Summit Materials Inc has announced its results for 1Q16.
First Quarter 2016 Operating Results
In 1Q16, net revenue increased by 18.8% to US$208.0 million, compared to US$175.1 million in the prior year quarter. The improvement in net revenue was primarily attributable to an increase in volumes and price in aggregates, cement and ready-mixed concrete. Net revenue growth from acquisitions in the West and East segments was US$8.5 million compared to the prior year quarter.Adjusted EBITDA grew to US$8.4 million with growth in all operating segments. As a percentage of net revenue, Adjusted EBITDA improved to 4.0%, up 480 basis points from the prior year quarter.
Gross profit increased 44.2% to US$51.5 million, compared to US$35.7 million in the prior year quarter. As a percentage of net revenue, gross margin improved to 24.8%, compared to 20.4% in the prior year quarter, primarily attributable to improved profitability in materials and products, a higher percentage of revenue from materials and lower energy costs.
Adjusted net loss in the first quarter 2016 was ($42.5) million and Adjusted EPS was ($0.42) per diluted share of Class A common stock. Before adjustments, net loss attributable to Summit Materials, Inc. was ($21.1) million, and EPS was ($0.42) per diluted share of Class A common stock. The shares of Class A common stock are issued by Summit Materials, Inc., and as such the earnings and equity interests of noncontrolling interests, including LP Units, are not included in basic or diluted earnings per share. Summit believes adjusted net income and Adjusted EPS are representative of earnings performance, because these measures exclude the non-operating impact to earnings per share of any potential conversions of LP units to Class A common stock in any given quarter.
In February 2016, Summit acquired AMC, an aggregates company, which expanded Summit’s geographic reach into the high-growth coastal North and South Carolina markets. In March 2016, Summit acquired Boxley, a vertically integrated construction materials business in Virginia. Together, Boxley and AMC comprise 11 aggregates locations with 0.5 billion t of reserves, along with four asphalt plants, four ready-mix concrete plants and one architectural products manufacturing facility. These acquisitions, along with Summit’s existing two aggregates operations in South Carolina, establish a strong aggregates-based position in the Mid-Atlantic region.
In April 2016, Summit acquired Sierra, a vertically integrated aggregates and ready-mixed concrete business located in Las Vegas, Nevada. Sierra is a well-established aggregates and ready mix concrete supplier in the Las Vegas market with an excellent reputation for quality and service. It operates a sand & gravel pit and two ready-mixed concrete facilities, and has well-balanced exposure across all end-use segments. The acquisition provides Summit with premier, well-located assets in an expanding market.
Full Year 2016 Outlook
For the full year 2016, based on current market conditions Summit expects to generate Adjusted EBITDA in the range of US$350.0 million to US$370.0 million, compared to Adjusted EBITDA of US$287.5 million in 2015. The Adjusted EBITDA outlook assumes organic improvement, along with the successor period for acquisitions completed through today’s date, including the acquisition of Sierra.
Summit continues to target approximately US$30.0 million of annualised Adjusted EBITDA per year from acquisitions. The upwardly revised full year 2016 Adjusted EBITDA outlook range of US$350.0 million to US$370.0 million excludes the potential upside from any future acquisitions due to the unspecified closing dates of any future acquisitions, the timing of which will impact the magnitude of acquired Adjusted EBITDA realised in 2016.
Tom Hill, CEO of Summit, stated, “We had a strong start to 2016 with price moving higher in all lines of business. We are especially pleased with our aggregates pricing momentum up 9.4% organically throughout key markets. In cement we more than doubled our volume for the second straight quarter with the continued integration of our Davenport cement plant progressing according to plan. Favourable industry dynamics in the upper Midwest and Mississippi river regions continue to support an attractive outlook for our growth initiatives, with cement price up 6.7% during the quarter. Through our products and services businesses we continue to gain exceptional advantages from our vertically integrated approach driving sustained margin improvement at each stage of the vertical chain. Gross profit increased 44.2% to $51.5 million, representing a gross margin expansion of 440 basis points, led by 85.8% incremental gross margins in aggregates. The overall result from all these favourable developments was a 480 basis point improvement in our Adjusted EBITDA margin during the first quarter. This collective improvement demonstrates the strength of our materials based-strategy, which focuses on securing attractively positioned reserves in well-structured markets, with selective downstream exposure.”
Mr. Hill continued, “Since the beginning of 2016 we have completed three aggregates-based acquisitions consistent with our strategy to source, acquire and integrate businesses. Boxley Materials Company (“Boxley”) and American Materials Company (“AMC”), which were added in the first quarter, provide a strategic path to deepen our Mid-Atlantic presence with a combined materials-focused platform of scale. In April, we entered the growing Las Vegas market with the addition of Sierra Ready Mix, LLC (“Sierra”), which fits nicely into our existing West segment operations. We expect these transactions to be accretive to our 2016 results as we integrate and optimiseperformance of these assets. Furthermore, with these three completed acquisitions we have already exceeded our target of $30 million of annualised acquired Adjusted EBITDA.
Beyond acquisitions, our public and private construction markets continue to exhibit positive fundamentals positioning us to capture incremental volume and price improvements while actively managing costs to accomplish our objectives for 2016.”
Brian Harris, CFO of Summit, stated, “We continue to produce stronger margins and focus on cash flow to generate attractive returns from our rapidly expanding operations. Our balance sheet strength and access to capital resources were key factors in our ability to acquire Boxley and AMC and to move swiftly on our acquisition of Sierra. We successfully completed a bond offering in February to fund these acquisitions while maintaining our credit metrics and cost of capital within our targeted levels. We ended the quarter with ample flexibility to continue investing in our announced aggregates facility enhancement initiatives. We are accomplishing this while remaining poised to further execute our strategic growth initiatives in a disciplined manner. However, we remain committed to reducing our leverage ratios by year end while growing Adjusted EBITDA to generate additional cash flow.”
Adapted from press release by Rebecca Bowden
Read the article online at: https://www.worldcement.com/the-americas/09052016/summit-materials-1q16-results/