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Vulcan Materials agg sales down, profit up to end 2020

By |  February 16, 2021

Logo: Vulcan Materials Co.

Fourth-quarter gross profit increased within Vulcan Materials’ aggregate business to $276 million due to growth in pricing and effective cost control, the company says.

This occurred despite a 1 percent decline in shipments for the quarter.

According to Vulcan, gains in aggregate segment unit profitability were widespread and marked the fourth consecutive quarter of growth in gross profit per ton.

For the full year, gross profit per ton in Vulcan’s aggregate segment increased 5 percent – despite 3 percent lower volumes. The growth marks the 10th straight quarter of year-over-year improvement in the company’s trailing-12-month unit profitability.

“Our best-in-class aggregates business, along with the efforts and dedication of our employees, allowed us to overcome COVID-19 related disruptions in 2020,” says Tom Hill, chairman and CEO of Vulcan. “Most impressive, we delivered year-over-year gains in aggregates unit profitability throughout each quarter in 2020.

According to Vulcan, the pricing environment continues to be positive across the company’s footprint. On a mix-adjusted basis, all of the company’s markets reported full-year price growth. For the year, mix-adjusted pricing increased 3.1 percent despite a 3 percent decline in shipments. For the fourth quarter, mix-adjusted sales price increased 1.8 percent, and reported freight-adjusted pricing increased 3.3 percent.

Fourth-quarter operating efficiencies and lower diesel fuel costs helped to mitigate increased spending to remove overburden ahead of future shipments and the timing of repair costs, Vulcan adds. The aggregate segment earnings impact from lower diesel fuel cost was $8 million in the fourth quarter.

Companywide performance

Headshot: Tom Hill, Vulcan Materials

Hill

Across Vulcan, net earnings were $115 million in the fourth quarter, and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $311 million. Fourth-quarter adjusted EBITDA increased 4 percent despite a 1 percent decline in total revenues. Effective cost management throughout the organization and aggregate price growth helped drive margin expansion, the company says.

Full-year 2020 revenues were $4.86 billion – a mark that is 1 percent lower than the prior year. Gross profit margins expanded across each segment, driving an improvement of 150 basis points in the company’s EBITDA margin. Net earnings were $584 million, and adjusted EBITDA was a record $1.32 billion.

“Construction employment gains in key markets are a positive signal that activity levels are recovering across our footprint, as compelling fundamentals in residential construction support growing demand in 2021,” Hill says. “Shipments into private nonresidential continue to benefit from growth in heavy industrial projects such as data centers and warehouses, while construction starts in other categories remain below the prior year.

“Recent improvements in highway lettings and contract awards indicate growing confidence and visibility, fueling advancement of planned projects – particularly in the second half of 2021,” he adds. “The pricing environment remains positive, and we continue to execute at a high level, positioning us well for 2021. We expect our 2021 adjusted EBITDA will range between $1.34 billion to $1.44 billion.”

The outlook

Photo: P&Q Staff

In 2021, Vulcan Materials expects aggregate shipments to be anywhere from down 2 percent to up 2 percent compared to 2020. Photo: P&Q Staff

According to Hill, Vulcan is encouraged by the continued strength in residential construction activity – particularly single-family housing.

“Our expectation is also supported by the recent improvement in highway awards and construction employment trends in key markets,” Hill says. “Data centers, distribution centers and warehouses, which now comprise the largest share of new private nonresidential project awards, will continue to underpin demand in this end market. We believe these leading indicators, along with sustaining a positive pricing environment, can be a catalyst for further recovery in construction activity during 2021.”

For 2021, Vulcan expects aggregate shipments to be down 2 percent to up 2 percent versus 2020. Also, the company expects a year-over-year aggregate freight-adjusted price increase of 2 to 4 percent.

“As we saw in 2020, demand for our products can be subject to market fluctuations outside of our control,” Hill says. “That said, we remained focused on the factors within our control, including our pricing and cost actions, both of which contributed to further improvement in our industry-leading unit margins in 2020. We will carry that determination through 2021 and beyond.”

Kevin Yanik

About the Author:

Kevin Yanik is the editor-in-chief of Pit & Quarry magazine. Yanik can be reached at 216-706-3724 or kyanik@northcoastmedia.net.

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