The Aggregates Industry’s Publicly Traded Companies Reported First-Quarter Results.
Vulcan Revenues Top $1 Billion in First Quarter; Aggregates Sales Up
Vulcan Materials Co. reported first-quarter total revenue of $1.05 billion, versus $996.5 million for the same period in 2019. First quarter Aggregates segment sales increased 4%, and gross profit increased 5% to $194 million, or $4.31 per ton. These improvements resulted from growth in shipments in certain key markets and wide-spread growth in pricing, the company stated.
First-quarter aggregates shipments were 1% lower than the prior year’s strong first quarter, when aggregates shipments increased 13% as a result of delayed shipments from the fourth quarter of 2018. Many markets in the Southeast and the Southwest were negatively impacted by wet weather while shipments in California, Florida, Illinois and Virginia realized solid growth.
On a mix-adjusted basis, all of the company’s key markets reported year-over-year price growth. For the quarter, freight-adjusted average sales price increased 4.5% (4.8% on mix-adjusted basis) versus the prior-year’s quarter.
As anticipated, first quarter cost of sales was negatively impacted by higher repairs, maintenance and stripping costs, which were incurred early in the quarter to take advantage of the seasonally low production volume. Wet weather inefficiencies also affected costs in certain markets. These were partially offset by the modestly lower unit cost of diesel fuel in the quarter. Cash gross profit per ton increased 6% from the prior year’s first quarter to $6.02 per ton. For the trailing 12 months, cash gross profit was $6.82 per ton.
Tom Hill, chairman and chief executive officer, said, “Our first quarter earnings improved across all segments and were in line with our expectations, despite wet weather in certain key markets in the Southeast and Southwest. These results demonstrated the strong long-term fundamental position of our aggregates-led businesses and our commitment to leading the industry in pricing and unit profitability.
“We experienced minimal financial impact from the COVID-19 pandemic in the first quarter. Our main focus right now is ensuring the health and safety of our employees, maintaining our operational readiness, preserving liquidity and supporting the communities in which we operate. Our employees are engaged and ready to support one another, service our customers, and meet the challenges of today as we prepare for tomorrow.
“From a position of strength, we are proactively planning for the potential impacts of the pandemic on construction activity. Our strengths are derived from the flexibility provided by our aggregates-focused business, our diverse geographic footprint, our balance sheet structure and recently enhanced liquidity, and our operational capabilities. Our leading market positions, built over more than 60 years, and our proven track record of strong operations also position us well. That said, we have undertaken a comprehensive review of our operating plans and have contingency plans in place to respond as efficiently as possible to demand shifts. Aggregates is far more adaptable to these demand shifts than any other construction materials, a characteristic that should serve us well during this period of disruption.
“As a result, we will be well-equipped to manage our business effectively and serve our customers reliably through these unprecedented times. Our execution capabilities are supported by our four strategic disciplines (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing), which have been implemented over the last few years. These operating plans are underpinned by our healthy balance sheet and strong liquidity position, which we have further enhanced,” Hill concluded.
Consistent with the company’s expectations, Asphalt segment gross profit was a loss of $2 million for the seasonally slower first quarter, an improvement over last year’s loss of $3 million. Concrete segment gross profit was $9 million, an 8% improvement from the prior year.
Regarding the company’s outlook, Hill stated, “The impact from the COVID-19 global pandemic continues to evolve quickly, and it is too early to estimate accurately the full-year impact on aggregates demand. Because we have been designated as an essential business, shipment activity today remains relatively strong across many of our markets as customers execute on their backlog of projects. However, we expect some project timelines will be modified as every market adjusts to economic disruptions.
“Because of this uncertainty in aggregates demand, we are withdrawing our previous financial guidance for 2020. We will continue to closely monitor trends in construction activity and work with our customers to meet their needs in this challenging operating environment. We will provide updates as more information becomes available and our visibility improves. While we do not have the ability to control demand, our advantage is our ability to control many other aspects of our business. We remain confident in our ability to successfully navigate the changing environment. We will continue to operate from a position of strength supported by the resiliency of our aggregates business, progress on the four strategic disciplines and the engagement of our people,” Hill concluded.
Martin Marietta Reports Strong First Quarter
Martin Marietta Materials Inc. reported results for the first quarter ended March 31, 2020. Total revenues were $958.2 million, versus $939 million in the first quarter of 2019.
First-quarter operating results demonstrated the strength of overall demand, most notably in Colorado, Iowa, Indiana and Maryland, against a challenging prior-year comparison.
The aggregates, cement and downstream operations in Texas, the company’s largest state by revenue, experienced project delays as the Dallas/Fort Worth area experienced record first-quarter precipitation. Additionally, Georgia, the company’s fourth-largest state by revenue, experienced its sixth wettest first quarter in 125 years.
First-quarter aggregates shipments and pricing improved 2.3% and 2.7%, respectively, compared with the prior-year quarter.
- Shipments for the Mid-America Group increased 4.3%. Robust warehouse and data center construction activity in Iowa and Indiana more than offset the anticipated lower infrastructure shipments in North Carolina. Geographic mix limited pricing growth to 1.4%.
- Shipments for the Southeast Group decreased 3.2% as significant rainfall hindered otherwise robust construction activity. Pricing growth of 4.7% reflected the underlying strength of the North Georgia and Florida markets.
- West Group shipments increased 2.5%, with double-digit growth in Colorado partially offset by weather-impacted construction delays in Texas. Pricing improved 3.7%.
Aggregates shipments to the infrastructure market increased, driven by large projects in Texas, Colorado, Iowa and Indiana. The infrastructure market accounted for 32% of first-quarter aggregates shipments, which is below the company’s most recent 10-year annual average of 45% but consistent with historical first-quarter trends.
Aggregates shipments to the nonresidential market increased modestly following double-digit growth in commercial and heavy industrial construction activity in the prior-year quarter. The company continued to benefit from distribution center, warehouse and data center projects in key geographies, including Texas, Colorado, Georgia, Florida and Iowa, as well as the early phases of several large energy-sector projects along the Gulf Coast. The nonresidential market represented 36% of first-quarter aggregates shipments.
Aggregates shipments to the residential market declined slightly when compared with the robust growth in homebuilding activity in the prior-year quarter. Ongoing homebuilding activity in Texas and Georgia was hindered by significant rainfall during first-quarter 2020. The residential market accounted for 25% of first-quarter aggregates shipments.
Ward Nye, chairman and CEO of Martin Marietta, stated, “For the first three months of the year, Martin Marietta delivered strong financial and operational performance, generating Adjusted EBITDA of $149 million. We established a new first-quarter record for consolidated revenues, as product demand led to improved shipments and pricing across most of our Building Materials business. Notably, production efficiencies improved our year-over-year per unit aggregates cost. While this is what we aim for, as lower unit costs improve operating margins, in the current quarter, this lower unit cost served to reduce aggregates inventory valuation. This year-over-year impact alone lowered earnings per share by $0.18. Further, the prior-year’s first quarter benefitted from a change in tax election for a subsidiary of $0.21 per share. Understanding those circumstances largely contextualizes our impressive first-quarter 2020 performance. Additionally, we strengthened the company’s balance sheet and cash position through the early March issuance of $500 million of 2.5% senior notes due in 2030. While our solid first-quarter performance provided a promising start to 2020, we recognize this will now be a challenging year for our country, customers, communities and industry as a whole. Thus, given the unprecedented level of uncertainty surrounding the length, breadth and severity of the coronavirus (COVID-19) pandemic, we have withdrawn our previously issued full-year 2020 guidance and will not update it at this time. With that said, we remain confident that the attractive underlying market fundamentals and long-term secular growth trends in our key geographies, both of which underpinned the company’s record 2019 performance and strong first-quarter 2020 results, remain intact and will be evident once again as the U.S. economy stabilizes and recovers.”
Summit Materials’ Aggregates Volumes Increase in First Quarter
Summit Materials Inc. reported that net revenue increased by 11.9% to $342.4 million in the first quarter 2020, versus $306.0 million in the prior-year period. The improvement in net revenue was primarily attributable to organic volume and price growth in ready-mix concrete and aggregates.
For the three months ended March 28, 2020, organic sales volumes increased 9.7% in aggregates, 0.7% in cement and 14.0% in ready-mix concrete and decreased 2.9% in asphalt, relative to the same period last year, while first-quarter 2020 organic average selling prices increased 2.2% in aggregates, 2.6% in cement, 6.0% in ready-mix concrete, and 4.1% in asphalt relative to the prior-year period.
Tom Hill, CEO of Summit Materials, commented, “We experienced strong demand and favorable pricing conditions in our East and West regions throughout the first quarter, resulting in record first quarter net revenue. More importantly, we implemented safety and distancing protocols at all of our operations in early March in response to the COVID-19 outbreak and we are committed to the continuous improvement of those safety measures. Construction has been deemed essential in all of Summit’s markets, and the health and safety of our workforce, customers and local communities is our highest priority.”
As of March 28, 2020, the company had $199.1 million in cash and $1.9 billion in debt outstanding. The company’s $345 million revolving credit facility has $329 million available after consideration of committed letters of credit.
For the three months ended March 28, 2020, cash flow used in operations was $38.9 million while cash paid for capital equipment was $61.8 million. Brian Harris, CFO of Summit Materials, added, “While we’ve only seen a limited impact from COVID-19 to date, we have been proactively engaging in contingency planning. We are conducting regular reviews of our capital spending, cost structure, receivables, and working capital under various demand scenarios. Summit has over $500 million in available liquidity and is in a strong financial position.”
Summit is withdrawing its previously announced 2020 Adjusted EBITDA guidance of $460 million to $500 million. Hill continued, “While demand for our products and services has not yet been materially impacted by COVID-19, the near-term impact to construction activity is less clear. We believe that it is prudent to withdraw guidance at this time, pending better visibility into the extent of economic disruption related to COVID-19 and the ultimate resumption of normal business conditions.”
The company is reducing its 2020 capital expenditure guidance to $145 million to $160 million, including $50 million to $60 million for greenfield projects, from its prior 2020 capital expenditure guidance of $185 million to $205 million, which included $65 million to $80 million for greenfield projects, as certain items have been deferred at Summit’s option to later periods.
Summit’s approximately 6,000 employees continue to work as construction has been deemed essential in its markets. Extensive safety, hygiene and distancing protocols have been implemented. Summit has been continuously improving its safety measures and following CDC guidelines. Employees in office-related functions have been working from home since early March.
Aggregates net revenues increased by 9.4% to $96.2 million in the first quarter 2020 when compared to the prior year period. Aggregates adjusted cash gross profit margin increased to 47.7% in the first quarter 2020 compared to 43.2% on higher volumes, increased average selling prices and product mix.
Aggregates sales volumes increased 9.7% in the first quarter 2020, when compared to the prior-year period on higher organic volume growth, particularly in Missouri, Kansas, Utah and Virginia. Average selling prices for aggregates increased 2.2% in the first quarter 2020 when compared to the prior-year period.
Eagle Materials Reports Record Revenue
Eagle Materials Inc. reported financial results for fiscal year 2020 and the fiscal fourth quarter ended March 31. The company is reporting record revenue of $1.5 billion, up 4% for fiscal year 2020 and record revenue of $315.4 million in the fiscal fourth quarter, up 11%.
On March 6, Eagle completed its acquisition of substantially all of the assets of Kosmos Cement Co., which includes a cement plant in Louisville, Ky., with annual capacity of 1.7 million tons, as well as seven distribution terminals and substantial raw-material reserves.
The purchase price paid by Eagle in the Kosmos acquisition was $665 million in cash, subject to a customary post-closing inventory adjustment. Eagle used cash on-hand, along with borrowings under a new term loan facility, to fund the purchase.
Fiscal 2020 revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates, and joint venture and intersegment Cement revenue, was $933.3 million, a 17% increase. Heavy Materials annual operating earnings increased 12% to $198.9 million, primarily because of higher sales volume and net sales prices.
Fiscal 2020 revenue from Concrete and Aggregates increased 31% to $181.3 million. Concrete and Aggregates reported fiscal 2020 operating earnings of $17.6 million, up 36%, reflecting improved sales volume and pricing as well as the financial results of a concrete and aggregates business Eagle acquired in August 2019.
Concrete and Aggregates revenue for the quarter was $39.5 million, an increase of 39%. Fourth quarter operating earnings were $2.5 million, a 13% increase, reflecting improved sales volume and pricing as well as the financial results of a concrete and aggregates business Eagle acquired in August 2019.
Michael Haack, president and chief executive officer, commented, “In the face of the COVID-19 pandemic, our management team is focused first and foremost on protecting the safety and health of our employees, customers, and business partners. We’ve generally been deemed an essential business, and as we continue operations, we are enforcing health and safety protocols that meet or exceed CDC guidelines.”
Commenting on the financial results, Haack said, “Having achieved record results in fiscal 2020, we entered this crisis period in a strong financial position, and we are taking prudent actions to sustain the financial health of our business. In light of the risks posed by the COVID-19 pandemic and its possible future effects on our business, we are managing our balance sheet and cash flow for stability today and in the future. We are limiting capital spending to critical projects only, managing inventory levels to improve working capital, and taking additional steps such as suspending share repurchases and future dividends to maximize free cashflow. The sale of our concrete and aggregates business in Northern California announced on April 17, coupled with the carryback treatment of our net operating loss, will increase our near-term liquidity considerably.”
Haack concluded, “I want to thank our dedicated employees for their extraordinary efforts and focus during this unprecedented time. We have a long history of managing through challenging market conditions, and I am confident we will successfully navigate through this difficult period.”
U.S. Concrete Aggregates Volumes Increase in First Quarter
U.S. Concrete Inc. reported results for the quarter ended March 31, 2020. The company’s first-quarter 2020 results compared to first quarter 2019 include:
- Consolidated revenue increased 0.4% to $334.4 million.
- Ready-mixed concrete revenue increased 0.6% to $292.2 million.
- Aggregate products revenue increased 1.6% to $43.6 million.
- Aggregate products sales volume increased 5.4% to 2.6 million tons.
- Net loss was $2.8 million compared to $2.6 million.
Aggregate products revenue increased $0.7 million in the quarter, compared to the prior-year first quarter, resulting from a 5.4% increase in sales volume and a 0.9% increase in average selling price related to the mix of products sold.
Aggregate products Adjusted EBITDA of $11.3 million in the 2020 first quarter increased 8.7% from the prior-year first quarter, primarily related to improved operating efficiencies, including the impact of the Coram Materials acquisition partially offset by inclement weather in Texas.
Ronnie Pruitt, president and chief executive officer of U.S. Concrete Inc., said, “We are very pleased with our financial results for the first quarter, which we accomplished in spite of significant rainfall in Texas and the initial impacts of COVID-19. Since early March, we have been focused non-stop on increased efforts to evaluate all areas of our business, both financially and operationally, to further drive process improvements and maximize financial flexibility. Our operations have been generally deemed to be essential, and we remain operational in each of our regions.”
Pruitt continued, “Our Coram Materials acquisition in February enhanced our vertical integrated position in the New York market. While our production volumes at Coram have decreased due to the COVID-19 related slowdown in New York City, we are starting to experience improved production volumes in recent days. We are pleased with the business and our ability to integrate their operations, which generated $1.7 million of Adjusted EBITDA during the quarter post-acquisition.
Pruitt concluded, “Due to the uncertainty surrounding the underlying impact of the operating restrictions resulting from the COVID-19 pandemic, we have elected to withdraw our previously communicated 2020 financial guidance. Even though certain of our projects in New York and San Francisco have been delayed due to the definition of ‘essential construction work’ in those local markets, the majority of our markets continue to see solid demand. We have taken swift action throughout the business to realign our cost structure with our operating volumes and will continue to reassess our costs in light of evolving market conditions. We believe we are well positioned to weather this storm and capitalize on the opportunities that will present themselves as the economy rebounds.”
Arcosa Rides Cherry Acquisition to Strong First Quarter
Arcosa Inc. reported that revenues increased 19% to $488.2 million in the first quarter of 2020. In its report, the company noted its response to COVID-19:
- Our highest priority is the health and safety of our employees and communities; protocols are in place at plants and offices that meet or exceed Centers for Disease Control (CDC) and other guidelines.
- Our businesses support critical infrastructure sectors, as defined by the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA.gov).
- Plants have continued to operate throughout the crisis.
“Above all else, we are committed to the health and safety of our employees and the communities in which we operate,” noted Antonio Carrillo, president and chief executive officer. “Our facilities are following the highest standards of health and safety, as we continue to produce products that are critical for North American infrastructure.”
For its Construction Products division, the company reported that revenues increased 41% to $149.4 million in the first quarter, driven primarily by the acquisition of Cherry Companies. Volumes in the legacy businesses increased over the previous year’s quarter from strong construction market activity but were offset by lower volumes in aggregates plants serving oil and gas end markets.
The performance of the Cherry acquisition exceeded its expectations, reflecting strong Houston market fundamentals and outstanding execution during the integration, the company said.
Commenting on first-quarter performance, Carrillo said, “Our first-quarter results demonstrate Arcosa’s outstanding earnings power when infrastructure markets are strong. Our Construction Products businesses had an excellent quarter, with the Cherry acquisition exceeding our expectations. Energy Equipment executed very well, and our Barge business continued to ramp up to meet higher levels of demand.
“Our experienced management team has led our businesses through numerous cycles. As the macroeconomic outlook changed during the quarter, we responded quickly to conserve cash by minimizing non-essential capital expenditures, tightening our working capital management around receivables, payables, and inventory, and reducing our SG&A spending. We will continue to take appropriate actions on our cost structure.
“We have entered this period of economic uncertainty in a strong financial position. We have low leverage, ample liquidity, and a lean operating model to respond quickly to changes in demand. Our strong balance sheet will help us manage through this crisis and seek disciplined acquisition opportunities, where appropriate. I am extremely proud of our team’s dedication and resilience during this challenging period.”
LafargeHolcim Achieves Resilient First-Quarter Results Amid COVID-19
LafargeHolcim had a strong start to the year as its first-quarter performance remained well ahead of last year’s results until mid-March, when the impact of COVID-19 spread beyond China into all business regions, the company reported. Nevertheless, first-quarter results remained resilient with net sales down 3.3% and Recurring EBIT down 2.6% compared to the prior-year period, both on a like-for-like basis.
North America delivered excellent improvement in volume growth across all business segments. The region showed a continuation of strong cement demand trends from 2019, further supported by favorable weather, while aggregate volume improvement of 12% in the quarter was driven by megaprojects along the Mississippi River. The U.S. and Canadian operations both delivered solid industrial performances, with only minor impact from COVID-19 in the quarter.
Europe delivered solid results despite disruptions in key markets, with good market growth in Eastern Europe and resilient performances in Switzerland and Germany. Volumes in France, the UK and Spain were impacted by COVID-19. Recurring EBIT improved on a like-for-like basis as a result of operational efficiencies.
Latin America delivered a resilient performance, led by a solid performance in Mexico. Brazil, Argentina, Ecuador and Colombia were impacted by COVID-19 lockdown measures since mid-March. The Recurring EBIT margin was resilient thanks to effective price and cost management.
Performance of Asia Pacific was impacted by the COVID-19 outbreak, with China significantly impacted in Q1. There was strong profitability improvement in India despite lockdown measures towards the end of March. The market slowdown in Australia continued.
Middle East Africa delivered an over-proportional increase in Recurring EBIT with turnaround initiatives offsetting COVID-19 impact in the region. Nigeria, Algeria and Iraq were solid contributors, while South Africa and Lebanon were impacted by lockdown measures.
Jan Jenisch, CEO, said, “We are confronting an unprecedented health crisis with COVID-19 that is changing how we live and how we work in many ways. Keeping our employees healthy and safe is our number one priority and core value. In early January, when the first signs of the pandemic emerged, we were quick to respond and take all the necessary measures to protect the health of our people while supporting our partners and communities, in full alignment with local authorities across our markets.
“I am very proud of how our people have gone above and beyond to engage in relief work worldwide,” he continued. “Building on our long tradition of working closely with our communities, our teams are actively supporting health efforts around the world – from participating in the rapid construction of emergency field hospitals to sanitizing public spaces and disposing of medical waste all the way to providing critical supplies such as personal protective equipment.
“This crisis highlights how essential construction is to keep society running,” he continued. “I would like to extend my sincere gratitude to all our people around the world whose swift response to our new reality has been exemplary. It has allowed us to maintain vital business continuity so that we can play our role to address this crisis. I applaud the determination of all our front-line workers who are providing critical materials and services in challenging lockdown circumstances.
“Our first-quarter results show how resilient we are as a business,” Jenisch concluded. “With our significantly strengthened balance sheet, we are in a very strong position to weather this storm. We are currently successfully executing our action plan ‘Health, Cost & Cash’ in all countries, setting the company up for the recovery of our markets. I am confident that LafargeHolcim will emerge from this pandemic as an important contributor to economic recovery as building activity gets back to normal.”
MDU Construction Materials Business Down in First Quarter
“While our operations continue to perform well as our country responds to the COVID-19 pandemic, earnings in the first quarter were adversely impacted by much lower investment returns, milder weather at our utility operations, and an adjustment on a construction contract. We are confident of our ability to continue to provide our customers with the essential services they need, however significant uncertainty exists about the economic impact that may be seen from COVID-19 and lower energy prices and demand,” said David L. Goodin, president and CEO of MDU Resources.
“Our companies are essential service providers, and our work remains vital to Building a Strong America as the country recovers from the pandemic and beyond. Our balance sheet is strong with ample liquidity, and we expect solid operational performance the remainder of the year while maintaining modified work practices in light of health guidelines around COVID-19. Our construction services business has an all-time record backlog of work and our construction materials business’s backlog is near last year’s record level. We anticipate our utility business and natural gas pipeline business will continue with near-normal operations.”
Comparing first quarter 2020 to first quarter 2019, MDU Resources’ businesses collectively experienced an earnings variance of approximately $10.1 million from lower returns on certain benefit plan investments. The company attributes this change in investment returns to the recent downturn in financial markets compared to strong market performance in the first quarter of 2019.
The construction materials business experienced a seasonal loss in the first quarter of $38.2 million compared to a loss of $34.4 million in first quarter 2019. Although favorable weather in the quarter allowed the company to begin construction work in certain areas earlier than last year, earnings in the quarter were negatively impacted by higher payroll-related costs and lower investment returns.
As previously announced, this business in February acquired a precast and prestressed concrete operation in Spokane, Wash., which complements the company’s existing prestressed operations in the Northwest. The construction materials backlog of work at March 31 was $905 million, compared to a record $943 million at March 31 last year.
The construction services business in the first quarter had record revenues, up approximately 22% over last year’s record first quarter revenues. Earnings were $16.8 million for the quarter, compared to $20.0 million in first quarter 2019.
Earnings were negatively impacted by an out-of-period adjustment of $6.7 million, after tax, to correct revenue recognition on a construction contract. This adjustment was related to, but not material to, the prior year’s results. The company continues to see strong demand for its services. Its backlog of work at March 31 was a record $1.27 billion, compared to last year’s record $1.02 billion at March 31. As previously announced, this business in February acquired PerLectric Inc., in Fairfax, Va.