Commercial Metals Company (CMC) Cash Flow Statement

The most recent quarter (2026Q4) reinforced this pattern, with $455.9 million in operating cash flow against $212.5 million of net income—a 2.15x conversion multiple. This persistent gap between cash flow and reported earnings is largely attributable to substantial non-cash depreciation charges ($113.2 million in 2026Q4 alone) and may indicate that the asset-heavy micro-mill model generates cash well beyond what net income reflects. However, the 2025Q1 quarter presents a notable counterexample: a $175.7 million net loss still produced $213.0 million in operating cash flow, suggesting working capital dynamics and non-cash charges can swing bottom-line results dramatically without impairing the cash engine. Investors should view the strong conversion as structurally reassuring but recognize that individual quarters can produce highly asymmetric NI-to-OCF relationships.

The most recent two quarters ($76.4 million and $280.4 million in FCF) represent a sharp sequential acceleration from the subdued first-half fiscal 2026 levels of $43.6 million and $78.8 million. This pattern is consistent with the revenue inflection and operating leverage described in the prior income statement analysis, where gross margin expansion from 12.5% to 18.9% has now begun flowing through to the cash statement. However, the trajectory must be contextualized against the $2.5 billion acquisition in 2026Q2, which depressed near-term free cash flow metrics and represents a structural step-change in the company's asset base. The key analytical question is whether the post-acquisition FCF run-rate can sustain the recent momentum, or whether working capital absorption (discussed below) will dampen near-term conversion.

This widening gap between capex and D&A—currently $62.4 million per quarter—signals that CMC is in a growth capex phase rather than a maintenance-only posture, likely reflecting the micro-mill expansion strategy and the integration of the $2.5 billion acquisition completed in 2026Q2. For a steel producer with high fixed-cost operations, this front-loaded capital deployment could drive future volume growth but simultaneously raises the breakeven utilization threshold. The rising D&A trajectory ($70.7M → $113.2M over ten quarters) confirms that the company's asset base is expanding meaningfully, and investors should monitor whether the incremental revenue from these investments keeps pace with the growing depreciation burden, as a shortfall would compress operating margins in future cycles.

The large negative working capital movements in recent quarters (-$81.5M, -$54.9M, -$58.8M, and -$217.8M for the four most recent periods) suggest that the surge in demand has required significant investment in raw material inventory (primarily ferrous scrap) and higher receivables balances. This is a natural byproduct of scaling into a stronger demand environment but compresses near-term operating cash flow relative to net income. For a company with LIFO inventory accounting, the combination of rising scrap prices and expanding sales volumes could also be generating inventory profits that inflate reported margins while simultaneously draining working capital. The volatility of this line item—from +$177M to -$218M in just two years—introduces meaningful quarter-to-quarter noise in CMC's cash flow metrics and warrants careful normalization in any FCF forecasting exercise.