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Vulcan Reports Strong Double-Digit Growth

Vulcan Materials Co. announced results for the quarter ended Dec. 31, 2019. Higher segment earnings in Aggregates and Asphalt helped drive 15% year-over-year growth in the company's fourth quarter earnings from continuing operations.

Solid shipment growth, up 4%, and compounding price improvements, up 5.5%, led to improved earnings in aggregates. Asphalt earnings benefited from double-digit revenue growth and improving unit margins.

Full-year revenues were $4.9 billion, up 12% as compared to the prior year, and net earnings were $618 million, an increase of 20%. Adjusted EBITDA increased 12% to $1.27 billion. At year end, total debt was $2.8 billion, or 2.2 times trailing 12-month Adjusted EBITDA.

Tom Hill, chairman and chief executive officer, said, "2019 marks another year of strong earnings growth and cash generation. We are particularly proud of our people who worked hard to achieve these results while ensuring another year of world-class safety performance. Widespread improvements in pricing helped drive 8% growth in our industry-leading unit profitability and double-digit growth in Adjusted EBITDA, a strong result despite some higher than expected costs in the fourth quarter. Industry leadership in safety and pace-setting unit margins are both evidence of our strong and healthy business. Going forward, our compounding unit margins and our disciplined capital allocation position us to increase our cash flows and improve our return on invested capital again in 2020.

"Looking ahead, demand in our markets will continue to benefit from higher levels of highway funding and continued growth in residential and nonresidential markets,” Hill said. “This visibility into demand growth has already set the stage for solid price improvement in 2020. Price improvement coupled with our four strategic initiatives (Commercial and Operational Excellence, Logistics Innovation and Strategic Sourcing) should continue to increase unit profitability. For the full year, we expect earnings from continuing operations between $5.20 and $5.80 per diluted share with Adjusted EBITDA between $1.385 and $1.485 billion." 

Fourth quarter segment sales increased 10%, and gross profit increased 7% to $275 million, or $5.32 per ton. These improvements resulted from growth in shipments and improved pricing.

Fourth quarter aggregates shipments increased 4% as compared to the prior year quarter. Markets in the Southeast and Southwest reported strong shipment growth, including double-digit growth in Florida and along the Gulf Coast. All of the company's key markets reported year-over-year price growth.  

For the quarter, freight-adjusted average sales price increased 5.5% (4.8% on mix-adjusted basis) versus the prior year's quarter. The 70 basis points benefit from mix was due in part to above average growth in the company's remote-served markets. Positive trends in booking pace, along with demand visibility and customer confidence, support expectations for continued price improvement.

Fourth quarter profitability was negatively impacted by higher repairs and maintenance costs, geographic volume mix including higher sales volumes in rail-served remote markets, as well as lower tipping fees for clean fill.

For the full year, segment sales increased 14%, driven by 7% (6% same-store) volume growth and 5.6% price growth (5.2% on mix-adjusted basis). Gross profit increased 16%, and unit profitability grew by 8% to $5.32 per ton. The company remains focused on compounding its industry-leading unit margins. Cash gross profit for the year was $6.74 per ton.

Asphalt segment gross profit was $11 million for the fourth quarter, an increase of $4 million from the prior year. Asphalt mix shipments increased 10% and selling prices increased 3% in the fourth quarter. California, the company's largest asphalt market, reported volume growth in the fourth quarter after a soft first half of the year due in part to weather. The average unit cost for liquid asphalt was 12% lower than the prior year quarter. Gross profit per ton in the quarter improved by 52% to $3.64.  

Concrete segment gross profit was $7 million, $5 million lower than the prior year. Shipments increased 1%, and average selling prices increased 2% when compared to the prior year's fourth quarter. Project delays, along with higher repair and maintenance costs, contributed to the year-over-year decline in gross profit.

Calcium segment gross profit was $0.8 million, up from the prior year quarter.

For the full year, Asphalt segment gross profit increased 12% to $63 million. Gross profit improved year-over-year in each of the last 3 quarters, despite a 6% increase in the unit cost of liquid asphalt for the year. Concrete gross profit was $43 million for the full year, down from $50 million in 2018. Backlogs remain good.  The majority of the year-over-year change occurred in the fourth quarter as a result of project delays.