Volumes, pricing strong in third quarter 2018 at Summit Materials

Hill

Summit Materials reports that its net revenue increased by 8.8 percent in the third quarter to $625 million.

The improvement was primarily attributable to both organic and acquisition-related contributions in the company’s east and west segments, offset by a decline in Summit’s cement segment.

Additionally, Summit reports that its net revenue increased 11.6 percent in the first nine months of 2018, primarily due to acquisitions.

“We experienced significant inclement weather in the third quarter, as well as continued inflationary cost pressures in our businesses beyond our expectations,” says Tom Hill, CEO of Summit Materials. “While we achieved organic volume and price increases in our aggregates and products during the third quarter, our net income declined and our adjusted EBITDA (earnings before interest, tax, depreciation and amortization) remained flat in the third quarter of 2018 as compared to the third quarter of 2017, reflecting lower contributions from our cement segment and Houston operations together with inflation in our variable costs.”

Aggregate net revenues increased 21 percent to $109.6 million in the third quarter, compared to the prior-year period. Also, aggregate adjusted cash gross profit margin declined to 69.2 percent in the third quarter, compared to 73 percent in the prior-year period, due to higher variable costs.

Organic aggregate sales volumes increased 3.9 percent in the quarter. Organic growth in aggregate sales volumes was due to higher volumes in the company’s west region, which more than offset a decline in organic aggregate sales volumes in the east region.

Organic average selling prices on aggregate increased 1.5 percent in the third quarter 2018 due to improvements in prices within both Summit’s west and east segments, the company says.

Since August, Summit completed two aggregate-based acquisitions for $72 million, acquiring both Walker Sand & Gravel and Aggregate Reserves.

Walker Sand & Gravel is an aggregate business that expands Summit’s market position and reserve base in Idaho. Summit closed on this acquisition in October.

The Aggregate Reserves deal was closed in October, as well. Summit acquired Aggregate Reserves’ property in the greater Atlanta area. The property contains more than 100 million tons of permitted reserves and an active quarry that is currently leased to a third party through mid 2021. Summit will initially receive royalty payments through the end of the lease, at which time Summit will take over quarry operations.

In all, Summit has completed 13 acquisitions this year for a total of $300 million. Summit has added more than 400 million tons of aggregate reserves to its portfolio through these 13 acquisitions.

“While our guidance for adjusted EBITDA has been reduced, we continue to generate significant free cash flow from operations that is helping to support the overall growth of our business,” says Brian Harris, CFO of Summit Materials.