Summit Materials Inc. announced results for the third quarter ended Oct. 1. Net revenue increased $23.8 million, or 3.6% in the third quarter to $686.0 million, due to increases in average sales prices across all lines of business that more than offset the impact of divestitures.
Operating income increased $2.0 million, or 1.6% in the third quarter to $127.1 million, as net revenue gains combined with lower general & administrative expenses and decreases in depletion, amortization and accretion expenses more than offset increases in cost of revenue. Summit’s operating margin percentage for the three months ended Oct. 1, 2022 decreased to 18.5% from 18.9%, from the comparable period a year ago.
Net income attributable to Summit Inc. increased to $86.5 million, or $0.73 per basic share, compared to $74.2 million, or $0.63 per basic share in the comparable prior year period. Summit reported adjusted diluted net income of $84.2 million, or $0.71 per adjusted diluted share as compared to $81.5 million, or $0.68 per adjusted diluted share in the prior year period.
“Today, we are pleased to report that Summit Materials delivered record organic pricing growth across aggregates, cement, and ready-mix while achieving the lowest net leverage in company history and the highest ROIC since we launched Elevate Summit,” said Anne Noonan, Summit Materials president and CEO. “These solid financial results in the face of market crosscurrents is thanks to continued execution of our Elevate Strategy and the commitment of our team to meet the opportunities of a dynamic marketplace. We are positioned to achieve strong pricing growth in 2022 driven, in large part, by double digit growth across all lines of business in the third quarter and catalyzed by accelerating aggregates and cement pricing. We continue to view the pricing environment as favorable and we expect to see substantial exit velocity heading into 2023.
“On portfolio optimization, recent transactions are evidence that Summit, equipped with the strongest balance sheet in company history, is well positioned to play offense as we intentionally shift towards a more materials-led portfolio. Finally, our 2022 Adjusted EBITDA guidance has been adjusted to reflect 2022 performance to date, the additional divestiture we made in the third quarter, and the projected fourth quarter impacts from Hurricane Ian and low Mississippi River levels. The mid-point of the revised guide now represents mid-single-digit Adjusted EBITDA growth on a pro forma basis, which we feel represents very strong performance especially in light of a challenging macroeconomic backdrop,” Noonan concluded.
Brian Harris, CFO of Summit Materials, added, “Our strong balance sheet and liquidity position affords us the unique opportunity to concurrently pursue multiple capital allocation priorities. We continue to make capital investments to sustain and drive organic growth while, at the same time, opportunistically buying back our own common stock when shares represent compelling value. And, more recently, we have taken steps to strengthen the portfolio via value creative M&A. With the acquisition of SCI Materials in October, we enter into the high-growth Florida market, expand the Summit footprint, and become more materials-led by adding an aggregates-based business to the portfolio. These moves are proof that we have a focused and intentional capital allocation approach and that we will use our financial flexibility and firepower to pursue the highest return opportunities for our shareholders.”
In the three months ended Oct. 1, Summit Materials sold one business in the East segment, resulting in cash proceeds of $32.0 million and a total gain on disposition of $4.1 million. To date, as part of its Elevate Summit Strategy, the company has received $502.1 million in proceeds from a total of 11 divestitures.
On Oct. 14, Summit completed the acquisition of SCI Materials, an aggregates-based business in the high-growth Florida market. SCI Materials is being integrated with Summit’s Georgia Stone Products business and will contribute to its East segment.
Aggregates net revenues increased by $3.2 million to $163.5 million in the third quarter. Aggregates adjusted cash gross profit margin decreased to 53.3% in the third quarter as compared to 60.3% in the third quarter 2021. Aggregates sales volume decreased 9.0% in the third quarter due primarily to divestitures in the East segment. Organic aggregates sales volumes declined 3.5% driven by a combination of unfavorable weather conditions and supply chain related disruptions. Average selling prices for aggregates increased 10.2% in the third quarter with solid growth across both reporting segments.
Cement segment net revenues increased 29.6% to $119.9 million in the third quarter. Cement segment adjusted cash gross profit margin decreased to 42.5% in the third quarter, compared to 47.4% in the prior year period as strong pricing gains were more than offset by higher variable costs and a greater proportion of sales from imports. Sales volume of cement increased 12.4% reflecting a healthy demand environment. Average selling prices increased 12.8% in the third quarter driven by compounding pricing actions taken in 2022 and a focus on value pricing.
The West segment operating income increased 8.4% to $73.1 million and Adjusted EBITDA increased 6.5% to $98.3 million in the third quarter due primarily to pricing gains that more than offset lower volumes and inflationary cost conditions.
Aggregates revenue in the third quarter increased 11.6% as 14.5% pricing growth was partially offset by 2.5% volume declines. Double digit price growth was experienced by all markets while volume growth in the Intermountain West was more than offset by lower sales volume in Texas and British Columbia. Ready-mix concrete revenue in the third quarter increased 18.6% driven by 19.4% pricing growth and only partially offset by lower volumes, particularly in South Texas. Lower aggregates and ready-mix volumes in Texas were due, in part, to unfavorable weather conditions and supply chain constraints. Asphalt revenue increased 18.0% in the third quarter as sales prices increased 16.7% and volumes increased 1.1% in the period.
The East segment operating income decreased 36.7% to $28.5 million and Adjusted EBITDA decreased 36.1% to $44.1 million in the third quarter reflecting the impact of divestitures as well as increased cost of revenue that exceeded pricing growth. The impact from divestitures on Adjusted EBITDA was approximately $16.3 million in the period.
Aggregates revenue decreased 9.2% versus the prior year period. Organic aggregates volumes decreased 4.7% with wet conditions and supply chain related disruptions more than offsetting growth in Kansas and Virginia. Aggregates organic pricing increased 8.2% led by the strongest growth in Virginia and the Carolinas. Ready-mix concrete revenue decreased 44.0% due primarily to divestitures. Organic sales volumes were down 4.9% relative to the year ago period due to unfavorable weather conditions and supply chain disruptions. Ready-mix concrete organic average selling price increased 15.0% in the period. Due to divestitures, asphalt revenue decreased 61.4%. Asphalt organic volumes decreased 18.5%while organic average selling prices for asphalt increased 29.2% to reflect increased costs.
The Cement segment operating income increased 18.1% to $35.5 million in the third quarter. Adjusted EBITDA increased $6.2 million as revenue growth combined with greater contribution from Green America Recycling more than offset inflationary conditions. In the third quarter, the Cement Segment reported a volume increase of 12.4% and average selling price growth of 12.8%.