Vulcan Materials shipments down in second quarter 2017

Vulcan Materials Co. announced results for the second quarter ended June 30, 2017. Net earnings were $120 million and adjusted EBITDA was $288 million. The company’s second-quarter results reflect record unit profitability in its aggregate segment despite wet weather and difficult operating conditions across many of its Southeastern and Mid-Atlantic markets.

Extreme wet weather across the Southeast and weaker demand in Illinois and coastal Texas contributed to a 2 percent decline in aggregate shipments compared to the prior year.

Tom Hill, chairman and CEO, said, “Despite the volume shortfall in the quarter, I am very encouraged by what I see happening behind the reported numbers. Private demand in our markets continued to strengthen. Highway project starts accelerated in the second quarter, signaling an end to the softness in starts that we have been working through for the last year.”

Hill continues, “Our business remains on track with our longer-term goals and expectations. We remain confident in the sustained, multi-year recovery in materials demand across our markets and in the further, compounding improvements to our unit profitability. We anticipate 5 to 10 percent growth in shipments from August through the end of the year. However, given the shortfall in shipments to date, we now expect full year aggregate shipments of 182 to 187 million tons and full year adjusted EBITDA of $1.05 to $1.13 billion.”

Aggregate
Shipment trends in aggregate varied widely across the company’s footprint, largely owing to weather and the timing of large projects. Aggregate shipments decreased 2 percent versus the prior year’s quarter and same-store shipments declined 3 percent. Alabama, Florida, Georgia, Louisiana and Mississippi combined saw shipments decline 12 percent versus the prior year’s second quarter.

Severe wet weather and flooding slowed construction activity and impaired shipments in May and June, two key months of the construction season. Aggregate shipments in Florida and Georgia, for example, declined double-digits in June despite very strong underlying market conditions, says the company.

Coastal Texas and Illinois also experienced significant shipment declines. In Illinois, shipments declined 19 percent versus the prior year due in part to the absence of a state budget to support public construction. Coastal Texas shipments in the quarter were impacted by a softer local economy and the relative timing of DOT spending and other large project activity.

Regarding the company’s earnings outlook for 2017, Hill says, “We are excited about the growth opportunities ahead of us. Leading indicators, such as growth in the pre-construction pipeline and in construction starts in our markets, as well as growth in our own order backlogs, point toward a return to growth in the second half of this year and beyond.

“However,” he says, “the rate of growth through the remainder of this year will depend on the pace at which our customers catch up on deferred work and on the timing of our shipments to large projects in our backlog.”