Summit Materials Delivers Strong Finish to 2020

Summit Materials Inc. announced results for the fourth quarter and full year 2020. For the three months ended Jan. 2, 2021, the company reported net income attributable to Summit Inc. of $35.2 million, or $0.31 per basic share, compared to net income attributable to Summit Inc. of $35.7 million, or $0.32 per basic share in the comparable prior-year period. 

Summit reported adjusted diluted net income of $28.8 million, or $0.25 per adjusted diluted share as compared to adjusted diluted net income of $71.5 million, or $0.62 per adjusted diluted share in the prior-year period. 

For the full year 2020, net income attributable to Summit Inc. was $138.0 million, or $1.21 per basic share, compared to $59.1 million, or $0.53 per basic share, in 2019.

Summit’s net revenue increased 13.0% in the fourth quarter of 2020 to $571.9 million, compared to $506.3 million in the fourth quarter of 2019, on higher ready-mix concrete, aggregates, asphalt and paving revenue, relative to a year ago. Net revenue increased $104.1 million to $2,134.8 million in the year ended Jan. 2, 2021, resulting from growth in all lines of business other than cement.

The company reported operating income of $66.2 million in the fourth quarter 2020, compared to $59.9 million in the prior-year period, and operating income of $225.2 million in the full year 2020, compared to $213.6 million in 2019. Operating income increased by $11.6 million, or 5.4%, in 2020 as compared to 2019, primarily due to net revenue gains, partially offset by higher G&A costs due in part to a management transition that occurred earlier in the year. 

Summit’s operating margin percentage for the three and 12 months ended Jan. 2, 2021 decreased to 11.6% from 11.8%, and was unchanged at 10.5%, respectively, from the comparable period a year ago, due to the factors noted above.

For the three months ended Jan. 2, 2021, sales volumes increased 24.7% in aggregates, 4.5% in cement,6.4% in ready-mix concrete and 20.3% in asphalt relative to the same period last year. Organic average selling prices for aggregates decreased 3.6% in the fourth quarter of 2020 due to changes in product mix relative to a year ago as the fourth quarter 2019 included a contribution from flood repair work. 

Inclusive of acquisitions, average selling prices in the fourth quarter of 2020 decreased 6.2% in aggregates, and increased 2.8% in cement, 3.2% in ready-mix concrete and 2.1% in asphalt. For the full year 2020, sales volumes increased 9.5% in aggregates, 5.0% in ready-mix concrete and 4.7% in asphalt, and decreased 4.6% in cement. 

Average selling prices in full year 2020 decreased 2.0% in aggregates due to product mix, and increased 1.5% in cement, 4.7% in ready-mix concrete and 1.4% in asphalt. On a mix-adjusted basis, aggregates prices increased 1.7%.

Anne Noonan, CEO of Summit Materials, commented, “Summit delivered a strong finish to 2020 as migration trends continued to favor our rural and exurban markets, which directly benefited residential construction activity. In many of our key states, public spending activity was resilient and we had more working days. We are reporting record annual net income, Adjusted EBITDA and free cash flow. We are focused on sustainable growth with investments in greenfields and end markets that are underpinned by strong growth fundamentals. Our leverage ratio declined to 3.2x at year end, down from 3.6x a year ago. Most importantly, we continue to vigilantly practice safety and distancing protocols in response to the COVID-19 outbreak.”

Brian Harris, CFO of Summit Materials, added, “Record annual net income and improved working capital management resulted in record annual free cash flow of $245.6 million. We ended 2020 at 3.2x leverage, which is the lowest year-end leverage ratio in Summit’s history, combined with nearly $750 million in available liquidity.”

The company is announcing 2021 capital expenditure guidance of $200 million to $220 million including approximately $25 million to $35 million for greenfield projects.

For the full year, aggregates net revenues were $498.0 million in 2020, compared to $469.7 million the prior year. Aggregates adjusted cash gross profit margin decreased to 59.2% in 2020 compared to 60.2% on a combination of higher volumes, and product mix. 

Aggregates sales volumes increased 9.5% in 2020, when compared to the prior-year period on higher organic volume growth, particularly in Texas, Utah and Kansas. Average selling prices for aggregates decreased 2.0% in 2020 when compared to the prior-year period, which included some favorably priced levee repair work in 2019. On a mix-adjusted basis, Summit estimates that aggregates prices increased by approximately 1.7% in 2020.

Cement segment net revenues decreased 6.9% to $270.6 million in 2020 when compared to the prior-year period. Cement adjusted cash gross profit margin decreased to 39.6%, compared to 40.3% in the prior year. Organic sales volume of cement decreased 4.6% in 2020 when compared to the prior year. 

Organic average selling prices on cement increased 1.5% in 2020 relative to 2019. In addition, our solid waste processing facility continued to undergo repairs related to an explosion that occurred in April 2020. The full year 2020 impact was approximately $14 million of foregone adjusted EBITDA.

Products net revenues were $1,069.0 million in 2020, compared to $988.6 million in the prior year. Products adjusted cash gross profit margin increased to 23.8%, versus 22.1% in the prior year. Organic average sales price for ready-mix concrete increased 4.7%, coupled with a 5.0% increase in organic sales volumes of ready-mix concrete, led by higher volumes in Utah and Kansas. Organic average sales price for asphalt increased 1.4% while we had a 4.7% increase in asphalt organic sales volumes, driven in part by volume growth in Texas, Kansas and Virginia.

In the fourth quarter of 2020, aggregates net revenues increased by $19.8 million to $135.5 million in the fourth quarter 2020 when compared to the prior-year period. Aggregates adjusted cash gross profit margin decreased to 57.6% in the fourth quarter 2020 as compared to 61.9% in the fourth quarter 2019 on differences in product mix. 

Aggregates sales volumes increased 24.7% in the fourth quarter 2020 when compared to the prior-year period on higher volumes in Texas, partially offset by lower volumes in Missouri and Kansas. Average selling prices for aggregates decreased 6.2% in the fourth quarter 2020, reflecting acquisition related volumes. 

On an organic basis, average selling prices for aggregates decreased 3.6%. On a mix-adjusted basis, Summit estimates that aggregates prices increased by approximately 1.7% in 2020.

Cement segment net revenues increased 3.3% to $72.2 million in the fourth quarter 2020, when compared to the prior-year period, on higher sales volume of cement. Cement adjusted cash gross profit margin increased to 47.5% in the fourth quarter, compared to 45.4% in the prior-year period, as higher volumes resulted in lower unit plant costs. 

In addition, the company’s solid waste processing facility continued to undergo repairs related to an explosion that occurred in April 2020. The Adjusted EBITDA impact from the down time at the facility was approximately $4.2 million in the fourth quarter 2020. Sales volume of cement increased 4.5% in the fourth quarter and average selling prices increased 2.8% when compared to the prior-year period.

Products net revenues were $286.0 million in the fourth quarter 2020, compared to $251.4 million in the prior-year period. Products adjusted cash gross profit margin increased to 24.0% in the fourth quarter, versus 23.9% in the prior-year period. 

Organic average sales price for ready-mix concrete increased 3.2% and organic sales volumes of ready-mix concrete increased 6.4%, as higher volumes in residential construction markets were offset by flat to slightly lower volumes in other parts of Texas (Permian) and Kentucky. 

Organic average sales price for asphalt increased 2.1%, while asphalt organic sales volumes increased 20.3%, as lower volume in Kentucky was offset by higher volumes in North Texas and Kansas.

Net revenue increased by 5.1% to $2.1 billion in 2020, versus $2.0 billion in 2019. The increase in consolidated net revenue relative to 2019 was primarily attributable to a 12.2% increase in West segment net revenue, partially offset by a 0.1% decrease in East segment net revenue, combined with a 6.9% decrease in Cement segment net revenue. 

The company reported operating income of $225.2 million in 2020, compared to $213.6 million in the prior year. Adjusted EBITDA was $485.0 million in 2020, an increase of 5.1% compared to $461.5 million in 2019.

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