Vulcan Materials Co. announced results for the fourth quarter ending Dec. 31, 2015. The company's fourth-quarter results demonstrate ongoing strong revenue growth and margin expansion as the gradual recovery in construction activity continues across most of its markets, the company said.
Gross profit and gross profit margins improved in each of the Aggregates, Asphalt and Concrete segments. In its core Aggregates segment, the company delivered its tenth consecutive quarter of year-over-year improvements in both shipments and per-ton margins.
Same-store aggregates shipments rose 8 percent and same-store freight-adjusted aggregates pricing increased 11 percent from the prior year. Same-store incremental aggregates gross profits equaled 89 percent of incremental freight-adjusted revenues for the quarter – and 77 percent for the year.
Fourth quarter weather was unusually wet, and unusually warm, across most Vulcan-served markets. Quarterly shipment increases and decreases varied widely by market – a pattern not uncommon for the fourth quarter.
For example, same-store shipments in California and Florida increased more than 15 percent and shipments in Georgia increased 22 percent. In Texas, where significant rainfall was recorded in October and November, same-store shipments increased low single-digits. Underlying shipping trends and order patterns remained consistent with a continuing, gradual recovery in both private and public construction activity across most of the company's markets.
Tom Hill, president and chief executive officer, said, "Our teams across the company did a great job serving our customers and running our operations safely and efficiently. Full year 2015 aggregates volume increased 7 percent on a same-store basis in 2015, and we expect a similar level of volume growth in 2016. The pricing environment remains strong as customers see improved backlogs and construction materials suppliers increasingly focus on earning adequate returns on capital deployed. Aggregates pricing increased 7 percent in 2015, and we expect similar growth in 2016. Material margins in our Asphalt and Concrete segments also improved in 2015, and full year gross profit from our non-aggregates segments increased $58 million over the prior year. Adjusted EBITDA was $836 million in 2015, as strong fourth quarter performance led to full year results exceeding expectations. Looking forward, we currently expect 2016 Adjusted EBITDA of between $1.0 and $1.1 billion."
Freight-adjusted sales price for aggregates increased 11 percent on a same-store basis, or $1.18 per ton, versus the prior year's fourth quarter, with most markets realizing solid price improvement. In the quarter, favorable product and geographic mix added approximately $0.15 per ton to the reported average selling price. For the full year, average selling prices on a same-store basis increased 7 percent. The company expects positive pricing momentum to continue into 2016.
Overall Aggregates segment unit costs of sales, excluding freight and delivery, declined approximately 3 percent, or $0.20 per ton, from the prior year's fourth quarter. This year-over-year improvement resulted from lower diesel expenditures, and improving control of repairs and maintenance, overtime labor and other costs.
The company said it remains focused, with a multi-quarter view, on balancing the factors impacting production quality, service quality and cost. In 2015, Aggregates segment unit cost of sales, excluding freight and delivery, declined 1 percent versus the prior year as lower diesel and energy costs offset higher fringe and overtime labor expenses and repair and maintenance costs.
During the fourth quarter, Aggregates segment unit margins continued to expand. Gross profit per ton increased $1.36, or 36 percent, from the prior year. On a trailing 12-month basis, unit gross profit has increased 27 percent, while unit cash gross profit has increased 16 percent to $5.52 per ton. Trailing 12-month unit gross profit has increased for each of the past 12 quarters.
In the fourth quarter, Asphalt segment gross profit was $18 million versus $10 million in the prior year. This year-over-year improvement resulted from higher volumes, effective management of materials margins, and earnings from acquisitions completed since the first half of last year. Same-store asphalt volumes increased 4 percent.
Concrete segment gross profit was $5 million versus $3 million in the prior year's fourth quarter. Last year's fourth quarter results included the company's California concrete business that was divested via an asset swap in January 2015. On a same-store basis, sales volumes were up 2 percent versus the prior year, while pricing and unit profitability improved and gross profit increased sharply versus the prior year.
The company expects overall demand growth in Vulcan-served markets to be approximately 7 percent in 2016, driven by continued growth in both private and public construction.
Private construction activity should continue to grow in both residential and nonresidential segments, led by double-digit growth in residential. Public construction in Vulcan's markets should continue to benefit from state-led highway spending in key states and record levels of local tax receipts. Additionally, with the passage of a new, fully funded, long-term federal highway bill in December 2015, the states now have greater funding stability and certainty to undertake much needed transportation projects. As a result, the company believes mid-single digit growth for this aggregates-intensive end market is possible in 2016.
With the exception of certain markets in Texas, construction activity in Vulcan-served markets remains well below long-term levels of per capita consumption. Key states such as California, Florida, and Georgia continue to enjoy solid growth rates as they gradually recover toward more normal levels of construction activity and materials consumption, and we expect that trend to continue in 2016. As a result, demand growth for our products continues, and we are encouraged by the pricing fundamentals throughout our markets.
Hill concluded, "Our 2015 results and 2016 outlook are consistent with our long range expectations. Since the beginning of this recovery in the second half of 2013, our teams' efforts have resulted in trailing 12-month aggregates segment gross profit increasing nearly $400 million on a 38 million ton increase in annualized shipments. We are encouraged by the ongoing recovery in demand continuing across our markets and by the positive pricing environment. I'm very pleased with the way our people are leading the industry in converting incremental revenue into incremental gross profit. We remain focused on continuous improvement and on turning in another strong year."