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Summit Materials Sees Spike in Aggregates Revenues


Summit Materials Inc. announced that for the three months ended June 29, net income attributable to Summit Inc. was $36.4 million, or $0.32 per basic share, compared to net income attributable to Summit Inc. of $35.5 million, or $0.32 per basic share in the comparable prior-year period. 

Summit's net revenue increased 0.6% in the second quarter of 2019 compared to the comparable 2018 period. Adjusted EBITDA increased to $140.5 million in 2019 as compared to $135.3 million in 2018, as Summit continues to achieve increases in aggregates, cement and asphalt volumes on a year to date basis and pricing increases for aggregates, ready-mix concrete and asphalt. 

The improvement in net revenue was primarily attributable to both organic and acquisition-related contributions in the East segment and to a lesser extent, the Cement segment, offset by a decline in the West segment. The company reported operating income of $80.4 million in the second quarter 2019, compared to $77.3 million in the prior year period. Net income increased 2.9% to $38.0 million in the second quarter of 2019, compared to $36.9 million in the prior-year period. Adjusted EBITDA increased 3.8% to $140.5 million in the second quarter of 2019, compared to $135.3 million in the prior-year period.

Tom Hill, CEO of Summit Materials, stated "We were very pleased to see the solid increases in our organic sales volumes as well as average sales prices for aggregates that started in the first quarter of 2019, continue into the second quarter." Summit reported a 12.6% increase in aggregate sales volumes combined with a 8.5% increase in aggregates average sales prices during the first six months of 2019 as compared to the same period in 2018. Despite achieving a 1.9% increase in year to date ready-mix concrete average sales prices, Summit reported its ready-mix concrete volumes in 2019 were 5.9% below 2018 levels as wet and cold weather conditions in Houston and the Intermountain geographies adversely impacted volumes.

Hill commented, "While the Mississippi River presented significant barge shipment challenges for our cement segment during the quarter, we were able to ship 2.6% more volume in the second quarter of 2019 compared to 2018. While average sales prices of cement were up slightly in the second quarter, they have been flat compared to the first six months of 2018." Summit's cement segment increased its Adjusted EBITDA from $34.7 million in the second quarter of 2018 to $35.4 million in the same period in 2019.

Summit reaffirmed its 2019 full year Adjusted EBITDA guidance. Hill continued, "Despite some adverse weather conditions impacting our cement and ready-mix concrete operations in the first half of 2019, we are pleased to confirm our previously announced Adjusted EBITDA guidance of approximately $430 million to $470 million for 2019."

“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 24.1% to $128.7 million in the second quarter 2019, when compared to the prior-year period. Aggregates adjusted cash gross profit margin declined to 61.4% in the second quarter 2019, compared to 64.8% in the prior-year period, primarily due to operational inefficiencies caused by the loss of a piece of mining equipment used in its Texas operations during the quarter. 

The East Segment reported operating income of $33.7 million in the second quarter 2019, compared to $26.9 million in the prior-year period. The quarterly improvement in East Segment operating income and Adjusted EBITDA was mainly attributable to increases in net revenue from its acquisition program, increases in average selling prices of aggregates, ready-mix concrete and asphalt, partially offset by decreases in ready-mix concrete volumes. Aggregates revenue increased 25.5%, primarily due to increases resulting from the acquisition program as well as a 4.1% and 10.6% increase in organic volumes and average sales prices, respectively.

Aggregate margins in the West region were also adversely impacted by certain stripping and maintenance costs which are not expected to recur in the second half of the year. Organic aggregates sales volumes increased 4.4% in the second quarter 2019, when compared to the prior-year period. Organic average selling prices on aggregates increased 8.0% in the second 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 increased 3.3% to $84.5 million in the second quarter 2019, when compared to the prior-year period. Cement adjusted cash gross profit margin decreased to 45.8% in the second quarter, compared to 46.5% in the prior-year period, as margins were impacted by lower production levels in 2019 and increased logistics and distribution costs. Organic sales volume of cement increased 2.6% in the second quarter, when compared to the prior-year period. Organic average selling prices on cement increased 0.6% in the second quarter, when compared to the prior year period due to changes of the customer mix across our geographies.

Products Business net revenues decreased 6.7% to $261.2 million in the second quarter 2019, when compared to the prior-year period, primarily due to the sale of a non-core business in the third quarter of 2018. Products adjusted cash gross profit margin slightly increased to 22.3% in the second quarter, versus 22.0% in the prior-year period. Our organic average sales price for ready-mix concrete increased 2.9%, which was offset by a 7.2% decrease in organic sales volumes of ready-mix concrete. Our organic average sales price for asphalt increased 6.8% while we had a 2.5% decrease in asphalt organic sales volumes.