Eagle Materials Inc. reported financial results for the third quarter of fiscal 2019 ended Dec. 31, 2018:
- Third quarter revenue of $333.3 million, down 7 percent.
- Earnings before income taxes of $74.5 million, up 45 percent.
- Net earnings per diluted share of $1.24, down 40 percent.
Commenting on recent results, Dave Powers, chief executive officer, said, “Adjusting for the effects of unusual weather trends during calendar 2018 and a shift in the timing of wallboard price increases and related buying activity, we estimate that the overall market demand for our building materials, notably cement and wallboard, remained in positive territory in calendar 2018, with growth rates in the low single digits. The outlook for calendar 2019 continues to be positive as the basic underlying fundamentals of low unemployment, low interest rates and higher wages remain favorable. Cement prices and volume were up, but margins were affected by higher costs resulting primarily from maintenance outages at two facilities.”
Powers concluded, “Our low-cost operations continue to generate strong cashflow that we are investing to improve our operational efficiency and lower our cost position while continuing to repurchase shares in line with our capital allocation strategy. To date, in fiscal 2019, we have purchased nearly 2.2 million shares, or 5 percent of our outstanding shares.”
Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates, and Joint Venture and intersegment Cement revenue, was $194.2 million, a 3 percent decline. Heavy Materials operating earnings decreased 14 percent to $48.2 million primarily because of higher operating costs within the Cement segment and unusually wet weather that affected both the Cement and Concrete and Aggregates businesses.
Cement revenue, including Joint Venture and intersegment revenue, was up 1 percent to $163.7 million, reflecting improved net sales prices and sales volume. The average net sales price for the quarter improved 1 percent to $107.54 per ton. Cement sales volume for the quarter was 1.3 million tons, a slight improvement versus the prior year.
Operating earnings from Cement were $47.2 million, 10 percent below the same quarter a year ago. The earnings decline was primarily due to higher maintenance costs. “We performed two maintenance outages within our Cement group and installed upgraded emission control equipment. These two outages increased maintenance costs and reduced production output for the quarter,” the company stated.
Concrete and Aggregates revenue for the third quarter was $30.5 million, a decrease of 21 percent. Third quarter operating earnings were $1.0 million, a 70 percent decline, reflecting lower sales volume partially offset by improved concrete pricing. “Our primary concrete and aggregates markets experienced heavier rainfall than typical during the quarter, which hampered their ability to move product,” the company stated.
Revenue in the Oil and Gas Proppants segment declined 47 percent to $14.1 million, reflecting lower frac sand sales volume and net sales prices. The third quarter’s operating loss of $9.3 million included $7.0 million of depreciation, depletion and amortization.
Sales volume and net sales prices were negatively affected by weakness in completions activity, which was greater than anticipated, and the typical seasonal slowdown. We continue to analyze our cost structure and will right-size the business given these near-term challenges.
“We conduct one of our cement plant operations through a 50/50 joint venture, Texas Lehigh Cement Co.,” the company stated. “We use the equity method of accounting for our 50 percent interest in the Joint Venture. For segment reporting purposes only, we proportionately consolidate our 50 percent share of the joint venture’s revenue and operating earnings, which is consistent with the way management organizes the segments within Eagle for making operating decisions and assessing performance.”