain keep more production domestic and that falls off. But it does seem like the other countries, the four you mentioned, are already shrunk in terms of importance, probably because of the filing of the case even before any decision.

Yes. No, it's a great point. We've definitely seen some pullback in the imports from those countries.

And I'll just remind you and others that those countries in 2005, the trade case countries imported about 500,000 tons of steel into the U.S. So if there was an outcome that's anything like what we have on the Algeria case on a preliminary ruling, I think that's going to be really helpful in terms of keeping those imports out of the country.

And remember, on those trade cases, these are 5-year terms before the sunset review. So it's quite a durable point.

I think to your question on Turkey, we have noticed that Turkey has increased their shipments. We'll have to watch that.

Again, in the context of overall imports today, we're not overly concerned about that. But again, we'll be watching that carefully to see -- to make sure that to make sure that what they're importing, they're importing of a fair trader.

The next question will come from Bill Peterson with JPMorgan.

Yes. Thanks, everyone. Happy New Year, and thanks for all the color on the call thus far. I wanted to ask about AI, how the ramp has progressed -- how the ramp progressed during the prior quarter and what utilization you're running at? And then how should we think about operations and utilization ahead?

Yes. AZ 2, we've said in the past that this has been a challenging one, and my comments will cover that a little bit. But I think it's -- the important point is we reached profitability on EBITDA in the fourth quarter, and we were nicely profitable in the first quarter 2, and we expect to be nicely profitable throughout the year there.

In terms of utilization rates, we exited last year at about 60%. We expect to demonstrate full run rate during our fiscal year 2026. But we don't expect to be at full run rate in 2026. And that is because we still have a number of merchant specs that we've got to perfect, and that's going to take some time, and it will force us to run at kind of suboptimal utilization. But we feel good about where we are.

There's still some challenges there to be clear. But the team has done an incredible job. And this is where I think the CMC team really shines because we have drawn people and expertise from all across our network to help us with this operation.

And remember, the challenge is this isn't your grandfather's steel mill, so to speak, right? This is a very innovative steel mill. It will be a workhorse in our portfolio, but there's a lot of new technology to make work.

And the other challenge that we've had there, Bill, is just with the kind of the people not from the vantage point of the people are good, the people are great, but it takes some training to learn this. And so we've done a lot of work around training, and I think that's enhancing our reliability substantially, and it will continue to do so as we go through the year. So hopefully, that helps you.

Yes, it does. And then my second question, can you speak a bit more to the pricing profile of your downstream backlog and whether new order entry continues to be priced higher than what's in the backlog? And I guess, to what extent is the commercial discipline/ag initiatives you spoke of earlier playing a role?

Yes, absolutely. So we do continue to see prices improve in our downstream. So we're -- we have been really for the last couple of quarters, putting new orders into the backlog at higher prices. So that continues, and we feel good about that progression. And actually kind of starting out the year, we've had a couple of new orders that have come in, in a really nice place. So I think we feel good about that.

And again, demand has -- in that business remains very solid. And so there's a lot of project activity and a lot on the drawing board. So we're optimistic about where things go there.

The next question will come from Carlos De Alba with Morgan Stanley.

Yes. Thank you very much. Happy new year, everyone. So maybe just add in to the discussion on the new commercial approach in the fabrication business. How much of your business is already in this indexed format where you are able to maybe better protect your margins? And how do you see that evolving in the coming quarters is still not a big percentage of the overall business?

Yes. It's not a big percentage today. and the openness to it among the customers can vary, right? So there are some DOTs, for example, that are more inclined to it than others. So we're working from a relatively low base on that, but we do see the opportunity to increase it and to open the dialogue with customers on indexation.

And indexation is just one of the strategies, right? The other obvious strategy there is just proper escalation. And when you talk about commercial excellence, one of the things that we've been, I think, showing -- the team has done an amazing job on being more disciplined about this is in making sure that, number one, we have proper escalators in place. And then number two, that we're actually enforcing those escalators as we go through kind of go through the period.

So this is a journey. But the way we think about it internally is that over time, it doesn't make sense for companies like CMC to take this type of risk in the way that we've been taking it. And over time, we will work towards reducing that. And that will again contribute to higher margins through the cycle, higher returns, more consistent returns, all the things that we're pointing towards.

And Carlos, I'd just add what we've spoken of is really around protecting the risk from a duration perspective. There's also recognizing the value that CMC brings from a reliability perspective. And I think that is also critical in terms of our capabilities and ensuring we get value for the service we bring.

There's a tremendous amount of risk to a construction project that comes with all the subcontractors. Having a reliable partner as CMC is drives a higher value recognition. And we got to make sure we capture that.

That makes sense. And then what is the EBITDA margin that your $160 million to $170 million EBITDA guidance for CSG represent? And would you say that this guidance -- this EBITDA guidance is somewhat conservative given that you're just starting to take over those assets?

Yes. I mean, Paul, you can comment on the margin, but the -- I would say, look, it's early days, right? And we're doing a lot of work on integration. As I said at the very beginning, we feel kind of good about what we've seen, but there's some adjustment that has to happen as you bring a new company into our company.

And so maybe we're being a little bit conservative, but I think it's appropriate to be cautious. And again, our goal with all of you and with all of our investors is to be in a situation where we are under promising and over delivering. And that's what we're shooting to do here.

And as far as the margins are concerned, it will be made up of the two buckets. Our existing business typically is in the high teens, so call that 18% to 20% margin. We would expect that to remain there. And the precast business combination of the two entities to be in the 30% to 35% range from a margin perspective. So no change. Obviously, it's just a different mix going forward than what we've had historically.

Great. Yes, I missed the spoke a period the $165 million to $175 million EBITDA guidance is not for CSG. It's not the precast.

The next question will come from Mike Harris with Goldman Sachs.

Just one quick question on my part. When I look at the TAG program, I think last quarter, the expectation for the expected run rate annualized EBITDA benefit at the end of '26 was greater than 150. And now you're saying 150. So does that change just a function of timing? Or did you adjust your initiative list or just being conservative.

No, I think -- I don't think it was greater than 150. I think we have moved towards 150 as we've gotten more clarity on the opportunities in TAG. And by the way, as we've said in many other forums, this is just the beginning, right? So it's not like 150 is the end. As we get more fidelity around this that we will share more.

What we're really doing in TAG is we're trying to build durable margin improvement. So rather than throw lots of programs in that we haven't fully vetted or we haven't done the work to make sure that they deliver and they deliver on a sustainable way we're proceeding a little bit more slowly, but I think the outcome will be something that's more lasting.

The next question will come from Phil Gibbs with KeyBanc Capital Markets.

Sorry if this question was asked earlier, but what is the typical seasonality of the North American business from a volume standpoint relative to Q1?

Typically, Phil, it's in the 5% to 10% range that we would expect. Obviously, that is very much weather dependent. And we've seen some inclement weather in the West Coast, certainly Nationally, it's been pretty good so far, but we were only in the early innings of the winter. So typical is 5% to 10%, and that's what we're guiding towards.

And in terms of integrating just baseline depreciation, I'm assuming you're going to have some write-ups associated with the precast deals. I think your baseline for D&A was like $70 million or $75 million in Q1. So what should we be anticipating for Q2?

Yes, it's a great question, Phil. And as we have owned these businesses just for a short period of time and the complexity of some of the purchase accounting, we're not in a place from a D&A perspective, well, really an amortization perspective to provide guidance. There's a lot of intangibles associated with the businesses, and they all have different valuation approaches and durations.

And so what we know is cash flow. The cash flow of these businesses will be certainly very attractive, as we outlined at the acquisition. We were able to achieve the financing at very attractive rates in November and excited about the conclusion of the financing. But as far as the accounting, we are not yet in a position to really provide much outline in terms of what the amortization will be.

At this time, there appear to be no further questions. Mr. Matt, I'll now turn the call back over to you.

Thank you, Nick. At CMC, we remain confident that our best days are ahead the combination of structural demand trends, operational and commercial excellence initiatives to strengthen our through-the-cycle performance and value-accretive growth opportunities create an exciting future for our company. Thank you for joining us on today's conference call. We look forward to speaking with many of you during our investor calls in the coming days and weeks. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Hello, and welcome, everyone, to the fiscal 2025 Fourth Quarter and Year-end Earnings Call for CMC. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer; and Paul Lawrence, Senior Vice President and Chief Financial Officer. Today's materials, including the press releases and supplemental slides that accompany this call can be found on CMC's Investor Relations website.

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 today's discussion contains forward-looking statements, including with respect to economic conditions effects of legislations and trade actions, U.S. steel import levels, construction activity, demand for finished steel products.

The expected capabilities, benefits, costs, and time line for construction of new facilities, the benefits and impact of the pending acquisitions of Foley Products Company and concrete pipe and precast the company's operations, the company's strategic growth plan and its anticipated benefits, legal proceedings, the company's future results of operations, financial measures and capital spending. These statements reflect the company's beliefs based on current conditions but are subject to risks and uncertainties.

The company's earnings release most recent annual report on Form 10-K and other filings with the U.S. Securities and Exchange Commission contain additional information concerning factors that could cause actual results to differ materially from those projected in forward-looking statements.

Except as required by law, CMC does not assume any obligation to update, amend or clarify these statements. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the company's earnings release, supplemental slide presentation or on the company's website. In addition, today's presentation includes financial information that gives effect to the consummation of pending acquisitions pro forma financial information is presented for illustrative purpose only and is based on available information and certain assumptions and estimates that the company believes are reasonable.

The pro forma financial information may not necessarily reflect what the company's results of operations and financial decision would have been the transactions occurred during the periods discussed or what the company's results of operations and financial position will be in the future. 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 Peter.

Good morning, everyone, and thank you for joining our conference call. As you've likely already seen, we have a lot of ground to cover today. First, we are excited to share more about CMC's agreement to acquire [ Foley ] Products Company, after which we will cover our fourth quarter performance, fiscal 2025 strategic progress and our outlook before opening the call to questions.

To supplement today's commentary, we have posted 2 presentations to our IR website, one for the Foley acquisition and one detailing our fourth quarter and fiscal 2025 results. Starting with Foley, we are thrilled to add a best-in-class business with industry-leading margins to CMC's portfolio.

In combination with our recently announced acquisition of CPMP, the addition of Foley will create a high-quality, large-scale platform in the strategically attractive precast industry greatly enhancing CMC's financial profile and growth over the long term. I am confident that the acquisition of Foley will increase our value proposition for customers and shareholders alike. Extending our growth run rate and marking another major milestone as we execute our strategy.

Slide 4 of the acquisition presentation provides a brief overview of Foley. Since its founding by Frank Foley, over 40 years ago, the company has grown into the largest regional precast producer in the United States with 580 employees and 18 plants across 9 states. Foley has a strong track record of growth and best-in-class margin performance, which is a testament to their talented management team and the industry-leading practices they have developed.

We are very excited to welcome them to the CMC family and look forward to collaborating on Poly's continued success. As you can see on Slide 7, the addition of Foley in combination with our recently announced acquisition of CP&P creates immediate scale for CMC's precast platform. Upon closing both transactions, CMC will be the third largest precast player in the U.S. and a leader across the Mid-Atlantic and Southeast, supported by 35 facilities across 14 states.

Our strategic entry into precast will broaden our commercial portfolio to support our customers, enhance our exposure to powerful structural trends in construction offer new capabilities to address construction industry challenges and establish a new platform with a significant future runway.

Slide 8 helps illustrate Foley's best-in-class operations, which will support our ability to build a broader precast platform and unlock further synergies with CP&P. The left side of the page outlines Foley's industry-leading margin and cash flow profile, which has been consistent over time and is enabled by a highly efficient, low-cost operating model.

The company has achieved sustained cost advantages through a combination of centralized production planning, automation, best-in-class manufacturing practices, low-cost support functions and optimize logistics. Foley has also developed a winning commercial formula with leading design and engineering capabilities, lead times and product quality. With the most comprehensive product portfolio of any precast supplier within its core regions, Foley is a true one-stop shop for many construction applications.

These capabilities have given the company enduring competitive advantages which CMC will seek to preserve and strengthen. As highlighted on Slide 9, Foley and CP&P have highly complementary footprints, and we see many meaningful synergy opportunities between the 2 companies. We expect the acquisition of Foley to generate annual run rate synergies of approximately $25 million to $30 million of EBITDA by year 3.

In addition to the $5 million to $10 million of EBITDA we originally identified for CP&P. The majority of this benefit will be driven by applying best practices across our platform, including optimized production planning, manufacturing efficiencies and a simplified structure for support functions.

The expected improvement equates to roughly 35% to 40% of CP&P forecasted 2025 EBITDA, consistent with our previous commentary that synergies would become more significant as our precast platform gained scale. It is worth pointing out that meaningful commercial synergies are likely to emerge but have not been included in our initial synergy estimates.

On Slide 10, we illustrate Foley's highly complementary proximity to both CMC and CP&P networks, which we believe will facilitate optimal coordination to achieve operational synergies and over the longer term, substantial commercial opportunities. As you can see, every precast site in the Eastern and Western U.S. is located near a CMC rebar mill or a fabrication plant.

Allowing us to maximize value over time through close coordination across commercial, operational and support functions. In particular, we are excited by the increased value we can bring to customers in these regions by providing CMCs full suite of early-stage construction solutions from site preparation to structural erection.

Our offering will be unique in the marketplace and will grow more compelling over time as we integrate our portfolio and offer attractive turnkey solutions. While a vast majority of the acquired precast facilities are located within one of CMC's densest, geographic regions, we will also operate on satellite location in Louisiana and 3 satellite locations in the Western U.S., which will provide beachheads in those regions and offer the opportunity for profitable bolt-on growth in the future.

To conclude my comments on Foley, when we began our study of the precast space nearly 2 years ago, we immediately identified fully as a best-in-class operator based on its reputation it's standing among customers and its top-tier financial profile in the construction materials sector. Our due diligence confirmed Foley's attractiveness as a strong business and drove us to execute on this unique opportunity.

I am incredibly excited about both of these announcements, and I am confident the additions of Foley and CPMP will unlock further upside as the cornerstones of our newly created precast platform. Both businesses together will position us to drive significant value for our customers and shareholders alike. With that summary of the deal rationale, I'll turn the call over to Paul to discuss the financial details. Paul?

Thank you, Peter, and good morning to everyone on the call. I will start by saying I share the excitement and optimism both about this transaction and the strategic momentum we have achieved at CMC over the last year. The acquisition of Foley in combination with CP&P is transformative to CMC's financial profile.

As shown on Slide 11, a the creation of the new precast platform meaningfully shift the composition of CMC earnings, increases margin levels and free cash flow capabilities and importantly, should reduce earnings and cash flow volatility in our business. The sum of CP&P in Foley representing our precast platform, is expected to generate approximately $250 million of adjusted EBITDA in calendar 2025, before growth in synergies with EBITDA margins in excess of 34%.

This compares to CMC's core EBITDA margin of 10.7% and the North American Steel Group adjusted EBITDA margin of 12.2% in fiscal 2025. The addition of these levels of earnings by the precast operations will significantly shift the composition of CMC's earnings increasing the combined contribution from our EBG segment and precast platform to over 32% of total operating segment adjusted EBITDA.

Upon completion of the acquisitions, we expect nearly 1/3 of our profitability will be generated by high value-added solutions with attractive market penetration potential, strong margins and cash flow conversion. The lower capital intensity of these businesses also means they require less reinvestment to maintain operations and less capital commitment to grow organically, enhancing free cash flows. Margin levels and normalized free cash flow conversion are both expected to increase meaningfully.

Based on fully and CP&P's forecasted results for 2025 and the addition of Foley and CP&P would have increased CMC's core EBITDA margin by more than 2 percentage points. And given the stability of these businesses, we anticipate this improvement to be sustained over time. In fiscal 2025 alone, the platform would have improved normalized free cash flow conversion by over 4 percentage points.

Now I will cover the major terms related to the transaction. Total consideration will be paid at closing and is subject to customary working capital adjustments. This valuation represents a 10.3x multiple on Fully's expected calendar 2025 EBITDA. Importantly, the effective multiple is reduced to approximately 9.2x and when cash tax savings are considered as CMC will benefit from a tax step-up on assets.

We believe this is a fair valuation for a fantastic asset and the multiple reflects Foley's best-in-class margin profile and business characteristics previously discussed by Peter. It's worth noting Foley's EBITDA margins are 5 to 10 percentage points higher than those of many blue-chip building products and construction material companies that routinely trade at 10 to 16x forward EBITDA.

Importantly, we anticipate the transaction to be immediately accretive to earnings and cash flow per share. The combined total consideration of approximately $2.5 billion related to the purchases of Foley and CP&P will be funded through a combination of cash on hand and committed bank financing. As soon as feasible, we will seek to raise permanent debt financing in the form of corporate bond offerings. Immediately following the completion of both transactions, which is expected by the end of calendar 2025, and CMC's net debt is expected to increase to approximately 2.7x trailing 12-month adjusted combined EBITDA.

As we have stated in the past, we are comfortable with temporarily increasing net leverage above our long-term target of 2x for the right strategic opportunity. as we did with the highly successful acquisition of Gerdau's U.S. rebar business in 2019. We will prioritize delevering in the quarters ahead with a goal of returning below 2x net leverage within 18 months.

This effort will be aided by strong free cash flow generation from the precast platform itself, the wind down of capital expenditures for the construction of Steel West Virginia and significant cash tax savings related to the 48C program and the 1 big beautiful bill. Based on these supportive factors and the positive outlook for our existing business, we are confident in our ability to delever quickly.

That concludes my remarks, and I'll turn it back to Peter to cover the fourth quarter and fiscal year.

Thank you, Paul. I will now turn to our earnings presentation. The goal of our strategy is to drive meaningful and sustainable improvements to CMC's margins, earnings cash flow and returns on capital while reducing volatility in our business. As you can see on Slide 5, we are executing against this objective along 3 paths.

First, by investing in our people and pursuing excellence in all we do; second, by investing in value-accretive organic growth; and third, by driving capability enhancing inorganic growth as we just discussed in detail. Each of these objectives represents a significant opportunity for CMC and taken together, will be game-changing for our returns, scale and ultimately, the value we create for investors.

We made tremendous progress across each of these strategic paths over the last year, and Slide 6 outlines some of our most notable accomplishments I'll start with investing in our people and pursuing excellence. As I've said before, the most important investment we can make in our people is to keep them safe on the job.

And I am proud to report that fiscal 2025 was the safest year in our company's history and marked the third consecutive year of record safety performance. The job of improving safety is never done but we are in an excellent position to maintain our momentum and cement our position as truly world class.

During the year, we also invested in the leadership talent and resources that will support strategic execution across our organization. Within our emerging businesses group, we now have in place a group of veteran leaders who are poised to drive EBG segment performance to new heights.

We are already seeing early dividends in our CMC construction services and performance reinforcing steel divisions as new sales and margin initiatives take hold. Late in fiscal 2025, we also streamlined reporting structures in our North America Steel Group to facilitate decision-making and provide optimal coordination in supporting key initiatives, including our tag program efforts.

On the topic of TAG, we began execution of our operational and commercial excellence program in fiscal 2025, and I could not be prouder of the progress the CMC team achieved during the year. Not only did we generate EBITDA benefits, well in excess of the $40 million we expected, but we also successfully identified additional opportunities to reduce cost, increase efficiencies, cut waste and drive profitable sales in the future.

Looking ahead, I am more confident than ever in this program's ability to drive meaningful and sustained improvement to CMC's financial profile. By the end of fiscal 2026 we now expect to generate a run rate annualized EBITDA benefit of more than $150 million with virtually no related capital investment. The next strategic path is value-accretive organic growth, which we anticipate will represent a meaningful source of new earnings and cash flow over the next several years particularly as our Arizona 2 and Steel West Virginia mill investments reach full operations LI am pleased to report that we made significant progress on both projects during fiscal 2025.

And notably, we achieved a full quarter of positive EBITDA at Arizona 2, for which I would like to congratulate our team out West. I would also like to highlight attainment of an approximately $80 million net tax credit related to Steel West Virginia under the 48C program, which we will realize in fiscal 2026 and effectively reduces our capital investment in this project.

Finally, turning to capability-enhancing inorganic growth, as I've already discussed at length, we have created a large-scale precast platform with the announced acquisitions of Foley and CP&P. We believe this platform will greatly enhance CNC's financial profile, increase our value to customers and provide an avenue for meaningful long-term growth.

Paul will cover the financials, but before this, I would like to briefly reflect on our markets. First, in North America, a combination of resilient construction activity and a balanced supply landscape resulted in favorable conditions for both volumes and margins during the quarter. Shipments of finished steel increased year-over-year and were unchanged from the prior quarter's strong level.

Downstream bid volumes, our best gauge of the construction pipeline remained healthy and were consistent with recent quarters as we continue to see strength across a number of key market segments, including Public Works, highway and bridge, institutional buildings and data centers.

As we have indicated previously, we see substantial pent-up demand, particularly within nonresidential markets. This view is supported by historic strength in the Dodge Momentum Index, or as well as recent conversations with many of our largest customers. The DMI leads construction activity by 12 to 18 months and reached a record high in September driven by growth that was broad-based across several market segments.

Additionally, our customers are increasingly bullish as they experience a large inflow of projects into the pipeline related to energy generation, reshoring, advanced manufacturing and LNG infrastructure. When we look beyond the current environment, we remain confident that the emerging structural drivers will support construction activity over a multiyear period.

These trends include investment in our nation's infrastructure, reshoring industrial capacity growth in energy generation and transmission, the build-out of AI infrastructure as well as addressing a U.S. housing shortage of 2 million to 4 million units. As noted on Slide 10 of the earnings presentation, over $2 trillion of corporate investments across AI, manufacturing, shipping and logistics and energy have been announced in calendar 2025.

And commencement of even a handful of related mega projects could provide a meaningful demand catalyst for CMC's products in the quarters ahead. Moving on to profitability in this segment. We experienced a strong sequential expansion in North American steel product margins during the quarter, achieving the highest level in 2 years. The improvement only partially reflects the impact of the June and July price announcements.

Realized pricing increased steadily throughout the quarter, and we exited at a much higher level than the period average, positioning us to further expand margins in the first quarter. Within our downstream business, we have seen price levels on new bids rise in tandem with the mill rebar price which should support average backlog pricing in the future as these higher-priced bids are converted into new contract awards.

On the topic of backlog, I would note that average pricing stabilized in the fourth quarter following more than 2 years of sequential quarterly declines from the post coated peak. Before I move on to our other segments, I would like to briefly update you on the status of the rebar trade case filed with the International Trade Commission, or ITC, back in June.

The petition alleges exporters located in Algeria, Bulgaria, Egypt and Vietnam, are guilty of dumping material into the U.S. market and should be subject to corrective duties ranging up to 160%. In mid-July, the ITC ruled that the case has merit and has passed it to the Department of Commerce for further investigation. Based on the current case schedule, we expect a preliminary ruling on the antidumping claim sometime in late calendar 2025 or early 2026.

It is worth noting that since filing the case, price levels have increased markedly on several rebar sizes often sourced from the subject countries. Turning to our emerging businesses group on Slide 11. Current conditions are supportive, and we see encouraging signals regarding future activity, specifically solid quoting levels busy engineering firms and improved velocity of quote conversion into backlog.

One attractive element of the EBG segment is the fact that our current solutions are underpenetrated in the market which provides significant opportunities for growth as we drive product adoption in addition to market expansion. In our key proprietary products we are winning share through the strong value proposition while maintaining solid margins.

This dynamic helped us achieve record segment profitability during the quarter as shipments of core solutions such as [ InteraxGeogrid, Galvabar and Cromax ] all increased from the prior year. We have outlined the unique capabilities of these products on prior calls, and we continue to expect a bay along with EPG's other high value-added offerings position the segment to achieve a consistent organic growth rate in the mid- to high single digits and EBITDA margins in the high teens.

Finally, for our Europe Steel Group, conditions improved modestly from the third quarter. Demand continued to normalize as a result of solid Polish economic growth, while on the supply side, import flows ticked up slightly from recent quarters, but remain below the disruptive levels of a year ago. During the fourth quarter, we saw metal margins recover to their highest mark in over 2 years, aided by an improved price environment for merchant bar and wire rod.

The green shoots that we have noted on recent earnings calls continue to mature. We are encouraged by recent developments that the EU is looking to bolster its trade legislation with the implementation of a long-term mechanism that will reduce existing quotas for foreign steel by nearly half. And imports beyond those quotas would be subject to new higher tariffs, which are currently proposed at 50%.

Before turning the call over to Paul, I would like to recognize the efforts of our world-class employees. We have asked a lot of the team as we execute on our ambitious vision for the future, and I am truly inspired by all that they have accomplished so far. Their efforts have been instrumental in laying the groundwork for years of success ahead, and I look forward to maintaining that momentum in the new fiscal year.

With that, I'll turn the call over to Paul to provide more color on the quarter. Paul?

Thank you, Peter. We reported fiscal fourth quarter 2025 net earnings of $151.8 million or $1.35 per diluted share compared to net earnings of $103.9 million and net earnings per diluted share of $0.90 in the prior year period. Excluding estimated net after-tax charges of approximately $3.2 million, adjusted earnings for the quarter totaled $155 million or $1.37 per diluted share compared to $97.4 million and $0.84 per diluted share, respectively, in the prior year period.

These adjustments consisted of a $3.8 million pretax expense for interest on the judgment amount associated with the previously disclosed litigation an impairment charge of $3.4 million and a $2.9 million unrealized gain on undesignated commodity hedges. During the fourth quarter of 2025, we modified our method of calculating adjusted EBITDA to exclude the impact of unrealized gains and losses from undesignated commodity derivatives.

This change was primarily driven by heightened volatility in copper forward markets, which introduced significant noncash fluctuations unrelated to our core operations. The relevant financial figures, including historical numbers have been adjusted to reflect this change, impacting consolidated adjusted earnings, adjusted earnings per diluted share adjusted EBITDA, core EBITDA and core EBITDA margin as well as North American Steel Group adjusted segment EBITDA.

Given the prominence of these metrics, we have published recast quarterly figures dating back to fiscal 2019 in a Form 8-K filing accompanying our earnings release this morning. We believe this change in reporting will provide a more representative view of our operating performance and cash generating capability. Consolidated core EBITDA was $291.4 million for the fourth quarter of 2025, representing a 33% increase from $219 million generated during the prior year period.

Slide 14 of the supplemental presentation illustrates the year-to-year changes in CMC's quarterly financial performance. Segment level adjusted EBITDA increased by $87.4 million in total with our North American Steel Group contributing $36.6 million of improvement providing $8.1 million and the Europe Steel Group delivering $42.7 million. The consolidated core EBITDA margin of 13.8% compared to 11% in the prior year period.

CMC's North American Steel Group generated adjusted EBITDA of $239.4 million for the quarter, equal to $207 per ton of finished steel shipped Segment adjusted EBITDA increased 18% compared to the prior year period, driven primarily by higher margin over scrap cost on steel products and contributions from our TAG operational excellence efforts.

In particular, scrap optimization, alloy consumption reduction, process yield improvements and logistics optimization. North American Steel Group adjusted EBITDA margin of 14.8% compared to 13% in the fourth quarter of 2024. Segment results also improved sequentially as steel product margins continued the expansion that began early in the third quarter.

As Peter noted, we exited the fourth quarter with steel prices on an upward trajectory in steel product metal margins, $31 per ton above the period average, setting the stage for us to generate strong margins in the first quarter of fiscal 2026. As indicated earlier, demand for long steel products was resilient during the quarter. Finished steel shipments increased by 3% compared to a year ago, while rebar shipments from CMC's mills and downstream operations grew at a similar rate.

Emerging Business Group fourth quarter net sales of $221.8 million increased by 13.4% on a year-over-year basis, while adjusted EBITDA of $50.6 million increased by 19.1%. The improvement was largely driven by 3 factors: strong demand for GEO grids and proprietary products within CMC's performance reinforcing Steel division, improved tenor cost performance and the impact of commercial initiatives within our CMC Construction Services division.

Turning to Slide 17 of the earnings presentation. Our Europe Steel Group reported adjusted EBITDA of $39.1 million for the fourth quarter of 2025 compared to a loss of $3.6 million in the prior year period. Segment adjusted EBITDA margin of 14.8% increased from negative 1.6% a year ago. The biggest driver of improved profitability was the receipt of a $31 million CO2 credit, which was the first of 2 payments that will be received this calendar year as part of the government energy cost reimbursement program in place through 2030.

Excluding this, operational results improved by $11.7 million, driven by higher margins a 17% increase in shipment volumes and ongoing cost management efforts. Similar to recent quarters, the team in Poland continued to drive efficiency gains with success in nearly every major cost category, including labor, consumable usage, alloys and overhead.

Most of these improvements are permanent in nature and set us up well to capitalize on market recovery. As Peter mentioned, during the quarter, we saw continued demand growth and a somewhat moderated level of long steel imports into Poland. The combination of these factors provided CMC the opportunity to achieve improved shipping volumes. CMC's effective tax rate was 21.5% in the fourth quarter and 21.3% for the full year.

Looking ahead, we anticipate a full year effective tax rate between 4% and 8% for fiscal 2026. As a result of several factors, we do not anticipate paying any significant U.S. federal cash taxes in fiscal 2026 and for much of fiscal 2027. During fiscal 2026, we will benefit from our 48C tax credit, bonus depreciation on our West Virginia mill investment as well as accelerated depreciation from the assets acquired in CMC's acquisition of Foley and CP&P, which will significantly increase our free cash flow generation.

Turning to CMC's fiscal '26 capital spending outlook, we expect to invest approximately $600 million in total. Of this amount, approximately $350 million is associated with completing the construction of our West Virginia micro mill as well as a handful of high-return growth investments within our EBG segment.

This concludes my remarks, and I'll now turn it back to Peter for additional comments on CMC's financial outlook.

Thank you, Paul. We expect consolidated financial results in the first quarter of fiscal 2026 to be generally consistent with those of the fourth quarter. Finish steel shipments within the North America Steel Group are anticipated to follow normal seasonal trends, while our adjusted EBITDA margin is expected to increase sequentially in of higher steel product margins over scrap.

While we expect financial results in the emerging businesses group to decline on a sequential basis due to normal seasonality and we believe they will improve year-over-year. Our Europe Steel Group will receive the second tranche of the annual CO2 credit in an amount of approximately $15 million during the first quarter. Excluding this credit, adjusted EBITDA for our Europe Steel Group is likely to be around breakeven as seasonal factors and scheduled maintenance outages weigh on profitability.

I am confident in CMC's long-term outlook and continue to believe in our ability to generate significant value for our shareholders. We are executing on several strategic initiatives, which we believe will deliver meaningful and sustained enhancements to our margins, earnings, cash flow and return on capital. We will achieve this by leveraging our TAG operational and commercial excellence program to get more out of our existing enterprise, completing value-accretive organic projects and adding complementary early-stage construction solutions that provide attractive new growth lanes.

Taken together, we believe these efforts will position our company to take full advantage of the powerful structural trends in the domestic construction market for years to come. I would like to conclude by thanking our customers for their trust and confidence in CMC and all of our employees for delivering yet another quarter of very solid safety and operational performance. Thank you.

[Operator Instructions] And your first question today will come from Mike Harris with Goldman Sachs.

This is Celia Tan on for Mike Harris. You mentioned strong growth in the construction industry. So I was wondering how much of that demand is coming from infrastructure, residential, industrial and energy?

Yes. Thank you very much for the questions, Asia. Infrastructure has been very strong. It has been for the past several years really on the back of the IA and we expect it's going to continue to be strong. And I would say that we expect there to be a follow-on bill so that this should be a multiyear trend.

Nonresidential construction, it's been a bit mixed. There have been certain areas that are very strong, areas like energy as you cite, that's been very strong. Data centers, obviously, very strong institutional spending on hospitals. So that type of thing has been also very strong. But then there have been other areas that are kind of weaker, and I'm thinking about kind of commercial buildings, retail has been weaker.

The thing that's exciting about the nonresidential space is that there is a huge backlog of potential projects coming down the pike. And I'm thinking about -- and we've said this before, there are something like $2 trillion of potential projects that are out there that have been announced.

And then there's still a huge pipeline of potential projects that come behind that in some of these trade deals if and when they get negotiated. So we're very bullish about a turn in nonresidential spending, and we'll see that move from kind of what's been flattish to something that's growing again.

And then lastly, residential markets. Residential markets have been lackluster, I would say. And a lot of that is tied to interest rates. Those markets tend to be more sensitive to interest rates but as we see interest rates start to come down, we have confidence that we're going to see a turn in that market.

And remember that we have a deficit of 2 million to 4 million homes in this country. So there's absolutely a demand backdrop that warrants the residential spending. And we just have to get to a place where the economics support that. But we think we're going to see that as rates continue to drift down.

So in total, we are -- we remain very bullish about the level of spending over the next several years. Each of these sectors, it's a multiyear trend.

That's very helpful. And also wondering, given the bullish outlook, why is it that the first quarter outlook is not more positive, especially given the positive performance in the current quarter?

Celia, there's a few moving pieces to our outlook for the first quarter. You're correct. As far as North America Steel Group is concerned, we're going to have a very strong quarter in the first quarter. We often measure the North American Steel Group as an EBITDA per ton and it was great to see in the fourth quarter that the EBITDA per ton of that segment was over $200 a ton.

And as we said in our stated remarks that we exited the quarter with a metal margin over $30 a ton higher than the average for the quarter. So North America Steel Group will have a great quarter. However, if we look at our Europe Steel Group, 2 aspects to that, we talked about the reduction in the CO2 credits. We will get another credit in the first quarter, but it will be roughly half of what we received in the fourth quarter.

So that will be a $50 million impact. And then we have our typical seasonal planned maintenance outage that will reduce the operating performance, excluding the CO2 credits to near breakeven. And the other pieces within the EBG group, because [indiscernible] means a significant portion to that business, and it's really involved in site prep, the seasonality of that business is quite a bit more significant than our other businesses.

So as we guided towards improvement over last year, but a similar type of transition from fourth quarter to first quarter. Those are the major factors, which drive us towards a fairly consistent overall quarter-over-quarter, but many different moving pieces within the portfolio.

Your next question today will come from Sathish Kasinathan with Bank of America.

Congrats on a strong quarter and the announced acquisition with Foley and CP&P, I think you now have a strong scale in the precast concrete market. With this kind of size, do you think the focus over the next couple of years will be to just integrate the assets and reduce debt? Or given the fragmented market, would you continue to look for additional inorganic growth opportunities?

Yes. So that's a great question. So thank you very much. As we kind of look forward with these 2 transactions, I'd say it's fair to say we are done for now. We have quite a bit of integration to do with these transactions, and we're very happy with the platform that we've built.

As we look a little bit further forward, once we bring our leverage down to -- into our acceptable range, then we would start to look at other transactions. We think this is a big market again, precast overall, as we said on the last call when we introduced CP&P this is a $30 billion market, and it's fragmented, and we think there are going to likely be opportunities for us over time. bolt-ons will be super attractive because they typically are cheaper. They come with synergies and are -- they strengthen our core, which is kind of part of the message that we are consistently trying to reinforce.

And bigger transactions will likely be more episodic. But our goal for this platform is ultimately to create one of national scale that looks a little bit like our rebar business, again, and that's -- to do that, we're going to build a platform that's several hundred million dollars of EBITDA. But we're going to do it on a measured basis.

And remember, we've always said from the beginning, we're going to be super disciplined about M&A and making sure that we deliver the returns on the M&A that we do and integrating these assets successfully is absolutely critical to ensuring the success of that going forward.

So very excited about the opportunity -- and these 2 businesses could not fit together better. So anyway, super excited about what we have so far.

Sathish, I would just add, as we've been talking with the investment community probably for 2 years, we've been looking at the early-stage construction and really honing in on this precast market. And the one thing that came up repeatedly was the -- these are the 2 leaders in the space.

And so obviously, we don't dictate timing of when the assets become available, but when they became available, it was imperative that we took a look and tried to build the portfolio that made sense.

Yes, that's great to hear. Just on Foley, it is clear that the margin profile is 1 of the best today, but can you maybe share the historical growth rate portfolio like over the past 2, 3 years? And looking ahead, do you see potential [indiscernible] business to continue like to gain market share and grow above the 5% to 7% market growth.

Yes. I think -- if you look at the growth over of the business over the last couple of years, I think we should assume there's a base level of growth that's kind of GDP related. And then on top of that, there's growth related to kind of share expansions that the business -- the business makes. And in the case of Foley, it has a number of expansions that it's in progress on in its territory today that are in its territories today that will provide opportunities for future growth.

So we would expect to grow at a level in excess of GDP over the next couple of years from a volume standpoint.

And I would just add, Sathish, the margin level that we described in the material the business has generated that consistently over the last handful of years. So very consistent performer.

I'll jump back in queue.

And your next question today will come from Alex Hacking with Citi.

Congrats on the deal. I guess just following up -- on the margin question, Foley's margins look like they're almost double CP&P. Could you maybe give a little more color on kind of what's driving that? And is there a potential opportunity to increase margins at CP&P from learning from Foley.

Yes, thanks, Alex. I appreciate the question. So a couple of things that I would point to. And again, I think as we look at these businesses, one of the things we really like about this is -- and as Paul said, we spent a lot of time looking at these businesses is that they both bring strength to the table.

There are certain things that Fully does really well, and there are certain things that CP&P does really well. And I think the combination of those companies is going to build really a formidable company for -- in our portfolio. If we look at fully specifically relative to CP&P and try to articulate the margin differentials One of the things fully has a different operating model than CPMP.

And so that's a factor. And the other thing that I would say on the CP&P side is that CP&P has made a number of acquisitions recently where they are kind of works in process, and so our works in progress. And so as a consequence, the margins in some of those businesses are lower and they bring down the overall margin.

So if you look at precast in general, it is the case that Foley's margins stand out. But CP&P does if you look at the plants that are kind of the more mature plants, they have very attractive margins there as well.

Okay. And then just following up, I guess, on the cash conversion side, of the $600 million CapEx next year estimate, how much of that would be for precast. And within that, how much would be kind of sustaining versus growth.

Yes. There's -- well, for precast, it's -- the maintenance CapEx on these businesses is much lower. We talked about -- in the case of cPMP, you may remember, we talked about $8 million to $10 million of maintenance CapEx. In the case of Foley, it's probably like a kind of 10 to 15 type of number.

In the case of CP&P for the reason that I just explained to you, they've got these businesses that they've acquired, where there's some investment that we think we can support. Their spending is probably going to be a little bit higher over the first couple of years of our ownership as we kind of bring together the investments that they've made.

And again, those are all -- all of that CapEx beyond maintenance is maintenance or spending that has very attractive returns tied to it.

The only thing Alex I'd add is Peter is talking about annual numbers. And as we talked about really -- we expect the transaction to close in -- by the end of the calendar year. So the numbers in our fiscal will be a lot lower than those in.

And your next question today will come from Carlos De Alba with Morgan Stanley.

And maybe a follow-up on the prior question. How quickly do you think that the margins in CP&P and particularly in those recent acquisitions could bring up or come to the levels that fully and maybe the core CPP business is already experiencing -- is it your a year or 2 years.

Great question, Carlos. So the one thing I'd say is we want to be a little careful. We don't own these businesses yet. So we need to kind of close on the transactions and better understand what we have. And with that understanding, will come more clarity on the time frame. But I think the appropriate way to frame it for you at this juncture is that we talk about the synergies as being achievable over a 3- to 5-year horizon.

And I think that, that's the right horizon to think about for any kind of improvement in the CP&P margins. Obviously, there are some things that will be -- that will come quick and then there's other things that will take longer. I just mentioned before in response to Alex's question that we're going to put some extra capital into the -- to the tune of kind of $5-ish million per year into CP&P and that will be to accelerate some of that.

And again, that's all really high return capital that we'll be deploying.

Right. So the $5 million to $10 million incremental EBITDA in CPP that you mentioned, that includes this recent acquisition by the company stepping off the EBITDA generation, right?

No, just to be clear. So when we announced CP&P, we said that there was $5 million to $10 million in that transaction. We maintain that, right? That's -- and then in this transaction, we're bringing another 25 to 30 over a 3- to 5-year period. So it's -- that's why -- and you'll remember in the last conversation that we had when we acquired -- or when we announced the acquisition of -- we said that as we have a platform, we would have more synergies with successive moves -- and this is a great example of this.

And honestly, you might ask a question about the timing of these 2 transactions. And obviously, we couldn't call the timing but I think when you see that magnitude of synergies, it makes it clear why this was a transaction we had to look at seriously. So it's -- yes, it's an extra $25 to $30 in this transaction.

Right. Fair enough. And my second question is regarding the outlook for dividends and buybacks vis-a-vis the cash flow generation of the company. You did mention that the acquisitions of both of them are going to be accretive to free cash flow. You're not going to really pay a lot of cash taxes in the next 2 years. How do you see dividends and buybacks in the coming quarters?

Yes. So let me just say -- to answer your question directly, on dividends, we will -- we have no plan to change our dividend, zero plan to change our dividend. And I'd say also our long-term capital allocation strategy is not changing at all, not at all.

What I would say is that we are done with acquisitions for now, and we're going to focus on the big acquisitions for now, and we're going to focus on integration and making sure that we make these transactions highly successful and great return investments for our business. We will continue the organic growth projects that we've started across the company.

As we move past Steel West Virginia, these will be much more capital-light investments, but we will continue those and we will slow down our share repurchase program and probably bring it to a level where we're offsetting employee share grants in the short term as we get our leverage back down below the 2x target.

And as we -- once we get to the 2x target or below, we'll then ramp up share repurchases. Share repurchases are a critical part of our capital allocation strategy and we intend to resume those as our balance sheet comes into line.

And Carlos, we're very confident in both the numerator and the denominator in terms of being able to bring that leverage down in terms of the -- you mentioned the cash flow and the lack of U.S. cash taxes, the reduction in CapEx going forward and the optimism in the current environment in our business is that cash flow generation is expected to be very strong and then that also is helping the EBITDA that we expect the business to generate over the coming periods is also expected to be strong.

And therefore, we should -- both aspects should help us achieve that 2x net leverage over the coming quarters.

And your next question today will come from Bill Peterson with JPMorgan.

Yes. Congrats on the second transaction here in a few months. Along those lines, that have a longer-term question, maybe more sort of for a capital market statement. Given these transactions, how would you envision the company looking like in sort of a 5-plus year time frame in terms of product mix, rebar versus long products, ground stabilization, precast or other materials given the margin structure on these newer businesses and acquired companies, would you consider selling core assets in order to accelerate the transition? I'm just trying to get a sense on how we should envision this company over the long term.

Yes, it's a great question. If you think about the strategy that we've outlined, it's one of becoming an early-stage construction supplier. And if you think about our rebar business, our fabrication business, these fit perfectly and these are early-stage construction suppliers. You think about our [ Tensor ] business, it's early-stage construction.

Think about our recently acquired precast platforms, early-stage construction, PRS, performance reinforcing steel early-stage construction and construction services, same thing. So if you look at the portfolio that we have today, we've got a number of interesting assets that we can build on, and that's one of the things we find so compelling about the portfolio to become a leader in early-stage construction.

So when we talk about our precast business. Again, as I said in response to an earlier question, our goal is to build that into something where we have a national footprint, and that's going to mean kind of several hundred million dollars of EBITDA with these 2 transactions, we're well on the way to doing that.

And with the footprint that Foley brings, I think we have a beachhead to examine some of those markets that -- by the way, we know well because we're already in those markets with our rebar fabrication and our mills business, right? So there's a very natural path that we're following. As we look at our other EBG businesses, we would love to grow Tensor.

We think that has great potential, and it's still a very underpenetrated market. It could be -- it will be an important piece of our portfolio. performance reinforcing steel. The plant that we have today is sold out. So we're building another one. And we believe that the demand for corrosion-resistant steel in this country given some of the changes in weather and so forth is only going to increase.

And Construction Services is a tremendous asset. We talk to customers and the customers tell us the construction services business where we are, and it's really a small segment of our footprint, which is really Texas, Louisiana and Oklahoma. It's a great asset to the customers we have. So that's something that we're looking at as a potential way to kind of complement the early-stage construction portfolio that we're building.

So -- it's -- as we look at the portfolio, again, what we want is we want businesses that can be of scale and that can be of significance to our customers. We want businesses that bring value to our customers so it's difficult to define the portfolio precisely, but the direction that we're going is we want value-added products that have high margins and kind of good returns on invested capital.

And I want to just come back -- sorry, this is a long answer, but I think this is important. I want to come back to our steel business and TAG and the whole mission of TAG is to improve the great platform that we already have in steel. And it is so critical when we talk to the customers, and I'm talking about big contractors, they tell us, you guys are -- your franchise in the steel market is tremendously valuable to us because you do what you say you're going to do and you do it when you say you're going to do it.

And TAG is helping us make that business even better. And our goal with that business is to raise the margins through the cycle so that they start to look like the margins in some of our kind of ultimately some of our EBG businesses. So again, this is a -- it's a multiyear journey, but we think we have a lot of opportunity.

And the team that's executing the tag program within our company is doing a phenomenal job. So Anyway, Bill, I know that's a long answer to your question, but hopefully, it gives you some color.

No, certainly. My next question is more, I guess, near-term focused. And you talked about typical seasonality across several of these sectors. But I guess, on North America, if you look back, this would imply something like a down 3% to 7% quarter-on-quarter -- but we've seen a lot of variability over the last 5 years or so.

And I would assume you're really talking more driven by the downstream versus products. But can you unpack what typical seasonality is really meant here and what that may look like for the various subsegments of your business?

Yes, Bill, the season, September through November, really, it is a good construction season similar to our fourth quarter with the exception of the week that we lose for Thanksgiving. So really, we see -- it's usually that 2%, 3% reduction in volumes that we see in the first quarter on the North American Steel Group.

As I said in an earlier answer, we do see impacts to the other segments, a little bit stronger given the more cyclical nature of site preparation, which drives a lot of the EBG business. So that one is a little bit more seasonal. And as you saw last year, and then Europe with the outage is less seasonal, but the outage season.

Appreciate it.

Your next question today will come from Andrew Jones with UBS.

I just want to better understand the barriers to entry in this business. I mean, to me, it looks like it's a pretty fragmented business, you obviously called out a few things on the slide including relatively high capital costs. I mean, could you give us some idea in terms of how to sort of quantify those?

And when you talk about the steep learning curve, can you kind of give us some sort of sense as to how complex this is? Because I mean, just high level, our fragmented business usually means a much lower margin than we're seeing in these numbers.

Yes. So again, if we look at what drives this business, it starts with customer relationships, right? And if you look across the portfolio, of CP&P or Foley, they've got great relationships in the region that connect them and obviously a reputation and the capability to service these -- the jobs that they're getting.

And I think obviously, reputation, just like in our rebar fabrication, it's critical that you deliver the products on time and that you deliver good quality products and that you help the contractor accelerate their jobs. So those are really important -- and the third leg of this is capability. And when you look at the capabilities of both CP&P and Foley, they bring a broad-based precast capability.

So you can be in the precast business pretty easily if you kind of have a concrete mixer and a mold. But the point is that most of these complicated job sites, they need a lot of different forms to be -- to serve the precast need. And so as a consequence, the capability that both of these companies have across the concrete pipe and precast fronts gives them a differentiating capability to perform in the market on these complicated jobs.

And the last thing I would say is, and this goes to the speed point is that having some scale helps a lot on these larger jobs because, again, what the contractors will tell you is when they start a project, they want to go fast. And so they don't want to wait for material. And the party that can have the material available has a real advantage in supplying the product.

The percentage of...

Andrew, can you start over because we lost a follow-on.

No, no, I [indiscernible] clear.

And your next question today will come -- and your next question will come from Katja Jancic with BMO Capital Markets.

Maybe just quickly Peter, did you say earlier on in the call that you would like to grow the precast business to $700 million in EBITDA. Did I hear that correctly?

No, no. several hundred million dollars several hundred million dollars. And sorry, go ahead.

No, no, you go. Sorry.

No, I was just going to say several hundred million. And again, between these 2 acquisitions, we're already at $250 million. So we've got a good start.

And I think before -- with the announcement of the first acquisition, the commentary was that most of the growth there is more likely through M&A. Is that correct?

It is. It is -- I mean, again, there are organic projects, and I noted 2 of them earlier in this call Foley platform, and there's a number of organic growth projects in the CPMP platform. But again, to build scale and the scale that we're talking about doing, as I said in the last call, it's likely going to involve M&A.

The good news is that now, as I said, we have a real platform that we can build around. So bolt-on acquisitions that come with lots of synergies will be very appealing. And then when they come around, some of these -- the larger acquisitions, which are not going to be every single day. But when they come around, we'll be in a position to look at those as well.

Just to supplement that, Katja, I would say the step change comes from inorganic growth. I think as we look at the trends in these businesses, we see above-average growth for the adoption and penetration of precast product. They really solve a labor shortage issue.

They solve storm water management issues and that has been what really has driven some good size growth. And if we look at the regions in which these businesses operate the growth expectation of construction activity in their geographies is expected to be very attractive over the coming years.

And your next question today will come from Phil Gibbs with KeyBanc Capital Markets.

A question about the CapEx guidance for this year, around $600 million. Does that include CapEx related to the businesses that you're poised to close on? And if not, what's the typical maintenance level of CapEx associated with those businesses?

Yes it does not. That's a CMC CapEx number, but Phil, you may have heard us say in response to an earlier question, the maintenance CapEx for these businesses, it's probably $8 million to $10 million for CP&P and probably 10 to 15 for Foley. So they're not big CapEx numbers.

That's a percentage of their revenues.

No. That's million dollars.

Yes. So it's generally 3% to 4% revenue in this precast space is the maintenance CapEx, a very generic number, but that's it's very capital light.

Okay. And as you've really pivoted and accelerated the strategy to acquire some of these more upstream-oriented construction-facing businesses in the United States, particularly in the Southeast and Mid-Atlantic. Do you think that -- do you think that, that means that there should be a more natural buyer perhaps for your European assets?

Well, so again, from a -- when we look at our European assets, I think I've said this in the past, we really, really appreciate those assets for what they bring to the CMC family. And I would just point to the tag kind of initiative that I mentioned earlier on the call, the team in Europe has done just a phenomenal job on being low cost, and there's a lot that we can extrapolate from what they've done to help us in North America.

And one of the things that our team in North America is absolutely dead set on is that we will be a low-cost producer in our steel business in North America. So we -- the Polish business brings a lot to the table, and it's absolutely a core part of our portfolio.

At this time, there appears to be no further questions. Mr. Matt, I'll turn the call back over to you.

Thank you very much. At CMC, we remain confident that our best days are ahead. The combination of the structural demand trends we have noted operational and commercial excellence initiatives to strengthen our through-the-cycle performance and value-accretive growth opportunities, including our recently announced precast acquisitions create an exciting future for our company.

Thank you for joining us on today's conference call. We look forward to speaking with many of you during our investor calls in the coming days and weeks. Thank you very much, everybody.

This concludes today's CMC conference call. You may now disconnect.

Hello, and welcome, everyone, to Commercial Metals Company's Financial Community Conference Call to discuss its acquisition of Concrete Pipe & Precast. Joining me on today's call are Peter Matt, CMC's President and Chief Executive Officer; and Paul Lawrence, Senior Vice President and Chief Financial Officer.

Today's materials, including the press release and supplemental slides that accompany this call can be found on CMC's Investor Relations website. 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. construction activity, the company's future operations, the company's future results of operations, financial measures, capital spending and the benefits and impact of the pending acquisition of Concrete Pipe & Precast.

These and other similar statements are considered forward-looking and may involve certain assumptions and speculations that 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 and forward-looking Statements section of the company's latest annual report on Form 10-K and other filings with the U.S. Securities and Exchange Commission.

Although these statements are based on management's current expectations and beliefs, CMC offers no assurance that these expectations or beliefs will prove to be 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 any 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 press release of supplemental slide presentation 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 I will turn the call over to the President and Chief Executive Officer, Peter Matt. Please go ahead.

Good morning, and thank you for joining us. Paul and I are very pleased to be with you to discuss CMC's agreement to acquire Concrete Pipe & Precast LLC or CP&P. This is an incredibly exciting announcement, which represents a meaningful advancement in CMC's growth strategy and one we believe will create long-term value for both our customers and our shareholders. We are particularly excited to welcome CP&P's world-class team to the CMC family.

CP&P brings a strong culture of respect, integrity, excellence, continuous improvement and innovation that mashes well with CMCs. Concrete Pipe & Precast establishes a scalable new growth platform for CMC in a highly attractive industry. CP&P is a long-standing and trusted supplier of a full suite of standard and highly engineered products that serve mission-critical applications in infrastructure, nonresidential and residential early-stage construction.

They are focused in the Mid-Atlantic and South Atlantic regions of the U.S. and hold the #1 or #2 positions across each of their core geographies. Their solutions complement CMC's existing product suite, expanding our role with key customer groups and in complementary geographies to bring us on to construction sites earlier in a project life cycle. CP&P's operational footprint, which includes 17 plants align strategically with our own as every CP&P facility is within 100 miles of a CMC mill or rebar fabrication site.

We believe this tight geographical overlap will help us fully capitalize on the opportunities we see ahead. As we have previously discussed, CMC's priorities in making a strategic acquisition are, number one, expanding our commercial portfolio and early-stage construction solutions; number two, improving our financial profile; and number three, meaningfully extending our growth runway. CP&P's checks every one of these boxes.

In this, we see a clear right to win in the precast space. The acquisition of CP&P will allow CMC to leverage our existing participation in early-stage construction and our deep knowledge of customers, applications and geographies to drive value-accretive solutions for our customers. The acquisition broadens our portfolio of value-added solutions that are critical to nearly all construction projects and will open up new conversations and early entry points with customers.

Moreover, CP&P's products also improve our ability to address key pain points in today's construction landscape. We are enhancing CMC's financial profile through the addition of a business with higher, more stable margins and lower capital intensity than our traditional steel operations. Finally, we are creating a highly scalable new growth platform in a large and attractive industry, while increasing CMC's exposure to the structural tailwinds that should benefit construction demand for years to come.

Zooming out on the precast industry at large, you can see on Slide 8, some of the characteristics that make the sector attractive to us. With a total addressable market of approximately $30 billion, precast is large and growing faster than the broader concrete sector. This growth is supported by the general trend in construction demand plus increasing market penetration. We believe this advantage is durable. Adoption is being driven by the ability of precast materials to save labor on the job site, deliver reliable quality and provide more predictable project time lines.

Another element that makes precast attractive is the financial characteristics of the industry. EBITDA margins are relatively stable and generally above 20%. While like I mentioned earlier, capital intensity is lower than steel meaning more cash flow is retained by the business rather than expanded to maintain operations. On the same slide, you can see the anticipated benefits of entry into precast for CMC specifically. This transaction increases our exposure to the powerful structural trends we believe will provide long-term support to construction activity.

Precast and concrete pipe products are essential to nearly all construction sites and will benefit from growing levels of infrastructure investment, reshoring of industry, the build-out of AI infrastructure and addressing the U.S. housing shortage. In fact, as a result of its solid lineup of utility products, CP&P is already capitalizing on investments in data centers and manufacturing plants in its core region, which is one of the fastest growing in the U.S.

There are areas where the addition of precast solutions will not only deepen but also broaden CMC's exposure to key structural trends. This includes stormwater management, where we have a few capabilities today, but with the addition of CP&P, we'll be able to better capitalize on investments to reinforce municipal infrastructure against elevated storm activity.

In addition to supportive trends in construction demand, precast also benefits from trends in construction execution strategy, labor scarcity, the drive to shorten project time lines and the desire for consistent quality, all benefit demand for precast products which are manufactured to precise specifications in a controlled manufacturing environment, require far less labor to install and are less vulnerable to on-site delays.

The precast industry is fragmented at both the national and regional levels with the top 10 players constituting less than 25% of the domestic market. This fragmentation presents opportunities to expand inorganically and increases the executability of transactions supporting our belief that this acquisition is establishing a highly scalable platform for CMC as can be seen on Slides 10 and 12.

Additionally, services localized with most product shipments occurring within 150-mile radius of a facility, local expertise is also needed to understand engineering conditions and building codes. This landscape provides the ability to build strong and defensible positions that generate solid and stable margins. As we scale up CMC's precast platform, we anticipate steadily enhancing economics by unlocking greater opportunities to capture operational, logistical and commercial efficiencies.

Core to our organic growth strategy is the broadening of CMC's commercial portfolio in a way that advances us towards a long-term vision of becoming a true partner to our customers, capable of designing, planning and optimizing early-stage elements of their construction projects. The addition of precast is consistent with this goal, the upside potential is evidenced in several areas where we already see a high degree of project and customer overlap.

One such example is in the data center space where precast is used extensively for dry utility access and water management and will complement CMC's current offerings, which include rebar and post-tension cable for foundations, forming ensuring for tilt wall erection, tensile products for paved surfaces and even merchant bar for ceiling joists. In the future, this significant overlap will provide CMC with an opportunity to offer turnkey solutions to our customers that optimize their project schedules and mitigate risk.

Another example is highway construction where we see strong customer alignment in CP&P core regions that can be leveraged over time. Before moving on, I would also again note that the business operates with similarities to our fabrication business. Both Precast and CMC's fabrication business are local in nature requiring deep market knowledge, strong customer relationships and a good reputation to succeed.

These are areas where CMC excels. Stepping back from today's announcement, I want to remind you that our growth strategy is designed to achieve higher, more stable margins and cash flows through the cycle. This common thread connects all our strategic initiatives from TAG to organic and inorganic growth investments. Each of our strategic actions is targeted to increase the efficiency of our capital and grow returns over time, and we are confident this acquisition will be accretive to that aim. We are incredibly excited to be entering this $30 billion industry with such a world-class team and see a tremendous opportunity to build on this platform over the short, medium and long term.

With that summary of our deal rationale, I'll turn the call over to Paul.

Thank you, Peter, and good morning to everyone on the call. I will start by building on Peter's remarks regarding the acquisition's impact on CMC's financial profile. Through the purchase of CP&P, we are adding a new complementary earnings driver with higher, less volatile margins and a strong rate of cash flow conversion.

Slide 14 illustrates this point. You can clearly see the relative stability of precast concrete pricing compared to rebar over the last 20 years as well as the expansion over concrete, which is the largest cost input. Not only are the margins higher and more stable, but the lower capital intensity of the precast business means more cash is retained on every dollar of EBITDA generated. The conversion of EBITDA to after-tax free cash flow is generally above 70% across the precast space, CP&P included, which is higher than CMC's current rate.

This is the kind of attractive financial profile we are seeking to integrate over time as we execute our ambitious growth strategy. On a post-transaction basis, we expect that the acquisition of CP&P will be accretive to our through-the-cycle EBITDA margin by approximately 50 basis points. This business will be included within the emerging business group and will increase the pro forma EBITDA contribution from this reporting segment to over 20% of the total compared to 15% over the trailing 12 months ended May 31, 2025.

Slide 17 outlines the major terms related to the transaction. Total consideration of $675 million will be paid at closing and is subject to customary working capital adjustments. This valuation represents a 9.5x multiple on CP&P's expected calendar 2025 EBITDA. Importantly, the effective multiple is reduced to approximately 8.5x when cash tax savings are considered as CMC will benefit from a tax step-up on assets.

As we have noted on previous calls, we are committed to buying down the multiple on strategic transactions to a level equal to CMC's average EBITDA multiple within a few years. What this requires is to quickly and sustainably grow earnings in the early years of ownership, which we have a plan to do and are confident in our ability to execute. I would like to highlight that we anticipate the transaction to be immediately accretive to earnings and cash flow per share.

We expect to generate annual run rate synergies of approximately $5 million to $10 million by the end of year 3 with the majority sourced from identified and clearly executable optimization initiatives. Long term, we anticipate meaningful commercial synergies as CP&P is integrated and we unlock the full potential of CMC's expanded commercial portfolio.

Synergies will become more significant source of economics in future transactions as we scale this platform. The acquisition is structured as an equity purchase. We anticipate closing the transaction with cash on hand. The time line to complete this purchase is subject to regulatory approval and customary closing conditions, which should be obtained by the end of calendar 2025.

Upon transaction close, we anticipate CMC's pro forma post-transaction net debt-to-EBITDA ratio to remain modest at approximately 1.1x, giving us ample financial strength to continue share repurchases. That concludes our prepared remarks, and I'd now like to pass to the operator to open the call for questions.

[Operator Instructions]

And your first question comes from Sathish Kasinathan with Bank of America.

Peter and Paul, congrats on the announced acquisition. So my first question is on the potential growth opportunities. If you look at the Slide 4, it seems there is strong growth potential for CP&P to grow into markets such as Texas or other regions where CMC has much greater presence. So can you talk about the growth strategy? Is it going to be organic or inorganic growth? So longer term, do you see CP&P having a potential to become a national player?

Thank you for the question, Sathish. We like the space a lot, and we do think that there's a very nice opportunity for us to grow this platform over time. In the short term, we see organic opportunities in working with the CP&P management to unlock some of the earnings potential of the asset. So that will drive not actually capacity expansion but earnings expansion. So we're excited about that. And then beyond that, we think there's a substantial opportunity to grow this through inorganic initiatives. And there, what we like is -- in this business, we think it's possible to create what we'll call regional strongholds while we consolidate into a national platform.

So I think again, with M&A, it's always chunky, so we're going to have to see how it comes. But there are a lot of very small players. So -- and then there are some regional players and we'll -- we're going to be looking at those to try to knit together something that mirrors the kind of footprint we have across the southern part of the U.S.

I mean, maybe another question is on Slide 15, you talk about potential line of sight for $20 million to $25 million of EBITDA growth by year 3. Can you maybe share some thoughts on how you expect to drive this? And I assume this doesn't include any of the potential growth opportunities into other regions?

Yes, that's correct to your second question. Let me just start by saying, so we also talked about $5 million to $10 million of synergies. And those are mostly operational synergies, and they would be included in that number. And beyond that, we would -- and by the way, those operational synergies are coming really from working with the CP&P management team to unlock some of our capabilities through kind of enhanced purchasing, enhanced logistics places where we can invest a little bit of capital, not huge dollars, but to unlock some of their earnings potential.

So those would be more on the operational side. And then the difference between that 5% to 10% and kind of the overall number that you cite is really in commercial synergies. And we see substantial opportunities for commercial synergies. In the near term, let me just give you a couple of examples of where I think that plays out. And I'm just going to talk about it in a baseball analogy in terms of at bats. So if we think about having -- these businesses are very local in their nature, right?

And so if you think about our rebar fab business, the business is sourced through kind of local relationships. And similarly, with the precast business also sourced through local relationships. So just by way of example, CP&P is on a manufacturing job that is in the Southeast, that's a very big manufacturing job and CMC is not on it. So again, the fact that the one is on it and the other one is not on it, it gives a potential for an at bat for CMC.

Going the other way, I'm thinking about -- or I'm pointing to a -- I would point to a DOT job where CMC is on the -- or is contracted, but the CP&P is not. So I think there are opportunities like that across the footprints that we share in common to gain greater visibility and help each other to number one, be successful in the product category that starts there, but also extending it to other CMC product categories.

Longer term, and I think where the real kind of what we're really playing for in this transaction is that over time, our goal is to build an early stage construction platform that increases our importance to our contractors, gives us a bigger seat in the table and allows us to deliver more content and more value. We talked in our prepared remarks about designing, planning and executing and we use the word turnkey. So those are -- that's where we're aiming to. And we believe that with the ubiquity of precast products that this is going to really help us do this over time. So very excited about the ability to achieve that overall incremental EBITDA. And again, I think if you do the math on that, it will show you that we're bringing on multiple just as we said we would down to the multiple that CMC trades at.

Sathish, I'll just add, there's 1 more component to why we're excited about this business, and it's really the market growth and the penetration of precast versus cast in place that has grown very nicely over the last 5 years and allowed for good revenue growth and that market penetration we're expecting. So also expecting the market growth both from a penetration as well as the markets in which CP&P operates today are very strong growth forecast for construction activity.

And your next question comes from Katja Jancic with BMO Capital Markets.

Peter, you mentioned that you're basically building an early-stage construction platform. When you look at the emerging business group's portfolio post this deal, do you still see opportunity to further expand into other products? Or is the portfolio as you have, you're happy with it?

Yes, it's a great question, Katja. So we -- let me just -- if you'll bear with me, let me just step back from this to say this is not -- this acquisition is not something that just popped up. We've been studying this space, the early-stage construction space for really 2 years now. And we've been engaged with this asset CP&P for well over a year. So this is something that we very deliberately kind of identified as part of a strategic thrust recognizing the fact that in our core steel mill business, we can't really expand that, as we've said to you in the past.

So we -- one of the things that was a criterion and looking at different business segments was to find a segment that we could grow in so that we don't have to keep adding new product lines, new capabilities, right, something that was scalable. And what we liked about the precast space is that it is -- we really believe given the fragmentation and given the growth opportunities that Paul just talked about that this is scalable.

And so I think in terms of a focal point, we will be focused on precast and, let's say, our existing portfolio and expanding that. Tensar we believe, has growth potential to it. Obviously, [ bridge systems ] has growth potential. We're investing in our GalvaBar and our performance reinforcing steel business. So we think we've got a nice portfolio of early-stage construction products. What I will say is that we need to keep our eyes open. And over time, we may consider other products but that's not our priority today. Our priority today is we like the space, and we think there's an opportunity to grow in it.

And your next question comes from Carlos De Alba with Morgan Stanley.

Peter and Paul, just following on the line of conversation. It seems that you really want to grow this business multi-region and potentially nationally. Would you consider using more debt and increase your leverage to do so, arguably more rapidly than just through cash as is the case of the CP&P deal. And given maybe the more stable EBITDA, increasing your leverage would not be such an issue?

Yes. So let me just start and then I'd like Paul to jump in on this, too. So we know we have debt capacity, but we're also mindful of the fact that we need to maintain flexibility given the business that we're in. So we are -- our target is to stay within this 2x debt to EBITDA. And that is really kind of our focal point at this point. This business, with this acquisition, we don't even come close to that. We're a 1.1x debt-to-EBITDA. But maybe I'll throw it over to Paul to make some additional comments.

Yes. If we look at our capital allocation strategy that I think we've been very clear on we've said we'd be very disciplined and balanced. And I think we provided an outlook in terms of where we would look to invest from a growth perspective. As Peter said earlier, we've been studying this industry for a long period of time. Early stage construction is what we would like to do. We're looking for businesses that have higher through the cycle, more stable margins and acquisitions that would be in the nature of this size. And CP&P ticks all of those boxes.

So from a capital allocation perspective, this does not change any of our priorities. We remain focused on growth. As we said, the balance sheet remains an asset to us in terms of the strength and flexibility that it provides. And so yes, for the right opportunity, we would certainly love to continue to leverage that balance sheet for acquisition opportunities that demonstrate the same characteristics of CP&P.

Carlos, could I just add 1 additional point to this. As we said earlier, inorganic growth, we can't call the timing on it. So it's -- we don't know today what is going to come our way. So I do want to be clear about the fact that depending on what comes our way, could we bring the leverage over 2x? It's possible. It's not our plan. It's possible. But if we did that, we would have a plan to bring it very quickly down to below 2x.

So I just want to kind of make sure we're clear on that point. And to echo Paul's point, a strong balance sheet is absolutely core to who we are, excuse me, and we're going to maintain a strong balance sheet.

Fair enough. And then if I may, is there any color or details that you can share in terms of the timing as to when you are going to realize the cash tax benefits that you alluded to?

No, Carlos, we do believe that the transaction will be immediately accretive. We do anticipate closing the transaction before the end of the calendar year. So to that end, we believe that it will be accretive here in our fiscal 2026, which we're already in, and that will be both from a cash and EPS perspective. But the cash tax benefits certainly has been enhanced based on the Big Beautiful Bill and some of the provisions that allow for accelerated depreciation, which allow us to reach or recognize those cash tax benefits sooner rather than later.

And your next question comes from Timna Tanners with Wells Fargo.

Thanks for all the color and the presentation. I wanted to, if I could, ask a little bit more about CP&P. We're not really familiar with that business. So I know you said it had more stable EBITDA margins, but could you talk a little bit about what the actual EBITDA look like through cycles or expand on that? And then along the same lines, if you could talk to us about why Eagle wanted to sell the division? That would be great.

Do you want to take the first one?

Yes. So as far as the business, it has had very strong growth, both top line and EBITDA. As outlined in terms of the presentation, what we're expecting in 2025 is EBITDA slightly north of $70 million with an EBITDA margin in the low 20% range, so in low to mid-20s. So that is what CP&P has delivered. Their business continues to benefit from the strength of the markets in which they operate. Their backlog levels are meaningfully up versus 12 months ago.

And so we expect that the revenue should continue to grow. And we're very confident that not only are these EBITDA multiples of what they've recorded today, sustainable, but also growable by the activities in that CP&P has in flight already as well will be augmented by some of the efficiency and optimization that we will bring from our expertise and capabilities.

And vis-a-vis the rationale for the sale by Eagle Corp, it's a family entity, and the family is not connected to the business. And so again, I think this is just an opportunity to monetize an investment for the family.

That makes sense. On Slide, I think, it's 8, you talk about adoption tailwinds. And I'd just like to understand those a little bit better. I think labor savings seemed really compelling obviously, time, regulatory, et cetera. Can you explain how that business really saves on labor and project efficiencies?

Yes, absolutely. So if you think about a precast product, what happens is it gets made in a factory as opposed to the alternative is cast in place, so you are beyond the construction site, and you'd actually make the -- effectively make the product on the construction site. So you can imagine if you bring a finished product to the construction site, you need less labor on the construction site to make it. So that's point number one, in terms of labor efficiency.

And obviously, there's time there, too, because you've got -- there's a whole process to cast in place. The other piece that I think is really important is that as you think about increased weather delays, and we've talked about this in some of our projects. I know all the people have talked about it in the case of their projects. When you have inclement weather, it's harder to do and sometimes you can't do a cast in place right?

So for example, you lose a construction day because of weather or you definitely lose a cast in place day. So it just adds more time on to your schedule, whereas if we make it in a factory, we bring it to the site, depending what that weather is, we might be able to install that, the precast product, in those conditions where you might not, for example, be able to do cast in place. So in that regard, it can save substantially on time. And as you know, from a construction perspective, that's hugely valuable to our contractors.

And your next question comes from Bill Peterson with JPMorgan.

Congrats on the acquisition. A lot of the questions have been answered thus far, but I'm curious as being not that familiar with these precast solutions. What kind of barriers to entry are there? Is it really just more of a regional play, you need to be fairly close to your customers? Is there any technical barriers to entry, commercial barriers to entry. Just trying to get more color on the sort of how the markets operate.

Yes. I would say there are -- again, in any particular region, there are established players. So there are relationships that are in play, just like what we have in rebar fab, and those relationships are very sticky. I can tell you, as I go around and meet with general contractors, they have long memories about who has stood by them and who have served them well over time, and they stand by those, right?

And so the relationship piece is very important. The other piece that I think is really important here is technical. And there -- these products are -- they're not easy to make. And again, I would analogize that in some ways to some of our rebar fabrication applications, where some of these fabrications that we do are quite complex.

And in this business, you've got some very complex forms that are made and not everyone can do them, and particularly when you start getting into the more engineered or more specialty products here. So I think that the technical knowledge is also a barrier. The third thing I'd point to is capital. Capital is a barrier and it depends on -- if you're talking about this marketplace, right? You've got 2 big national players. And then you got some regional players and then a lot of small players. So if you think about kind of the capital it requires to put in a pipe plan that's a pretty significant number for a small business.

If you're talking about adding precast capability, that's still a pretty significant number for a small player. And so I think the capital does become a barrier and particularly as the industry advances and companies get more sophisticated with their manufacturing, I think that becomes an increasing barrier. So I'd point to those 3.

Yes. trying to frame how to ask it, but how should we think about any sort of pull-through on rebar from -- I guess this would be sort of an internal customer on one hand? And then I guess, just maybe more information or more color on how this could pull rebar demand from your existing business, I guess, on a given construction site? Just trying to get a sense for how those synergies may play out.

Yes. And there is some of that. They do consume rebar, and we could supply rebar. The total steel that they consume is about last year is I think it's something like 15,000 tons. Not all of it being rebar. Some of it is in the form of wire rod and some of it's in the form of mesh. So wire rod, we do produce, obviously, in Florida. Mesh, we do not produce today. But I think the important thing on the steel side is it's a nice connection but it's not a driver for us in this instance. The driver really is about building early-stage construction platform in an attractive industry where we can create value and where we can grow our platform over time to be a substantial contributor to our overall EBITDA. So we'll continue to look at that, but it's a nice to have, not a must have.

And your next question comes from Alex Hacking with Citi.

My first question would be on CP&P's margins. Do you know how that 25% EBITDA margin stacks up versus peers? Is that best of breed? Is that kind of average?

It's definitely not best of breed. There's a range of margins, and I'll kick this over to Paul, but I'd say it's probably 25% to 35% is the range to think about here?

Yes. There is certainly in an industry in which there's a lot of different scale and a lot of different regions, it's a different margin profile that if you look at across the entire country. But certainly those that are in the top half of the industry, it's generally north of 20% and can go almost nearing 50% we've seen.

So we think there's good room for continued growth, certainly in the markets that CP&P plays. But again, to the earlier comment, I think these margins, we're very comfortable are sustainable and certainly growable with some of the things that are in-flight and with the capabilities that CMC will bring.

And 1 other thing, Alex, too, that I might add is just the fact that we're super excited about the team that we're getting from the management team, we're getting from CP&P. They've done a really nice job over the last several years in elevating their margins. And again, I think they're going to be great partners in kind of realizing full potential for this business. And we've had a lot of conversations about that. And I think there's a broad agreement on the opportunity.

And then I guess as a follow-up, how would you categorize capacity utilization? And I guess, kind of a dumb question, but what define capacity in this business? Is it the amount of equipment you have, the number of shifts that you can run.

Capacity utilization is a very interesting concept in this, and it really comes down to equipment and efficiencies that exist in the sites as well as what we've seen is we've seen a very fragmented market. And so I think with the opportunity to enter with a great platform company like CP&P and opportunity to roll up. Some of that will definitely be in terms of leveraging utilization through optimization of sites of introducing capital in some cases.

So I think it's a combination of there is good area for growth in this platform to continue to grow for what we see as the immediate future in terms of what we project for where this business can go. We don't need to add to the capacity. We can make it more efficient. But I think CP&P has a great footprint to grow with the market as we expect it to over the coming years.

One other thing, Alex, that is kind of interesting about this space as we did -- as we've done a lot of diligence on this over the last couple of years is the fact that you don't see that many new capacity adds. There are, of course, a couple of exceptions to that. But generally speaking, it's not a business where you see a lot of greenfields. And when you do see greenfields, and this is probably why you don't see a lot of greenfields, it seems to take a long time for them to penetrate the market, which comes back to that comment about strong regional relationships with the site prep guys is they're very sticky.

And your next question comes from Mike Harris with Goldman Sachs.

Peter, Paul, if you could, on the revenue growth over the last 5 years, I think you called out like 14%. Can you speak to how much of that was price versus volume? And maybe give us some idea of how we should think about the contribution from each going forward?

Mike, it's a good question. I think what we're excited about from a CP&P perspective is they've really benefited from both sides of that equation. Clearly those markets in which it operates, has seen great construction activity. And to Peter's point, the relationships and the value that CP&P brings to its customer base, they have seen their outsized share of that growth. But they've also had a great opportunity to leverage commercial excellence within the business that we hope to continue to use to expand margins from a pricing perspective. So it is both a revenue growth from making the commercial approach more efficient as well as seeing good market growth.

And I think that's a great response. And I would also call your attention to Slide 6 and look at the chart on the left-hand side of Slide 6. It's a very interesting chart, and it's one of the things that we've studied a lot as we looked at this space, and it goes to our comment about volatility, and there is pricing power in this space. And obviously, that's something that we think is attractive for our business.

Okay. Okay. Very helpful. And I guess just 1 last 1 here. When we look at this acquisition, what percent of the job site do you now provide a products for customer needs. I mean does that put you on 100% offering? Or is there still some areas on the job site where you could still, I guess, provide a product offering?

Yes. No. I mean we're still -- with the suite that we have today, we're still a relatively small piece of the overall spend. When you think -- if you think about early-stage construction, we're talking about $150 billion market. So there's a lot of products that go into that. So we're still a relatively small piece.

But I think the important thing here is that, remember, any small piece that's not there when it needs to be there, can delay a project. And so it's really important that even if you are a small piece when you're an important piece like a piece of precast concrete, pipe or a precast structure or a rebar fab, you got or a tensile product or any of the other products we make. If you don't have that on time, you're going to be costing the contractor.

This concludes our question-and-answer session. I would like to turn the conference back over to Peter Matt for any closing remarks.

Well, thank you for joining us on today's conference call. We are confident that this transaction will generate good value for both our customers and shareholders. We are entering an attractive industry through the purchase of a leader whose products complement our existing portfolio and take us further towards our goal of being an unmatched solutions provider in early-stage construction. We are excited about the returns we can generate from this new growth platform, particularly as we scale it over time. We look forward to speaking with many of you after our fiscal fourth quarter results are announced in mid-October. Have a good day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.