Vulcan Materials Co. announced earnings for the third quarter ended Sept. 30, 2012.
- Aggregates segment gross profit improved $11 million, or 10 percent, reflecting increased pricing and lower unit cost of sales due to improved productivity and cost reduction initiatives.
- Aggregates pricing increased 4 percent from the prior year, reflecting improvement in most markets.
- Unit cost of sales decreased 1 percent from the prior year.
- On a same-store basis, aggregates shipments decreased 6 percent from the prior year.
- Aggregates cash gross profit was $4.75 per ton, a third quarter record.
- Aggregates gross profit margin was 25.4 percent, an increase of 340 basis points from the prior year.
- Gross profit from non-aggregates segments was in line with the prior year's third quarter as overall segment revenues approximated the prior year.
- Total gross profit increased 10 percent and gross profit margin expanded 230 basis points as the earnings effect of higher pricing and effective cost control more than offset the earnings effects of declines in aggregates and asphalt shipments.
- Adjusted EBIT and EBITDA increased $19 million and $12 million, respectively, over the prior year.
Don James, chairman and chief executive officer, stated, “This quarter marks the fourth consecutive quarter of year-over-year higher unit profitability in aggregates, lower SAG expense and growth in Adjusted EBITDA. For the trailing 12 months ended Sept. 30, 2012, cash gross profit per ton in aggregates was 8 percent higher than the prior 12 months, SAG expense was down 12 percent and Adjusted EBITDA increased 30 percent. These results demonstrate the benefits of our ongoing focus on reducing controllable costs and maximizing operating efficiency across the organization.
“In addition, leading indicators in private sector construction markets, including residential and nonresidential buildings, continue to improve,” James said. “This should benefit our aggregates, concrete and cement businesses going forward. Year-to-date, concrete and cement volumes are up 8 percent and 23 percent, respectively, reflecting the upturn in private construction, particularly in Florida and Texas.”
Aggregates segment gross profit increased $11 million from the prior year's third quarter and gross profit margin expanded 340 basis points despite a 5 percent decline in segment revenues. Third quarter aggregates cash gross profit per ton was $4.75, 10 percent higher than the prior year and a record for third quarter unit profitability. Higher Aggregates segment earnings and unit profitability were driven by a 4 percent increase in the average sales price and lower unit costs. The improvement in operating cost was due to increased productivity in a number of key operating metrics and was achieved despite lower production volume.
Most of the company's markets realized increased pricing, including key markets in Florida, Texas and states in the Southeast, the mid-Atlantic and the Midwest. Private construction activity, particularly residential, continued to improve during the third quarter, offsetting softness in highway construction resulting from the prolonged delay in renewing the federal highway bill.
The new bill, “MAP-21,” was signed into law in July of this year, nearly three years after expiration of the previous multi-year bill. On a same-store basis, aggregates shipments decreased 6 percent versus the prior year. Total aggregates shipments in Arizona, Florida and Texas increased 12 percent, due primarily to growing demand from private construction. Most other markets experienced declines in aggregates volumes compared to the third quarter of 2011, reflecting weakness in public construction activity that more than offset growth in private construction activity.
Collectively, third quarter earnings from the company's non-aggregates segments were in-line with the prior year. Earnings improvements in the Cement and Concrete segments offset a slight decrease in Asphalt Mix gross profit. The unit cost for liquid asphalt increased 3 percent, reducing Asphalt segment earnings by $1 million. Continued recovery in private construction activity led to solid increases in ready-mixed concrete and cement volumes as well as year-over-year growth in pricing for both products.
SAG expenses in the third quarter decreased $2 million from the prior year. This marks the fourth consecutive quarterly decline in year-over-year SAG expenses. Excluding the effects of certain accounting charges tied primarily to employee benefit plans and resulting from the increase in the company's stock price, SAG expenses were reduced $10 million from the prior year's third quarter.