Summit Materials Inc. announced results for the third quarter 2017. Operating income increased by 28.8 percent to $113.9 million in the third quarter 2017, versus $88.4 million in the prior year period. For the three months ended Sept. 30, 2017, the company reported diluted net income per share of $0.72 on net income of $79.1 million, compared to diluted earnings per share of $0.60 on net income of $44.8 million in the prior year period.
Aggregates net revenues increased by 15.7 percent to $90.6 million in the third quarter 2017, when compared to the prior year period. Aggregates adjusted cash gross profit margin increased to 73.0 percent in the third quarter 2017, versus 71.7 percent in the prior year period.
Organic aggregates sales volumes increased 2.6 percent in the third quarter 2017, due mainly to increased demand in north Texas, Utah, Vancouver and additional markets in the Southeast. Organic aggregates average selling prices declined 0.8 percent in the third quarter, mainly in the West Segment, where hurricane-related weather impacted business conditions.
“We delivered double-digit year-over-year growth in net revenue, operating income and net income during the third quarter, driven by a combination of increased organic sales volumes in our materials businesses, together with contributions from recently completed acquisitions,” stated Tom Hill, CEO of Summit Materials. “Adjusted EBITDA increased 18.1 percent year-over-year to $172.7 million, supported by organic growth in our Cement Segment and East Segment. Organic growth contributed nearly 30 percent of the year-over-year improvement in third-quarter Adjusted EBITDA, as we continue to leverage efficiencies afforded by our vertically integrated, decentralized model.
“Demand fundamentals remain strong in our core regional markets,” continued Hill. “Organic sales volumes of cement and aggregates increased 10.0 percent and 2.6 percent, respectively, in the third quarter 2017, when compared to the prior year period. Organic sales volumes of cement in our core northern Mississippi River markets increased significantly on a year-over-year basis in the third quarter, while organic aggregates sales volumes in both the East and West Segments increased versus the prior year period.
“Our two cement plants located along the Mississippi River corridor are operating at capacity, given continued growth in cement demand throughout the region,” continued Hill. “On a year-to-date basis, cement prices have grown organically by 3.6 percent, consistent with expectations. Looking to 2018, we anticipate additional growth in cement prices along the Mississippi River corridor.
“Organic prices on aggregates declined less than 1 percent in the third quarter, due mainly to sales mix related factors isolated to the West Segment,” continued Hill. “Excluding mix, we estimate organic aggregates prices increased nearly 3 percent in the third quarter, versus the prior year period.
“We continue to deliver exceptional margin capture in our materials lines of business,” continued Hill. “During the third quarter, adjusted cash gross profit margin on aggregates increased 130 basis points to a record 73.0 percent while adjusted cash gross profit margin on cement increased 160 basis points to 50.6 percent. Temporary disruptions related to Harvey, a category 4 hurricane, impacted operations in Houston, our single largest ready-mix market by volume, resulting in lower overall margin capture in our products line of business in the third quarter.
“Since our last update in August 2017, we closed on four additional materials-based acquisitions,” noted Hill. “Our acquisitions of Georgia Stone/McLanahan provide us with an entry point into the growing Georgia market, while the acquisition of Alan Ritchey Materials provides us an entry point into the Dallas market. Columbia Silica and Stockman are attractive bolt-on acquisitions that expand our existing footprint in South Carolina and Missouri, respectively. As before, we remain disciplined acquirors, transacting on quality aggregates reserves with high synergy potential. For the full-year 2017, we are maintaining our annualized acquired EBITDA target range of $50 million to $70 million.
“From a regional perspective, we remain bullish on Texas, where we have existing positions in Houston, Midland/Odessa, Austin, North Dallas, together with Utah, Nevada, North/South Carolina, Virginia and Georgia. Over time, we believe each of these regions stand to benefit from a combination of increased state-level infrastructure investment, stable demand for new single-family homes and the subsequent build-out of low-rise commercial amenities,” noted Hill. “For the full-year 2017, we expect Adjusted EBITDA to be in a range of $425 million to $435 million, down from the previous range of $440 million to $455 million,” stated Hill. “In the aftermath of Hurricanes Harvey and Irma, sales volumes in our Texas and southeastern U.S. markets temporarily declined below historical levels in September and, to a lesser degree, in October, the combined impact of which has led us to reduce our full-year Adjusted EBITDA guidance.”
“We ended the third quarter with significant available liquidity on our balance sheet with which to support a combination of organic and acquisition-related growth,” stated Brian Harris, CFO of Summit Materials. “As of September 30, 2017, we had $506 million in cash and availability under our revolving credit facility, up from $224 million in the prior year period.
“We are pleased with our year-to-date performance,” continued Hill. “Although historic volumes of rainfall resulting from the current hurricane season have impacted our full-year outlook, underlying demand conditions remain strong in our private and public end-markets, positioning us for continued profitable growth as we look ahead to 2018.”
As of October 2017, the company has completed 14 acquisitions on a year-to-date basis, including four transactions that have closed since August 2017. Total investment spend across the 14 acquisitions completed year-to-date 2017 was approximately $402 million, including approximately $94 million for the four acquisitions completed since August 2017.
- Alan Ritchey Materials (Southern Oklahoma-Northeast Texas). Alan Ritchey Materials is an aggregates bolt-on acquisition to Summit’s existing business in the northeast Texas market. This acquisition complements Summit’s existing footprint in the region and provides increased exposure to the fast-growing north Dallas market, Alan Ritchey’s primary shipping destination. Summit closed on its acquisition of Alan Ritchey in August 2017.
- Georgia Stone Products/McLanahan (Northeast Georgia). Georgia Stone Products is an aggregates bolt-on acquisition comprising two quarries in northeast Georgia. This transaction represents an expansion westwards into Georgia from Summit’s existing position in the Carolinas. Summit closed on this acquisition over August/September 2017.
- Columbia Silica (Columbia, S.C). Columbia Silica is an aggregates bolt-on acquisition in central South Carolina. This acquisition is a strong complementary fit with the recent Glasscock acquisition also in South Carolina (acquired May 2017) and brings additional scale to Summit’s growing footprint in the region. Summit closed on its acquisition of Columbia Silica in September 2017.
- Stockman Quarry (Central Missouri). Stockman is an aggregates bolt-on acquisition in central Missouri. This transaction brings new market expansion to Summit’s existing Missouri business. Summit closed on its acquisition of Stockman in October 2017.