BIRMINGHAM, Ala., May 2, 2019 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the quarter ended March 31, 2019.
Net earnings were $63 million and Adjusted EBITDA was $193 million in the first quarter. The 15 percent growth in Adjusted EBITDA was driven by strong aggregates shipments, up 13 percent year-over-year, and a 5.4 percent increase in aggregates pricing.
Tom Hill, Chairman and Chief Executive Officer, said, "Our first quarter results represent a good start to the year and are consistent with our full-year expectations. Broad-based shipment growth, compounding price improvements and solid operating efficiencies in our aggregates business contributed to 17 percent growth in total revenues and 29 percent growth in operating earnings. These results demonstrate the strength of our unique aggregates-centric business model.
"Aggregates segment gross profit increased from $3.66 per ton to $4.07 per ton. This double-digit improvement in first quarter unit profitability builds on last year's results, and we are well positioned for further gains in our industry-leading unit profitability.
"Our key markets are benefitting from both robust growth in public construction demand and continued growth in private demand. Leading indicators, such as construction award activity, signal broad-based shipment growth across our footprint. Aggregates pricing momentum continues to improve – consistent with our full-year expectations. As a result, we reiterate our full-year expectations for 2019 earnings from continuing operations of between $4.55 and $5.05 per diluted share and Adjusted EBITDA of between $1.250 and $1.330 billion."
First quarter and trailing twelve month highlights include:
First quarter segment gross profit increased 25 percent to $186 million, or $4.07 per ton. As a percentage of segment sales, gross profit margin expanded 100 basis points due to strong growth in shipments and price improvements.
Trailing-twelve month same-store incremental gross profit flow-through rate was 57 percent, which is in line with longer-term expectations of 60 percent. As a reminder, quarterly gross profit flow-through rates can vary widely from quarter to quarter; therefore, the Company evaluates this metric on a trailing-twelve month basis.
First quarter aggregates shipments increased 13 percent (11 percent on a same-store basis) versus the prior year quarter. Solid underlying fundamentals and pent-up demand carried over from last year helped drive shipment growth across most of the Company's footprint. In California, shipments decreased by double-digits due to record rainfall throughout most of the quarter. A strong demand environment, driven by transportation-related construction as well as growth in the Company's project-related bookings, support our expectations for shipment growth in California in 2019.
Price growth was positive across all markets served by the Company. For the quarter, freight-adjusted average sales price for aggregates increased 5.4 percent versus the prior year's quarter. Excluding mix impact, aggregates price increased 5.8 percent compared to the prior year first quarter. Pricing was particularly strong in Arizona, California, Georgia, Tennessee and Texas. Positive trends in backlogged project work along with demand visibility and customer confidence support continued upward pricing movements throughout 2019.
First quarter same-store unit cost of sales (freight-adjusted) increased 3 percent compared to the prior year quarter due in part to planned higher repair and maintenance costs in advance of the construction season. Unit cost of sales in California was negatively impacted by record rainfall. The Company remains focused on compounding improvements in unit margins throughout the cycle through fixed cost leverage, price growth and operating efficiencies.
Asphalt, Concrete and Calcium
Asphalt segment gross profit was a loss of $3 million for the first quarter, in line with expectations. Asphalt shipments increased 11 percent (5 percent same-store) and asphalt mix selling prices increased 5 percent in the first quarter, or $2.73 per ton. The average unit cost for liquid asphalt was 29 percent higher than the prior year quarter but remained relatively stable throughout the quarter on a monthly basis. Pricing gains are beginning to offset higher liquid asphalt costs, but their impact will be gradual during 2019. The full-year earnings outlook for our Asphalt segment remains unchanged.
Concrete segment gross profit was $9 million versus $10 million in the prior year quarter. Same-store shipments decreased 10 percent year-over-year driven by inclement weather in Virginia. Same-store average price increases of 1 percent led to a modest gain in same-store material margin.
Calcium segment gross profit was $0.7 million, a slight increase versus the prior year quarter.
Capital Allocation and Financial Position
Capital expenditures in the first quarter were $122 million. This amount included $67 million of core operating and maintenance capital investments to improve or replace existing property, plant and equipment. In addition, the Company invested $55 million in internal growth projects to secure new aggregates reserves, develop new production sites, enhance the Company's distribution capabilities, and support the targeted growth of its asphalt operations. The Company's full-year expectations for 2019 remain the same - approximately $250 million on maintenance capital and $200 million for internal growth projects that are largely underway.
During the quarter, the Company returned $41 million to shareholders through dividends, a 10 percent increase versus the prior year quarter. No shares were repurchased during the quarter. At quarter-end, total debt was $3.0 billion, or 2.6 times trailing-twelve month Adjusted EBITDA.
Selling, Administrative and General (SAG) Expenses and Taxes
SAG expense in the quarter was $90 million versus $78 million in the prior year quarter. Full-year expectations for total SAG expense remain unchanged at $355 million. On a trailing-twelve month basis, SAG expense as a percentage of total revenues was 7.6 percent, 50 basis points lower than the prior year period. The Company remains focused on further leveraging its overhead cost structure.
In the first quarter, the Company reported income tax expense of $11 million versus income tax benefit of $5 million in the prior year quarter. The first quarter tax provision includes $9 million less of discrete adjustments related to stock-based incentive compensation compared to the prior year quarter. The Company continues to project an effective tax rate for the full year of 20 percent.
Demand and Earnings Outlook
Regarding the Company's full-year outlook for 2019, Mr. Hill stated, "We delivered good incremental earnings in the first quarter, and we are well positioned to carry that momentum forward through the remainder of the year. Above-average demand growth in Vulcan markets compared to the rest of the United States further supports our positive outlook for shipment growth. The underlying direction of unit profitability remains clear, supported by our strategic and tactical focus on compounding pricing improvements and operating disciplines. We expect earnings from continuing operations of between $4.55 and $5.05 per diluted share and Adjusted EBITDA of between $1.250 and $1.330 billion. All other aspects of our expectations are consistent with our outlook provided in February."
Vulcan will host a conference call at 10:00 a.m. CT on May 2, 2019. A webcast will be available via the Company's website at www.vulcanmaterials.com . Investors and other interested parties may access the teleconference live by calling 888-221-3881, or 720-452-9217 if outside the U.S. approximately 10 minutes before the scheduled start. The conference ID is 8961757. 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 with headquarters in Birmingham, Alabama, is the nation's largest producer of construction aggregates – primarily crushed stone, sand and gravel – and a major producer of aggregates-based construction materials, including asphalt mix and ready-mixed concrete. For additional information about Vulcan, go to www.vulcanmaterials.com .
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; the increasing reliance on information technology infrastructure for Vulcan's ticketing, procurement, financial statements and other processes could adversely affect operations in the event that the infrastructure does not work as intended, 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, including those relating to climate change, wetlands, greenhouse gas emissions, the definition of minerals, tax policy or international trade; the outcome of pending legal proceedings; pricing of Vulcan's products; weather and other natural phenomena, including the impact of climate change; 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; volatility in pension plan asset values and liabilities, which may require cash contributions to the pension plans; the impact of environmental cleanup costs and other liabilities relating to existing and/or divested businesses; Vulcan's ability to secure and permit aggregates reserves in strategically located areas; Vulcan's ability to manage and successfully integrate acquisitions; significant downturn in the construction industry may result in the impairment of goodwill or long-lived assets; changes in technologies, which could disrupt the way we do business and how our products are distributed; the effect of changes in tax laws, guidance and interpretations; 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.
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