Commercial Metals Company (CMC Quick QuoteCMC - Free Report) has declared plans to exit its International Marketing and Distribution Segment. As part of this plan, the company and its fully-owned subsidiary, CMC Cometals International Sarl have landed a deal to divest its raw materials trading unit (CMC Cometals) to Traxys North America L.L.C. and Traxys Europe S.A., which are affiliates of The Carlyle Group.  

 

The deal is expected to close later this summer and is subject to customary closing conditions and regulatory approvals.

 

The Cometals team has a strong track record of supplier and customer service that fits well with Traxys' activities and broadens their product offerings. As per the new ownership structure, the Cometals team will continue to operate from its current locations in the U.S., China, Benelux and Russia.

 

Additionally, Commercial Metals plans to sell its Cometals steel division in Irving, TX, which markets steel products, as well as restructure and sell the remaining trading operations in Asia and Australia.   

 

These divestments will allow the company to focus on its core steel manufacturing operations in the U.S. and Poland, which are well positioned to meet the robust demand for steel for non-residential construction and infrastructure. 

 

Commercial Metals has underperformed the Zacks categorized Steel-Producers industry over the last one year. The company’s shares have moved up around 16.2% over this period, compared with roughly 28.5% gain recorded by the industry.

 

 

Commercial Metals anticipates strong demand supported by strong levels of bidding in its fabrication business. The company expects shipment levels to grow in the fiscal third quarter due to strong construction season in both the U.S. and Poland. 

 

The company believes that the new administrative policies of U.S. will support economic growth through tax reform, a reduced regulatory environment and more rigorous enforcement of trade actions, among others.  Also, the company is well-positioned to capitalize on the benefits from these actions.

 

However, margin pressure is expected to continue as imports make it difficult to increase selling prices for the company’s products in sync with a rise in scrap costs.

 

 

Commercial Metals currently carries a Zacks Rank #3 (Hold).

 

Some top-ranked companies in the basic material space include BASF SE (BASFY Quick QuoteBASFY - Free Report) , The Chemours Company (CC Quick QuoteCC - Free Report) and Kronos Worldwide Inc (KRO Quick QuoteKRO - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

BASF has expected long-term growth of 8.9%.

 

Chemours has expected long-term growth of 15.5%.

 

Kronos has expected long-term growth of 5%.

 

 

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