Vulcan Materials Reports Strong Growth

Vulcan Materials Co. announced results for the third quarter ending Sept. 30, 2014. The company is reporting that total revenues increased $60 million, or 7 percent and gross profit increased $50 million, or 31 percent, while aggregates freight-adjusted revenues increased $66 million, or 14 percent. Average sales price increased 2 percent. Asphalt, concrete and cement segments gross profit improved $12 million, collectively.

 

Tom Hill, president and chief executive officer, said, “Strong growth in aggregates volumes and solid operating performance in our aggregates businesses led to significant earnings growth for the company. Our third quarter results continued to demonstrate the earnings leverage of volume growth in our aggregates business. We are also seeing the benefit of our continuing efforts to grow unit profitability and leverage our overhead structure. Over the past 12 months, aggregates shipments have increased 9 percent, or 13 million tons. During the same period, aggregates segment gross profit has increased 30 percent, or $117 million.

“The overall pricing outlook for our aggregates products continues to improve with the recovery in demand for construction materials,” Hill continued. “Our aggregates shipments have grown for six consecutive quarters, and we expect this demand momentum to lead to accelerating price growth. This lead-lag relationship between growing volumes followed by accelerating price growth is typical for our business. We already see price increases between 5 and 10 percent in certain markets, particularly where the recovery in construction activity is further along.  As we look ahead, we believe price momentum will increase with continued volume growth.”

According to Hill, aggregates sales were $689 million, up 15 percent from the prior year’s third quarter, due largely to strong volume growth across most of the company’s footprint. Third-quarter aggregates shipments increased 12 percent compared to the prior year. Shipments in Illinois and Texas increased 31 and 21 percent, respectively, due in part to large-project work. 

Other markets, including Florida, Georgia, North Carolina and Virginia, reported volume growth of 10 to 15 percent versus the prior year. During the third quarter, the company completed several bolt-on acquisitions. Excluding shipments from these new operations, same-store aggregates shipments increased 10.5 percent from the prior year.

Freight-adjusted average sales price for aggregates increased 2 percent, or $0.23 per ton, versus the prior year’s third quarter, as almost all of markets realized price improvement. This quarterly price improvement marks the thirteenth consecutive quarter of year-over-year price improvement, said the company. The sharp volume increase in Illinois negatively impacted the overall increase in average selling price by 1 percent. Additionally, several large shipments of base material and other lower-priced products also impacted the reported average selling price for the quarter by approximately 1 percent. 

“The widespread price improvement, combined with reductions in costs, drove a $0.43 per ton, or 12 percent, increase in our third quarter gross profit per ton,” Hill said. “Despite relatively modest price growth during these early stages of demand recovery, trailing 12-month unit profitability has increased $0.52 per ton, or 19 percent, from the prior year’s third quarter.”

Regarding the company’s outlook for the remainder of the year, Hill stated, “Growth in private-end markets continues to drive increased construction activity and demand for our products. Leading indicators, such as housing starts, nonresidential contract awards and employment levels, continue to show favorable above-average growth trends in Vulcan-served markets, and Vulcan markets continue to grow faster than U.S. markets as a whole. Importantly, we continue to convert these higher volumes into higher unit margins by operating efficiently at the plant level. This strong execution has resulted in a 19 percent increase in our trailing 12-month unit profitability, as measured by Aggregates segment gross profit per ton, from what are already industry-leading profitability levels. This improved unit profitability, coupled with above-average demand growth, positions us well for significant future earnings growth.”

Based on these market trends, the company expects the following:

  • Strong full year aggregates volume growth near the top end of guidance range of between 7 and 9 percent, assuming normal weather patterns in the fourth quarter. 
  • Full-year pricing growth at the low end of guidance range of between 3 and 5 percent, with positive impact from current pricing actions benefiting price growth in 2015.
  • Non-aggregates gross profit to be $40 to $45 million for the full year 2014, compared to $14 million in 2013.
  • Full year 2014 selling, administrative and general (SAG) expenses in line with the prior year, excluding business development-related expenses
  • Capital spending for 2014 to be approximately $240 million to support the increased level of shipments and to further improve production costs and operating efficiencies.

“Our business continues to improve,” Hill concluded. “Our employees remain focused on increasing unit profitability, delivering expected incremental earnings, and improving our valuable aggregates franchise. Our confidence in the prospects for a sustained multi-year recovery in aggregates demand continues to grow. Our markets are recovering from trough levels of demand and are outpacing the rest of the U.S. We are excited about our future as the leading aggregates supplier in the U.S. We remain focused on further improving the profitability of our existing businesses, strategically expanding our unmatched asset base to serve the needs of our customers, and continuing our disciplined management of capital.”

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