Summit Materials Inc. reported that for the three months ended Sept. 29, the company achieved net income attributable to Summit Inc. of $71.3 million or $0.64 per basic share, compared to net income attributable to Summit Inc. of $81.3 million or $0.74 per basic share in the comparable prior-year period.
Summit reported adjusted diluted net income of $61.9 million or $0.54 per adjusted diluted share as compared to adjusted diluted net income of $54.0 million or $0.48 per adjusted diluted share in the prior-year period.
The company reported operating income of $108.2 million in the third quarter 2018, compared to $113.9 million in the prior year period. Adjusted EBITDA was $172.0 million in the third quarter 2018, compared to $172.7 million in the prior-year period.
Net revenue increased by 8.8 percent to $625 million in the third quarter 2018, versus $574.4 million in the prior-year period. The improvement in net revenue was primarily attributable to both organic and acquisition-related contributions in the East and West segments, offset by a decline in the Cement segment.
Summit’s net revenue increased 11.6 percent in the first nine months of 2018 as compared to the same period in 2017, primarily due to acquisitions.
- Walker Sand & Gravel (Idaho). Walker Sand & Gravel is an aggregates business that expands the company’s market position and reserve base in Idaho. Summit closed on the acquisition in October.
- Aggregate Reserves (Georgia). Summit acquired property in the greater Atlanta, Georgia area containing over 100 million tons of permitted reserves and an active quarry, which is currently leased to a third party through mid 2021. Initially, Summit will receive royalty payments through the end of the lease, at which time Summit will take over quarry operations. Summit closed on the acquisition in October.
Tom Hill, CEO of Summit Materials, stated, “We experienced significant inclement weather in the third quarter, as well as continued inflationary cost pressures in our businesses beyond our expectations. While we achieved organic volume and price increases in our aggregates and products during the third quarter, our net income declined and our Adjusted EBITDA remained flat in the third quarter of 2018 as compared to the third quarter of 2017, reflecting lower contributions from our cement segment and Houston operations together with inflation in our variable costs. We had expected normal weather going into the third quarter; instead, weather patterns continued to have a significant negative impact on most of our operating geographies.”
Organic sales volumes in Summit’s cement segment were impacted by a combination of high precipitation levels, together with competitive pressures along the Mississippi River corridor.
Further, Summit’s Houston operations were affected by a wetter than normal third quarter, as rainfall in many parts of Texas reached all-time record levels in September.Summit’s average selling prices on both materials and products gained traction through the third quarter, which partially offset these higher raw materials, freight, labor and fuel costs.
“Underlying demand conditions in most of our markets are healthy and are expected to remain so into 2019,” continued Hill. In Summit’s public markets, state transportation funding measures in Texas, coupled with steady increases in federal subsidies, are contributing to increased lettings activity. Single family housing starts and permits remain well below peak levels in Summit’s major markets.
Since August 2018, Summit has completed two aggregates-based acquisitions for total invested capital of $72 million. During 2018 to date, Summit has completed 13 acquisitions for total invested capital of $300 million. Across these 13 transactions, Summit has added more than 400 million tons of aggregates reserves to its portfolio.
Aggregates net revenues increased by 21 percent to $109.6 million in the third quarter 2018, when compared to the prior year period. Aggregates adjusted cash gross profit margin declined to 69.2 percent in the third quarter, compared to 73.0 percent in the prior year period, due to higher variable costs.
Organic aggregates sales volumes increased 3.9 percent in the third quarter, when compared to the prior-year period. Organic growth in aggregates sales volumes was due to higher volumes in the West Region, which more than offset a decline in organic aggregates sales volumes in the East Region. Organic average selling prices on aggregates increased 1.5percent in the third quarter 2018 due to improvements in prices within both the West and East segments during the period.
Cement segment net revenues declined 7.2 percent to $94 million in the third quarter 2018, when compared to the prior-year period. Cement adjusted cash gross profit margin increased slightly to 50.7 percent in the third quarter, compared to 50.6 percent in the prior-year period, as productivity gains were mostly offset by a reduction in average selling price, coupled with higher freight, storage and demurrage costs related to weather-affected cement inventories.
Organic sales volume of cement declined 6.4 percent in the third quarter, when compared to the prior-year period, due to high levels of precipitation that continued to disrupt project work during the period, as well as increased competition. Organic average selling prices on cement decreased 1 percent in the third quarter, when compared to the prior-year period, as competitive pressures continued in the company’s markets.