Summit Materials announces 3Q18 results
Published by Lucy Stewardson,
Summit Materials has announced its 3Q18 results, with net income of US$71.3 million (or US$0.64 per basic share). This is compared to US81.3 million (or US$0.74 per basic share) in 3Q17. The company has reported an adjusted diluted net income of US$61.9 million (or US$0.54 per adjusted diluted share), as compared to US$54 million (or US$0.48 per adjusted diluted share) in 3Q17.
Net revenue increased 11.6% in the first nine months of 2018, compared to the same period in 2017. It is thought that this was primarily due to acquisitions.
A combination of high precipitation levels and competitive pressure along the Mississippi River corridor impacted Summit’s cement segment. Average selling prices on both materials and products gained traction in the quarter, partially offsetting higher raw materials, freight, labour, and fuel costs. As a result of inflationary cost increases exceeding Summit’s price increases, alongside persistent weather conditions impacting operations, Summit reduced its 2018 guidance for adjusted EBITDA to US$400 million to US$410 million.
Summit has completed two aggregates-based acquisitions since August 2018, for total invested capital of US$72 million. The company has completed 13 acquisitions since the start of 2018, for total invested capital of US$300 million. Across these transactions, Summit has added more than 400 million t of aggregates reserves to its portfolio.
The company has reported that its aggregates net revenues increased by 21% from 3Q17, to US$109.6 million in 3Q18. Compared to 73% in 3Q17, aggregates adjusted cash gross profit margin declined to 69.2% in 3Q18. This has been attributed to higher variable costs. Organic sales volumes also increased by 3.9% when compared to 3Q17, due to higher volumes in the West region. This more than offset a decline in organic aggregates sales volumes in the East region. Due to improvements in prices in west and east segments during 3Q18, organic selling prices on aggregates increased 1.5%.
Compared to 3Q17, cement segment net revenues declined by 7.2% to US$94 million. Compared to 50.6% in 3Q17, cement adjusted cash gross profit margin increased slightly to 50.7% in 3Q18. Productivity gains were mostly offset by a reduction in average selling price, alongside higher freight, storage, and demurrage costs related to weather-affected cement inventories. Organic sales volume of cement declined 6.4% compared to 3Q17. It is thought that this was due to high levels of precipitation that continued to disrupt project work in the period, as well as increased competition. As competitive pressures increased in the company’s markets, organic average selling prices on cement decreased 1% in 3Q18.
At the end of 3Q18, Summit had cash in hand of US$64.9 million, as well as a borrowing capacity under its revolving credit facility of US$219.6 million. Within the terms and covenant requirements of its credit agreement, the borrowing capacity on the revolving credit facility is fully available to the company. The company has US$1.8 billion in outstanding debt at the end of 3Q18.
In terms of financial outlook, Summit has reduced its adjusted EBITDA guidance from a range of US$460 million to US$410 million. This includes acquisition-related contributions from two transactions that closed since the company’s last update in August 2018. The company’s full year 2018 adjusted EBITDA includes no further potential acquisitions. Capital expenditure guidance for the full year has been revised to be in the range of US$225 million to US$235 million.
“While our guidance for adjusted EBITDA has been reduced, we continued to generate significant cash flow from operations that is helping to support the overall growth of our business,” said Brian Harris, CFO of Summit Materials.
“We experienced significant inclement weather in 3Q18, as well as continued inflationary cost pressures in our businesses beyond our expectations,” said Tom Hill, CEO of Summit Materials. “While we achieved organic volume and price increases in our aggregates and products during 3Q18, our net income declined and our adjusted EBITDA remained flat in 3Q18, as compared to 3Q17. This reflects lower contributions from our cement segment and Houston operations, together with inflation in our variable costs. We had expected normal weather going into the third quarter; instead, weather patterns continued to have a significant negative impact on most of our operating geographies.
“Underlying demand conditions in most of our markets are healthy and are expected to remain so into 2019.”
Summit Materials was formed to acquire and grow heavy-side building materials companies in the aggregates, ready mix concrete, cement, asphalt paving, and construction industries.
Read the article online at: https://www.worldcement.com/the-americas/08112018/summit-materials-announces-3q18-results/
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