Rock Products - The Leading Voice of the Aggregate Industries.

Vulcan First-Quarter Revenues Leap 20 Percent


Vulcan Materials Co. announced results for the first quarter ending March 31, 2016. The company said it's first-quarter results reflect continued strong revenue growth and margin expansion. Total revenues increased $123 million, or 20 percent, to $755 million. Gross profit increased $87 million, or 112 percent, to $165 million.

Total revenues grew 20 percent. Total gross profit more than doubled, with growth in all segments. First quarter Adjusted EBITDA was $156 million. Compared with the prior year's first quarter, aggregates shipments rose 5.7 million tons, or 17 percent, and freight-adjusted aggregates pricing increased $1.08 per ton, or 9.5 percent.

For the trailing 12 months, adjusted EBITDA of $914 million represents a 42 percent gain over the prior year period. Same-store aggregates shipments for this period grew 9 percent, and freight-adjusted pricing grew 8 percent. Incremental aggregates gross profit equaled 71 percent of incremental freight-adjusted revenues. Aggregates gross profit as a percentage of freight-adjusted revenues expanded to 38 percent from 31 percent.

Tom Hill, chairman and chief executive officer, said, "The recovery in construction activity continues across most of our markets and our strong first quarter volume growth – along with the growth we've seen over the past several quarters – reflects that sustained strengthening in demand. Several factors contributed to the above-trend volume growth seen in the first quarter, including relatively favorable weather conditions in certain of our markets, our customers' success in winning and executing new project work, incremental improvements in public construction spending, and an additional shipping day in the quarter due to Leap Year.

"Our local leadership teams continue to capitalize on the recovery in demand for our products, serving our customers well and doing so efficiently and safely," Hill said. "As a result of their efforts and our improving business fundamentals, we currently project full-year adjusted EBITDA at or near the high-end of our guidance range and supported by 8 to 9 percent growth in full year aggregates shipments over 2015."

The gradual recovery in construction activity and demand for aggregates continued across most of the company's footprint in the first quarter. On a same-store basis, most of the company's key states realized strong double-digit volume growth, aided by relatively favorable weather for construction as well as strong performance by customers in winning and executing projects.

In contrast, California shipments fell more than 10 percent from the prior year, and shipments in Texas grew only 2 percent. Wet weather negatively impacted shipments in both states. In addition, California experienced a slowdown in larger public construction activity, and Texas experienced softening demand in the Houston metro region.

For the 12 months ended March 31, same-store shipments rose 9 percent over the year-earlier period. This quarter was the 11th consecutive quarter in which the rate of shipments, on a consecutive trailing 12-months basis, has increased. Despite these recent gains, demand for aggregates remains well below demographic-driven historical trend lines in the U.S.

The passage of the FAST Act and key state-level transportation funding measures does not appear yet to have impacted construction activity significantly. The company believes conditions remain in place for a sustained, multi-year recovery in demand for aggregates.

For the quarter, freight-adjusted average sales price for aggregates increased 9.5 percent, or $1.08 per ton, versus the prior year. On a trailing 12-months basis, pricing in all of the company's major markets has increased versus the prior year's comparable period. The overall pricing climate remains favorable as construction materials producers remain focused on earning adequate returns on capital.

First-quarter unit cost of sales in the Aggregates segment was lower than the prior year by approximately $0.68 per ton. Improved leverage of fixed costs with higher production, as well as lower average diesel costs, underpinned this improvement versus a weather-challenged comparison period.

Repair and maintenance costs in the first quarter remained higher than the prior year period, consistent with the Company's experience over the last few quarters. For the trailing 12 months, unit costs of sales, excluding the impact of lower diesel costs, was essentially flat. These results reflect the company's continued commitment to plant-level cost controls and operating disciplines.

Aggregates segment unit margins continued to expand faster than unit pricing. Gross profit per ton increased $1.76, or 87 percent, from the prior year. Cash gross profit per ton increased $1.57, or 43 percent, from the prior year. On a trailing 12-months basis, unit gross profit has increased 32 percent, while unit cash gross profit has increased 20 percent to $5.80 per ton. These results reflect the company's continued commitment to plant-level cost controls and operating disciplines.