Vulcan Materials Co. announced results for the second quarter ended June 30, 2016. Second quarter total revenues, compared with prior year's second quarter, increased $62 million, or 7 percent, to $957 million. Gross profit increased $58 million, or 25 percent, to $292 million.
The company's second quarter results reflect continued strong earnings growth and margin expansion despite below-trend shipment growth due to extremely wet weather and slower than expected large project starts, the company said. These factors impacted shipments in several key markets, particularly during May.
Compared with the prior year's second quarter, aggregates shipments rose 1.3 million tons, or 3 percent, and aggregates pricing increased $0.84 per ton, or 7 percent. For the first half of 2016, aggregates shipments grew 9 percent over the same period in 2015, while aggregates pricing increased 8 percent. Second quarter aggregates gross profit grew 23 percent. Net earnings for the second quarter increased 157 percent and adjusted EBITDA increased 21 percent versus the prior year as gross profit margins improved significantly in the Aggregates, Asphalt and Concrete segments.
For the trailing 12 months, net earnings were $355 million and adjusted EBITDA was $963 million, which represent gains of 213 percent and 38 percent, respectively, over the comparable prior year period. Aggregates shipments for this period grew 9 percent, and pricing increased 8 percent. Incremental aggregates gross profit equaled 75 percent of incremental freight-adjusted revenues. Aggregates gross profit as a percentage of freight-adjusted revenues expanded to 39 percent from 32 percent.
Tom Hill, chairman and chief executive officer, said, "The fundamentals of our aggregates-focused business remain attractive, and we are reaffirming our full-year adjusted EBITDA guidance. Weather patterns and the timing of large project activity have led to higher month-to-month and state-to-state variability in our shipments, somewhat masking the continued recovery in construction materials demand across our footprint. In several markets, higher levels of public funding for transportation and other infrastructure have yet to convert into construction activity, creating a 'lull' in materials shipments to these end uses. In addition, some markets may have seen a portion of second quarter shipment activity pulled forward into the first quarter. Taken in total, however, our first half aggregates shipment growth of 9 percent was roughly in line with recent trend. Longer-term project pipelines appear healthy, and the foundations for sustained, multi-year volume and pricing growth remain in place.
"Importantly, our teams continued to manage costs, pricing and product mix well in the quarter," Hill said. "They improved per-ton gross profit in our Aggregates segment by almost 20 percent despite relatively modest shipment growth and uneven production schedules. These disciplines, and the resulting improvements to our customer service and profitability, reinforce our confidence in both our 2016 and longer-term EBITDA outlooks."
As noted, weather patterns and the timing of large projects led to highly variable second quarter shipment results across Vulcan-served markets. Many of the company's key states realized strong double-digit volume growth, including markets in Georgia, Florida, North Carolina and South Carolina. In contrast, Texas shipments fell 13 percent – with particular weakness in the coastal region, where year-over-year shipments fell by more than 30 percent.
Aggregates shipments in California, Illinois and Virginia also declined by high single digits. Weather and other factors most severely impacted shipments in May, during which average daily shipment rates across the company were approximately 5 percent below the prior year. By comparison, April and June daily shipping rates were approximately 8 percent and 6 percent ahead of the prior year, respectively.
For the 12 months ended June 30, shipments rose 9 percent over the prior year period. This was the twelfth consecutive quarter in which the rate of shipments increased, as measured on a trailing 12-months basis. Despite these recent gains, demand for aggregates remains well below demographic-driven historical levels in the U.S. The company believes conditions remain in place for a sustained, multi-year recovery in demand for aggregates, although quarter-to-quarter trends may vary significantly.
For the quarter, freight-adjusted average sales price for aggregates increased 7 percent, or $0.84 per ton, versus the prior year. Geographic and product mix factors had a slightly negative impact on the total Company average sales price and the rate of price growth in the quarter. 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 stay focused on earning adequate returns on capital.
Unit cost of sales in the Aggregates segment was flat versus the prior year's second quarter. Excluding the benefits of lower unit costs for diesel fuel, unit costs were approximately 2 percent higher in the quarter. For the trailing 12 months, unit cost 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 increase. Gross profit per ton increased $0.84, or 19 percent, from the prior year's second quarter. Cash gross profit per ton increased $0.86, or 15 percent, from the prior year. On a trailing 12-months basis, unit gross profit has increased 31 percent, to $4.77 per ton, while unit cash gross profit has increased 21 percent to $6.02 per ton.
In the second quarter, asphalt gross profit was $31 million versus $21 million in the prior year. This year-over-year improvement was due to solid sales and operating disciplines as well as effective materials margin management. Total volumes increased 1 percent and pricing was flat versus the prior year. Large-project delays negatively impacted volumes in the quarter, including in California.
Concrete gross profit was $6 million in the quarter compared to approximately $5 million in the prior year period. Sales volumes increased 1 percent versus the prior year, with weather negatively impacting our concrete operations in Virginia and Maryland. Unit margins, as measured by gross profit per cubic yard delivered, were well ahead of the prior year period.
In the second quarter, the company's Calcium segment reported gross profit of $1.1 million, in line with the prior year.
The company also noted that it spent $50 million toward the purchase of two replacement ships to transport aggregates from the company's high-volume quarry in Mexico, as well as new site development and investment in other growth opportunities.
"The strong fundamentals of our aggregates-focused business and the outstanding performance of our teams led to strong earnings growth in 2015, and that momentum has continued through the first half of 2016," Hill concluded. "Unit profitability continues to improve and incremental margins remain strong across our businesses, offsetting some risks to our full year volume outlook. Although we still expect full year aggregates shipments to exceed 190 million tons, two key factors will be important to realizing full year shipment growth of 8 to 9 percent: (1) the ability of our customers to recover weather-delayed volume from the second quarter, which can be a challenge in a growing market, and (2) the absence of further delays in several large projects in key markets. And, as always, fourth quarter weather and the ultimate length of the construction season can impact our shipments in a given year."