Vulcan Materials announces third quarter 2017 results

Vulcan Materials Co., the nation’s largest producer of construction aggregate, today announced results for the third quarter ended September 30, 2017.

Hurricanes Harvey and Irma negatively affected more than half of the company’s operational footprint in the third quarter. Important Southeastern markets, particularly Florida and Georgia, as well as coastal markets in Texas and along the central Gulf Coast were disrupted. Prolonged extreme weather conditions limited both revenue growth and profitability. Aggregate shipments increased 1 percent and pricing improved 3 percent versus the prior year’s third quarter. Overall, both gross profit and operating earnings improved slightly compared to the prior year.

Tom Hill, chairman and CEO, said, “Storms disrupted the third quarter shipment pattern in a number of our stronger growth markets. Absent the impact of these storms, our daily shipping pace would have been at least 7 percent higher than the prior year during August and September, and in line with expectations. We are still experiencing some lingering effects from these storms on plant efficiency and shipment levels, which will take some time to work through,” Hill said.

“Underlying demand, however, remains solid, the pricing environment remains positive and our unit profitability in aggregate continues to strengthen. On a same-store basis, our third quarter gross profit per ton was essentially flat while our cash gross profit per ton set a third quarter record despite the severe weather. I am very encouraged by these trends,” Hill said, “which should provide good momentum into 2018.”

Aggregate shipments
The company’s aggregate shipments increased 1 percent versus the prior year’s quarter. Shipment trends in aggregate were disrupted by hurricanes across the company’s Florida, Georgia, Gulf Coast, North Carolina, South Carolina and coastal Texas markets. Markets outside of these areas combined to grow mid-single-digit versus the prior year’s third quarter – more in line with trends and expectations.

Broad pricing momentum continued across the company’s footprint with most markets realizing price growth in the third quarter. For the quarter, same-store freight-adjusted average sales price for aggregate increased 3 percent versus the prior year, or $0.42 per ton, despite a negative geographic and product mix impact. Excluding mix impact, aggregate pricing increased 4 percent. The company said the overall pricing climate remains favorable as visibility to a sustained recovery improves and as construction materials producers stay focused on earning adequate returns on capital.

Third quarter aggregate segment gross profit was $259 million, or $5.09 per ton. These results were slightly lower than the prior year as a result of weather events in the current year’s third quarter. Weather-related disruptions impaired shipments and drove inefficiencies that limited revenue growth and earnings improvement.

The company said product mix, partly owing to aggregate needs immediately after the hurricanes, negatively impacted price growth by approximately 100 basis points. An 18 percent increase in the unit cost of diesel fuel and costs related to the transition to two new, more efficient ships to transport aggregate from the company’s quarry in Mexico negatively impacted segment gross profit by $7 million in comparison to the prior year.

The company remains active in the pursuit of bolt-on acquisitions and other value-creating growth investments. Since January, Vulcan Materials has closed acquisitions totaling $212 million. These acquisitions complement its existing positions in certain California, Illinois, New Mexico and Tennessee markets.

The company expects to close the Aggregates USA acquisition during the fourth quarter of this year.