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Eagle Materials Heavy Materials Business Down

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.” 

Powers continued, “Looking ahead, a strong jobs market, coupled with real wage growth and low interest rates, bodes well for our key construction markets in calendar 2019. We are confident that we will continue to produce industry-leading margins and generate significant cash flow, and our ongoing strategic portfolio review will ensure that Eagle’s inherent value is appropriately reflected in the marketplace.”

Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates, and joint venture and intersegment cement revenue, declined 1% to $795.5 million in fiscal year 2019. Heavy Materials operating earnings for the fiscal year were $177.6 million, a decline of 10%.  

The decline in its Heavy Materials revenue and operating earnings was driven primarily by unusually wet weather throughout the year, which hampered sales volume, and by increased maintenance costs partially offset by improved cement and concrete average net sales prices.

Revenue from Cement, including joint venture and intersegment revenue, increased 1% to $656.8 million for the full fiscal year. Fiscal 2019 operating earnings from cement were $164.8 million, a decline of 8%, reflecting increased maintenance costs partially offset by improved pricing.

Cement revenue for the quarter, including joint venture and intersegment revenue, was down 2% to $113.1 million. Operating earnings from cement for the fourth quarter were $22.7 million, 8% below the same quarter a year ago. The revenue and earnings decline was caused primarily by reduced sales volume due to persistently wet weather in many of its markets and was partially offset by improved average net cement sales prices. Cement sales volume for the quarter was down 2% to 928,000 tons. The average net sales price for the quarter improved slightly to $109.15 per ton.

Fiscal 2019 revenue from Concrete and Aggregates declined 11% to $138.8 million. Concrete and Aggregates reported fiscal 2019 operating earnings of $12.9 million, down 28%. Persistently wet weather in its Austin market was the primary driver of the revenue and earnings decline.

Concrete and Aggregates revenue for the fourth quarter of 2019 was $28.5 million, a decrease of 7%. Fourth quarter operating earnings were $2.2 million, a 20% decline, reflecting lower sales volume partially offset by improved concrete pricing. Its primary concrete and aggregates markets experienced heavier rainfall than typical during the quarter, which hampered its ability to move product.

Eagle’s Oil and Gas Proppants segment reported fiscal 2019 revenue of $83.0 million, a decrease of 16%, primarily reflecting lower average net sales prices partially offset by a 6% increase in Frac Sand sales volume. The fiscal 2019 operating loss was $28.7 million compared with an operating loss of $6.1 million in the prior year.

Eagle’s Oil and Gas Proppants segment reported fourth quarter revenue of $17.7 million, a decline of 43%, primarily reflecting a 41% decrease in average Frac Sand sales prices. The fourth quarter’s operating loss of $9.1 million includes depreciation, depletion and amortization of $6.9 million.

During the second half of the fiscal year, demand for its frac sand product was increasingly affected by industry-wide reduced completion budgets. In addition, pricing pressure resulted from a combination of low demand and increased use of local in-basin sand with lower logistics cost. Faced with these dynamics, which are not expected to recover in the near term, the company recorded long-lived asset and goodwill impairments during the quarter of $213.4 million and $6.9 million, respectively.