The aggregates industry’s publicly traded companies reported second quarter results.
Vulcan’s Aggregates Business Reaps Record Results
Vulcan Materials Co. announced results for the second quarter ended June 30, 2017. Total revenues increased $74 million, or 8 percent, to $1.03 billion. Gross profit was $292 million, in line with the prior year. Net earnings were $120 million and Adjusted EBITDA was $288 million.
The company said its second quarter results reflect record unit profitability in its Aggregates segment despite wet weather and difficult operating conditions across many of its Southeastern and Mid-Atlantic markets. Extreme wet weather across the Southeast and weaker demand in Illinois and coastal Texas contributed to a 3 percent decline in same-store aggregates shipments compared to the prior year. Same-store pricing in aggregates improved 5 percent.
Tom Hill, chairman and chief executive officer, said, “Aggregates shipments in the quarter were hit hard by prolonged and extremely wet weather in the Southeast, particularly in May and June, and the absence or delayed timing of large project work in Illinois and coastal Texas compared to last year. This shortfall in second quarter aggregates shipments drove most of the difference in our reported results versus our plan.
“Despite the volume shortfall in the quarter, I am very encouraged by what I see happening behind the reported numbers,” Hill continued. “Private demand in our markets continued to strengthen. Highway project starts accelerated in the second quarter, signaling an end to the softness in starts that we have been working through for the last year. Our shipment backlog for public highway work hasn’t been this high in at least three years. California and Virginia, important states for us, have returned to shipment growth. Our recent acquisitions are performing well. And, our core profitability in aggregates continues to improve. Aggregates unit gross profit was a second quarter record despite the wet weather we experienced in some of our strongest markets. Aggregates pricing, adjusted for mix, was consistent with full year expectations. These results are a good indication of the market’s visibility to further demand recovery.
“Our business remains on track with our longer-term goals and expectations, Hill concluded. “We remain confident in the sustained, multi-year recovery in materials demand across our markets and in the further, compounding improvements to our unit profitability. We anticipate 5 to 10 percent growth in shipments from August through the end of the year. However, given the shortfall in shipments to date, we now expect full-year aggregates shipments of 182 to 187 million tons and full-year Adjusted EBITDA of $1.05 to $1.13 billion.”
Shipment trends in aggregates varied widely across the company’s footprint, largely due to weather and the timing of large projects. Aggregates shipments decreased 2 percent versus the prior year’s quarter and same-store shipments declined 3 percent.
Alabama, Florida, Georgia, Louisiana and Mississippi combined saw shipments decline 12 percent versus the prior year’s second quarter. Severe wet weather and flooding slowed construction activity and impaired shipments in May and June, two key months of the construction season.
- Aggregates shipments in Florida and Georgia declined double-digits in June despite very strong underlying market conditions.
- Coastal Texas and Illinois also experienced significant shipment declines.
- In Illinois, shipments declined 19 percent versus the prior year due in part to the absence of a state budget to support public construction.
- Coastal Texas shipments in the quarter were impacted by a softer local economy and the relative timing of DOT spending and other large project activity; however, backlogs for that market remain strong.
- Markets outside of these areas combined to grow 6 percent versus the prior year’s second quarter – more in line with trend and despite weather challenges in Virginia, the Carolinas and Tennessee.
- Shipments in California grew 10 percent, driven by private construction activity and the catch-up on work deferred from the very wet first quarter. California’s passage of a long-term transportation bill resolved Caltrans’ funding uncertainty and should, along with other factors, support sustained shipping rate improvements over the coming years.
Fundamental demand drivers and leading indicators for shipment growth continued to strengthen in the quarter for Vulcan-served markets. Trailing 12-month construction starts in its markets have steadily improved from a year ago, outpacing non-Vulcan markets by a wide margin.
Private construction starts remain strong, led by continued growth in both residential and nonresidential buildings. Importantly, public construction starts have turned positive due to growth in highway and road spending.
Additionally, the pre-construction pipeline of projects continues to grow across the company’s footprint. State and local governments have continued to pass funding measures to increase public infrastructure investment significantly, and more projects supported by federal FAST Act funding have moved further toward the active construction stage.
Broad pricing momentum continued across the company’s footprint with substantially all markets realizing price growth in the second quarter. For the quarter, same-store freight-adjusted average sales price for aggregates increased 5 percent versus the prior year, or $0.59 per ton, despite a negative mix impact.
The overall pricing climate remains favorable as visibility to a sustained recovery improves and as construction materials producers stay focused on earning adequate returns on capital. California and Georgia each realized high-single digit price growth, again supported by clear and improving visibility to sustained growth in demand.
Second quarter Aggregates segment gross profit was $253 million, or $5.27 per ton. Segment results in the quarter were negatively impacted by product shipment mix, acquisition-related integration costs, a 15 percent increase in the unit cost of diesel fuel and costs related to the transition to two new, more efficient ships to transport aggregates from a quarry in Mexico. In total, these items negatively impacted segment gross profit by $16 million in comparison to the prior year.
Martin Marietta Scores Record Second Quarter Results
Martin Marietta Materials Inc. reported record results for the second-quarter ended June 30, 2017, including consolidated net sales of $996.3 million, an increase of 8.8 percent compared with $915.4 million in the second quarter of 2016. The company also reported:
- Building Materials net sales of $931.7 million compared with $856.6 million, an increase of 8.8 percent, and Magnesia Specialties net sales of $64.6 million compared with $58.8 million, an increase of 9.7 percent.
- Consolidated gross profit of $274.1 million compared with $247.4 million, an increase of 10.8 percent.
- Consolidated earnings from operations of $212.9 million compared with $190.8 million, an increase of 11.5 percent.
- Earnings per diluted share of $2.25 compared with $1.90, an increase of 18.4 percent.
- EBITDA of $292.3 million compared with $266.5 million, an increase of 9.7 percent.
In the second quarter of 2017, net sales for the company’s Building Materials business, which includes the aggregates, cement, ready mixed concrete, and asphalt and paving product lines, were $931.7 million, an increase of 8.8 percent from $856.6 million, driven by pricing and volume gains in all product lines.
The aggregates product line average selling price improvement of 3.8 percent was led by a 10.6 percent increase in the Southeast group. The West and Mid-America groups reported increases of 3.4 percent and 2.4 percent, respectively. The cement product line had pricing growth of 5.2 percent, further reinforcing the underlying positive market fundamentals in Texas. Ready mixed concrete and asphalt pricing increased 1.4 percent and 11.1 percent, respectively.
Aggregates product line shipments increased 2.0 percent compared with the second quarter of 2016. Volume growth was led by the West’s increase of 3.6 percent followed by 2.0 percent growth in the Mid-America group. Volume growth in Mid-America was negatively impacted by heavy precipitation. In addition, the Southeast’s shipments were particularly affected by wet weather in Georgia throughout the majority of the second quarter and decreased 3.2 percent compared with the second quarter of 2016.
Total cement shipments increased 8.0 percent. Ready mixed concrete shipments, including volumes from acquired businesses, increased 11.5 percent. Asphalt volumes increased 16.5 percent compared with the second quarter of 2016, benefitting from robust demand in Colorado.
Gross margin (excluding freight and delivery revenues) for the Building Materials business was 26.8 percent, an increase of 30 basis points, driven by the Southeast group’s nearly 250-basis-point improvement. Further growth was hindered by poor, weather-impacted operating conditions. The Building Materials business results reflect cement kiln maintenance costs of $3.5 million for the quarter compared with $5.7 million. Remaining planned kiln maintenance costs for the year are $10.6 million, with nearly all to occur in the fourth quarter. Total kiln maintenance costs for the full year 2017 are expected to be $18.3 million compared with $20.9 million in the prior year.
Ward Nye, chairman, president and CEO of Martin Marietta, stated, “Our record second-quarter results reflect improved sales, gross profit and earnings from operations in each reportable group, underscoring the breadth of our business and our ability to capitalize on the ongoing recovery in construction activity. Positive residential and nonresidential activity drove results, along with pricing improvements across our aggregates product line, led by the Southeast group’s 10.6 percent increase. We overcame challenging operating conditions in several key states, as near-record levels of precipitation in North Carolina, South Carolina, Georgia and Florida negatively impacted aggregates shipments and operating efficiencies in our historically most profitable geographic areas. Looking ahead, we are optimistic about the remainder of 2017 and beyond due to increased momentum across almost our entire geographic footprint and the positive near- and medium-term outlooks expressed by our customers.”
Nye added, “To ensure we are prepared for the expected strong demand throughout the remainder of 2017 and 2018, we are continuing key operational initiatives, including increasing production capabilities, investing in personnel, and undertaking grading and equipment maintenance. Our focus on increased production is particularly relevant for high-demand products meeting Department of Transportation specifications; this production ramp-up and increased operating leverage should favorably impact our cost structure for the balance of 2017.
“Consistent with the long-term nature of our business and in alignment with our strategic plan, we recently announced an agreement to acquire Bluegrass Materials Co. (Bluegrass), the largest privately-held, pure-play aggregates business in the United States, for $1.625 billion in cash,” Nye concluded. “Bluegrass has a portfolio of 23 active sites with more than 125 years of strategically located, high-quality reserves in Georgia, South Carolina, Tennessee, Maryland and Kentucky. Bluegrass’ strategic assets and impressive cost profile, combined with the depth and strength of its personnel, are a natural fit with Martin Marietta. We expect the transaction to be accretive to earnings per diluted share and cash flow in the first full year after closing, which is expected to occur in the fourth quarter of 2017, following regulatory approvals and other customary closing conditions.”
Summit Materials Aggregates Revenues See Healthy Increase
Summit Materials Inc. announced results for the second quarter 2017. For the three months ended July 1, 2017, the company reported basic earnings per share of $0.47 on net income of $50.0 million, compared to basic earnings per share of $0.21 on net income of $13.4 million in the prior year period. Operating income increased by 75. percent to $82.4 million in the second quarter 2017, versus $46.9 million in the prior year period.
“We delivered exceptional growth in net revenue, operating income and net income during the second quarter, driven by a combination of strong seasonal demand across all lines of business, together with contributions from recently completed acquisitions,” said Tom Hill, CEO of Summit Materials. “Adjusted EBITDA increased 17.9 percent year-over-year to $135.2 million, supported by favorable market conditions in our West Region and in our Cement Segment. Organic growth contributed one-third of the year-over-year improvement in Adjusted EBITDA, as supported by ongoing price, volume and cost optimization initiatives at each of our operating companies.
“Organic sales volumes within our materials lines of business have exceeded our expectations coming into the year,” continued Hill. “Organic cement and aggregates sales volumes increased 7.1 percent and 6.1 percent, respectively, in the second quarter 2017, when compared to the prior year period. Cement sales volumes in our northern Mississippi River markets increased nearly 25 percent year-over-year, while aggregates demand in Texas and Utah benefited from a combination of favorable demographic trends and recent state-level funding initiatives that support multi-year investments in transportation infrastructure.”
“Organic cement pricing increased 3.0 percent year-over-year, in-line with expectations, while organic aggregates pricing declined on a year-over-year basis due to a less favorable sales mix in our Vancouver and Austin markets, given increased sales of lower priced products. Outside of Austin and Vancouver, organic aggregates pricing increased on a year-over-year basis in nearly all of our other platform markets,” stated Hill.
Aggregates net revenues increased by 15.3 percent to $84.2 million in the second quarter 2017, when compared to the prior year period. Aggregates adjusted cash gross profit margin increased to 68.3 percent in the second quarter 2017, versus 63.3 percent in the prior year period.
Organic aggregates sales volumes increased 6.1 percent in the second quarter 2017, due mainly to increased demand in Texas, Utah, Virginia and Vancouver. Organic aggregates average selling prices declined 1.7 percent in the second quarter, due in part to an unfavorable sales mix in the Vancouver and Austin markets. Excluding the Vancouver and Austin markets, organic aggregates average selling prices increased 3.5 percent on a year-over-year basis.
Eagle Materials Reports Strong First Quarter
Eagle Materials Inc. reported financial results for the first quarter of fiscal 2018 ended June 30, 2017. The company is reporting record revenues of $366.1 million, up 23 percent.
Concrete and Aggregates reported revenues for the first quarter of $43.5 million, an increase of 26 percent. First quarter operating earnings were $6.0 million for the first quarter, a 63 percent improvement from the same quarter a year ago, reflecting improved concrete and aggregates pricing and concrete sales volumes.
Oil and Gas Proppants reported first quarter revenues of $18.9 million, a 271 percent increase from the prior year, reflecting improved frac sand sales volumes and net sales prices. The first quarter’s operating loss of $2.0 million includes depreciation, depletion and amortization of $7.6 million.
Cement revenues for the first quarter, including joint venture and intersegment revenues, totaled $182.9 million, which was 26 percent higher than the same quarter last year. The average net sales price for this quarter was $106.95 per ton, 6 percent higher than the same quarter last year.
Total Cement segment sales volumes for the quarter were more than 1.5 million tons, 21 percent higher than the same quarter a year ago. Like-for-like average net cement sales prices and sales volumes increased 4 percent and 7 percent, respectively, versus the first quarter of fiscal 2017 (comparison excludes cement sales from the Fairborn Business since its acquisition date).
Operating earnings from cement for the first quarter were a record $43.2 million and 37 percent greater than the same quarter a year ago. The earnings improvement was driven primarily by improved average net cement sales prices and sales volumes and earnings from the Fairborn Business.
During the quarter, its Nevada cement plant experienced reduced production in connection with the installation of certain pollution control equipment to enable the plant to burn solid-waste fuels. The ability to use solid-waste fuel will lower energy costs in the future. The reduced production negatively affected the absorption of operating costs at the cement plant during the quarter. The project is expected to be completed in the fall.
LafargeHolcim Notes U.S. Business Gains in Second Quarter
LafargeHolcim reported that net sales rose 3.6 percent like-for-like in the second quarter of the year.
Beat Hess, chairman and interim CEO said, “LafargeHolcim delivered positive earnings growth for the fifth consecutive quarter supported by favorable pricing, cost discipline and synergies. The unique strengths of our balanced portfolio are once again evident in our results with key countries such as the United States, India, Nigeria and, notably this quarter, Mexico making significant contributions to earnings, more than offsetting headwinds in some of our markets. On that basis, and with our performance to date, we remain confident that we will achieve our full year guidance and our 2018 targets.”
North America made a strong contribution to operating EBITDA adjusted growth – up 16.5 percent on a like-for-like basis – despite the effect of heavy rain on volumes of cement and aggregates in parts of the United States and Canada. In both markets, cost savings in logistics and manufacturing contributed to positive results, while the U.S. continued to benefit from favorable pricing.
Cement volumes in the U.S. for the second quarter were down on the prior year. Aggregates volumes in the U.S. were also impacted by unfavorable weather conditions which constrained deliveries for a period during the quarter. Operational enhancements undertaken in the second quarter should further benefit earnings going forward, according to the company.
Despite lower volumes, performance in Canada remained stable in the second quarter thanks to cost efficiency measures, notably in the west of the country. Western Canada saw a modest recovery while volumes in Eastern Canada were negatively impacted by weather and operational challenges.
Cemex Second Quarter Net Income Spikes Higher
Cemex, S.A.B. de C.V. announced that consolidated net sales reached $3.6 billion during the second quarter of 2017, an increase of 2 percent on a like-to-like basis for the ongoing operations and adjusting for currency fluctuations, versus the comparable period in 2016.
The increase in consolidated net sales on a like-to-like basis was due to higher prices of products in local currency terms in Mexico and the U.S., as well as higher volumes in its Europe region, the company said.
Cemex’s operations in the United States reported net sales of $916 million in the second quarter of 2017, an increase of 4 percent on a like-to-like basis from the same period in 2016.
Net income was $289 million in the second quarter of 2017, an increase of 41 percent compared to the same period last year. For the first half of the year it reached $626 million, the highest net income for this period since 2008.
Operating earnings before other expenses, net, in the second quarter decreased by 11 percent, to $478 million. Controlling interest net income during the quarter improved to $289 million, from an income of $205 million in the same period last year.
Fernando A. Gonzalez, chief executive officer, said, “Our second quarter operating and financial performance was essentially in line with our expectations as of the first quarter: good results in Mexico, the U.S. and Europe; increasing challenges in Colombia and Egypt, and to a much lesser extent, the Philippines. In addition, we continue to further strengthen our balance sheet where the financial markets have allowed us to execute on our targets a bit faster than we anticipated earlier in the year.”