BIRMINGHAM, Ala., Oct. 30, 2018 /PRNewswire/ -- Vulcan Materials Company (NYSE: VMC), the nation's largest producer of construction aggregates, today announced results for the third quarter ended September 30, 2018.

Third quarter earnings from continuing operations were $180 million, or $1.34 per diluted share.  Net earnings increased 65 percent to $179 million and Adjusted EBITDA increased 13 percent from the prior year's third quarter to $353 million.

Tom Hill, Chairman and Chief Executive Officer, said, "Our operating disciplines and execution were very good under difficult conditions that included weather challenges and higher diesel costs.  Severe weather impacted our ability to serve customers in a number of key markets, but it didn't stop us from improving our unit profitability and realizing double-digit earnings growth in our core aggregates business.  Aggregates pricing continued to march higher in the third quarter and unit costs declined, resulting in same-store earnings flow-through of more than 60 percent."

On a same-store basis, gross profit for the Company's core Aggregates segment increased 15 percent to $295 million.  This same-store gain was driven by a 6 percent increase in shipments and an 8 percent increase in gross profit per ton, to $5.45.  The improvement in unit profitability was supported by both higher selling prices and lower operating costs.  The gross profit flow-through rate on same-store incremental segment sales excluding freight and delivery was 65 percent in the third quarter.  The Company estimates that weather conditions impacted third quarter earnings by approximately $27 million, as compared to $30 million in the prior year's third quarter. 

Mr. Hill went on to say, "We remain focused on executing at a high level and capitalizing on the above-average demand growth in our markets.  The aggregates shipment growth rate seen in the third quarter should continue for the balance of the year.  Aggregates pricing continues to show upward momentum and the rate of price growth will continue to improve during the fourth quarter given additional pricing actions implemented earlier this year in certain markets. 

"We now expect full year 2018 Adjusted EBITDA between $1.125 and $1.135 billion and earnings from continuing operations of between $3.85 and $3.95 per diluted share.  This full year outlook reflects the impact of aggregates shipments deferred due to weather as well as full year Asphalt segment gross profit that is expected to be $25 million below prior year.

"Looking ahead to 2019, our business is positioned for continued shipment growth, compounding pricing improvements, and further gains in unit profitability in 2019.  Vulcan-served markets are benefitting disproportionally from both growing public construction demand and continued growth in private demand, led by residential demand growth in our markets.  We expect our aggregates shipment and price momentum to continue in 2019 leading to mid-single-digit growth in both."

Third Quarter Summary

• Total revenues increased $145 million, or 13 percent, to $1.2 billion
• Gross profit was $343 million versus $304 million in the prior year
• Aggregates segment sales increased $125 million to $984 million
• Shipments increased 5 million tons, or 10 percent, to 56 million tons
• Freight-adjusted sales price increased 2 percent to $13.35 per ton
• Segment gross profit increased $46 million, or 18 percent, to $304 million
• Asphalt, Concrete and Calcium segment gross profit was $39 million, collectively
• SAG was $82 million, or 6.6 as a percentage of total revenues
• Net earnings were $179 million versus $109 million in the prior year
• Adjusted EBIT was $264 million versus $232 million in the prior year
• Adjusted EBITDA was $353 million, an increase of $42 million, or 13 percent
• Earnings from continuing operations were $1.34 per diluted share versus $0.82 per diluted share
• Adjusted earnings from continuing operations were $1.40 per diluted share versus $1.04 per diluted share

Trailing-Twelve-Month Summary

• Total revenues were $4.27 billion, an increase of $487 million, or 13 percent
• Gross profit was $1.07 billion, an increase of $87 million, or 9 percent
• Aggregates segment sales increased $369 million to $3.41 billion
• Shipments increased 10 percent, to 198 million tons
• Freight-adjusted sales price increased $0.15 per ton, or 1 percent
• Segment gross profit increased $94 million to $942 million
• Asphalt, Concrete and Calcium segment gross profit was $125 million, collectively
• SAG was $335 million, or 7.8 as a percentage of total revenues
• Net earnings were $719 million versus $386 million in the prior year
• Adjusted EBIT was $745 million, an increase of 10 percent
• Adjusted EBITDA was $1.08 billion, up 10 percent from the prior year
• Earnings from continuing operations were $5.37 per diluted share versus $2.77 per diluted share
• Adjusted earnings from continuing operations were $3.80 per diluted share versus $2.97 per diluted share

Segment Results

Aggregates

Growth in gross profit accelerated again in the third quarter despite severe weather in key markets and a 28 percent increase in diesel cost per gallon.  Third quarter segment gross profit increased 18 percent to $304 million, or $5.41 per ton. 

Segment gross profit flow-through rate continues to move towards longer-term expectations of 60 percent.  During the third quarter, same-store incremental gross profit was 65 percent of incremental segment sales excluding freight and delivery, and 52 percent year-to-date.  Although quarterly gross profit flow-through rates can vary widely from quarter to quarter, the Company expects continued flow-through improvement in the fourth quarter.

Third quarter aggregates shipments increased 10 percent (6 percent on a same-store basis) versus the prior year quarter.  Shipments in most markets outside those impacted by severe weather realized solid growth versus the prior year.  Shipment growth in North Carolina and Virginia was interrupted due to the impact of Hurricane Florence and same-store shipment growth in most Texas markets was limited due to extremely wet weather in September. 

For the quarter, freight-adjusted average sales price for aggregates increased 2 percent versus the prior year quarter, with the growth rate negatively affected by weather-impacted shipments in higher-priced markets such as North Carolina and Virginia as well as strong shipment growth in relatively lower-priced markets such as Alabama, Arizona and Illinois.  Excluding this mix impact, aggregates price increased 3 percent.  Positive trends in backlogged project work along with demand visibility, customer confidence, rising diesel prices, and logistics constraints support continued upward pricing movements for the remainder of the year and into 2019.

Same-store unit cost of sales (freight-adjusted) decreased 2 percent versus the prior year quarter as fixed cost leverage and other operating efficiencies more than offset the 28 percent increase in the unit cost for diesel fuel and weather-related operating inefficiencies. 

Asphalt, Concrete and Calcium

Asphalt segment gross profit of $24 million was $7 million lower than the prior year quarter due to lower material margins.  Although asphalt mix selling prices increased 8 percent, or $4.07 per ton, a 29 percent increase in unit costs for liquid asphalt more than offset the price improvement.  Year-to-date, higher liquid asphalt costs negatively affected segment earnings by $32 million.  Pricing gains are beginning to offset higher liquid asphalt costs, but will only marginally benefit the rest of 2018.  As a result, the Company expects full-year segment gross profit to be approximately $25 million lower than the prior year ($19 million lower year-to-date).

Concrete segment gross profit improved slightly versus the prior year's third quarter.  Same-store shipments decreased 7 percent year-over-year due to wet weather in the Company's Virginia markets.  Same-store average price increases of 5 percent led to a 6 percent gain in the same-store material margins.  Through the first nine months of 2018, Concrete segment gross profit is in line with Company expectations.

Calcium segment gross profit was $0.9 million versus $0.7 million in the prior year's third quarter.

Growth, Capital Allocation and Financial Position

During the third quarter, the Company invested $48 million in core operating and maintenance capital, in line with expectations.  The Company expects core operating and maintenance capital spending for the full year of approximately $225 million. 

Additionally, the Company invested $53 million in internal growth capital projects.  Current projects underway include securing new aggregates reserves, developing new production sites, enhancing the Company's distribution capabilities, and selectively expanding asphalt and concrete production capabilities.  The Company now plans for $300 million in internal growth capital expenditures during 2018.

For 2018, we expect the business to generate approximately $810 million of after-tax cash flows from earnings (defined as EBITDA less working capital growth, operating and maintenance capital, and cash taxes).  With disciplined capital deployment and compounding improvements in unit margins, our aggregates-centric business model should enable further gains in after-tax cash flows from earnings as the recovery moves forward.

The Company's capital allocation and investment-grade rating priorities remain unchanged.

Selling, Administrative and General (SAG), Other Operating Expense and Taxes

SAG expenses in the quarter were $82 million, $8 million higher than the prior year.  The year-over-year increase was primarily attributable to acquired operations and the timing of investments to further improve operational performance.  On a trailing-twelve-month basis, SAG expense was $335 million, or 7.8 percent as a percentage of total revenues, down from 8.5 percent.  Full year expectations for SAG expense remain unchanged at $335 million.

Other operating expense was $14 million in the third quarter compared to $4 million in the prior year.  Current year expense included $10 million of charges associated with divested operations, which has been adjusted out of Adjusted EBITDA. 

The full year projected effective tax rate is approximately 18 percent and full year projected cash taxes are approximately $45 million before the effects of debt refinancing actions in the first quarter, use of various credits, and refunds from prior period overpayments. 

Demand and Earnings Outlook

Regarding the Company's outlook Mr. Hill stated, "Our execution in the third quarter overcame weather challenges in key markets and delivered strong incremental earnings.  We are focused on finishing 2018 strong and carrying that momentum forward. 

"Despite Hurricane Michael's impact on shipments in the Gulf Coast and Southeastern markets in early October and continued wet weather in Texas, aggregates shipment growth for the fourth quarter should approximate the same-store growth experienced in the third quarter.  The underlying direction of price remains clear, strongly supported by our strategic and tactical focus on compounding pricing improvements.  We expect aggregates pricing to continue strengthening throughout the remainder of the year and into 2019.  Our preliminary outlook for 2019 includes mid-single digit growth in both aggregates volume and price.

"Our broad geographic footprint uniquely positioned in high-growth markets will continue to benefit Vulcan and its shareholders.  Above-average demand growth in Vulcan markets compared to the rest of the U.S. supports our continued progress toward mid-cycle goals in 2019 and beyond."

Conference Call

Vulcan will host a conference call at 10:00 a.m. CT on October 30, 2018.  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 888-208-1711, or 323-794-2423 approximately 10 minutes before the scheduled start.  The conference ID is 3967537.  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; 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 clean-up 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, including those related to the Tax Cuts and Jobs Act that was enacted in December 2017; 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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SOURCE Vulcan Materials Company