Rock Products

SEP 2015

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6 • ROCK products • September 2015 www.rockproducts.com I N D U S T RY N E W S IN THE KNOW Vulcan Materials Co. announced results for the second quarter ended June 30, 2015. The company is reporting: • Total revenues increased $104 million, or 13 percent, to $895 million. • Gross profit increased $60 \million in total, or 34 percent, to $234 million. • Aggregates freight-adjusted reve- nues increased $75 million, or 15 percent, to $558 million. The company's second quarter results reflect the continuation of strong mar- gin expansion and improvement in its industry-leading unit profitability in aggregates, according to its report. Noting extremely wet weather in many of its markets, second quarter revenues increased 13 percent and gross prof- it increased 34 percent from the prior year, with gross profit and gross profit margins improving in all segments. Same-store aggregates shipments rose 5 percent and same-store freight-ad- justed aggregates pricing increased 6 percent from the prior year. Underlying demand recovery and pric- ing momentum remain strong. Same- store incremental aggregates gross profits equaled 74 percent of incremen- tal freight-adjusted revenues for the quarter – and 72 percent for the trailing 12 months. Although weather impacts in the second quarter and first half may result in full-year volumes below plan, pricing and margin improvements lead the company to reconfirm its full-year EBITDA guidance," the company said. Tom Hill, president and chief executive officer, said, "The continuing recovery in construction activity across most of our markets was masked by extremely wet weather, particularly in April and May. Despite deferred shipments and operating cost challenges due to these weather conditions, our local teams delivered another quarter of significant margin improvements – a pattern of performance sustained since the grad- ual recovery in shipments began eight quarters ago. Customer confidence and the overall demand outlook continue to improve, and, as expected, pricing momentum continues to strength- en. Looking forward, we remain well positioned to serve our customers and to achieve strong earnings growth in 2015 and beyond." Severe wet weather disrupted ship- ments across many of the company's key markets. Same-store shipment growth of 5.4 percent in the quarter fell below both plan and recent trends. A monthly break-down of shipping trends illustrates the weather impacts in the quarter. On a same-store basis, aggregates shipments in April and May (when record rainfall was reported in several of its markets) increased 5 per- cent and 2 percent, respectively, versus the prior year. In contrast, June same- store aggregates shipments increased 9 percent versus the prior year. Despite weather limiting available con- struction days in several markets, the second quarter marked the eighth con- secutive quarter of growth in trailing 12-month shipments. For the quarter just ended, trailing 12-month ship- ments grew 9 percent over the prior year period. Both public and private demand for aggregates continue to recover across most markets; howev- er, current consumption levels remain well below historic trends. Freight-adjusted average sales price for aggregates increased 6.4 percent on a same-store basis, or $0.71 per ton, versus the prior year's second quarter, with most markets realizing acceler- ating price improvement. Product mix muted the impact of reported price increases in some key markets, includ- ing Virginia, where large shipments of lower-priced fines product contribut- ed to a 1 percent decline in quarterly average selling price over the prior year. In most markets, announced price increases have been well accepted. Overall, aggregates operating costs approximated the prior year's second quarter. During the second quarter, sev- eral markets experienced higher than expected costs pertaining to repair and maintenance activities and overtime labor, with weather conditions also negatively impacting production effi- ciencies. Despite lower than planned shipments in the current quarter, the company moved ahead with stripping and other expenditures geared toward meeting rising customer demand. Diesel related cost-savings mostly off- set these higher costs in the quarter. Compared to last year's second quar- ter, cost of revenues for the aggregates segment benefitted by approximately $9 million from lower fuel expendi- tures. he company remains focused, with a multi-quarter view, on balancing the several factors impacting produc- tion quality, service quality and cost. Over the trailing twelve months, and excluding the impact of diesel price movements and newly acquired opera- tions, aggregates unit cost of sales have declined by approximately 1 percent. Vulcan Materials Notes Weather Issues in Second-Quarter Report FAST FACT Second quarter revenues increased 13 percent and gross profit increased 34 percent.

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