Vulcan reports healthy third-quarter 2018 aggregate activity

Hill

Aggregate earnings and pricing increased in the third quarter at Vulcan Materials, the company reports.

According to Vulcan, its total revenues in the third quarter increased $145 million, or 13 percent, to $1.2 billion. Gross profit was $343 million versus $304 million in the prior-year period, and aggregate segment sales jumped $125 million to $984 million for the quarter.

Overall, Vulcan’s net earnings increased 65 percent to $179 million, and adjusted EBITDA (earnings before interest, tax, depreciation and amortization) increased 13 percent from the prior year’s third quarter to $353 million.

“Our operating disciplines and execution were very good under difficult conditions that included weather challenges and higher diesel costs,” says Tom Hill, chairman and CEO. “Severe weather impacted our ability to serve customers in a number of key markets, but it didn’t stop us from improving our unit profitability and realizing double-digit earnings growth in our core aggregates business.

“Aggregates pricing continued to march higher in the third quarter and unit costs declined, resulting in same-store earnings flow-through of more than 60 percent.”

On a same-store basis, gross profit for the company’s core aggregate segment increased 15 percent to $295 million. This same-store gain was driven by a 6 percent increase in shipments and an 8 percent increase in gross profit per ton, to $5.45.

The improvement in unit profitability was supported by both higher selling prices and lower operating costs. The gross profit flow-through rate on same-store incremental segment sales, excluding freight and delivery, was 65 percent in the third quarter.

Vulcan estimates that weather conditions impacted third-quarter earnings by about $27 million, as compared to $30 million in the prior year’s third quarter.

“We remain focused on executing at a high level and capitalizing on the above-average demand growth in our markets,” Hill says. “The aggregates shipment growth rate seen in the third quarter should continue for the balance of the year. Aggregates pricing continues to show upward momentum, and the rate of price growth will continue to improve during the fourth quarter given additional pricing actions implemented earlier this year in certain markets.

“We now expect full-year 2018 Adjusted EBITDA between $1.125 and $1.135 billion and earnings from continuing operations of between $3.85 and $3.95 per diluted share. This full year outlook reflects the impact of aggregates shipments deferred due to weather as well as full year asphalt segment gross profit that is expected to be $25 million below prior year.”

Looking ahead, Hill notes that Vulcan is positioned for continued shipment growth, compounding pricing improvements and additional gains in unit profitability in 2019.

“Vulcan-served markets are benefitting disproportionally from both growing public construction demand and continued growth in private demand, led by residential demand growth in our markets,” Hill says. “We expect our aggregates shipment and price momentum to continue in 2019, leading to mid-single-digit growth in both.”

Aggregate

In aggregate, Vulcan’s growth in gross profit accelerated again in the third quarter despite severe weather in key markets and a 28 percent increase in diesel cost per gallon, the company says. Third-quarter segment gross profit increased 18 percent to $304 million, or $5.41 per ton.

Third quarter aggregate shipments increased 10 percent (6 percent on a same-store basis) versus the prior-year quarter, Vulcan adds. Shipments in most markets outside those impacted by severe weather realized solid growth versus the prior year.

Shipment growth in North Carolina and Virginia was interrupted due to the impact of Hurricane Florence, and same-store shipment growth in most Texas markets was limited due to extremely wet weather in September, according to Vulcan.

For the quarter, freight-adjusted average sales price for aggregate increased 2 percent versus the prior-year quarter, with the growth rate negatively affected by weather-impacted shipments in higher-priced markets such as North Carolina and Virginia, as well as strong shipment growth in relatively lower-priced markets such as Alabama, Arizona and Illinois.

Excluding this mix impact, aggregate pricing increased 3 percent. Positive trends in backlogged project work along with demand visibility, customer confidence, rising diesel prices and logistics constraints support continued upward pricing movements for the remainder of the year and into 2019, Vulcan adds.