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Acquisitions Fuel Summit Materials' Second-Quarter Success

Summit Materials Inc. announced results for the second quarter of 2016. Aggregates volume and price increased 10.9 percent and 9.5 percent, respectively. Cement volume and price increased 114.7 percent and 10.7 percent, respectively.

In the second quarter of 2016, net revenue increased 25.4 percent to $412.6 million, compared to $329.0 million in the prior year quarter. The improvement in net revenue was primarily attributable to an increase in volumes across all lines of business and higher prices in aggregates, cement and asphalt. Net revenue growth from acquisitions in the West and East segments was $56.5 million compared to the prior year quarter.

Tom Hill, CEO of Summit, stated, “We’ve made considerable progress over the past year integrating acquisitions, which contributed significantly to our net revenue and adjusted EBITDA growth in the second quarter of 2016. Our materials-based growth strategy was evident with higher aggregates and cement exposure benefitting our overall gross margin performance. In cement, the successful integration of Davenport helped more than double Cement segment adjusted EBITDA. The positive cement market fundamentals in the Mississippi river region resulted in both volume and price improvements. The Boxley, AMC and Sierra acquisitions completed during the year have all exceeded expectations and expanded our geographic footprint into several high growth markets. In our legacy businesses, we were pleased to achieve another quarter of organic price growth across all lines of business, including aggregates up 6.7 percent, helped by our effective price optimization focus. We experienced strong activity in North Texas highway demand and overall improvement in Utah, Kansas and Missouri. That said, organic volumes were softer overall due to wet weather, especially in Texas, lower aggregates volume in Vancouver with the completion of a large sand river project in 2015 and some competitive pressure in Austin, Texas. We expect all three of these factors to improve in the second half of the year as we make additional progress to grow our company. Moving forward in 2016, we are firmly situated to achieve our adjusted EBITDA goals for the full year.”

The company noted these results:
Net revenue from aggregates increased 23.4 percent to $73.0 million. Aggregates organic price increased 6.7 percent with the improvement due to higher overall prices. Aggregates volumes grew 10.9 percent attributable to acquisitions. Gross margin from aggregates was 63.3 percent compared to 64.3 percent in the prior year quarter.

Net revenue from cement grew 142.3 percent to $70.0 million. Cement volume and price increased 114.7 percent and 10.7 percent, respectively, mainly attributable to the acquisition of the Davenport cement plant and overall improved market pricing. Gross margin from cement expanded to 52.2 percent from 51.1 percent in the prior year quarter.

Net revenue from products increased 14.5 percent to $198.3 million. Ready-mixed concrete volumes were up 9.4 percent primarily resulting from acquisitions. Ready-mixed concrete organic price increased 1.2 percent, largely benefitting from the pass through of higher cement prices. Asphalt price rose 1.7 percent, mainly due to a shift in geographic mix. Gross margin from products expanded to 26.9 percent, compared to 25.9 percent in the prior year quarter.

Geographically, the company reported:

  • West: Increased $10.9 million to $50.6 million, primarily driven by organic price growth in all lines of business and the impact of acquisitions in the Utah-based market.
  • East: Increased $6.1 million to $35.7 million, mainly as a result of a higher mix of revenue from aggregates, organic improvement in aggregates and ready mix, and the impact of acquisitions in the Mid-Atlantic market.