The Aggregates Industry’s Publicly Traded Companies Reported First Quarter Results.
Aggregates Strength Drives Vulcan’s First- Quarter Success
Vulcan Materials Co. announced that first-quarter earnings from continuing operations increased 23 percent year-over-year to $53 million on a 9 percent increase in total revenues. Gross profit was $159 million, led by a 7 percent increase in Aggregates segment gross profit to $148 million.
Asphalt, Concrete and Calcium segment gross profit was $11 million, as delayed work and higher input costs negatively impacted Asphalt margins. Selling, administrative, and general expenses declined $4 million to $78 million.
In the company’s core Aggregates segment, unit margins improved despite higher energy costs and shipment delays due to unusually cold and wet weather in certain markets. On a same-store basis, the aggregates business delivered cash gross profit per ton of $5.33, a record for the first quarter. This $0.19 per ton increase over the prior-year period was achieved despite an $0.11 per ton increase in diesel.
Same-store shipments grew 1 percent for the quarter, with a 7 percent increase in daily shipment rates in March as weather conditions improved. Adjusted for mix, freight-adjusted average selling price rose 3 percent over the prior year. Same-store total cost of revenues per ton declined year-over-year despite the aforementioned weather and energy cost headwinds as well as the planned shutdown of certain large production facilities for maintenance ahead of the construction season.
Tom Hill, chairman and chief executive officer, said, “Our first quarter results represent a solid start to the year and were consistent with our internal plans and full-year expectations despite difficult weather and higher than anticipated energy costs. Key leading indicators, as well as our shipment patterns through the first quarter and through April, support our full-year volume expectations. Aggregates pricing momentum continues to improve, supported by demand visibility, higher diesel prices, and tight logistics capacity. And as seen in our first quarter results, we’ve begun to turn the corner with respect to cost challenges faced in 2017. As such, we reiterate our full-year expectations for 2018 earnings from continuing operations of between $4.00 and $4.65 per diluted share and Adjusted EBITDA of between $1.150 and $1.250 billion.”
First-quarter Aggregates segment gross profit increased 7 percent to $148 million, or $3.66 per ton. Solid operating disciplines and the absence of one-time costs (e.g. California flooding) experienced in the prior year’s first quarter helped offset a 26 percent increase in the unit cost for diesel fuel, the planned shutdown of three large facilities for repairs ahead of the construction season, and above normal distribution costs due to lingering storm-related ship and barge movement inefficiencies. The company has taken possession of one of its two new, more efficient, Panamax-class ships, and expects to take possession of the second ship during the second quarter.
First-quarter aggregates shipments increased 6 percent (1 percent on a same-store basis) versus the prior year’s quarter. After being down 3 percent through February, same-store daily shipment rates for aggregates were up 7 percent year-over-year in March, reflecting demand fundamentals consistent with our full-year expectations.
Shipments in Arizona, California, Florida and coastal Texas experienced double-digit gains due to solid demand growth and the start of some large projects. Shipment growth in other Texas markets, particularly north Texas, were held back due to wet weather. Wetter and colder weather led to reduced shipments in a number of other southeastern markets and Virginia.
On a same-store basis, shipments in Georgia and South Carolina were down double-digits and Virginia decreased high-single digits. Daily shipping rates in these markets strengthened in April, and the company’s overall shipment momentum remained consistent with full-year plans.
With respect to the balance of 2018, leading indicators such as employment growth and construction starts indicate a continued recovery in demand across Vulcan’s footprint. Private demand, both residential and nonresidential, continues to recover across Vulcan-served markets, and highway demand is again growing after a disappointing 2017. Transportation agencies appear to be catching up to new, higher funding levels in key Vulcan-served states.
Construction starts data for Vulcan markets – as well as the company’s backlogs, booking rates for future work, and shipment patterns – all suggest improved demand visibility. Certain markets do face near-term logistics challenges, including disappointing rail-service quality, although the company expects these pressures to ease over the balance of the year.
Demand visibility, customer confidence, diesel prices, and logistics constraints support continued upward pricing movements in many markets. For the quarter, freight-adjusted average sales price for aggregates increased 1 percent versus the prior year, despite a negative geographic and product mix impact. Excluding mix impact, aggregates price increased 3 percent.
Pricing remained particularly strong in California, Georgia and other southeastern markets that are supported by clear demand visibility for both private and public construction. Texas, particularly coastal Texas, experienced relative pricing weakness in the quarter due to higher inbound freight costs and the mix of work – although the company expects this trend to reverse over the remainder of the year. April price increases to key customers were executed well, and the company expects additional price increases in several markets later in the year.
Asphalt segment gross profit was $8 million lower than the prior year due to weather impacts on volumes, lower materials margin and the comparative timing of an acquisition that closed during the first quarter last year.
Concrete segment gross profit was $10 million in the quarter, in line with the prior year. Total shipments increased 3 percent year-over-year. Average price increases of 9 percent allowed for a 5 percent gain in the material margins. The company divested its Georgia ready-mix concrete operations in March. Full-year expectations for concrete segment gross profit remain unchanged.
Calcium segment gross profit was $0.5 million versus $0.7 million in the prior year’s first quarter.
Martin Marietta Takes First Quarter Hit
Martin Marietta Materials reported results for the first quarter ended March 31, 2018. The company is reporting revenues of $802 million versus $843.9 million in the first quarter of 2017.
Ward Nye, chairman, president and CEO of Martin Marietta, stated, “As we start the year, we are encouraged by ongoing customer optimism and our first-quarter results, both of which are consistent with our expectations. Additionally, while we remain on track to achieve our original 2018 guidance, we are updating and increasing that outlook to reflect the contribution we expect from our acquisition of Bluegrass Materials Co.
“We remain confident that underlying market fundamentals, including positive employment and population trends across our geographic footprint, will stimulate continued growth in private construction activity and provide an impetus for additional infrastructure demand as the current broad-based recovery continues. Underlying demand trends, coupled with continued pricing growth for all products and segments, reinforce our full-year 2018 outlook as construction activity accelerates during the balance of the year. Importantly, throughout the quarter, we saw strong shipment volumes on days not impacted by typical winter weather.
“Our confidence is bolstered by the recent completion of our acquisition of Bluegrass and the addition of a talented group of new employees to the Martin Marietta team. The acquisition, the second largest in our history, strengthens our aggregates-led position in high-growth southeastern and Mid-Atlantic regions, particularly in Georgia and Maryland, and is consistent with our long-term strategic growth plan. We worked collaboratively with the U.S. Department of Justice (DOJ) as it completed its review of the transaction and, as expected, the two quarries required to be divested do not impact the overall value or strategic rationale for the transaction. I want to thank our collective employees for their contributions to successfully completing this acquisition. Working together, we will expeditiously deliver significant value from our enhanced business profile. As we integrate the Bluegrass operations and realize synergies, we remain committed to world-class safety standards, diligent cost discipline, operational excellence, customer service and prudent capital allocation.”
Nye concluded, “We believe the United States is in the midst of a steady, multi-year construction recovery. Our leading positions in attractive, high-growth markets allow us to benefit from anticipated increased demand for both public and private construction activity in 2018 and beyond. Long term, we remain focused on elevating Martin Marietta from an aggregates industry leader to a globally recognized world-class organization, allowing us to further enhance shareholder value.”
First-quarter aggregates shipments returned to levels more in-line with historical trends and patterns. Winter weather traditionally limits the ability of outdoor contractors to perform work during the winter months. Accordingly, first-quarter operating results compare unfavorably to the first quarters of 2017 and 2016, when the company benefitted from back-to-back unseasonably favorable weather conditions. For the quarter, aggregates product revenues decreased 5.8 percent, reflecting a 7.9 percent decline in shipments. Aggregates pricing improved 2.3 percent.
The Mid-America Group generated aggregates pricing growth of 4.9 percent, driven by continued price discipline and favorable product mix. Pricing improved 2.2 percent for the Southeast Group as winter weather and poor railroad performance constrained long-haul shipments to distribution yards in Florida and Georgia. Product mix, reduced commercial rail-shipped volumes and various competitive dynamics in portions of Texas offset robust pricing growth in Colorado, resulting in a modest price increase for the West Group. Traditional cold and wet conditions, coupled with railroad inefficiencies, also contributed to the 12.4 percent shipment decline for the Southeast Group and the 4.7 percent decline for the West Group. Mid-America Group shipments decreased 9.9 percent.
Summit Materials Reports Revenue Increase
Summit Materials Inc. announced results for the first quarter 2018. Net revenue increased by 11.9 percent to $289.9 million in the first quarter 2018, versus $259.0 million in the prior-year period. The improvement in net revenue was primarily attributable to acquisition-related contributions in the East and West segments, coupled with organic growth in the West Segment.
For the three months ended March 31, 2018, the company reported a basic loss per share of $0.49 on a net loss attributable to Summit Inc. of $53.7 million, compared to a basic loss per share of $0.49 on a net loss attributable to Summit Inc. of $52.4 million in the prior-year period.
“While demand fundamentals remain strong in our core markets, weather conditions were challenging during the first quarter, resulting in lower materials sales volumes in the period,” stated Tom Hill, CEO of Summit Materials. “Importantly, given the inherent seasonality of our business, the first quarter has a very limited impact on our full-year outlook. Our businesses have strong momentum heading into the start of construction season. For the full-year 2018, we anticipate organic price and volume growth in both aggregates and cement.
“Heavy materials selling prices are trending higher in our core regional markets,” stated Hill. “Organic average selling prices on aggregates increased on a reported and mix-adjusted basis in the first quarter 2018, with both Houston and Salt Lake City achieving high-single digit organic growth in aggregates selling prices, when compared to the prior-year period.
“We anticipate our average realized selling price on cement sold in the Mississippi River corridor will grow in the low- to mid-single-digit percent range in 2018,” continued Hill. “As supplies of domestically produced cement continue to tighten, we anticipate price growth could escalate above current levels in 2019. Cement prices have now risen for six consecutive years in the United States, with no indications of abating.
“On a year-to-date basis, we have completed seven acquisitions for total invested capital of $154 million,” continued Hill. “Recent acquisitions have served to further establish our leadership in well-structured, materials-based markets in Utah, Texas, Oklahoma, Kansas, Kentucky and Missouri. The acquisition pipeline remains very active as we look ahead to the remainder of the year, with multiple transactions currently in various stages of diligence.
“Summit’s diesel fuel forward purchase program has helped to mitigate the impact of commodity price volatility within our business, particularly given the recent increase in the price of crude oil-linked hydrocarbon products,” stated Brian Harris, CFO of Summit Materials. “Diesel fuel represents our single most significant variable cost each year, with an estimated 30 million gallons consumed annually by our operating companies. Our program, which utilizes physical contracts to pre-purchase a portion of our required diesel fuel volumes up to 12 months in advance, provides visibility into our overall diesel fuel expense each year. To date, we have pre-purchased 62 percent of our current year fuel requirements at an average ultra-low sulfur diesel NYMEX price of less than $1.90 per gal.”
Aggregates net revenues increased by 9.5 percent to $67.5 million in the first quarter 2018, when compared to the prior-year period. Aggregates adjusted cash gross profit margin declined to 41.5 percent in the first quarter, versus 43.6 percent in the prior-year period.
Organic aggregates sales volumes declined 6.8 percent in the first quarter, due mainly to lower organic aggregates sales volumes in the East Segment, where challenging weather impacted working conditions. Organic average selling prices on aggregates increased 1.6 percent in the first quarter 2018 due to year-over-year improvements in prices within both the West and East segments during the period.
Cement segment net revenues declined 14.3 percent to $37.6 million in the first quarter 2018, when compared to the prior-year period.
Products Business net revenues increased 26.0 percent to $156.2 million in the first quarter 2018, when compared to the prior-year period. Organic sales volumes of ready-mix concrete increased 2.8 percent in the first quarter, while organic average selling prices increased 4.2 percent, versus the prior-year period.
As of May 8, 2018, the company has completed seven acquisitions on a year-to-date basis, including four transactions that have closed since the company’s last quarterly update on Feb. 14, 2018. Total investment spent across the seven acquisitions completed year-to-date 2018 was approximately $154 million, including approximately $34 million for the four acquisitions completed since the last update.
- Stoner Sand (Missouri). Stoner Sand is a high synergy, bolt-on aggregates acquisition that is an excellent fit with the company’s existing operations in the region. Summit closed on the acquisition of Stoner Sand in late February 2018.
- Midwest Minerals (Kansas). Midwest Minerals is an aggregates company with extensive, high-quality reserves. The acquisition expands Summit’s market presence in southeast Kansas. Summit closed on the acquisition of Midwest Minerals in April 2018.
- Day Concrete (Oklahoma). Day Concrete is long-established ready-mix concrete company that has a leading position in its local market, and is an excellent fit with the company’s existing aggregates and ready-mix concrete operations in the state. Summit closed on the acquisition of Day Concrete in April 2018.
- Superior Ready-Mix (Kentucky). Superior Ready-Mix is a ready-mix concrete company that enhances the company’s market coverage in the region and will integrate seamlessly into existing operations. Summit closed on the acquisition of Superior Ready-Mix in April 2018.
“We believe that demand for construction materials could increase meaningfully during the second half of 2018, given recent feedback from our customers and operating companies,” stated Hill. “Our outlook for north Texas, Austin, Vancouver, Utah and the Carolinas has improved within the last 90 days, given strong growth in single family residential, stable growth in low-rise commercial and accelerating growth in state public lettings. Despite the slow start to the year, the combination of accelerating organic growth within our larger platform markets, together with a solid pipeline of acquisition targets, positions Summit for another strong year ahead.”
Granite Construction Materials Revenue Spikes in First Quarter
Granite Construction reported that revenue increased to $563.4 million, up 20.3 percent year-over-year for the quarter ended March 31, 2018. Construction Materials revenue increased 32.5 percent to $45.7 million, compared with $34.5 million last year. However, the company reported a net loss of $11.4 million, compared to a net loss of $23.8 million in the first quarter.
First quarter 2018 results include the impact of acquisition expenses related to Granite’s announced and pending acquisition of Layne Christensen Co. and from its recently completed purchase of LiquiForce.
“We were pleased to deliver solid results with a record-revenue first quarter, carrying through some of the momentum we created in 2017,” said James H. Roberts, president and chief executive officer of Granite Construction. “All three segments delivered strong revenue growth and improved year-over-year margins. Our Construction segment led the way, with the Construction Materials segment producing strong top-line revenue growth in our seasonally weakest quarter. The Large Project Construction segment again produced solid revenue growth and improved profitability, driven primarily by the contribution of newer projects in our portfolio. While work on under-performing, mature projects had less impact in the first quarter, it remained a drag on overall profitability, and it is expected to negatively impact margins through much of 2018.
“The near- and long-term outlook for demand and funding of infrastructure investment continues to improve. Backlog trends remain steady, even with more than 20 percent revenue growth in the first quarter. Large Project Construction segment backlog at $2.61 billion and Construction segment backlog at nearly $1 billion points to continued solid demand,” Roberts said. “The integration of LiquiForce is moving along as planned, and the integration planning related to our announced acquisition of Layne Christensen is progressing very well. Considering the progress that our joint integration teams have made to date, we are increasingly confident that this deal represents the ideal combination of value creation for all stakeholders. We remain on track for a successful closing in the second quarter of 2018.”
Forbes magazine recently recognized Granite as one of America’s Best Mid-Size Employers for the third year in a row. The annual Forbes ranking honors employers based on an independent survey asking how likely employees would be to recommend their employer – and other employers in their respective industries – to someone else.
“We owe this honor to our employees who are the heart and soul of our company,” said Roberts. “Our employees walk and talk our core values, the cornerstone of our success for nearly a century. It is because of them that we strive to create rewarding careers while growing our business safely and profitably.”
Eagle Materials Buoyed by Heavy Materials Earnings
Eagle Materials Inc. reported record revenue of $1.4 billion, up 14 percent for fiscal year 2018; and record revenue of $284.7 million, up 2 percent for its fiscal fourth quarter ended March 31, 2018.
Eagle’s Oil and Gas Proppants segment reported fiscal 2018 revenue of $85.5 million, an increase of 147 percent, primarily reflecting a 170 percent increase in frac sand sales volume. The fiscal 2018 operating loss was $6.4 million versus an operating loss of $14.6 million in the prior year. Eagle’s Oil and Gas Proppants segment reported fourth quarter revenue of $22.6 million, an increase of 43 percent, primarily reflecting a 59 percent increase in frac sand sales volume. The fourth quarter sales volume was impacted by harsh winter weather and rail delays. The fourth quarter’s operating loss of $1.6 million includes depreciation, depletion and amortization of $3.7 million.
Revenue from Cement, including joint venture and intersegment revenue, increased 15 percent to $651.8 million for full fiscal 2018. Fiscal 2018 operating earnings from Cement were a record $179.2 million, an increase of 17 percent, reflecting the financial results of the acquired cement plant in Fairborn, Ohio, and related assets (the Fairborn business) and improved pricing.
Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates and joint venture and intersegment Cement revenue, increased 12 percent to $807.4 million in fiscal year 2018. Heavy Materials operating earnings for the fiscal year were $197.0 million, an increase of 15 percent.
Fiscal 2018 revenue from Concrete and Aggregates increased 2 percent to $155.7 million. Concrete and Aggregates reported fiscal 2018 operating earnings of $17.9 million, down 1 percent.
Concrete and Aggregates revenue for the fourth quarter of 2018 was $30.7 million, a decrease of 22 percent. Fourth quarter operating earnings were $2.8 million, a 44 percent decline from the same quarter a year ago.
Operating earnings from Cement for the fourth quarter were $24.7 million, 5 percent below the same quarter a year ago. The earnings decline was driven primarily by reduced sales volume due to persistently wet weather in many of our markets and was partially offset by earnings from the Fairborn business and improved average net cement sales prices.
Cement revenue for the quarter, including joint venture and intersegment revenue, was down 1 percent to $115.6 million. Cement sales volume for the quarter was down 4 percent to 945,000 tons. The average net sales price for the quarter improved 3 percent to $108.98 per ton.
Commenting on the results, Dave Powers, president and CEO, said, “Our track record of competitive margin performance remains industry leading due to our long-standing commitment to improving our low-cost producer positions, through wise investment in our people, processes and operations. We have invested more than $1.5 billion so far this cycle to profitably grow our businesses and create shareholder value. As we look ahead, our strong balance sheet and anticipated cash flows, which have been enhanced by tax reform, position us to continue to execute on value-creation opportunities.”
LafargeHolcim Touts North American Market Potential
LafargeHolcim is reporting a “good start to the year” with like-for-like net sales up 3.1 percent despite the impact of adverse weather and fewer working days in the first quarter of the year.
Broadly, the underlying market trends seen at the end of 2017 continued into the first three months of 2018, according to the company. In North America, the group said it is well positioned to take advantage of good market conditions despite the effect of a particularly harsh winter.
Latin America continued its positive development with top and bottom line growth. Strong performance in China and India contributed to growth in the Asia Pacific region. In contrast, Middle East Africa underperformed with challenging conditions in some markets. In Europe, where underlying demand was good, first quarter performance reflected adverse weather, fewer working days and higher maintenance activity in preparation for high season growth.
Jan Jenisch, group chief executive officer of LafargeHolcim, said, “The first quarter was a good start to the year. The continued growth in the top line is encouraging and confirms the positive outlook for our businesses. Though the quarter was affected by several headwinds, we expect the strength of our portfolio and the benefits of our new strategy to become increasingly visible over the full year. That makes us confident we will deliver on our 2018 targets.”
The company’s outlook for the remainder of 2018:
- Further market growth is anticipated in North America driven by residential and non-residential demand.
- Market demand in Latin America is expected to be up in most countries.
- The group expects sustained market demand supported by infrastructure and residential growth in India, while in China favorable market conditions are expected to remain.
- In Southeast Asia, the market environment will generally remain challenging although demand outlook is encouraging.
- The environment for building materials is positive across most markets in Europe.
- The overall outlook for Middle East Africa is mixed and the region continues to be affected by challenging markets.