Summit Materials Details Strong Quarterly, Yearly Results


Summit Materials Inc. announced results for the fourth quarter and full year 2019. For the three months ended Dec. 28, 2019, the company reported net income attributable to Summit Inc. of $35.7 million, or $0.32 per basic share, compared to a net loss attributable to Summit Inc. of $19.2 million, or $(0.17) per basic share in the comparable prior-year period. 

Summit reported adjusted diluted net income of $71.5 million, or $0.62 per adjusted diluted share as compared to adjusted diluted net loss of $18.6 million, or $(0.16) per adjusted diluted share in the prior year period. The increase in adjusted diluted net income in the fourth quarter 2019 was partially due to an annual re-measurement of the company's Tax Receivable Agreement.

For the year ended Dec. 28, 2019, the company reported net income attributable to Summit Inc. of $59.1 million, or $0.53 per basic share, compared to net income attributable to Summit Inc. of $33.9 million, or $0.30 per basic share in the comparable prior-year period. 

Summit reported adjusted diluted net income of $108.8 million, or $0.94 per adjusted diluted share as compared to adjusted diluted net income of $17.4 million, or $0.15 per adjusted diluted share in the prior year period. The increase in 2019 adjusted diluted net income was partially due to an annual re-measurement of the company's Tax Receivable Agreement.

Summit's net revenue increased 13.7% in the fourth quarter and 6.4% in full year 2019 compared to the fourth quarter and full year 2018, respectively. While volume and price increased in all lines of business in 2019 relative to the prior year, aggregates contributed the largest proportion of incremental net revenue. 

The company reported operating income of $213.6 million in 2019, compared to $162.5 million in the prior year. Summit's operating margin expanded to 10.5% in 2019 from 8.5% in 2018 on net revenue gains in excess of our cost of revenue, partially offset by increases in general and administrative, depreciation, depletion, amortization and accretion expenses. 

Tom Hill, CEO of Summit Materials, commented, "Sustained public sector demand coupled with improved pricing contributed to margin expansion in our aggregates and products lines of business late in the quarter, resulting in the highest fourth quarter Adjusted EBITDA in the company's history. For the full year 2019, our aggregates business delivered strong results due in part to strong performance from our East Segment."

As of Dec. 28, 2019, the company had $311.3 million in cash and $1.9 billion in debt outstanding. For the year ended Dec. 28, 2019, cash flow from operations was $337.2 million while cash paid for capital equipment was $177.5 million. 

Brian Harris, CFO of Summit Materials, added, "We were disciplined and selective on acquisitions while generating increased cash flow from operations, which combined with lower capital expenditures enabled us to lower our leverage ratio."

  • For the year ended Dec. 28, 2019, organic sales volumes increased 9.5% in aggregates, 2.8% in cement, 0.1% in ready-mixed concrete, and 2.6% in asphalt relative to the same period last year. 
  • Full-year 2019 organic average selling prices increased 6.5% in aggregates, 1.7% in cement, 3.3% in ready-mixed concrete, and 6.2% in asphalt relative to the prior-year period.

Hill continued, "In 2020 we anticipate continued growth in public markets, as many states enact new fuel taxes, in residential markets where entry-level housing demand continues to exceed supply, and in non-residential markets where low rise commercial development and windfarm work present opportunities."

Aggregates net revenues increased by 25.6% to $469.7 million during 2019, when compared to the prior year due to higher organic volume and selling price, and to a lesser extent, our acquisition program. 

Aggregates adjusted cash gross profit margin increased to 60.2% in 2019, compared to 59.4% in 2018 primarily due to higher average selling prices. Organic aggregates sales volumes increased 9.5% in 2019 as compared to 2018 led by higher volumes in our Missouri, Kansas and Texas markets. Organic aggregates pricing increased 6.5% as compared to 2018, primarily due to higher pricing in Missouri, and to a lesser extent, higher prices in many of our other markets.

Cement net revenues increased 3.5% to $290.7 million during 2019, when compared to 2018. Cement adjusted cash gross profit margin decreased to 40.3% in 2019, compared to 44.3% in 2018 due to higher distribution costs related to flooding and unplanned maintenance. 

Sales volume of cement increased 2.8% in 2019 when compared to 2018 on higher sales in northern markets relative to the prior year. Cement average selling prices increased 1.7% in 2019 relative to 2018.

Products net revenues increased to $988.6 million during 2019 compared to $967.5 million in 2018. Products adjusted cash gross profit margin increased to 22.1% in 2019, versus 21.1% in 2018. Organic sales volumes of ready-mixed concrete increased 0.1% in 2019, while organic average selling prices increased 3.3% as compared to 2018, led by pricing gains in Texas as well as in a number of our other markets. 

Organic sales volumes of asphalt increased 2.6% in 2019, while organic average selling prices increased 6.2% during 2019 as higher volume and pricing were reported in our Utah, Texas, and Kentucky markets.

Aggregates net revenues increased by 24.2% to $115.6 million in the fourth quarter 2019, when compared to the prior-year period. Aggregates adjusted cash gross profit margin increased to 61.9% in the fourth quarter 2019 compared to 54.8% on higher volumes, increased average selling prices and product mix. 

Aggregates sales volumes increased 15.4% in the fourth quarter 2019, when compared to the prior-year period on higher organic volume growth, particularly in Missouri, Kansas, and Texas. Average selling prices for aggregates increased 4.3% in the fourth quarter 2019 when compared to the prior-year period.

Cement net revenues increased 3.6% to $69.9 million in the fourth quarter 2019, when compared to the prior-year period. Cement adjusted cash gross profit margin decreased to 45.4% in the fourth quarter, compared to 46.4% in the prior-year period, as the company incurred some unplanned maintenance and winter storage costs. 

Organic sales volume of cement increased 2.7% in the fourth quarter, when compared to the prior-year period, on higher sales in certain southern markets along the Mississippi River versus a year ago. Organic average selling prices on cement increased 2.6% in the fourth quarter when compared to the prior-year period.

Products net revenues were $251.4 million in the fourth quarter 2019, compared to $216.1 million in the prior-year period. Products adjusted cash gross profit margin increased to 23.9% in the fourth quarter, versus 21.6% in the prior-year period. Organic average sales price for ready-mixed concrete increased 6.5%, coupled with a 12.6% increase in organic sales volumes of ready-mixed concrete, led by higher volumes in Utah and Texas. Organic average sales price for asphalt increased 4.3% while we had a 4.6% increase in asphalt organic sales volumes, driven in part by volume growth in Utah, Texas and Kentucky.

Net revenue increased by 6.4% to $2.0 billion in 2019, versus $1.9 billion in 2018. The increase in consolidated net revenue relative to 2019 was primarily attributable to a 16.2% increase in East Segment net revenue, combined with a 3.5% increase in Cement Segment net revenue and a 1.1% increase in West Segment net revenue. The company reported operating income of $213.6 million in 2019, compared to $162.5 million in the prior year. Adjusted EBITDA was $461.5 million in 2019 compared to $406.3 million in 2018.

The West Segment reported operating income of $109.2 million in 2019, compared to $92.1 million in 2018, due in part to higher revenue from aggregates and asphalt. Adjusted EBITDA increased to $205.0 million in 2019, compared to $189.0 million in 2018. Aggregates revenue in 2019 increased 11.4% over 2018 as a result of a 5.8% increase in organic volumes, led by volume growth in Texas, and a 2.7% increase in organic average selling prices, led by pricing gains in Utah and Colorado. Ready-mixed concrete revenue in 2019 increased 2.9% over 2018, reflecting improved weather conditions in Utah and the Intermountain geographies relative to a year ago. A 1.5% decrease in organic ready-mixed concrete volumes was offset by a 3.6% increase in organic average sales prices. Asphalt revenue increased by 14.7% in 2019, as organic volumes increased 2.8% and average sales prices increased 5.7% compared to 2018, when the company's liquid asphalt terminal did not operate for the full year 2018 due to hurricane-related repairs.

The East Segment reported operating income of $101.8 million in 2019, compared to $59.6 million in 2018. The increase in East Segment operating income was mainly attributable to higher net revenue from aggregates. Adjusted EBITDA increased to $187.6 million in 2019, compared to $138.0 million in 2018. Aggregates net revenue increased 29.2%, primarily due to a 12.9% increase in organic volume as well as an increase in organic average sales prices of 9.1%, mainly related to public repair work. Organic ready-mixed concrete revenue increased 7.7% due to a 5.4% increase in volume and a 2.2% increase in price. Organic asphalt revenue increased 16.0%, reflecting a 2.1% increase in volume, led by our Kentucky markets, combined with a 7.5% increase in price, led by our Kansas markets.

The Cement Segment reported operating income of $64.7 million in 2019, compared to $75.8 million in 2018. Adjusted EBITDA declined to $103.4 million in 2019, compared to $111.4 million in 2018. Cement Segment revenue increased 3.5%, reflecting a 2.8% increase in volume and a 1.7% increase in price. Cement segment operating income declined as higher revenue was more than offset by additional distribution costs incurred as a result of shipping challenges on the Mississippi River due to flooding, as well as incremental plant downtime.

Net revenue increased by 13.7% to $506.3 million in the fourth quarter 2019, versus $445.1 million in the prior-year period. The improvement in net revenue was primarily attributable to organic volume and price growth in aggregates and ready-mixed concrete. The company reported operating income of $59.9 million in the fourth quarter 2019, compared to $28.5 million in the prior-year period. Net income increased to $36.4 million in the fourth quarter of 2019, compared to a loss of $18.6 million in the prior-year period. Adjusted EBITDA increased 29.6% to $121.1 million in the fourth quarter of 2019, compared to $93.4 million in the prior-year period.

The West Segment reported operating income of $30.7 million in the fourth quarter 2019, compared to $11.6 million in the prior-year period. Adjusted EBITDA increased to $53.9 million in the fourth quarter 2019, compared to $37.7 million in the prior-year period. Improvements in operating income reflected increased demand for aggregates across the Segment as well as more favorable weather conditions than a year ago. Aggregates revenue in the fourth quarter increased 8.9% over the prior-year period including a 11.4% increase in organic volumes despite a 2.2% decrease in organic average sales prices as higher pricing in Utah and British Columbia was offset by lower pricing in Texas. Ready-mixed concrete revenue in the fourth quarter 2019 increased 15.5% over the prior-year period, as a 7.1% increase in organic volumes and a 7.7% increase in organic average sales prices reflected favorable weather and market conditions in Utah and in parts of Texas. Asphalt revenue increased by 19.8% in the fourth quarter 2019 over the prior-year period on a 10.7% increase in volume and a 5.9% increase in price, led by our Utah, Texas and British Columbia operations.

The East Segment reported operating income of $29.8 million in the fourth quarter 2019, compared to $15.5 million in the prior-year period. Adjusted EBITDA increased to $53.1 million in the fourth quarter 2019, compared to $37.5 million in the prior-year period. Adjusted EBITDA was favorably impacted by a higher than expected contribution related to public repair work. Aggregates revenue increased 29.4% due to increases resulting from a 19.0% and 8.7% increase in organic volumes and average sales prices, respectively, driven by growth in Missouri and Kansas. Ready-mixed concrete revenue increased 34.6% due to an increase in organic volumes while average selling prices increased 3.0%. Asphalt revenue increased 1.9% despite a 4.5% decrease in organic volumes slightly offset by a 1.4% increase in organic average sales prices reflecting strength in Kentucky and parts of Kansas.

The Cement Segment reported operating income of $20.6 million in the fourth quarter 2019, an increase from $19.3 million in the prior-year period. Adjusted EBITDA decreased to $27.9 million in the fourth quarter 2019, compared to $28.8 million in the prior-year period, due primarily to the lingering effects of shipping constraints on the Mississippi River. Despite these challenges, the segment reported increases of 2.7% and 2.6% in organic sales volumes and organic average selling prices, respectively, during the fourth quarter 2019 as compared to the prior-year period.