Major operators affirm strong deliveries in peak season

Fall 2013 saw the release of one set of positive quarterly financials after another from New York Stock Exchange-traded companies with integrated U.S. concrete, aggregate, cement and asphalt businesses. Uniformly upbeat sales, EBITDA (earnings before interest, taxes, depreciation and amortization) and net earnings reports encompass the peak 2013 construction season; MDU Resources Group summing up conditions likely shared with peers: “The [Knife River] construction materials group had its best quarter since 2007.”

Cemex. In third quarter 2013 figures for worldwide operations, Cemex S.A.B. de C.V. noted net sales of $4 billion, 3 percent above the comparable period in 2012, coupled with a 2 percent EBITDA gain this year over last. Cemex USA operations reported net 2013 Q3 sales of $891 million, up 8 percent from the same period in 2012. Operating EBITDA increased to $78 million in the quarter, versus a $27 million gain in the same period last year.
“We are pleased to report continued growth in operating EBITDA on a year-over-year basis, supported by the increase in volumes in most of our regions and an increase in consolidated prices in local-currency terms for our three main products on a year-over-year basis,” said Cemex Executive Vice President of Finance and Administration Fernando González. “We continue to be focused on companywide efforts to improve operating efficiencies and the value we generate from our asset base, while delivering better value to our customers.”

CRH Plc. Citing improved construction activity and pent up demand from weather-impacted markets in the first half of the year, the parent company of Oldcastle Inc. reported 4 percent and 10 percent increases in 2013 Q3 sales and EBITDA, respectively, compared to same period of 2012. Improving demand fueled by new housing starts saw CRH Americas Products operations, encompassing Oldcastle Architectural and Precast, finish the 2013 Q3 with a 10 percent sales gain over the prior year period.

Oldcastle Materials operations saw trading pick up the last six weeks of the quarter, following weather-impacted July and August sales. As a result, like-for-like aggregates volumes in the third quarter were 6 percent ahead of 2012, while ready mixed concrete and asphalt volumes were in line with last year’s levels. Positive first-half trends in pricing continued into the third quarter, and overall EBITDA for the quarter was ahead of last year. Assuming normal weather patterns for the remainder of the year, Oldcastle Materials management anticipates 2013 EBITDA to be 5 percent ahead of last year’s level.

Eagle Materials Inc. Nearly a year into absorbing Lafarge’s Great Plains cement (Missouri and Oklahoma plants, six terminals in four states), and Kansas-centered aggregate (two plants) and ready mixed (eight plants) production assets, the 2013 financials of Dallas-based Eagle reflect a larger geographic footprint than the prior year. Sales volumes improved across all business lines during the company’s second fiscal year 2014 quarter, ending September 30, with cement volumes setting a quarterly record at 1.4 million tons, and net sales prices improving across nearly all businesses.

Second quarter operating earnings from cement were $32.4 million—an 86 percent increase from the same 2012 period—owing to increased sales volumes and average net cement sales prices. Cement revenues for the quarter, including joint venture and intersegment revenues, totaled $133.2 million, 70 percent greater than the same quarter last year. Eagle Materials reported an average net cement sales price of $85.34 per ton, 3 percent higher than the same quarter last year. The company’s concrete and aggregates operations logged a near-negligible operating loss ($9,000) for FY 2014 Q2, an improvement from the same quarter a year ago ($362,000)—prior to addition of the Lafarge properties.

Martin Marietta Materials, Inc. Reflecting on prior-year quarter, the number two aggregate producer reported double-digit revenue and earnings increases in the third quarter of 2013; record consolidated net sales of $600.5 million, accounting for both the Aggregates and Specialty Products businesses, compared with $537.5 million in 2012 Q3; and, Aggregates product line volume up 8.1 percent, pricing up 2.3 percent.
The Martin Marietta Aggregates business (sand & gravel, crushed stone, ready mixed concrete, asphalt production and paving), divided by Southeast, Mid-West and West Groups, logged 2013 Q3 sales of $545 million versus $488 million the prior-year quarter, with ready mixed concrete deliveries of $41 million—a $10 million gain from 2012.

“Performance was driven largely by the ongoing recovery in private-sector construction activity, as well as solid execution of long-term strategic plans and diligent management of our cost structure,” says Martin Marietta CEO Ward Nye. “I am especially proud of the fact that our company achieved these strong results despite the continued public-sector construction headwinds. The combination of a 12 percent increase in consolidated net sales over the prior-year quarter and our ongoing focus on controlling costs resulted in a 13 percent increase in earnings per diluted share. These results reflect new third-quarter records for volume and pricing growth in the Aggregates product line.

“Pricing momentum in the Aggregates business continued with each of our product lines reporting growth. Importantly, for the third quarter in a row, each of our reportable segments achieved pricing improvement in the Aggregates product line, enabling us to achieve an overall increase of 2.3 percent. Our vertically integrated businesses also achieved pricing growth, with the ready mixed concrete and asphalt product lines reporting increases of 7.0 percent and 1.6 percent, respectively.”

MDU Resources/Knife River Corp. MDU’s construction materials and services businesses saw sustained volume and margin growth for 2013 Q3, with combined earnings of $61.4 million against the prior year’s $51.8 million; compared to 2012, earnings were 29 percent higher for the trailing 12 months ended September 30.

The Knife River subsidiary’s nearly $10 million gain accounted for nearly half of the increase MDU Resources reported in third-quarter consolidated adjusted earnings: $92.3 million, or 49 cents per share this year, compared to $71.9 million, or 38 cents per share in 2012 Q3. “We are seeing excellent results from capital investments and strategic focus continuing the trend we have had for the last three quarters,” says CEO David Goodin, assessing the company’s namesake energy and Knife River operations. “These results reflect the value of our diversified model with all of our business segments contributing to this success.”

Texas Industries Inc. Dallas-based TXI was the first public operator to report earnings for a period spanning the critical months of June–August, releasing results in early October from its first quarter of fiscal 2014, ending August 31. A portfolio realignment that nearly doubled the company’s ready mixed production and delivery capabilities in the past year, coupled with an exit from lightweight aggregates, skews fiscal 2013 and 2014 performance comparisons.

However, the company noted that net income for 2014 Q1 was slightly positive ($.4 million) versus a slightly negative ($2.7 million loss) for the same FY2013 period (June–August 2012). Continuing operations’ EBITDA as a percentage of net sales for the August quarter this year and last year equaled 16.2 percent and 8.1 percent, respectively.

“The results reflect continuing improvement in construction activity in all of our markets,” says TXI CEO Mel Brekhus. “It is satisfying to start reaping the benefits from our recent strategic activities. So far, the start-up of our new kiln in central Texas has been the most successful of any I have been involved with in my career and we are realizing the benefits expected from the expansion of our vertical integration footprint last spring. We continue to focus on doing everything we can to fully participate in the market recoveries under way.”

Vulcan Materials Co. The top aggregate producer reports a slew of favorable figures in a 2013 Q3 summary, complete with comparisons to the same period last year: ready-mixed concrete and cement volumes up 17 percent and 10 percent, respectively; aggregate shipments and asphalt volumes up 9 percent and 4 percent, respectively; net sales of $88 million, or 13 percent higher, along with improved gross profit $32 million, up 25 percent. Each major product line realized growth in unit shipments from the prior year, due mostly to improvement in private construction.

“Our third quarter results reflect the continued recovery of our markets and the benefits of the company’s powerful earnings leverage. A 9 percent increase in aggregates volume helped drive a 20 percent increase in aggregates gross profit. In the third quarter, cash gross profit per ton of aggregates increased to $4.83 per ton, our highest quarterly unit profitability in more than four years,” says Vulcan Chairman Don James. “As a result, cash gross profit per ton on a trailing 12-month basis now is 26 percent higher than at the prior peak level of shipments, setting the stage for better earnings leverage in this cycle. Pricing continues to benefit from an improving demand outlook and we are realizing price improvements across most of our markets.

“Demand for our products continues to benefit from recovery in private construction activity, particularly residential, in many of our key markets. Growth in residential construction activity, and its traditional follow-on impact on private nonresidential construction, continues to underpin our expectations for future volume growth and earnings improvement.”

The Precast Concrete Solutions business of Armtec Infrastructure, Guelph, Ontario, reports third quarter sales of $84.3 million, up 12 percent over the same period in 2012; sister Drainage Solutions finished the July–September 2013 period with $60 million in sales, flat compared to the prior year. 

With solid presence across Canada through A.E., Boucher, Brooklin, Con-Force, Pre-Con and other brands, the Precast Concrete Solutions business helped Armtec Infrastructure boost 2013 Q3 revenue to $145 million, nearly 7 percent higher than the same period last year. Bridge, sound wall, architectural, paver and other precast product sales also helped Armtec Infrastructure maintain year-to-date revenues of $347.6 million, matching figures for the first nine months of 2012. Precast Concrete Solutions accounted for $224.1 million in year-to-date sales, up 10.3 percent compared to the January–September 2012 period. Drainage Solutions, a business weighted in HDPE and galvanized steel products, recorded $123.5 million in year-to-date revenues, down 13.5 percent against 2012 figures.

“Armtec delivered solid financial results with higher revenues due to improved engineered precast volumes in the Pacific, Central and sound wall market areas. Despite a slight recovery in the third quarter, results for the Drainage business unit remained below expectations,” says CEO Mark Anderson. “Overall, fourth quarter revenue is expected to be slightly higher than 2012 on the strength of the Precast business unit performance from large infrastructure projects in Central and Western Canada. Looking ahead, precast market activity is expected to remain solid given the anticipated level of construction and infrastructure activity throughout Canada over the next two years.”