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Aggregates Strength Drives Vulcan's First-Quarter Success


Vulcan Materials Co. announced that first-quarter earnings from continuing operations increased 23 percent year-over-year to $53 million on a 9 percent increase in total revenues. Gross profit was $159 million, led by a 7 percent increase in Aggregates segment gross profit to $148 million.

Asphalt, Concrete and Calcium segment gross profit was $11 million, as delayed work and higher input costs negatively impacted Asphalt margins. Selling, administrative, and general expenses declined $4 million to $78 million.

In the company's core Aggregates segment, unit margins improved despite higher energy costs and shipment delays due to unusually cold and wet weather in certain markets. On a same-store basis, the aggregates business delivered cash gross profit per ton of $5.33, a record for the first quarter. This $0.19 per ton increase over the prior year period was achieved despite an $0.11 per ton increase in diesel.

Same-store shipments grew 1 percent for the quarter, with a 7 percent increase in daily shipment rates in March as weather conditions improved. Adjusted for mix, freight-adjusted average selling price rose 3 percent over the prior year. Same-store total cost of revenues per ton declined year-over-year despite the aforementioned weather and energy cost headwinds as well as the planned shutdown of certain large production facilities for maintenance ahead of the construction season.

Tom Hill, chairman and chief executive officer, said, "Our first quarter results represent a solid start to the year and were consistent with our internal plans and full-year expectations despite difficult weather and higher than anticipated energy costs. Key leading indicators, as well as our shipment patterns through the first quarter and through April, support our full-year volume expectations. Aggregates pricing momentum continues to improve, supported by demand visibility, higher diesel prices, and tight logistics capacity. And as seen in our first quarter results, we've begun to turn the corner with respect to cost challenges faced in 2017. As such, we reiterate our full-year expectations for 2018 earnings from continuing operations of between $4.00 and $4.65 per diluted share and Adjusted EBITDA of between $1.150 and $1.250 billion."

First-quarter Aggregates segment gross profit increased 7 percent to $148 million, or $3.66 per ton. Solid operating disciplines and the absence of one-time costs (e.g. California flooding) experienced in the prior year's first quarter helped offset a 26 percent increase in the unit cost for diesel fuel, the planned shutdown of three large facilities for repairs ahead of the construction season, and above normal distribution costs due to lingering storm-related ship and barge movement inefficiencies. The company has taken possession of one of its two new, more efficient, Panamax-class ships, and expects to take possession of the second ship during the second quarter.

First-quarter aggregates shipments increased 6 percent (1 percent on a same-store basis) versus the prior year's quarter. After being down 3 percent through February, same-store daily shipment rates for aggregates were up 7 percent year-over-year in March, reflecting demand fundamentals consistent with our full-year expectations.

Shipments in Arizona, California, Florida and coastal Texas experienced double-digit gains due to solid demand growth and the start of some large projects. Shipment growth in other Texas markets, particularly north Texas, were held back due to wet weather. Wetter and colder weather led to reduced shipments in a number of other southeastern markets and Virginia.

On a same-store basis, shipments in Georgia and South Carolina were down double-digits and Virginia decreased high-single digits. Daily shipping rates in these markets strengthened in April, and the Company's overall shipment momentum remained consistent with full-year plans.

With respect to the balance of 2018, leading indicators such as employment growth and construction starts indicate a continued recovery in demand across Vulcan's footprint. Private demand, both residential and nonresidential, continues to recover across Vulcan-served markets, and highway demand is again growing after a disappointing 2017. Transportation agencies appear to be catching up to new, higher funding levels in key Vulcan-served states.

Construction starts data for Vulcan markets – as well as the company's backlogs, booking rates for future work, and shipment patterns – all suggest improved demand visibility. Certain markets do face near-term logistics challenges, including disappointing rail-service quality, although the company expects these pressures to ease over the balance of the year.

Demand visibility, customer confidence, diesel prices, and logistics constraints support continued upward pricing movements in many markets. For the quarter, freight-adjusted average sales price for aggregates increased 1 percent versus the prior year, despite a negative geographic and product mix impact. Excluding mix impact, aggregates price increased 3 percent.

Pricing remained particularly strong in California, Georgia and other southeastern markets that are supported by clear demand visibility for both private and public construction. Texas, particularly coastal Texas, experienced relative pricing weakness in the quarter due to higher inbound freight costs and the mix of work – although the company expects this trend to reverse over the remainder of the year. April price increases to key customers were executed well, and the company expects additional price increases in several markets later in the year

  • Asphalt segment gross profit was $8 million lower than the prior year due to weather impacts on volumes, lower materials margin and the comparative timing of an acquisition that closed during the first quarter last year.
  • Concrete segment gross profit was $10 million in the quarter, in line with the prior year. Total shipments increased 3 percent year-over-year. Average price increases of 9 percent allowed for a 5 percent gain in the material margins. The company divested its Georgia ready-mix concrete operations in March. Full-year expectations for concrete segment gross profit remain unchanged.
  • Calcium segment gross profit was $0.5 million versus $0.7 million in the prior year's first quarter.