How Summit Materials performed in third quarter 2017

Summit Materials provided details of its third-quarter performance, including that its net revenue increased nearly 20 percent to $574.4 million.

In the prior year’s third quarter, Summit Materials reported a net revenue of $480.2 million.

The improvement in net revenue was primarily attributable to acquisition-related contributions, increased organic sales volumes of cement, aggregate and asphalt, along with increased organic selling prices on cement, ready-mix concrete and asphalt, the company says.

“We delivered double-digit, year-over-year growth in net revenue, operating income and net income during the third quarter, driven by a combination of increased organic sales volumes in our materials businesses, together with contributions from recently completed acquisitions,” says Tom Hill, CEO of Summit Materials. “Adjusted EBITDA increased 18.1 percent year-over-year to $172.7 million, supported by organic growth in our Cement segment and East segment. Organic growth contributed nearly 30 percent of the year-over-year improvement in third quarter adjusted EBITDA, as we continue to leverage efficiencies afforded by our vertically integrated, decentralized model.”

Specifically, aggregate net revenues increased 15.7 percent to $90.6 million in the third quarter when compared to the prior-year period. Aggregate adjusted cash gross profit margin increased to 73 percent in the third quarter versus 71.7 percent in the prior-year period.

Organic aggregate sales volumes increased 2.6 percent in the third quarter, due mainly to increased demand in north Texas, Utah, Vancouver and additional markets in the Southeast, according to Summit. Organic aggregate average selling prices declined 0.8 percent in the third quarter, mainly in the company’s West segment, where hurricane-related weather impacted business conditions.

“Organic prices on aggregates declined less than 1 percent in the third quarter, due mainly to sales mix-related factors isolated to the West segment,” Hill says. “Excluding mix, we estimate organic aggregates prices increased nearly 3 percent in the third quarter, versus the prior-year period.

“We continue to deliver exceptional margin capture in our materials lines of business,” Hill adds. “During the third quarter, adjusted cash gross profit margin on aggregates increased 130 basis points to a record 73 percent while adjusted cash gross profit margin on cement increased 160 basis points to 50.6 percent. Temporary disruptions related to Harvey, a Category 4 hurricane, impacted operations in Houston, our single largest ready-mix market by volume, resulting in lower overall margin capture in our products line of business in the third quarter.”

Regionally, Summit’s West segment reports that its operating income increased 22.4 percent to $57.5 million in the third quarter. Adjusted EBITDA increased by 20.3 percent to $76.6 million in the quarter.

Year-over-year organic improvements in sales volumes of aggregate, ready-mix concrete and asphalt, together with acquisition-related EBITDA contributions, were partially offset by lower organic declines in average selling prices on aggregate, Summit says.

Meanwhile, Summit’s East segment reports that its operating income increased 5.2 percent to $36.9 million in the third quarter. Adjusted EBITDA increased 9.4 percent to $56.4 million in the quarter.

Year-over-year organic improvements in average selling prices on aggregate and ready-mix concrete and asphalt, improved organic sales volumes of aggregate and asphalt, together with acquisition-related EBITDA contributions, were offset by a sales volume decline in ready-mix concrete, due in part to weather-related factors.

“From a regional perspective, we remain bullish on Texas, where we have existing positions in Houston, Midland/Odessa, Austin, north Dallas, together with Utah, Nevada, North/South Carolina, Virginia and Georgia,” Hill says. “Over time, we believe each of these regions stand to benefit from a combination of increased state-level infrastructure investment, stable demand for new single-family homes and the subsequent build-out of low-rise commercial amenities.

For the full year of 2017, Summit expects adjusted EBITDA to be in a range of $425 million to $435 million – down from the previous range of $440 million to $455 million.

“In the aftermath of Hurricanes Harvey and Irma, sales volumes in our Texas and Southeastern U.S. markets temporarily declined below historical levels in September and, to a lesser degree, in October, the combined impact of which has led us to reduce our full-year Adjusted EBITDA guidance,” Hill says.

“We are pleased with our year-to-date performance,” he adds. “Although historic volumes of rainfall resulting from the current hurricane season have impacted our full-year outlook, underlying demand conditions remain strong in our private and public end-markets, positioning us for continued profitable growth as we look ahead to 2018.”