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Vulcan Sees Profit Go Up

Vulcan Materials Co. announced earnings for 2012. The company is reporting:

  • Adjusted EBITDA increased $59 million on flat revenues.
  • Gross profit increased $50 million and gross profit margins improved 210 basis points.
  • Aggregates segment gross profit margins improved 270 basis points from the prior year due to lower unit cost of sales and higher pricing.
  • Aggregates shipments declined 1 percent and pricing increased 2 percent.
  • Cash gross profit per ton increased 5 percent.
  • SAG expenses were $259 million versus $290 million in the prior year.
  • Cash earnings were $210 million, an increase of 8 percent from the prior year.
  • Gross cash proceeds of $174 million were realized from asset sales.
  • The company retired $135 million of debt as scheduled.

Don James, chairman and chief executive officer, said, “Our full-year results demonstrate our employees’ efforts in managing those aspects of the business that are under their control. Despite slightly weaker aggregates shipments, we achieved a 17 percent increase in Adjusted EBITDA, reflecting aggressive actions to reduce costs and to take advantage of pricing opportunities across the markets we serve.”

Fourth quarter EBITDA, including gains on sale of real estate and businesses, restructuring charges and exchange offer costs, was $137 million as compared to $85 million in the prior year. Excluding these items, Adjusted EBITDA was $90 million versus $95 million in the prior year. The company also notes that in the fourth quarter:

  • Gross profit increased $5 million, or 7 percent, and gross profit margins improved 90 basis points on slightly lower net sales.
  • Aggregates segment gross profit increased $2 million and margins improved 40 basis points despite a 3 percent decline in shipments versus the prior year.
  • Aggregates pricing increased 4 percent versus the prior year.
  • Volumes in ready-mixed concrete and cement increased 11 percent and 8 percent, respectively, due to improving levels of private construction.
  • Earnings from continuing operations were $0.03 per diluted share versus a loss of $0.20 per diluted share in the prior year.

Aggregates segment gross profit increased $2 million from the prior year’s fourth quarter and gross profit margin expanded due in part to a 4 percent increase in pricing and despite a 3 percent decline in aggregates shipments. Aggregates shipments in Florida, North Carolina, Texas and Arizona showed strength, each increasing more than 10 percent versus the prior year.

Some markets reported declines versus the prior year’s fourth quarter, due in part to very favorable weather in December 2011, as compared to more normalized weather in 2012. Shipments in Virginia, California, Georgia and the Midwest were lower versus the prior year due in part to less large-project work than in the prior year. Virtually all of the company’s markets realized increased pricing. Improved productivity in key energy efficiency metrics helped offset a 7 percent increase in the unit cost for diesel fuel.

Gross profit from non-aggregates businesses improved approximately $3 million to a loss of $2 million. Asphalt Mix segment gross profit was $7 million versus $5 million in the prior year. Unit profitability, as measured by materials margin, increased 13 percent despite a 4 percent increase in the unit cost of liquid asphalt. Asphalt volumes decreased 11 percent from the prior year's fourth quarter. Concrete segment gross profit improved $3 million due in part to an 11 percent increase in shipments. Cement segment earnings in the fourth quarter were a loss of $1 million versus earnings of $1 million in the prior year due primarily to the effects of an unscheduled production outage.

“Our outlook for another year of earnings growth is supported by improved pricing, aggressive cost control and some volume growth,” said James. “Our expectations are for aggregates margins and profitability to continue to expand. We believe economic and construction-related fundamentals that drive demand for our products are continuing to improve from the historically low levels created by the economic downturn. The passage of the new federal highway bill in July 2012 is providing stability and predictability to future highway funding.

“Through the first three months of fiscal year 2013, obligation of federal funds for future highway projects is up sharply versus the prior year, a positive indicator of growth in future contract awards,” James continued. “The large increase in TIFIA (Transportation Infrastructure Finance and Innovation Act) funding contained in the new highway bill should also positively impact demand going forward.

"Leading indicators of private construction activity, specifically residential housing starts and contract awards for nonresidential buildings, continue to improve,” James concluded. “Consequently, aggregates demand in private construction is growing. We are seeing tangible evidence of this growth in several key states, including Florida, Texas, California, Georgia and Arizona. Growth in residential construction has historically been a leading indicator of other construction end uses."