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The Aggregates Industry’s Publicly Traded Companies Reported First-Quarter Results.

Vulcan’s Aggregates Shipments Up 13% for Quarter

Vulcan Materials Co. announced results for the quarter ended March 31. Total revenues were $996.5 million, compared to $854.5 million in the first quarter of 2018. Net earnings were $63 million and Adjusted EBITDA was $193 million in the first quarter. The 15% growth in Adjusted EBITDA was driven by strong aggregates shipments, up 13% year-over-year, and a 5.4% increase in aggregates pricing. 

First-quarter aggregates segment gross profit increased 25% to $186 million, or $4.07 per ton. As a percentage of segment sales, gross profit margin expanded 100 basis points due to strong growth in shipments and price improvements.

Trailing 12-month same-store incremental gross profit flow-through rate was 57%, which is in line with longer-term expectations of 60%. As a reminder, quarterly gross profit flow-through rates can vary widely from quarter to quarter; therefore, the company evaluates this metric on a trailing 12-month basis.

First-quarter aggregates shipments increased 13% (11% on a same-store basis) versus the prior-year quarter. Solid underlying fundamentals and pent-up demand carried over from last year helped drive shipment growth across most of the company’s footprint.  

In California, shipments decreased by double-digits due to record rainfall throughout most of the quarter. A strong demand environment, driven by transportation-related construction as well as growth in the company’s project-related bookings, support its expectations for shipment growth in California in 2019.

Price growth was positive across all markets served by the company. For the quarter, freight-adjusted average sales price for aggregates increased 5.4% versus the prior-year’s quarter. Excluding mix impact, aggregates price increased 5.8% compared to the prior-year first quarter. 

Pricing was particularly strong in Arizona, California, Georgia, Tennessee and Texas. Positive trends in backlogged project work along with demand visibility and customer confidence support continued upward pricing movements.

First quarter same-store unit cost of sales (freight-adjusted) increased 3% compared to the prior-year quarter due in part to planned higher repair and maintenance costs in advance of the construction season. Unit cost of sales in California was negatively impacted by record rainfall. The company remains focused on compounding improvements in unit margins throughout the cycle through fixed cost leverage, price growth and operating efficiencies. 

Tom Hill, chairman and chief executive officer, said, “Our first quarter results represent a good start to the year and are consistent with our full-year expectations. Broad-based shipment growth, compounding price improvements and solid operating efficiencies in our aggregates business contributed to 17% growth in total revenues and 29% growth in operating earnings. These results demonstrate the strength of our unique aggregates-centric business model. 

“Aggregates segment gross profit increased from $3.66 per ton to $4.07 per ton. This double-digit improvement in first quarter unit profitability builds on last year’s results, and we are well positioned for further gains in our industry-leading unit profitability.  

“Our key markets are benefitting from both robust growth in public construction demand and continued growth in private demand. Leading indicators, such as construction award activity, signal broad-based shipment growth across our footprint. Aggregates pricing momentum continues to improve – consistent with our full-year expectations. As a result, we reiterate our full-year expectations for 2019 earnings from continuing operations of between $4.55 and $5.05 per diluted share and Adjusted EBITDA of between $1.250 and $1.330 billion.”

Martin Marietta Achieves Record First-Quarter Results

Martin Marietta Materials Inc. reported record results for the first quarter ended March 31, 2019. Total revenues were $939 million versus $802 million in the first quarter of 2018.

First-quarter heritage aggregates volume and pricing improved 12.5% and 4.0%, respectively. 

Shipments for the Mid-America Group heritage operations increased 18.4%, primarily driven by infrastructure, commercial and residential projects in the Carolinas. Heritage pricing improved 3.1% despite unfavorable product mix from increased shipments of lower-priced base stone in 2019.

Shipments for the Southeast Group heritage operations increased 16.7%, reflecting the overall strength of the North Georgia and Florida markets. Heritage pricing improved 6.2%. 

West Group shipments increased 6.3% as strong nonresidential construction activity in Texas more than offset weather-impacted Colorado shipments. Product and geographic mix limited West Group pricing growth to 2.7%.

Inclusive of acquired operations, aggregates volume and pricing improved 24.2% and 2.3%, respectively. Acquired operations shipped 3.5 million tons at selling prices that are approximately 15% below the company’s average. 

Martin Marietta’s first-quarter heritage aggregates shipments by end use are as follows (all comparisons are versus the prior-year quarter):

Aggregates shipments to the infrastructure market increased 2% as modestly improved weather, particularly in the Southeast, allowed contractors to advance transportation-related projects earlier in the construction season. Following more than a decade of underinvestment, management remains confident that infrastructure demand is poised for meaningful growth. Funding provided by the Fixing America’s Surface Transportation Act (FAST Act), combined with numerous state and local transportation initiatives, has resulted in an acceleration in lettings and contract awards in key states, including Texas, Colorado, North Carolina, Georgia and Florida. For the quarter, the infrastructure market represented 33% of aggregates shipments, which is below the company’s most recent 10-year average of 46% but consistent with first-quarter historical trends.

Aggregates shipments to the nonresidential market increased 33%, driven by both commercial and heavy industrial construction activity. The company continued to benefit from robust distribution center, warehouse, data center and wind turbine projects in key geographies, including Texas, the Carolinas, Georgia and Iowa. The nonresidential market represented 37% of first-quarter aggregates shipments.   

Aggregates shipments to the residential market increased 8%, driven by weather-deferred homebuilding activity in the Carolinas, Georgia and Florida. Despite the recent slowdown in housing unit starts at the national level, the residential construction outlook across the company’s geographic footprint remains positive for both single- and multi-family housing, driven by favorable demographics, job growth, land availability, steady interest rates and efficient permitting. On a national level, housing starts remain below the 50-year annual average of 1.5 million despite notable population gains. The residential market accounted for 23% of first-quarter aggregates shipments.

Ward Nye, chairman, president and CEO of Martin Marietta, stated, “Our company delivered strong operating and financial performance for the first three months of 2019, including first-quarter records for revenues and Earnings Before Interest, Taxes, and Depreciation and Amortization (EBITDA). Driven by improved shipments, pricing and cost management, we are off to a promising start to what we expect to be another record year for Martin Marietta. Notably, the Building Materials business benefitted from robust pent-up demand as well as modestly improved weather across portions of our geographic footprint, which allowed for an early beginning to the construction season. These encouraging trends, combined with favorable pricing momentum and growing contractor backlogs, reaffirm our confidence in our full-year outlook.

“Consistent with our expectations, construction activity in our key regions, supported by strengthening public- and private-sector spending, is outpacing the nation as a whole. Infrastructure construction has begun in earnest on several transportation projects in North Carolina, Georgia and Florida following the recent acceleration in public lettings and contract awards in these key states,” Nye said. “Additionally, notable employment gains and population growth continue to support private-sector strength in our leading markets. These favorable dynamics bode well for a busy construction season throughout the remainder of the year.”

Nye concluded, “This year, Martin Marietta celebrates 25 years as a public company. We have established a proven record of value creation and will continue to build upon our success by focusing on price discipline, strategic geographic positioning and prudent capital allocation. We remain committed to the diligent execution of our strategic plan and further enhancement of the world-class attributes of our business – including safety, cost discipline and operational excellence. We believe Martin Marietta is firmly positioned for continued growth and enhanced shareholder value in 2019 and beyond.”

Summit Materials Aggregates Revenue Rises in First Quarter

Summit Materials Inc. reported a first-quarter 2019 net loss of $68.8 million, compared to a net loss of $53.7 million in the comparable prior-year period.

Summit’s net revenue increased 5.5% in the first quarter of 2019 compared to the comparable 2018 period, while net income and earnings per share decreased in 2019 as compared to the comparable 2018 period, primarily due to the $14.6 million loss on debt financing to redeem the 8.5% senior notes in March 2019.  

Tom Hill, CEO of Summit Materials, stated, “We were very pleased to see our organic average sales prices for aggregates increased by 6.3% in the first quarter as compared to a year ago. We continue to believe end market fundamentals remain intact for the construction industry going into 2019.” 

Hill commented, “Cement sales volumes were up slightly in the first quarter of 2019 as compared to 2018 despite challenging weather conditions. However, an extended annual maintenance shutdown and record flooding on the Mississippi River that has continued into the second quarter has negatively impacted our Cement business. 

“Underlying demand conditions in most of our markets remain favorable and are expected to remain so during the remainder of 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.

Aggregates net revenues increased by 30.3% to $87.9 million in the first quarter 2019, when compared to the prior-year period. Aggregates adjusted cash gross profit margin improved to 43.2% in the first quarter 2019, compared to 41.5% in the prior-year period, as pricing gains exceeded input costs. 

Organic aggregates sales volumes increased 6.6% in the first quarter 2019, when compared to the prior-year period. Organic average selling prices on aggregates increased 6.3% in the first quarter 2019 when compared to the prior year period due to improvements in prices within both the West and East segments during the period. 

Cement segment net revenues declined 0.7% to $37.3 million in the first quarter 2019, when compared to the prior-year period. Cement adjusted cash gross profit margin decreased to 3.1% in the first quarter, compared to 19.5% in the prior-year period, as margins were impacted by lower production levels in 2019. 

Organic sales volume of cement increased 1.0% in the first quarter, when compared to the prior-year period. Organic average selling prices on cement decreased 1.5% in the first quarter, when compared to the prior-year period due to changes of the customer mix across its geographies.

  • The West Segment reported operating loss of $11.6 million in the first quarter 2019, compared to a loss of $6.1 million in the prior-year period. Aggregates revenue in the first quarter increased 12.3% over the prior-year period as a result of contributions from acquisitions, resulting in a 4.2% increase in organic volumes and a 4.7% increase in organic average sales prices.
  • The East Segment reported operating loss of $17.3 million in the first quarter 2019, compared to a loss of $20.9 million in the prior-year period. Aggregates revenue increased 36.8%, primarily due to increases resulting from its acquisition program as well as a 9.1% and 7.6% increase in organic volumes and average sales prices, respectively. 

As previously announced, in February 2019 Summit extended and amended its revolving credit facility, which now has maximum availability of $345 million and matures in 2024. Further, in March 2019, Summit retired $250 million of 8.5% senior notes due 2022 by issuing $300 million of 6.5% senior notes due in 2027. Brian Harris, CFO of Summit Materials, stated, “We were very pleased with both of those transactions, which increased our overall liquidity position and lowers our cash interest outlays in the future. Further, we are pleased to reaffirm our guidance for 2019 capital expenditures of approximately $160 million to $175 million.”

Cemex U.S. Business Up 3% in First Quarter

Cemex, S.A.B. de C.V. announced that, on a like-to-like basis for the ongoing operations and adjusting for foreign exchange fluctuations, consolidated net sales increased by 1%, reaching $3.2 billion during the first quarter of 2019 versus the comparable period in 2018. Operating EBITDA decreased by 3% on a like-to-like basis during the first quarter of 2019 to $562 million on a year-over-year basis.

The increase in quarterly consolidated net sales was due to higher prices of its products, in local-currency terms in all of its regions, as well as higher volumes in its three core products in Europe, and in ready-mixed and aggregates in the United States.

Cemex’s operations in the United States reported net sales of $878 million in the first quarter of 2019, an increase of 3% from the same period in 2018. Operating EBITDA decreased by 1% to $130 million from $131 million in the same quarter of 2018.

  • Operating earnings before other expenses, net, decreased by 14% in the first quarter, to $294 million.
  • Controlling interest net income during the quarter was $39 million, from $20 million in the same period of 2018.
  • Operating EBITDA decreased by 3%, on a like-to-like basis, during the quarter on a year-over-year basis, to $562 million.
  • Operating EBITDA margin during the quarter decreased to 17.4% from 17.9% in the same period in the previous year.
  • Free cash flow after maintenance capital expenditures for the quarter was negative $337 million.

Fernando A. Gonzalez, chief executive officer of Cemex, said, “We are pleased with the 1% top-line growth we achieved during the first quarter, despite important volume declines in our two most important markets: Mexico and the United States. During the quarter, we enjoyed improved pricing performance in all our regions with favorable volume dynamics in Europe. In the United States, ready-mixed and aggregates volumes also grew despite adverse weather in part of our footprint. In addition, operating cash flow performance was bolstered by the ongoing successful implementation of our A Stronger Cemex initiatives.»

Eagle Materials Reports Flat Revenue; Plans to Sell Business Units

Eagle Materials Inc. reported financial results for fiscal year 2019 and the fiscal fourth quarter ended March 31. For 2019, the company is reporting:

  • Revenue of $1.4 billion, flat with the prior year.
  • Net earnings per diluted share of $1.47, down 72%.
  • Adjusted net earnings per share of $5.05.

For the fiscal fourth quarter the company is reporting:

  • Revenue of $284.7 million, flat with prior year.
  • Net loss per diluted share of $2.82, down 471%.
  • Adjusted net earnings per share of $0.87.

Commenting on the financial results, Dave Powers, chief executive officer, said, “In fiscal 2019, our businesses continued to generate strong earnings and cashflow, despite challenging weather trends that depressed sales opportunities throughout much of our fiscal year. Importantly, we continued to improve our already low-cost position throughout the year, making meaningful investments to further improve our operational efficiency, while continuing to repurchase shares in line with our capital allocation strategy. In fiscal 2019, we purchased more than 3.3 million shares, or 7% of our outstanding shares, and we returned nearly $300 million to shareholders, through a combination of share repurchases and dividends.” 

Eagle Materials Inc. announced that its board of directors has approved a plan to separate its Heavy Materials and Light Materials businesses into two independent, publicly traded corporations by means of a tax-free spin-off to Eagle shareholders. The separation is expected to be completed in the first half of calendar year 2020.

The company also announced that it is actively pursuing alternatives for its Oil and Gas Proppants business with the support of an independent financial advisor. Additionally, the company’s board will continue to evaluate any opportunity to create value that may arise prior to completion of the separation.

The announcement follows a thorough review of strategic, operational and financial alternatives to enhance shareholder value by the company’s board and management team, with the support of independent financial and legal advisors and input from the company’s largest shareholders, including Sachem Head Capital Management.

Mike Nicolais, Eagle’s chairman stated, “The Eagle board and management team has maintained a regular evaluation of the strategic and financial options to best position the company to drive value for shareholders. Historically, our Light and Heavy businesses have provided Eagle with balance and financial strength; however, the board recognized that our industry-leading performance is not adequately reflected in the market value of the combined company. We engaged with shareholders and took their input into account in coming to this conclusion. Based upon our recent comprehensive review of various strategic, operational and financial alternatives, the Eagle board and management team believe this separation will provide each of the businesses with the financial flexibility to pursue its own growth strategies and operating priorities, and will develop the appropriate capital structure and allocation priorities to generate long-term growth for all shareholders. Accordingly, we have determined that now is the optimal time to pursue this separation.”

“We believe that by pursuing the actions announced today the Eagle board is taking significant steps to unlock the company’s inherent value,” said Scott Ferguson, managing partner of Sachem Head. “Given these developments and the substantial value creation potential, Sachem Head is withdrawing our director nominations and proposals, and we will fully support the board’s recommendations at Eagle’s 2019 Annual Meeting. We are pleased with the constructive work of the Eagle board and look forward to seeing significant value creation for all shareholders in the months ahead.”

Following completion of the separation, each company is expected to be well capitalized, generate strong free cash flows, be well positioned for future growth and be best-in-class in its respective industry. Eagle believes that as two separate companies, each business will be able to: 

  • Focus on its distinct strategic priorities that best position the business for profitability and growth, with targets and goals that fit its own markets and unique opportunities.
  • Implement a capital structure that is tailored to the needs of the businesses it operates.
  • Allocate resources and deploy capital in a manner consistent with its strategic priorities.
  • Allow new and existing investors to value the two companies based on their particular operational and financial characteristics.

After the separation, the company’s existing Heavy Materials business, a U.S.-heartland cement-plant system with complementary concrete and aggregates operations, is expected to continue to produce strong margins and significant cash flows. Eagle will remain focused on low-cost production, operate in key U.S. geographies with favorable market dynamics and drive profitable growth through both strategic acquisitions and the organic development of its asset network. The business enjoys long-lived, owned raw material reserves that will sustain its operations over the long term. This business will operate as a distinct pure-play, U.S.-only cement company with excellent future prospects as the largest U.S.-owned producer.

Upon separation, Eagle’s existing Light Materials business is expected to continue to be a benchmark producer of gypsum wallboard and recycled paperboard. This business has a long track-record of superior margin performance, driven by its sustainable low-cost producer positions in U.S. sunbelt markets, and has uniquely distinguished itself through industry business cycles. The business includes an integrated paperboard mill that utilizes advanced technologies to supply the wallboard plants with high-performing, low-cost facing paper. The business enjoys long-lived raw material reserves as well as industry leading levels of customer satisfaction.

In connection with the separation, Eagle is actively pursuing alternatives for its Oil and Gas Proppants business with the support of an independent financial advisor. There can be no assurance that this process will result in any particular action being taken, nor can there be any assurance regarding the timing of any such action. 

Eagle does not intend to disclose developments regarding this process if and until an action is announced, or the process is otherwise concluded.

Upon completion of the separation, each company will have its own management team and an independent board of directors that will include members of the current Eagle board. Full management teams and boards for both companies will be named in the months leading up to the formal separation.

ACG Acquisition Drives Arcosa’s First Quarter 2019 Results

Arcosa Inc. announced results for the first quarter ended March 31, 2019. The company is reporting that revenues increased 16% to $410.9 million. Net income increased 25% to $27.7 million; while adjusted net income increased 30% to $28.8 million, excluding non-routine items related to the ACG Materials acquisition.

Construction Products revenues increased 51% to $106.0 million in the first quarter, benefitting from a full quarter of operating results from the December 2018 acquisition of ACG Materials. Operating profit for the first quarter was $11.3 million compared to $12.4 million in the same period in 2018. Adjusting for the write-up of acquired ACG Materials inventory, first quarter Adjusted Segment EBITDA was $21.5 million, $4.0 million higher than a year ago. The increase was driven by the ACG acquisition.

“Arcosa’s first quarter results were better than our expectations,” said Antonio Carrillo, president and chief executive officer. “This strong start to 2019 supports our confidence in our full-year guidance. We achieved year-over-year revenue growth in each of our business segments, benefitting from organic initiatives and the addition of ACG Materials into our Construction Products Group. ACG’s first quarter results were in line with our expectations, and we continue to consider bolt-on acquisitions in the aggregates and specialty materials markets. 

“We continued to execute effectively on our stage one priorities: growing Construction Products, improving margins in Energy Equipment, expanding our Transportation Products business as markets continue to recover, and operating a lean corporate structure,” Carrillo continued.

“Our strong start to the year and confidence in current business trends support our expectations for substantial growth in 2019. We reaffirm our full-year revenue and adjusted EBITDA guidance ranges of $1.70 billion to $1.80 billion and $215 million to $225 million, respectively. The mid-point represents 18% year-over-year adjusted EBITDA growth in 2019, after absorbing additional standalone company costs and initial pricing on a long-term components contract,” Carrillo noted.

MDU Resources Materials Group Takes First-Quarter Loss

MDU Resources Group Inc. reported first quarter earnings of $40.9 million, or 21 cents per share, compared to first quarter 2018 earnings of $42.4 million, or 22 cents per share.

The construction materials business experienced a seasonal loss in the first quarter, with a loss of $34.4 million this year compared to $23.5 million in 2018. Acquisitions that the company made in 2018 added to operations that are impacted by winter weather conditions, and the company experienced lower margins as a result of less-favorable weather conditions in certain regions. The construction materials backlog of work at March 31 was a record $943 million, compared to $692 million in 2018. 

The construction services business in the first quarter had record revenues, up about 26% over last year, and record earnings. Earnings were $20.0 million, approximately 33% higher than the $15.1 million earned in first quarter 2018. 

The company performed a higher volume of work for the hospitality and high-tech industries, as well as for other utility companies, during the quarter. It also saw an increase in sales and rentals of the utility construction equipment it manufactures. Its backlog of work at March 31 was a record $1.02 billion, compared to $675 million at the same time last year.

“Our construction services business had record results in the first quarter, including record revenues, which has led us to increase our 2019 revenue guidance by $50 million for this business. Our utility and pipeline businesses also performed very well,” said David L. Goodin, president and CEO of MDU Resources. “Our construction materials business experienced a larger first quarter loss compared to last year, which was anticipated as we added operations through acquisitions in 2018 in areas where construction activity is impacted by winter.

“Our construction businesses have combined record backlog of nearly $2 billion at March 31, giving us confidence as we enter the peak of the 2019 construction season,” Goodin said. “Our natural gas pipeline business has begun construction on two expansion projects that we expect to be finished and in-service later this year. Our utility business recently announced that we plan to retire our wholly owned coal-fired electric generation units, and we continue to move forward with that effort while ensuring we are providing affordable, safe and reliable electricity to our customers.”

U.S. Concrete Aggregates Volume Rises 17%

U.S. Concrete Inc. reported results for the quarter ended March 31, including:

  • Consolidated revenue increased 1.6% to $333.1 million.
  • Ready-mixed concrete revenue increased 0.4% to $290.4 million.
  • Aggregate products revenue increased 25.4% to $42.9 million.
  • Aggregate products volume increased 17.0% to 2.5 million tons.
  • Operating income increased to $7.9 million and operating income margin increased to 2.4%.
  • Adjusted Gross Profit increased 4.8% to $64.7 million and Adjusted Gross Profit Margin increased to 19.4%.

Aggregate product sales volume increased 17.0% compared to the prior-year period, predominantly driven by the company’s Polaris and west Texas quarries. Adjusted EBITDA for this segment increased to $10.4 million in the first quarter of 2019 from $4.7 million in last year’s first quarter, primarily reflecting the higher sales volume partially offset by the related higher production costs associated with the increased volume.

William J. Sandbrook, chairman and chief executive officer stated, “While faced with negative weather patterns, which seemingly have become routine, we are pleased to report multiple financial accomplishments, including our 33rd consecutive quarter of year-over-year revenue growth and an improved adjusted gross profit. We continue to believe these trends, including the solid runway of demand in all of our regions, reflect the strong fundamentals in the markets we serve.”

Sandbrook continued, “A significant driver of the positive momentum in our Adjusted Gross Profit is the significant growth in our higher margin aggregate products segment, once again led by Polaris. We sold 2.5 million tons of aggregates during the 2019 first quarter, generating more than $10 million of Adjusted EBITDA, which is more than double last year’s first quarter.

“There are numerous positive indicators that fuel our positive outlook for continued growth and reaffirm our position in the construction market,” he concluded. “We are focused on continuous improvement in the face of the negative weather patterns with the intent to fortify our market positions and related operating leverage. We have several internal strategic initiatives in place to help us capitalize on the robust demand within all of our regions. These initiatives are designed to improve our operating leverage, customer service, internal processes, and most importantly our ability to operate more efficiently in our seasonal and cyclical business.”