Summit Materials Inc. announced results for the first quarter 2017. For the three months ended April 1, 2017, the company reported a net loss of $52.4 million, compared to a net loss of $21.1 million in the prior-year period. On an adjusted basis, Summit reported a net loss of $54.8 million, versus a diluted net loss of $42.5 million in the prior year period.
Aggregates net revenues increased by 23.5 percent, Cement net revenues increased 29 percent, while ready mix and asphalt revenues increased 21.9 percent.
“Our business performed ahead of expectations during the first quarter, as organic growth in materials sales volumes and average selling prices contributed to strong year-over-year increases in gross margins and Adjusted EBITDA,” stated Tom Hill, CEO of Summit Materials. “Demand within our core early-cycle residential and commercial construction markets continues to accelerate, while a combination of federal and state level funding for critical infrastructure projects remains a significant opportunity for us, particularly in Texas where a combination of FAST Act, Proposition 1 and Proposition 7 funding combine to support robust multi-year investment in public infrastructure.
“We forecast positive organic materials volume and price growth for the full-year 2017,” continued Hill. “Within our aggregates businesses, Utah, Virginia and the Carolinas are poised for another strong year, while our businesses in Austin and Vancouver have rebounded from prior year levels, with both regions reporting solid organic volume growth in the first quarter. As expected, our Cement segment has continued to benefit from a combination of steady demand for product within our Mississippi River corridor markets and sustained growth in average selling prices,” continued Hill. “On an organic basis, sales volumes and average selling prices for cement increased 17.6 percent and 6.3 percent, respectively, in the first quarter 2017, when compared to the prior year period.
“On a year-to-date basis, we have completed six acquisitions, including four transactions that have closed since February,” continued Hill. “Together, these four acquisitions bring another 90 million tons of permitted aggregates reserves into our portfolio, while expanding our vertically-integrated aggregates and products businesses in northeast Houston, South Carolina, Missouri and Vancouver. Our acquisition pipeline remains very active, with more than 20 transactions currently under review, including four potential acquisitions that are in late-stage diligence.”
“Exiting the first quarter, we had more than $370 million in cash and availability under our revolving credit facility,” stated Brian Harris, CFO of Summit Materials. “Given continued growth in trailing 12-month free cash flow, together with available cash and liquidity, we are well positioned to support the ongoing growth of our business.”
Net revenue increased by 24.5 percent to $259.0 million in the first quarter 2017, versus $208.0 in the prior year period. The improvement in net revenue was primarily attributable to acquisition-related sales volumes, higher organic sales volumes of aggregates, cement and asphalt, together with higher organic sales prices on aggregates and cement.
Gross profit increased 29.3 percent to $66.7 million in the first quarter 2017, versus $51.6 million in the prior year period. Gross profit generated from the company’s aggregates and cement assets represented 50 percent of total gross profit in the first quarter 2017, consistent with the prior year period. Adjusted EBITDA increased 62 percent year-over-year to $13.6 million, versus $8.4 million in the prior year period, in what is typically the seasonally slowest quarter of the year.
Results by line of business are:
Aggregates business: Aggregates net revenues increased by 23.5 percent to $61.6 million the first quarter 2017, when compared to the prior year period. Aggregates gross profit as a percentage of aggregates net revenues increased 70 basis points to 43.6 percent in the first quarter 2017, versus 42.9 percent in the prior year period. Organic aggregates sales volumes and average selling prices increased 0.6 percent and 2.9 percent, respectively, in the first quarter 2017, when compared to the prior year period. Improved market conditions in the company’s Austin, North Texas and Vancouver markets, together with continued strength in the Utah markets, contributed to the year-over-year improvement in organic volumes.
Cement business: Cement segment net revenues increased 29 percent to $43.8 million in the first quarter 2017, when compared to the prior year period. Cement gross profit as a percentage of cement segment net revenues was 14.3 percent in the first quarter 2017, 150 basis points higher than in the prior year period. Organic sales volumes and average selling prices of cement increased 17.6 percent and 6.3 percent, respectively, when compared to the prior year period. Favorable weather conditions and new customer acquisitions contributed to strong organic demand in the first quarter, while continued organic growth in sales prices was attributable to previously announced price increases.
Products business: Net revenues increased 21.9 percent to $124.0 million in the first quarter 2017, when compared to the prior year period. Products gross margin as a percentage of net revenues declined 190 basis points to 21.2 percent in the first quarter 2017, when compared to the prior year period. Organic sales volumes of asphalt and ready-mix concrete increased 64.5 percent and decreased 11.4 percent, respectively, when compared to the prior year period. Strong paving activity in the Austin market contributed to increased organic volume growth in asphalt, while lower organic sales volumes of ready-mix concrete was attributable to residential softness in the Houston market.
The company has completed six acquisitions on a year-to-date basis, including four acquisitions that have closed since February 2017. In total, these four acquisitions bring to Summit approximately 90 million tons of permitted aggregates reserves, four quarries, three ready-mix concrete plants, one asphalt plant and related paving operations.
The four acquisitions represent compelling bolt-on opportunities to existing platform businesses in Texas, South Carolina, Missouri and British Columbia. The total combined acquisition spend on the four acquisitions was approximately $70 million. Together with the previously announced acquisitions of Everist Materials and Razorback Concrete, the combined year-to-date acquisition spend is approximately $180 million.
Hanna’s Bend Aggregate (Texas) is a sand and gravel supplier with significant permitted reserves in northeast Houston. Hanna’s Bend is an ideal fit with Summit’s existing aggregates operations in the Houston market. The company estimates that Hanna’s Bend’s end-market exposure is largely weighted toward non-residential and residential construction markets.
Carolina Sand (South Carolina) is a construction and specialty sand supplier that enhances Summit’s existing exposure to the coastal South Carolina market and brings attractive synergy opportunities to the company’s business in that region. The company estimates that Carolina Sand’s end-market exposure is entirely weighted toward the private markets, with an emphasis on non-residential construction.
Sandidge Concrete (Missouri) is a ready-mix concrete business in southern Missouri that represents an attractive bolt-on acquisition to our existing Con-Agg platform. The company estimates that Sandidge’s end-market exposure is weighted mainly toward private markets with some public market exposure.
Winvan Paving (Vancouver) is an asphalt and paving company that represents an attractive bolt-on acquisition to Summit’s aggregates business in British Columbia and is consistent with the company’s vertically integrated materials growth strategy. The company estimates that Winvan’s end-market exposure is weighted equally between private and public markets.