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Mixed Results for Eagle Materials in Latest Report

Eagle Materials Inc. reported financial results for the first quarter of fiscal 2020 ended June 30. The company is reporting revenue of $370.6 million, down 6%; and net earnings per diluted share of $0.94, down 32%.

Commenting on the first quarter results, Michael Haack, president and CEO, said, “Our cement sales volume was up 3% to a record 1.6 million tons in the first quarter despite challenging weather conditions and was considerably stronger during periods when the weather was favorable. Market demand for our wallboard also remained healthy when adjusted for a shift in the timing of our price increases and related buying activity. The outlook for the remainder of the year continues to be positive and demand for our products is supported by a number of favorable market dynamics including ongoing growth in jobs and wages, high consumer confidence and low interest rates.”

Haack concluded, “Our low-cost operations are generating strong cash flow that we are investing to improve our operational efficiency and lower our cost position while continuing to repurchase shares in line with our capital allocation strategy. During the quarter, we purchased more than 2.2 million shares, or nearly 5% of our outstanding shares, and we returned more than $200 million to shareholders, through a combination of share repurchases and dividends.”

Revenue in the Heavy Materials sector, which includes Cement, Concrete and Aggregates and Joint Venture and intersegment Cement revenue, was $234.7 million, a 3% improvement from the first quarter of fiscal 2019. Heavy Materials operating earnings decreased 5% to $40.6 million due primarily to increased fixed and freight costs coupled with significant wet weather throughout the quarter, which hampered Concrete and Aggregates sales volume.

Cement revenue for the quarter, including Joint Venture and intersegment revenue, was up 5% to $195.3 million, reflecting higher sales prices and improved sales volume. The average net sales price for the quarter improved 1% to $109.70 per ton. Higher freight costs affected net cement prices by approximately $1 per ton during the quarter. Cement sales volume for the quarter was a record 1.6 million tons, up 3%.

Operating earnings from Cement for the first quarter were $36.1 million, 3% below the same quarter a year ago. The decline was primarily due to increased fixed costs and freight costs. Flooding in the Midwest disrupted transportation routes in our markets, causing delays and increasing transportation costs. The company anticipates some of the disruption will continue into the fall.

Concrete and Aggregates revenue for the first quarter of fiscal 2020 was $39.4 million, a decrease of 3%. First quarter operating earnings were $4.4 million, a 19% decline, reflecting lower sales volume partially offset by improved concrete pricing. Our primary concrete and aggregates markets experienced heavy rainfall during the quarter, which hampered our ability to move product.

The Oil and Gas Proppants segment reported revenue of $15.2 million, a decrease of 45%. This decline primarily resulted from a 45% decrease in average frac sandsales prices, partially offset by an 11% improvement in frac sandsales volume. The first quarter operating loss of $3.7 million included $3.8 million of depreciation, depletion and amortization.

The company previously announced that its board of directors has approved a plan to separate its Heavy Materials and Light Materials businesses into two independent, publicly traded corporations by means of a tax-free spin-off to Eagle shareholders. The separation is expected to be completed in the first half of calendar year 2020.

The company also announced that it is actively pursuing alternatives for its Oil and Gas Proppants business with the support of an independent financial advisor. Additionally, the company’s board will continue to evaluate any opportunity to create value that may arise prior to completion of the separation.