Rock Products

SEP 2018

Rock Products is the aggregates industry's leading source for market analysis and technology solutions, delivering critical content focusing on aggregates-processing equipment; operational efficiencies; management best practices; comprehensive market

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20 • ROCK products • September 2018 www.rockproducts.com IN THE KNOW April and May, together with competi- tive pressures in the markets we serve," stated Hill. "Our Houston operations were impacted by a slower start to the construction season than had been anticipated. Looking to the second half of the year, we expect a strengthening in both our cement segment and Houston operations, given accelerating demand in our residential, low-rise commercial and public end-markets. "The pace of cost inflation in raw mate- rials, freight, labor and fuel exceeded our expectations in the first half of 2018," continued Hill. "Although we anticipated some measure of cost inflation entering the year, the effec- tive date of our announced price increases lagged behind the impact of higher costs incurred by our business. Importantly, our average selling prices on both materials and products have gained traction entering the third quar- ter, which we expect will offset these higher variable costs in the second half of the year. "Demand conditions in most of our markets are strong and are expected to remain so into 2019 and beyond," continued Hill. "Within our private mar- kets, we are seeing sustained growth in new single-family home construction, given low inventories and positive demographic trends, while in our public markets, state transportation funding measures in Texas, coupled with steady increases in federal subsidies, are con- tributing to increased lettings activity. In July 2018, aggregates shipments per day increased 5 percent versus the pri- or-year period and 13 percent versus June 2018." Aggregates net revenues increased by 23.1 percent to $103.7 million in the second quarter 2018, when compared to the prior-year period. Aggregates adjusted cash gross profit margin declined to 64.8 percent, versus 68.3 percent in the prior-year period, given higher variable costs. Organic aggregates sales volumes increased 2.3 percent in the second quarter 2018, when compared to the prior-year period. Excluding contributions from the company's project-dependent sand business in Vancouver, organic aggregates sales volumes increased 4.3 percent in the second quarter 2018. Organic growth in aggregates sales vol- umes was due mainly to higher volumes in the East Region, which more than offset a decline in sales volumes in the West Region, which was impacted by adverse weather conditions during the period. Organic average selling prices on aggregates increased 3.6 percent in the second quarter of 2018 due to year-over-year improvements in prices within both the West and East segments during the period. Cement segment net revenues declined 2.8 percent to $81.8 million in the second quarter of 2018, when compared to the prior-year period. Cement adjusted cash gross profit margin declined to 46.5 percent in the second quarter, versus 57.4 per- cent in the prior-year period, due to higher freight, storage and demur- rage costs related to weather-affected cement inventories. Organic sales volume of cement declined 4.8 percent in the second quarter, when compared to the pri- or-year period, due mainly to high levels of precipitation that disrupted project work during the period, together with competitive pressures in the market. Organic average selling prices on cement increased 1.9 percent in the second quarter, when compared to the prior-year period. FAST FACT Aggregates net revenues increased by 23.1 percent to $103.7 million in the second quarter 2018, when compared to the prior-year period. Granite Construction reported a net loss of $8.4 million for the quarter ended June 30, compared to a net income of $14.1 million in the prior-year period. Second quarter 2018 results include acquisition expenses of Layne Chris- tensen Co. and LiquiForce. Excluding the impact of these expenses, second quarter adjusted net income was $17.9 million, or $0.43 per diluted share, a 22.9 percent increase from 2017. •  Construction Materials revenue increased 27.5 percent to $100.9 million. •  Gross profit of $17.5 million improved 32.6 percent from $13.2 million. • Gross profit margin improved nearly 70 basis points to 17.3 percent. • The gross profit and margin improve- ment was attributable primarily to improved external demand across most markets. "After producing the best first-half revenue performance in our compa- ny's history and with adjusted EBITDA nearly tripling year-over-year through June,Granite teams remain focused on consistent execution, process improve- ment, and steady, strategic growth," said Granite President and CEO James H. Roberts. "Following the successful completion of two acquisitions in the second quarter, we greatly appreciate the support that our employees and shareholders provided in the execution of our strategic plan. We are quite pleased to expand Granite's platforms for growth in this opportunistic environment. "These strategic moves extend our reach, as we execute our strategy to diversify and grow across geographies in our core infrastructure markets, inclusive of the water, wastewater, and mining markets," Roberts said. "State- and local- led program expansions, coupled with growing federal government investment and continued private-sector strength are fueling the healthiest market condi- tions we have experienced in more than a decade." Granite Construction's Materials Revenue Increases 27.5 Percent

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