‘Resilient’ demand, favorable weather drive Summit’s second quarter 2020

Hill

The aggregate industry’s publicly traded producers are getting ready to release their second-quarter reports, but at least one company – Summit Materials – already published its latest quarterly results.

Summit experienced some quarterly gains within its aggregate business, with net revenues increasing by $1.3 million to $130 million compared to the second quarter of 2019. Additionally, Summit’s aggregate adjusted cash gross profit margin increased to 63.9 percent in the second quarter compared to 61.4 percent on higher volumes and product mix.

According to Summit, its aggregate sales volumes increased 2.6 percent in the second quarter on higher organic volume growth, particularly in Utah, Kansas, Missouri and Texas. Summit’s average selling prices for aggregate decreased 0.2 percent in the quarter.

On a mix-adjusted basis, Summit estimates aggregate prices have increased by about 2.5 percent in 2020.

“Despite economic uncertainty, Summit experienced resilient demand and favorable weather conditions, particularly in Utah and Kansas, which led to record [second-quarter] net revenue, net income and adjusted EBITDA (earnings before interest, tax, depreciation and amortization), says Tom Hill, CEO of Summit Materials, who separately just announced his plan to step down from his executive role.

Companywide performance and outlook

Overall, Summit’s net revenue increased 4.1 percent in the second quarter, with aggregate and ready-mixed concrete contributing the largest proportion of incremental net revenue.

“While our average selling price for aggregates declined relative to the second quarter of 2019, our aggregates adjusted cash gross profit margin expanded by 250 basis points, reflecting a different sales mix, particularly for levee repair work, than a year ago,” Hill says. “Most importantly, we have been vigilant in practicing safety and distancing protocols in response to the COVID-19 outbreak. Construction is essential in all of Summit’s markets, and the health and safety of our workforce, customers and local communities continues to remain our highest priority.”

Although Summit has experienced a limited impact from the pandemic thus far, CFO Brian Harris says the economic outlook remains uncertain.

“We continue to engage in contingency planning and proactive reviews of capital spending, receivables and working capital under various demand scenarios,” Harris says. “Summit reported over $580 million in available liquidity at quarter end, and is in a strong financial position.”

M&A development

Upon releasing its second-quarter report, Summit revealed that it acquired Multisources Sand & Gravel, an aggregate producer in west and north Houston. The acquisition gives Summit 14 plants in Houston.