Vulcan reports latest quarterly performance

By |  November 2, 2016
vulcanmaterialslogo

Logo: Vulcan Materials Company

Vulcan Materials Co. unveiled its third-quarter performance results, reporting continued strong earnings growth and margin expansion despite lower shipment levels.

According to Vulcan, slower-than-expected large project starts and extremely wet weather impacted shipments in several key markets throughout the third quarter. Compared with the prior year’s third quarter, aggregate shipments declined 2.3 million tons, or 4 percent, while aggregate pricing increased 79 cents per ton, or 7 percent. Third-quarter aggregate gross profit grew 4 percent, despite slightly lower segment sales.

In addition, net earnings for the third quarter increased 13 percent and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased 6 percent versus the prior year as gross profit margins improved in the aggregate and asphalt segments.

For the trailing 12 months, the company reported its net earnings were $371 million and adjusted EBITDA was $981 million, which represent 118 percent and 28 percent gains, respectively, over the comparable prior period. Aggregate shipments for this period grew 5 percent, and pricing increased 8 percent.

Incremental aggregate gross profit equaled 80 percent of incremental freight-adjusted revenues. Aggregate gross profit as a percentage of freight-adjusted revenues expanded to 39 percent from 34 percent.

Headshot: Tom Hill

Headshot: Tom Hill

“Core profitability in our business continues to strengthen, despite recent volume headwinds in certain markets,” says Tom Hill, chairman and CEO of Vulcan. “So far this year, weather patterns and the timing of large project activity have led to higher month-to-month and state-to-state variability in our shipments, somewhat masking the continuing recovery in demand for construction materials across our footprint.

“However, our unit margins continue to improve,” Hill adds. “Per-ton gross profit in our aggregates segment grew by 9 percent in the third quarter despite lower shipments and uneven production schedules. Year-to-date per-ton gross profit has improved by 22 percent. As a result, we remain on track to reach the low end of our 2016 profit plan despite shipments well below beginning-of-year expectations.”

Compared with the third quarter of 2015, Vulcan’s total revenues decreased $30 million, or 3 percent, to $1 billion; gross profit increased $13 million, or 4 percent, to $304 million; aggregate segment sales decreased $9 million, or 1 percent, to $822 million; aggregate freight-adjusted revenues increased $12 million, or 2 percent, to $641 million; and shipments decreased 4 percent, or 2.3 million tons, to 50.3 million tons.

Compared with the prior 12-month period, Vulcan’s revenues over the last 12 months increased $257 million, or 8 percent, to $3.58 billion; gross profit increased $242 million, or 31 percent, to $1.02 billion; aggregate segment sales increased $297 million, or 11 percent, to $2.96 billion, aggregate freight-adjusted revenues increased $266 million, or 13 percent, to $2.29 billion; and shipments increased 5 percent, or 8 million tons, to 183 million tons.

Behind the numbers

In addition, Vulcan offered some details related to its third-quarter aggregate performance, noting that a noticeable slowdown in trailing 12-month construction starts in March, the timing of certain large projects and weather patterns led to highly variable third-quarter shipment results across the company’s markets. Arizona, Florida, Georgia and North Carolina saw shipment increases of between 12 and 21 percent in the third quarter, the company says. In contrast, California, Illinois and Texas experienced shipment declines of between 16 and 21 percent versus the prior year’s third quarter.

Also, weather and other factors impacted shipments most severely during the month of August, with the daily rate of total shipments declining 8 percent from 2015 levels, according to Vulcan. In August, daily shipment rates in Texas fell more than 30 percent relative to the prior year; shipments in Illinois fell more than 20 percent; and shipments in Louisiana fell almost 40 percent.

For the 12 months ending Sept. 30, shipments rose 5 percent over the comparable prior period. Despite the recent gains, demand for aggregate remains well below levels consistent with demographic growth in the United States, Vulcan says. The company believes conditions remain in place for a sustained, multi-year recovery in demand for aggregate, although quarter-to-quarter trends may vary significantly.

“The strong fundamentals of our aggregates-focused business and the outstanding improvement in our core profitability have led to strong earnings growth through the first nine months of 2016 despite slower-than-expected volume growth,” Hill says. “Unit profitability continues to improve and incremental margins remain strong across our businesses. The core drivers of a continuing recovery in shipments remain firmly in place, with higher levels of publicly funded construction activity just beginning to join the ongoing recovery in private demand.

“The pricing environment remains favorable,” Hill adds. “Daily shipment rates in October have exceeded prior-year levels. Construction starts in Vulcan-served markets strengthened in August and September after weakening for several months. Although it is too soon to issue firm guidance, at this point we would expect to see broad-based volume and pricing growth accompanied by continued margin expansion in 2017.”

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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