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Article Excerpt
Commercial Metals Co., Irving, Texas, believes in diversity with a capital "D." With diversified business units ranging from steel and copper production to recycling to international trade, and geographical diversification ranging from Irving to Beijing, the company has achieved 25 consecutive years of profitability.
"We have definitely been helped by our vertical integration and our diversity" says Stanley A. Rabin, chairman, president and chief executive officer. "Our diversification evens out the cyclical nature of the businesses we are in."
Never has that been more true than in the past year, he adds. "This year was one of the toughest ever for our manufacturing group, which includes steel and copper production, but it was an extremely good year for our recycling and our [domestic and international] marketing and distribution business units."
Commercial Metal's net income dropped 81.6 percent in its fiscal third quarter, ended May 31, yet the company is still faring better than most. "While Commercial Metals' recent earnings are weak, they are less weak than some of their competitors. They have an extremely good [rack record with steady growth, and their profitability is also very sustainable," says analyst Aldo Mazzaferro, vice president of research for Goldman Sachs, New York.
The company's diversification has helped make its downturns shallower, though its peaks also may not be as high, he notes. "What makes them stand out is they are an efficient, integrated company in the scrap market, as well as being a minimill steel-maker. They are fabricators and commodity traders, too."
Managing such a large, diverse company is a challenge, Rabin admits. To take advantage of all the opportunities presented by its size...
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