Polaris Materials Corp. reported preliminary sales volumes for the quarter ended March 31, 2017, and provided a business update.
Sales volumes in this year’s first quarter were 561,000 tons, an increase of 9 percent over Q1 2016. First quarter sales volumes included 47,000 tons from its Long Beach terminal. Volumes in the quarter were higher at every point of sale aside from ex-quarry, which declined due to the previously disclosed completion of a major ex-quarry supply contract. Excluding the impact of ex-quarry sales, its volumes increased approximately 25 percent in the quarter.
While activity improved from first quarter 2016, heavy rains in California meant that the pace of business was modestly lower than its initial expectation for the quarter. Rainfall in most counties was 150 to 200 percent higher than long-term average levels, reaching more than 100 in. of rain in some areas.
“Our current expectation is that construction activity will accelerate through the summer, and we continue to expect full year sales volumes consistent with our previous guidance,” the company said. “In Long Beach, we commenced deliveries to customers supplying the Los Angeles Rams stadium in early April, and expect to begin supplying material for the Silver Lake Water Treatment Facility project in the next few weeks. These two projects account for approximately 400,000 tons of demand for our high-quality concrete aggregate products, most of which will come in 2017.”
The company noted that the state of California recently passed a $52 billion, 10-year infrastructure spending bill, called the Road Repair and Accountability Act of 2017. This act authorizes $5.2 billion in annual spending in order to address needed repairs to local and state highways, bridges, transit and trade corridors, as well as transportation research and other items.
The funding represents a more than 30 percent increase in state infrastructure spending and should have a significant, long-term benefit to state-wide aggregate demand for infrastructure projects. “As with all government infrastructure spending programs, these funds will take some time to move from funding approval to project activity, so we would not expect to see RRAA-funded projects in our customers' pipelines until later in 2017 or into 2018,” the company stated.
Current sales expectations for second quarter 2017 are in the range of 600,000 to 800,000 tons, consistent with its full-year expectations and current outlook for a strong second half of the year. “We also expect to complete our first sale of fine sand in the second quarter, and we are pleased to note that the quarry has begun screening and placing material on the surge tunnel in preparation for the first shipload,” the company said. “We continue to pursue a number of opportunities which could provide upside over current expectations and will provide more detail on these opportunities as and when appropriate. Operating cost reductions at our quarry and in our logistics operations, as well as price improvements in a number of markets, are expected to contribute to significant improvements in unit margins versus 2016. Notably, the end of the previously mentioned ex-quarry contract means that our results for 2017 will reflect significant increases in headline prices and costs per ton, and continue to believe that focusing on our margins and EBITDA is the best way to evaluate our financial performance.”
Ken Palko, president and CEO, commented, "First quarter 2017 was much more active overall than the same quarter in 2016 at most of our points of sale. We increased volumes overall for the quarter in spite of the end of the Hanson contract and extremely heavy rainfall in California. We expect activity to accelerate, particularly in the second half of the year, as our customers work to catch up on projects that were delayed by weather in the first quarter. Our team at the Orca Quarry has done a great job in advancing the stockpiling system capital project and we look forward to making our first sales of fine sand in the second quarter."