Knife River Corp. announced financial results for the first quarter ended March 31. The company reported consolidated revenue of $353.5 million, a 7% increase from the prior-year period, primarily driven by a $14.6 million increase to its contracting services revenues and price increases on asphalt, aggregates and ready-mix.
As anticipated, all product lines experienced cost increases in the first quarter compared to the prior year. Aggregates had the highest increase in costs, primarily driven by pre-production activities and improvements identified by PIT Crews. “We also had higher selling, general and administrative costs, including $5.8 million related to our corporate due diligence and integration process, as well as $3.5 million of overhead from the addition of Strata and Albina,” the company said.
Knife River said it typically records a seasonal loss in the first quarter of approximately 5% of annual EBITDA.
With the addition of Strata and Albina in its northern markets, “we expect the 8% seasonal loss we experienced this quarter to be more reflective of our first quarter results going forward,” the company stated. “Aggregates gross profit decreased year-over-year, as we performed more pre-production activities and implemented site improvements identified by our PIT Crews. As production ramps up for this construction season, we expect these costs will help drive increased profits. Contracting services revenue was higher than the same period last year, but gross profit was lower based on the type of work and the timing of incentive payments. For the full year, we believe contracting services margins will be similar to 2024,” said the company.
“Our typical seasonal loss in the first quarter was in line with our expectations, and Knife River remains on track to have our most profitable year in history – including record revenue, net income and adjusted EBITDA,” said Knife River President and CEO Brian Gray. “We made substantial investments in the first quarter to prepare for a successful 2025. That includes closing on the acquisition of Strata Corp., which we expect will positively impact our financial results starting in the second quarter. We anticipate a $45 million EBITDA contribution from Strata for the full year, at margins accretive to Knife River. Additionally, our corporate development team is pursuing other strategic targets and moving them toward completion.
“At the same time, we continued to invest in our Competitive EDGE strategy,” Gray said. “Our Process Improvement Teams helped us optimize prices during the quarter while also preparing our materials operations for the busy year ahead. We identified and implemented plant-improvement opportunities we expect will increase operating margins this year.
“Together, these investments in our long-term success resulted in SG&A expenses that were $13 million higher than first quarter last year, primarily related to increased corporate development activity, Strata and the 2024 acquisition of Albina Asphalt,” Gray said. “Approximately $8 million of these expenses were incurred in the first quarter as part of an overall $20 million step-up in SG&A for the year. Given the size of Strata and the work we’re doing to move other possible transactions through our pipeline, we anticipate our step-up in SG&A will continue to be front-loaded in the first half of the year. We continue to expect the total step-up in SG&A for 2025 to be in line with the $20 million we guided to at year-end 2024.”
In March, the American Society of Civil Engineers graded the nation’s roads a “D+” and estimated $2.2 trillion will be needed by 2033 for roads to achieve a passing grade.
Budgets at the local, state and federal levels remain near all-time records. “We believe public funding will continue to support the build-out of America’s infrastructure. We are tracking 51 bills in our 14 states, and Idaho, North Dakota and Washington have recently passed new transportation funding packages,” the company stated.
“Our business fundamentals remain strong, and we anticipate record financial results in 2025,” Gray said. “In the current economic environment, our business has been relatively insulated from any direct impact from tariffs. It is unclear at this time how economic uncertainties will affect downstream private work, as project owners evaluate interest rates and trade policy. However, Knife River has a resilient business model, with the ability to flex between public and private work, along with a proven record of successfully navigating through business cycles. Our outlook for the year does not include any significant impacts related to uncertainty in the private market, and we expect to have more clarity when we report our second quarter results. For the full-year 2025, we anticipate revenue of $3.25 billion to $3.45 billion and adjusted EBITDA of $530 million to $580 million.
“America’s roads, bridges and runways need to be repaired,” Gray said. “The funding is there to support these efforts, and we are well-positioned to execute on the opportunities in our markets. Additionally, we are committed to our EDGE plan and our self-help initiatives to improve our margins and deliver long-term, profitable growth for our shareholders.”