Commercial Metals Company (CMC - Free Report) has wrapped up the earlier announced sale of its raw materials trading division, CMC Cometals, to Traxys North America L.L.C. and Traxys Europe S.A., which are affiliates of The Carlyle Group. The aggregate consideration for the transaction was roughly $179 million, which is subject to adjustment.
The divestment marks a key step in Commercial Metals' plans to reposition its business. It also allows the company to focus on its core steel manufacturing operations in the United States and Poland, which are well positioned to meet the robust demand for steel for non-residential construction and infrastructure.
The Cometals team has a strong track record of supplier and customer service that fits well with Traxys' activities. As per the new ownership structure, the Cometals team will continue to operate from its present locations in the United States, China, Benelux and Russia.
Commercial Metals, in June 2017, also announced its 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.
Commercial Metals has underperformed the industry it belongs to over a year. The company’s shares have gained around 19.4% over this period, compared with roughly 32.4% gain recorded by the industry.
The company is seeing sustained strength in its markets, especially in construction activity across the United States and Poland. It is also gaining from its cost reduction initiatives.
Commercial Metals sees solid demand in the United States and Poland through the balance of 2017. The company expects that the ongoing trade actions in the United States and Poland will provide some reprieve from the torrent of unfairly priced imports of rebar.
Commercial Metals is a Zacks Rank #3 (Hold) stock.
Stocks to Consider
Better-placed stocks in the basic materials space include BASF SE (BASFY - Free Report) , Kronos Worldwide Inc (KRO - Free Report) and Akzo Nobel N.V. (AKZOY - Free Report) . All 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 earnings growth rate of 8.6%.
Kronos Worldwide has expected long-term earnings growth rate of 5%.
Akzo Nobel has expected long-term earnings growth rate of 11.1%.
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