Summit Materials Inc. announced record results for the second quarter 2020. For the three months ended June 27, the company reported net income attributable to Summit Inc. of $57.1 million, or $0.50 per basic share, compared to net income attributable to Summit Inc. of $36.4 million, or $0.32 per basic share in the comparable prior year period. Summit reported adjusted diluted net income of $58.9 million, or $0.50 per adjusted diluted share as compared to adjusted diluted net income of $36.0 million, or $0.31 per adjusted diluted share in the prior year period.
Summit’s net revenue increased 4.1% in the second quarter of 2020 compared to the second quarter of 2019, as ready mix and aggregates contributed the largest proportion of incremental net revenue. The company reported operating income of $100.1 million in the second quarter 2020, compared to $80.4 million in the prior year. Summit’s operating margin improved to 17.4% in the three months ended June 27, 2020 from 14.6% in the comparable prior-year period on net revenue gains in excess of our cost of revenue, partially offset by increases in general and administrative expenses. Adjusted EBITDA increased 14.1% in the second quarter to $160.2 million as compared to $140.5 million in 2019.
For the three months ended June 27, organic sales volumes increased 2.6% in aggregates, 3.2% in ready-mix concrete, and 10.0% in asphalt, respectively, and decreased 6.3% in cement relative to the same period last year. Organic average selling prices in the second quarter of 2020 decreased 0.2% in aggregates, and increased 1.2% in cement, 5.5% in ready-mix concrete, and 2.3% in asphalt relative to the prior year period.
Tom Hill, CEO of Summit Materials, commented, “Despite economic uncertainty, Summit experienced resilient demand and favorable weather conditions, particularly in Utah and Kansas, which led to record second-quarter net revenue, net income, and adjusted EBITDA. While our average selling price for aggregates declined relative to the second quarter of 2019, our aggregates adjusted cash gross profit margin expanded by 250 basis points, reflecting a different sales mix, particularly for levee repair work, than a year ago. Most importantly, we have been vigilant in practicing safety and distancing protocols in response to the COVID-19 outbreak. Construction is essential in all of Summit’s markets, and the health and safety of our workforce, customers and local communities continues to remain our highest priority.”
As of June 27, the company had $253.4 million in cash and $1.9 billion in debt outstanding. The company’s $345 million revolving credit facility has $329 million available after consideration of committed letters of credit. For the six months ended June 27, cash flow provided by operations was $61.7 million while cash paid for capital equipment was $105.7 million.
Brian Harris, CFO of Summit Materials added, “While we’ve only seen a limited impact from COVID-19 thus far, the North American economic outlook remains uncertain. We continue to engage in contingency planning and proactive reviews of capital spending, receivables and working capital under various demand scenarios. Summit reported over $580 million in available liquidity at quarter end, and is in a strong financial position.”
Subsequent to the end of the second quarter of 2020, Summit acquired Multisources Sand & Gravel, a pure play, 100% aggregates supplier in West and North Houston. Combined with Summit’s existing footprint, this acquisition creates the leading aggregates supplier in Houston with 14 plants.
Given the uncertainties relating to COVID-19, Summit is not providing Adjusted EBITDA guidance at this time. Hill continued, “We continue to believe that it is prudent to forego providing guidance pending better visibility into the ultimate resumption of normal business conditions.”
The company is maintaining its previously announced 2020 capital expenditure guidance to $145 million to $160 million, which the company expects will include $50 million to $60 million for greenfield projects.
By business line, the company is reporting:
- Aggregates net revenues increased by $1.3 million to $130.0 million in the second quarter 2020 when compared to the prior-year period. Aggregates adjusted cash gross profit margin increased to 63.9% in the second quarter 2020 compared to 61.4% on higher volumes and product mix. Aggregates sales volumes increased 2.6% in the second quarter 2020, when compared to the prior-year period on higher organic volume growth, particularly in Utah, Kansas, Missouri and Texas. Average selling prices for aggregates decreased 0.2% in the second quarter 2020. On a mix-adjusted basis, Summit estimates that aggregates prices have increased by approximately 2.5% year-to-date in 2020.
- Cement segment net revenues decreased 10.5% to $75.7 million in the second quarter 2020, when compared to the prior-year period on lower sales volume of cement. Cement adjusted cash gross profit margin increased to 50.8% in the second quarter, compared to 45.8% in the prior year period, as the Company incurred lower storage, distribution and plant costs. In addition, our solid waste processing facility underwent repairs related to an explosion in April 2020, which shut down that facility during the quarter. The Adjusted EBITDA impact from the down time at the facility was approximately $3.8 million in the second quarter. Organic sales volume of cement decreased 6.3% in the second quarter and organic average selling prices increased 1.2% when compared to the prior year period.
- Products net revenues were $285.0 million in the second quarter 2020, compared to $261.2 million in the prior year period. Products adjusted cash gross profit margin increased to 25.4% in the second quarter, versus 22.3% in the prior year period. Our organic average sales price for ready-mix concrete increased 5.5% and organic sales volumes of ready-mix concrete increased 3.2%, led by higher volumes in Utah, Kansas and Missouri. Our organic average sales price for asphalt increased 2.3%, led by strength in Kansas, while asphalt organic sales volumes increased 10.0%, led by Texas, Utah, and Kansas.