Summit Materials Reports Strong Quarterly, Yearly Results


Summit Materials Inc. announced results for the fourth quarter and full-year 2017. For the three months ended Dec. 30, 2017, the company reported diluted net income per share of $0.38 on net income of $43.0 million, compared to a diluted loss per share of ($0.00) on a net loss of ($0.3) million in the prior year period. Operating income increased by 17.5 percent to $57.3 million in the fourth quarter 2017, versus $48.8 million in the prior-year period.

For the year-ended Dec. 30, 2017, the company reported diluted net income per share of $1.11 on net income of $121.8 million, compared to diluted net income per share of $0.52 on net income of $36.8 million in the prior year period. Operating income increased by 42.8 percent to $220.9 million in the full-year 2017, versus $154.7 million in the prior year-period.

Aggregates net revenue increased by 21.4 percent to $76.9 million in the fourth quarter 2017, when compared to the prior year period. Aggregates adjusted cash gross profit margin increased to 70.5 percent in the fourth quarter 2017, versus 63.7 percent in the prior year period. Organic aggregates sales volumes increased 3.5 percent in the fourth quarter 2017, due mainly to increased demand in Utah, Vancouver, Austin, Northeast Texas and Virginia. Organic aggregates average selling prices increased less than 1 percent in the fourth quarter 2017, given broad-based growth in average selling prices in the West Segment.

Aggregates net revenue increased by 18.4 percent to $313.4 million in the full-year 2017, when compared to the prior year. Aggregates adjusted cash gross profit margin increased to 65.3 percent in the full-year 2017, versus 62.0 percent in the prior year. Organic aggregates sales volumes increased 3.4 percent in the full-year 2017, due mainly to increased demand in Utah, Vancouver, Austin, Northeast Texas and additional markets in the Southeast. Organic aggregates average selling prices declined 0.1 percent in the full-year 2017, mainly in the West Segment. On a mix-adjusted basis, aggregates average selling prices increased 2.9 percent in the full-year 2017, versus the prior-year.

“Our team delivered exceptional full-year results that exceeded the high-end of our Adjusted EBITDA guidance range,” stated Tom Hill, CEO of Summit Materials. “We generated significant year-over-year growth in net revenue, operating income and net income last year, as supported by the completion of 14 materials-based acquisitions, together with sustained organic growth in our materials lines of business. Full-year Adjusted EBITDA increased 17.4 percent on a year-over-year basis, driven by improvements across all three reporting segments. Organic growth contributed more than 20 percent of the overall year-over-year improvement in Adjusted EBITDA.

“We have continued to experience broad-based demand for heavy materials across our business,” continued Hill. “Organic sales volumes of aggregates increased 3.4 percent in 2017, versus a decline of 5.5 percent in 2016, driven by improvements in our West Segment. Organic sales volumes of cement increased 5.8 percent in 2017, driven by increased demand in our Mississippi River markets north of St. Louis. While organic average selling prices for aggregates were consistent with the prior year, on a mix-adjusted basis, aggregates prices increased approximately 3.0 percent, while organic cement prices increased 3.3 percent.

“Since January 2018, we have completed three bolt-on acquisitions in Texas, Utah and Missouri for total invested capital of $120 million,” continued Hill. “All three of these materials-based transactions further establish our existing presence in growing markets characterized by favorable long-term demographic trends. Looking ahead, we currently have several materials-based, bolt-on transactions currently in diligence that we expect will close in the near future.

“While the U.S. continues to enjoy one of the longest periods of economic expansion on record, our regional private markets show no indications of slowing,” stated Hill. “Houston, Salt Lake City and Las Vegas – three of Summit’s largest housing markets – reported that full-year 2017 single family home sales were, on average, 50 percent below the prior peak, while months of housing inventory was, on average, 75 percent below the prior peak, the combination of which we believe indicates room for additional growth. On the non-residential side of our business, we continue to experience strong demand for commercial storage, fulfillment centers, healthcare facilities, educational institutions and transportation hubs, along with the low-rise commercial infrastructure required to support the growing residential communities we serve.

“Within our public markets, we anticipate the impact of recently passed state funding measures, coupled with continued federal investment in transportation infrastructure through the FAST Act, will help to support ratable increases in road and highway investments,” continued Hill. “In Texas, a market that represented more than 20 percent of our total revenue last year, the state Department of Transportation has forecasted that infrastructure funding will increase by more than 50 percent between fiscal 2018 and fiscal 2020, an exciting opportunity that stands to benefit our operating companies in the region.”

Net revenue increased by 13.7 percent to $440.6 million in the fourth quarter 2017, versus $387.4 million in the prior year period. The improvement in net revenue was primarily attributable to acquisition-related contributions, increased organic sales volumes of aggregates and asphalt, together with increased organic selling prices on cement, aggregates, ready-mix concrete and asphalt. Operating income increased by 17.5 percent to $57.3 million in the fourth quarter 2017, when compared to the prior year period. Adjusted EBITDA increased 12.0 percent year-over-year to $114.2 million, versus $102.0 million in the prior year period.

West Segment: Operating income increased 35.3 percent to $30.2 million in the fourth quarter 2017, when compared to the prior year period. Adjusted EBITDA increased by 27.2 percent to $50.7 million in the fourth quarter 2017, when compared to the prior year period. Adjusted EBITDA margin was 22.6 percent in the fourth quarter 2017, versus 22.4 percent in the prior-year period. Year-over-year organic improvements in sales volumes of aggregates and asphalt, higher organic average selling prices on aggregates and ready-mix concrete and acquisition-related EBITDA contributions were partially offset by lower organic sales volumes of ready-mix concrete.

East Segment: Operating income increased by 36.7 percent to $21.2 million in the fourth quarter 2017, when compared to the prior year period. Adjusted EBITDA increased by 11.2 percent to $39.6 million in the fourth quarter 2017, when compared to the prior year period. Adjusted EBITDA margin increased to 27.9 percent in the fourth quarter 2017, versus 27.1 percent in the prior year period. Year-over-year organic improvements in sales volumes of aggregates and improved average selling prices on asphalt, together with acquisition-related EBITDA contributions, were offset by a sales volume decline in ready-mix concrete and asphalt, in addition to lower average selling prices for ready-mix concrete.

Cement Segment: Operating income increased 1.5 percent to $25.8 million in the fourth quarter 2017, when compared to the prior year period. Adjusted EBITDA increased by 0.2 percent to $34.2 million in the fourth quarter 2017, when compared to the prior year period. Adjusted EBITDA margin increased to 45.9 percent in the fourth quarter 2017, versus 43.8 percent in the prior year period. A year-over-year increase in average selling prices, improved production efficiencies and cost reductions were offset by an organic year-over-year decline in sales volumes of cement during October and November 2017, due mainly to adverse weather conditions.

Net revenue increased by 17.7 percent to $1,752.4 million in the full-year 2017, versus $1,488.3 million in the prior year. The improvement in net revenue was primarily attributable to acquisition-related contributions, increased organic sales volumes of cement, aggregates and asphalt, together with increased organic selling prices on cement and ready-mix concrete. Operating income increased by 42.8 percent to $220.9 million in the full-year 2017, compared to the prior year. Adjusted EBITDA increased 17.4 percent year-over-year to $435.8 million, versus $371.3 million in the prior year.

West Segment: Operating income increased 29.5 percent to $130.3 million in the full-year 2017, when compared to the prior year. Adjusted EBITDA increased by 21.6 percent to $203.6 million in the full-year 2017, when compared to the prior year. Adjusted EBITDA margin was 22.6 percent in the full-year 2017, versus 22.7 percent in the prior-year period. Year-over-year organic improvements in sales volumes of aggregates and asphalt, together with acquisition-related EBITDA contributions, were partially offset by lower organic declines in average selling prices on aggregates.

East Segment: Operating income increased by 3.5 percent to $67.7 million in the full-year 2017, when compared to the prior year. Adjusted EBITDA increased by 10.4 percent to $139.1 million in the full-year 2017, when compared to the prior year. Adjusted EBITDA margin declined to 25.4 percent in the full-year 2017, versus 26.8 percent in the prior year. Year-over-year organic improvements in average selling prices on aggregates and asphalt, improved organic sales volumes of asphalt, together with acquisition-related EBITDA contributions, were offset by a sales volume decline in aggregates and ready-mix concrete.

Cement Segment: Operating income increased 8.3 percent to $89.4 million in the full-year 2017, when compared to the prior year. Adjusted EBITDA increased by 12.9 percent to $127.5 million in the full-year 2017, when compared to the prior year. Adjusted EBITDA margin increased to 42.0 percent in the full-year 2017, versus 40.2 percent in the prior year. A year-over-year increase in average selling prices, organic sales volumes, improved production efficiencies and cost reductions all contributed to improved results.

“At year-end 2017, we had record available liquidity on our balance sheet with which to support a combination of organic and acquisition-related growth,” stated Brian Harris, CFO of Summit Materials. “As of Dec. 30, 2017, we had $602.5 million in cash and availability under our revolving credit facility, up from $352.1 million at year-end 2016. Net leverage was 3.4x exiting the year, versus 3.9x in the prior year period, given our continued focus on disciplined capital management,” concluded Harris.

“The recent passage of comprehensive federal tax reform legislation is a positive development for our business,” continued Harris. “As a result of this legislation, we estimate that our Tax Receivable Agreement (TRA) liability has been reduced by approximately 40 percent to $332 million. Further, due to the extension of bonus depreciation provision included in the federal tax reform legislation, we anticipate future cash payments to former LP unit holders under the terms of the TRA will be further deferred, with no significant cash payments until 2026, while expecting to continue to pay no federal income taxes for the foreseeable future. We believe the passage of this legislation will provide a measurable long-term benefit to our free cash flow, as $217 million in future cash payments that would have been paid to pre-IPO investors can instead be invested back into the business.”

In the full-year 2017, the company completed 14 acquisitions for a combined purchase price of approximately $420 million. With more than 60 transactions completed since 2009, Summit has continued to consolidate quality, materials-based assets in what remains a fragmented industry, bringing the benefits of scale to smaller private operations, while creating significant value for shareholders.

Since Jan. 1, 2018, the company has completed three materials-based acquisitions. The combined purchase price across the three transactions was approximately $120 million.

  • Metro Ready Mix (Wasatch Front, Utah). Metro Ready Mix is an aggregates and ready-mix concrete company that both expands and complements Summit’s vertically integrated position in the Salt Lake City market. Summit closed on its acquisition of Metro Ready Mix in January 2018.
  • Price Construction Co. (West Texas). Price Construction is an aggregates, asphalt, paving and construction services company that expands Summit’s footprint in the West Texas region, while creating a fully integrated aggregates, ready-mix concrete and paving services platform in the growing Midland-Odessa market. Summit closed on its acquisition of Price in January 2018.
  • Mertens Construction Co. (Central Missouri). Mertens Construction Company is a pure-play aggregates business with extensive reserves that geographically expand Summit's existing position in Central Missouri. Summit closed on its acquisition of Mertens in January 2018.