Vulcan Announces Second Quarter 2014 Results

BIRMINGHAM, Ala., Aug. 5, 2014 /PRNewswire/ -- Vulcan Materials Company VMC, the nation's largest producer of construction aggregates, today announced results for the second quarter ending June 30, 2014.

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Second Quarter Summary (compared with prior year's second quarter)

• Net sales increased $60 million, or 9 percent
• Gross profit increased $42 million, or 32 percent 
• Aggregates segment gross profit increased $35 million, or 27 percent
  • Shipments increased 10 percent, or 4.1 million tons
  • Pricing increased 3 percent on a freight-adjusted basis
  • Cash gross profit per ton was $5.00, an 8 percent increase
• Other combined segment gross profit improved $7 million
• Earnings from continuing operations were $0.35 per diluted share as compared to $0.23. The current year's second quarter includes costs of $0.02 per diluted share related to acquisition and divestiture activity.  The prior year's second quarter earnings include $0.10 per diluted share related to the gain associated with the sale of the Company's businesses in Wisconsin.
• Adjusted EBITDA was $173 million, an increase of $32 million, or 23 percent

Tom Hill, President and Chief Executive Officer, said, "Our second quarter results further demonstrate the earnings leverage of volume growth in our aggregates business, and our continuing improvements to margins and unit profitability.  A 10 percent increase in aggregates volume helped drive a 27 percent increase in Aggregates segment gross profit.  Cash gross profit per ton increased to $5.00, an 8 percent increase from the prior year's second quarter and a record level of unit profitability for this segment. Across all of our businesses, gross profit as a percent of net sales increased 400 basis points. 

"We continue to experience accelerating demand recovery in most of our markets.  Our aggregates shipments have increased year-over-year for five consecutive quarters, and the markets Vulcan serves should continue to grow faster than U.S. markets as a whole.  We now expect our full year 2014 aggregates shipments to be 7 to 9 percent higher than the prior year, as compared to our prior estimate of a 4 to 7 percent increase."

Commentary on Second Quarter 2014 Segment Results

Aggregates Segment
Aggregates segment revenues were $596 million compared to $508 million in the prior year's second quarter.  These revenues include sales generated from producing and selling aggregates tons as well as revenues from aggregates distribution, delivery and other services, including truck brokerage services.  The truck brokerage services have been expanded recently to enhance our ability to serve customers and generate additional earnings from each ton shipped.  The gross profit margin on growth in revenue associated with producing and selling aggregates tons was in line with our expectations.  Also as expected, revenue growth from our transportation-related activities contributed to earnings but at a lower margin percentage.

Aggregates shipments increased 10 percent compared to the prior year, with key markets including Georgia, Illinois, North Carolina, Texas and Virginia reporting more than 15 percent volume growth and Florida and Southern California realizing 11 and 12 percent growth, respectively. 

Freight-adjusted pricing for aggregates increased 3 percent, or $0.33 per ton, versus the prior year's second quarter as virtually all markets realized price improvement.  This widespread price improvement, combined with reductions in our production costs shipped, drove a $0.49 per ton, or 15 percent, increase in our gross profit.  As a percent of segment revenues, our gross profit margin in the Aggregates segment improved 210 basis points over the prior year's second quarter.  Aggregates segment gross profit was $162 million, an increase of $35 million, or 27 percent, versus the prior year's second quarter. 

Asphalt, Concrete and Cement Segments
Overall, gross profit from the non-aggregates segments improved $7 million versus the prior year. Earnings improvement in the Concrete segment drove the majority of this gain. 

Asphalt gross profit was $9 million, in line with the prior year's second quarter.  Asphalt volume increased 3 percent and materials margin improved slightly versus the prior year due mostly to lower costs for liquid asphalt.  Operating costs, primarily energy-related, were slightly higher than the prior year.

Concrete gross profit was $3 million compared to a loss of $6 million in the second quarter of the prior year.  Last year's second quarter results included the Company's Florida concrete business that was sold in the first quarter of 2014.  On a same-store basis, volume and pricing improved, driven primarily by increased private construction activity, while gross profit increased $3 million.

The Company's cement business was also sold in the first quarter along with the Florida concrete assets.  The Company retained its calcium products business that is included in its Cement segment.  This business reported second quarter revenues of $2.2 million and gross profit of $0.8 million, both slightly better than the prior year.

2014 Outlook
Regarding the Company's outlook, Mr. Hill stated, "Growth in the private end markets continues to drive increased construction activity and demand for our products. Leading indicators, such as housing starts, nonresidential contract awards and employment, continue to show favorable above-average growth trends in Vulcan-served markets.  These factors underpin our full year aggregates shipment forecast of a 7 to 9 percent increase in 2014.  This volume growth, coupled with the continuing improvement in unit profitability, supports our expectations for strong earnings leverage and margin expansion – and we remain focused on achieving these expectations. 

"We are maintaining our outlook for full year freight-adjusted aggregates pricing to improve 3 to 5 percent from the prior year.  The overall pricing outlook for our aggregates products continues to improve with the recovery in demand for construction materials.  As we look ahead to the second half of the year, we expect continuing margin improvement driven by price growth, operating leverage, and other cost controls.    

"In our Concrete and Asphalt segments, we have realized improvements in unit profitability, as measured by materials margin. We expect continued growth in private construction activity to benefit volumes and prices, leading to higher unit profitability in both our Concrete and Asphalt segments.  Overall, we expect our non-aggregates gross profit to be $40 to $50 million for the full year, compared to $14 million in 2013.

"Selling, administrative and general (SAG) expenses are expected to be in line with the prior year, allowing us to leverage our overhead structure to expected higher sales.

"Our confidence in a sustained multi-year recovery in aggregates demand continues to grow. Our markets are recovering off trough levels of demand and are outpacing the rest of the U.S.  To support the anticipated increased level of shipments, and to further improve our production costs and operating efficiencies, we now project capital spending for 2014 to be approximately $240 million.

"Our second quarter and first half results demonstrate the broadening recovery of our markets and the benefits of the Company's powerful earnings leverage. Comparing the first half of 2014 to the first half of 2013, Adjusted EBITDA grew $45 million, or 27 percent, on a 9 percent increase in net sales.  We expect to continue to deliver strong gains in earnings because of increasing demand in Vulcan-served markets.

"We are excited about our future as the leading aggregates supplier in the U.S. We remain focused on further improving the profitability of our existing businesses, strategically expanding our unmatched asset base to serve the needs of our customers, and continuing our disciplined management of capital."

Conference Call
Vulcan will host a conference call at 10:00 a.m. CDT on August 5, 2014.  A live webcast will be available via the Company's website at www.vulcanmaterials.com.  Investors and other interested parties in the U.S. may also access the teleconference live by calling 855-877-0343 approximately 10 minutes before the scheduled start.  International participants can dial 678-509-8772.  The conference ID is 74678231.  The conference call will be recorded and available for replay at the Company's website approximately two hours after the call.

Vulcan Materials Company, a member of the S&P 500 Index, is the nation's largest producer of construction aggregates, and a major producer of asphalt mix and concrete.

FORWARD-LOOKING STATEMENT DISCLAIMER
This document contains forward-looking statements.  Statements that are not historical fact, including statements about Vulcan's beliefs and expectations, are forward-looking statements. Generally, these statements relate to future financial performance, results of operations, business plans or strategies, projected or anticipated revenues, expenses, earnings (including EBITDA and other measures), dividend policy, shipment volumes, pricing, levels of capital expenditures, intended cost reductions and cost savings, anticipated profit improvements and/or planned divestitures and asset sales.  These forward-looking statements are sometimes identified by the use of terms and phrases such as "believe," "should," "would," "expect," "project," "estimate," "anticipate," "intend," "plan," "will," "can," "may" or similar expressions elsewhere in this document.  These statements are subject to numerous risks, uncertainties, and assumptions, including but not limited to general business conditions, competitive factors, pricing, energy costs, and other risks and uncertainties discussed in the reports Vulcan periodically files with the SEC.

Forward-looking statements are not guarantees of future performance and actual results, developments, and business decisions may vary significantly from those expressed in or implied by the forward-looking statements.  The following risks related to Vulcan's business, among others, could cause actual results to differ materially from those described in the forward-looking statements: those associated with general economic and business conditions; the timing and amount of federal, state and local funding for infrastructure; changes in Vulcan's effective tax rate that can adversely impact results; the increasing reliance on information technology infrastructure for Vulcan's ticketing, procurement, financial statements and other processes could adversely affect operations in the event such infrastructure does not work as intended or experiences technical difficulties or is subjected to cyber attacks; the impact of the state of the global economy on Vulcan's businesses and financial condition and access to capital markets; changes in the level of spending for private residential and private nonresidential construction; the highly competitive nature of the construction materials industry; the impact of future regulatory or legislative actions; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena; energy costs; costs of hydrocarbon-based raw materials; healthcare costs; the amount of long-term debt and interest expense incurred by Vulcan; changes in interest rates; the impact of Vulcan's below investment grade debt rating on Vulcan's cost of capital; volatility in pension plan asset values and liabilities which may require cash contributions to the pension plans; the impact of environmental clean-up costs and other liabilities relating to previously divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; the potential of goodwill or long-lived asset impairment; the potential impact of future legislation or regulations relating to climate change or greenhouse gas emissions or the definition of minerals; and other assumptions, risks and uncertainties detailed from time to time in the reports filed by Vulcan with the SEC. All forward-looking statements in this communication are qualified in their entirety by this cautionary statement.  Vulcan disclaims and does not undertake any obligation to update or revise any forward-looking statement in this document except as required by law.

 

 

 

 

 

 

 

 

 

 

           

          

 

 

SOURCE Vulcan Materials Company