Skip to main content

Summit sees opportunity in organic growth

Published by
World Cement,


Summit Materials has increased its CAPEX guidance for 2017 to between US$180 – US$190 million from US$140 – US$160 million, as the company – more known for its acquisition-led growth – turns more focus on organic growth opportunities.

CAPEX investments include development of a new cement terminal in Memphis, Tennessee. The terminal is expected to cost a total US$15 million over this year and next. Completion is expected by mid-2018.

According to the company, the Memphis terminal will help to reduce delivered costs and grow volumes.

In addition, the company is investing US$30 million over the next two years in upgrading its aggregates operations in Vancouver, aiming to lower variable costs at its quarry by 20% per tonne. Completion is expected by the end of next year.

The investment in organic growth is still dwarfed by Summits M&A activity: the company has invested US$402 million across 14 acquisitions so far in 2017 and anticipates spending a similar figure in 2018 – although CEO Tom Hill said an exact M&A figure was “difficult to predict” on its latest earnings call.

Acquisitions also led year-on-year revenue growth, accounting for US$66.7 million of Summit’s US$94.2 million increase in revenue in 3Q17. Organic growth accounted for just US$27.5 million, although that proportion was higher in Summit’s cement business, where organic growth accounted for US$9.5 million of US$11.7 million in revenue growth on higher sales volumes and cement pricing.

However, with acquisitions becoming more expensive – a fact noted by Hill on the earnings call – investment in organic growth opportunities may be increasingly attractive for Summit. There certainly appeared to be little appetite for large marquee acquisitions, despite Summit’s recent multi-billion move on Ash Grove Cement.

The company recently reported earnings of US$113.9 million in 3Q17, compared to US$146.2 million in 3Q16. Earnings expectations for the full year were revised down to US$425 million – US$435 million from US$440 million – US$455 million, following Hurricane Harvey and Irma, which have resulted in weaker construction activity in a number of Summit’s key markets.

Read the article online at: https://www.worldcement.com/the-americas/01112017/summit-sees-opportunity-in-organic-growth/

You might also like

 WCT2020

WCT2020

WCT2020 provides a unique online forum for cement industry professionals to hear first-hand from experts through a series of exclusive presentations from cement producers and industry experts.

Find out more and register for the series »

 

 Spotlight

World Cement Spotlight with Rockwell Automation

World Cement Editor, David Bizley, sat down with Michael Tay, Advanced Analytics Product Manager at Rockwell Automation to discuss his recent article in World Cement.

Entitled ‘Smooth Sailing’, this article explains how machine learning can help save energy, reduce downtime and predict equipment failures, thus enabling the smooth running of cement plant operations.

Watch the interview now »

 
 
 

Embed article link: (copy the HTML code below):


 

This article has been tagged under the following:

US cement news Aggregates news