Cost control, price growth theme of Vulcan Materials’ second quarter 2020

The W.H. Blount in Vulcan’s Houston Ship Yard. Photo: P&Q Staff

Second-quarter aggregate segment sales increased 1 percent at Vulcan Materials, and the segment’s gross profit jumped 7 percent to $351 million, or $6.25 per ton. 

According to Vulcan, the improvement resulted from widespread growth in pricing and effective cost control.

Second-quarter aggregate shipments were 2 percent lower than the prior year’s second quarter, Vulcan adds. Shipping patterns varied widely across the company’s footprint as a result of economic uncertainty and wet weather, but they were generally supported by healthy backlogs, the company says.

Hill

“Our second-quarter results demonstrate the resiliency of our best-in-class aggregates-led business and reflect the proactive response by our employees to the COVID-19 pandemic,” says Tom Hill, chairman and CEO of Vulcan Materials. “Our operational execution was integral to widespread gains in unit profitability, despite some disruptions to construction activity during the quarter.”

On a mix-adjusted basis, all of the company’s key aggregate markets reported year-over-year price growth. For the quarter, freight-adjusted average sales price increased 3 percent versus the prior year’s quarter.

Also in the aggregate segment, freight-adjusted unit cost of sales decreased 1 percent versus the prior year’s second quarter. Effective operating efficiencies helped mitigate the cost impact of lower sales volumes and a reduction in inventory, Vulcan adds.

Actions taken across the company’s more than 360 locations reduced cash spending and controlled inventories in areas most impacted by shelter-in-place orders, Vulcan says. The associated cost of reducing inventory offset the majority of a $14 million earnings benefit from lower diesel fuel costs.    

“While demand is subject to market fluctuations outside of our control, we remain focused on those things we can control such as our cost and our pricing discipline, both of which help to compound our unit margins,” Hill says. “Our year-to-date results demonstrate those capabilities.”

Unit profitability improvements were widespread across Vulcan’s footprint, the company adds. Cash gross profit per ton increased 9 percent from the prior year’s second quarter to $7.69 per ton. For the trailing 12 months, cash gross profit was $6.98 per ton.

“Although the economic environment is showing signs of improvement, the pandemic’s effect on demand and the broader economy remains unclear,” Hill says.