Summit Materials Inc. announced results for the third quarter ended Sept. 30, reporting that net revenue increased $56.0 million, or 8.2%, to $742.0 million, as increases in average sales prices across all lines of business more than offset lower volumes.
Operating income increased $0.9 million, or 0.7% in the third quarter to $128.0 million, driven by increases in average sales price that more than offset a combination of inflationary increases in cost of revenue, higher general and administrative expenses, and increased transaction costs versus the prior-year period.
Summit’s operating margin percentage for the three months ended Sept. 30, decreased to 17.2% from 18.5%, from the comparable period a year ago primarily reflecting the aforementioned transaction costs related to the Argos USA transaction.
Net income attributable to Summit Inc. increased to $230.0 million, or $1.93 per basic share, compared to $86.5 million, or $0.72 per basic share in the comparable prior year period due primarily to recognizing a tax receivable benefit of $153.1 million in connection with Summit’s agreement to acquire all the rights and interest in the TRA from affiliates of Blackstone Inc. and other TRA holders.
Excluding this gain as well as other customary adjustments, Summit reported adjusted diluted net income of $97.5 million, or $0.81 per adjusted diluted share, up from $84.2 million, or $0.70 per adjusted diluted share in the prior-year period.
Aggregates net revenues increased by $16.3 million to $179.8 million in the third quarter. Aggregates adjusted cash gross profit margin was 59.0% in the third quarter as compared to 53.3% in the prior-year period.
Aggregates sales volume decreased 3.8% in the third quarter despite a positive impact from acquisitions. Due primarily to reduced residential activity, organic aggregates sales volumes declined 7.5% as lower volumes in British Columbia, Kansas, and Missouri more than offset organic aggregates volume growth in Virginia and North Texas.
Average selling prices for aggregates increased 14.4%, maintaining strong levels and reflecting the cumulative effects of multiple pricing actions implemented in 2023.
Cement Segment net revenues increased 1.2% to $121.3 million in the third quarter. Cement Segment adjusted cash gross profit margin increased to 46.3% in the third quarter, compared to 42.5% in the prior-year period as strong pricing gains combined with increased product mix of internally produced cement to more than offset inflationary cost conditions.
Sales volume of cement decreased 11.3% reflecting, in part, a lower proportion of import volume relative to the prior year as well as wet conditions in many northern markets. Average selling prices increased 13.9% in the third quarter due to the compounding effects of pricing actions implemented in January and July of 2023.
Products net revenues were $346.8 million in the third quarter, up 11.5% versus the prior-year period. Products adjusted cash gross profit margin increased to 20.0% in the third quarter primarily driven by asphalt margin expansion. Organic average sales price for ready-mix concrete increased 8.1% driven by pricing growth across all markets, including the key markets of Houston and Salt Lake City.
Organic sales volumes of ready-mix concrete decreased 12.2% due to reduced residential activity. Organic average selling prices for asphalt increased 14.3%, due to pricing gains in North Texas and the Intermountain West. Organic asphalt sales volume increased 2.5% fueled by public infrastructure growth.
“Once again I’m pleased to report we delivered record financial results this quarter as our sharp executional focus along with a more powerful, materials-led portfolio drove significant growth across the P&L,” commented Anne Noonan, Summit Materials president and CEO. “Year-to-date performance and enduring pricing trends allows us to again increase our 2023 Adjusted EBITDA guidance and carry strong momentum into 2024. Our dedicated teams throughout our footprint deserve the credit for powering Elevate Summit highs for Adjusted EBITDA margin and Return on Invested Capital. It’s their commitment, together with our strategic direction that gives us confidence that Summit is well positioned to better seize the opportunities ahead of us.
“We look forward to our announced combination with Argos USA, which accelerates our materials-led strategy, enhances our scale and reach in cement, and bolsters our cash flow generation to fuel further aggregates-oriented organic and inorganic growth opportunities,” Noonan said. “Importantly, we have cleared HSR review and are now on pace to close the transaction before the end of the first quarter of next year. When completed, we will be better positioned to capitalize on strong and durable demand tailwinds while leveraging proven expertise to materially upgrade profitability through synergy generation. With enhanced capabilities, world-class talent, and a strong balance sheet, Summit is well positioned to deliver superior growth and value creation to all of our shareholders.”
West Segment operating income increased $16.5 million to $89.6 million and Adjusted EBITDA of $117.8 million in the third quarter increased 19.9% versus the prior-year period. Aggregates revenue increased 11.8% as 14.7% organic pricing growth was partially offset by 6.6% organic volume declines. Pricing growth was strongest in Houston, Intermountain West, and British Columbia. Ready-mix concrete revenue increased 16.1% as 7.8% organic pricing growth was only partially offset by lower organic volumes. Asphalt revenue increased 25.0% due to organic pricing growth of 15.9% including double-digit growth in North Texas and the Intermountain West. Asphalt organic volumes increased 3.7% versus the prior-year period.
East Segment operating income of $34.2 million increased 20.2% versus the prior year period and Adjusted EBITDA increased 13.5% to $50.1 million, despite the impact of divestitures and reflecting constructive pricing conditions across Summit’s markets. Aggregates revenue increased 8.4% versus the prior-year period. Organic aggregates volumes decreased 8.4% as growth in Virginia and the Carolinas was more than offset by lower volumes in Kansas and Missouri. Aggregates pricing increased 13.7% with solid growth across markets. Ready-mix concrete revenue decreased 7.9% with selling price growth of 9.5% more than offset by lower volumes. Due primarily to divestitures, asphalt revenue decreased to $7.8 million.
Cement Segment operating income increased 7.9% to $38.3 million. Adjusted EBITDA increased $3.8 million as revenue growth and favorable product mix combined to more than offset inflationary conditions. As noted above, in the third quarter, the Cement Segment reported a volume decrease of 11.3% and average selling price growth of 13.9%.