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Vulcan reports lower earnings, decreased shipments

Vulcan Materials reported that third-quarter aggregates earnings were $125 million versus $133 million in the prior year. Aggregates shipments declined 2.6 percent from the prior year's third quarter, accounting for most of the year-over-year decline in segment earnings.

An industry-wide strike during most of July by construction workers in Illinois affected its customers and accounted for the year-over-year decline in shipments, according to the company. Otherwise, many Vulcan-served markets realized solid increases in shipments versus the prior year's third quarter due primarily to stronger demand from public infrastructure projects and some improvement in single-family housing starts while some other markets realized declines in shipments.

The average unit price for aggregates in the third quarter was in line with the prior year but pricing continues to reflect wide variations across Vulcan-served markets. Aggregates unit costs of sales were in line with the prior year's third quarter despite higher energy costs.

Segment earnings in asphalt were $8 million lower than the prior year due primarily to a 14 percent increase in the unit cost for liquid asphalt and lower selling prices. Selling prices for asphalt mix generally lag increasing liquid asphalt costs and were further held in check due to competitive pressures. Asphalt volumes decreased 3 percent from the prior year's third quarter. Sequentially, unit material margins in the third quarter increased 10 percent from the second quarter due to lower unit costs.

Concrete segment earnings declined $9 million from the prior year's third quarter due principally to lower selling prices. Cement segment earnings in the third quarter were a loss of $2 million due primarily to lower selling prices.

Selling, administrative and general expense in the third quarter was $78 million versus $80 million in the prior year's third quarter. The year-over-year decline resulted mostly from lower employee-related expenses.

Commenting for the company, Don James, Vulcan's chairman and chief executive officer, stated, "Despite the modest decline in third-quarter aggregates shipments, we are encouraged by underlying shipping trends. Trailing 12-month aggregates shipments have been increasing since February in spite of significantly lower volumes in the third quarter in Illinois due to a labor strike affecting our customers. In asphalt, trailing 12-month shipments have been relatively stable for the last 4 months.

"We continue to focus on controlling costs and managing production levels to meet current demand,’ James said. “During the last two years, we have reduced inventory levels of aggregates across our footprint. This action, while negatively affecting reported earnings, has improved cash flows and better positions us operationally for a recovery in demand. In the third quarter, aggregates production equaled sales volumes and, as a result, our unit cost of sales was in line with the prior year, notwithstanding the increase in energy costs. Going forward, we believe the cumulative effect of aggressively managing our inventory levels during the past two years has better positioned us to benefit from higher production levels.

"Contract awards for highway construction in Vulcan-served states continue to out-pace other states,” James continued. “During the twelve months ending September 2010, total contract awards for highway construction in Vulcan-served states, including awards for federal, state and local projects, increased 7 percent from the prior year compared to 3 percent for other states. Through September 2010, the Federal Highway Administration reported that only 42 percent of the total stimulus funds obligated for highways in Vulcan's 10 largest revenue states had been spent - which bodes well for increased construction activity from federal stimulus spending for the remainder of 2010 and 2011."

Source: Vulcan Materials Co.