Vulcan Materials Co. announced results for the quarter ended Sept. 30, reporting that net earnings were $200 million compared to $216 million in the prior year’s comparable quarter.
Third quarter gross profit margin expanded 70 basis points despite a decrease in segment sales. Gross profit was $338 million compared to $357 million in the prior year. Unit profitability increased 3% to $6.04 per ton due to widespread growth in pricing and effective cost control.
Third-quarter aggregates shipments were 8% lower than the prior year’s third quarter due to economic uncertainty caused by the pandemic, severe wet weather and wildfires in key markets.
Last year’s third quarter included very few severe weather events, helping drive strong volume growth. Despite lower shipments in most markets, virtually all of the company’s markets improved their respective unit profitability compared to the prior year’s third quarter.
Shipments declined in most of our markets reflecting weaker demand resulting from the pandemic. Shipments along the Atlantic Coast, in the Southeast and Texas were impacted by severe weather. Shipments in California were impacted by wildfires and resulting power outages which interrupted the supply of cement for ready-mix concrete production and limited construction activity.
On a mix-adjusted basis, most of the company’s markets reported year-over-year price growth. For the quarter, mix-adjusted sales price increased 2.9% (reported freight-adjusted sales price increased 2.4%). Year-to-date, mix-adjusted pricing has increased 3.5% (reported freight-adjusted sales price increased 3.2%) despite a 4% decline in shipments.
Freight-adjusted unit cost of sales increased 2%, and cash costs were flat versus the prior year’s third quarter. Effective operating efficiencies and lower diesel fuel costs helped mitigate the cost impact of lower sales volumes. The Aggregates segment earnings impact from lower diesel fuel was $9 million in the quarter.
Tom Hill, chairman and chief executive officer, said, “Building on strong performance from the first half of the year, our operational execution produced another quarter of unit margin expansion in the third quarter. Unit profitability gains were widespread across our footprint, and our team remained focused on driving those improvements. The continued impact of the COVID-19 pandemic on construction activity, along with severe wet weather, led to lower shipment levels in the quarter. However, our resilient and best-in-class aggregates business overcame these disruptive conditions, which enabled us to expand cash gross profit per ton, drive higher cash flows, and improve returns on invested capital.”
Hill continued, “Year-to-date, cash gross profit per ton has increased 7%, despite a 4% decline in shipments. The flexibility of our operating plans and our aggregates-focused business model have enabled us to continue to perform at a high level while also positioning us for earnings growth in the future as demand recovers. The pricing environment remains supportive, and we are encouraged by the sequential improvement in demand visibility. Residential construction has rebounded quickly which should bode well for private nonresidential construction as it has been the weakest end market since the pandemic began. State transportation revenues continue to recover to pre-pandemic levels, and the one-year extension of federal highway funding will support future highway construction. Continued recovery in these fundamentals would point to construction activity stabilizing over the course of 2021. As we consider the remainder of 2020, we now believe we have sufficient near-term visibility to provide guidance for the full year. We expect that our 2020 Adjusted EBITDA will range between $1.285 billion to $1.315 billion.”
Concrete segment gross profit was $12 million compared with $15 million in the prior year’s third quarter. Shipments decreased 11% versus the prior year, and average selling prices increased 3% compared to the prior year. Third quarter shipments were impacted by wet weather in Virginia, the company’s largest concrete market, and wildfires in Northern California.
Asphalt segment gross profit was $30 million, an improvement of $3 million from the prior year’s third quarter. The year-over-year improvement was driven by higher material margins (sales price less unit cost of raw materials). Although asphalt volumes in the third quarter declined 13% compared to the prior year, results benefited from slightly higher prices and effective cost containment, including lower liquid asphalt costs.
Shipments in the current year’s quarter were impacted by wildfires in California, the company’s largest asphalt market, and the completion of certain large projects last year in the Tennessee market.