Summit Materials Inc. announced results for the third quarter of 2016. For the three months ended Oct. 1, 2016, the company generated adjusted net income of $73.5 million, an increase of more than 15 percent when compared to the prior year period.
Aggregates net revenues increased 25.4 percent to $78.3 million in the third quarter 2016, when compared to the prior year period. Aggregates gross profit as a percentage of aggregates net revenues increased 490 basis points to 71.7 percent in the third quarter 2016, when compared to the prior year period.
Including acquisitions, sales volumes increased 16.8 percent and average sales price increased 8.1 percent, when compared to the prior year period. Excluding acquisitions, organic sales volume declined 3.4 percent and organic average sales price increased 4.6 percent, when compared to the prior year period.
Organic sales volumes were impacted in the third quarter by a combination of lower volumes in: (1) the Vancouver, British Columbia, Canada, market, given the completion of a large sand river project in 2015; and (2) the Texas market, given temporary flooding during the period. Aggregates organic average sales price was strong across all major markets in the third quarter.
Cement net revenues increased 22.4 percent to $81.2 million in the third quarter 2016, when compared to the prior year period. Cement gross profit as a percentage of cement segment net revenues was 48.9 percent in the third quarter 2016, essentially flat with the prior year period.
Sales volumes increased 14.4 percent and the average sales price increased 7.0 percent in the third quarter, in each case when compared to the prior year period. Cement volumes increased on a year-over-year basis as a result of the Davenport acquisition in July 2015, while cement prices improved as a result of favorable overall market conditions.
Net revenues from ready-mix concrete, asphalt and other products increased 8.4 percent to $226.8 million in the third quarter 2016, when compared to the prior year period.
“Sustained organic growth in aggregates and cement pricing, coupled with improved cost discipline and margin capture, contributed to significant year-over-year increases in operating cash flow and net income in the third quarter,” stated Tom Hill, CEO of Summit Materials. “Materials gross profit increased nearly 30 percent on a year-over-year basis, representing more than half of total gross profit in the period. Overall, total gross profit margin increased 290 basis points on a year-over-year basis to 40.3 percent in the third quarter 2016.
“Total sales volumes increased across all lines of business in the third quarter, due mainly to the benefit of acquisitions completed during the past 12 months,” continued Hill. “On an organic basis, total sales volumes of aggregates and products declined due to a combination of severe summer weather in most of our core regional markets and tough prior-year comparisons in Vancouver. Looking ahead, we believe that our regional markets remain in the early stages of a multi-year recovery in public infrastructure, residential and non-residential construction spending, as supported by favorable long-term demographic trends.
“For the nine months ended 2016, approximately 40 percent of our aggregates revenues were related to public infrastructure projects,” continued Hill. “Entering 2017, we anticipate an acceleration in public infrastructure spending from current levels, supported in part by the passage of the FAST Act and state-level funding.
“We remain a disciplined acquirer of strategic assets that serve to further entrench Summit as a leader in markets where our scale and integrated model are proven competitive advantages,” stated Hill. “During the third quarter, we completed four small bolt-on acquisitions, including one transaction that serves to expand our materials distribution capabilities through two acquired terminals in the Louisiana market. We anticipate financial contributions from these transactions will begin to contribute meaningfully in 2017.”