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Summit Materials shares Q3 results

Published by , Deputy Editor
World Cement,

Summit Materials, Inc., a leading vertically integrated construction materials company, has announced its results for the third quarter of 2020.

For the three months ended 26 September 2020 the company reported net income attributable to Summit Inc. of US$90.7 million, or US$0.79 per basic share, compared to net income attributable to Summit Inc. of US$55.8 million, or US$0.50 per basic share in the comparable prior year period. Summit reported adjusted diluted net income of US$63.9 million, or US$0.55 per adjusted diluted share as compared to adjusted diluted net income of US$58.2 million, or US$0.50 per adjusted diluted share in the prior year period.

Summit's net revenue decreased 3.1% in the third quarter of 2020 to US$645.2 million, compared to US$665.8 million in the third quarter of 2019, on lower east segment and cement revenue relative to a year ago. Net revenue increased US$38.5 million to US$1562.9 million in the nine months ended 26 September 2020 primarily resulting from organic growth in aggregates and ready-mix concrete. The company reported operating income of US$100.6 million in the third quarter 2020, compared to US$130.9 million in the prior year period, as the third quarter 2020 included US$10.6 million of CEO transition and related stock compensation adjustments.

Operating income increased by US$5.3 million in the first nine months of 2020 as compared to the first nine months of 2019, primarily as net revenue gains exceeded increases in costs of revenue and general and administrative expenses. Summit's operating margin percentage for the three and nine months ended 26 September 2020 decreased to 15.6% from 19.7%, and increased to 10.2% from 10.1%, respectively, from the comparable period a year ago, due to the factors noted above.

Net income attributable to Summit Inc., which included the reversal of an unrecognised tax benefit, increased 62.7% in the third quarter to US$90.7 million as compared to US$55.8 million. Net income attributable to Summit Inc. was US$102.8 million for the nine months ended 26 September 2020. Adjusted EBITDA decreased 8.1% in the third quarter to US$177.7 million as compared to US$193.3 million in 2019, and for the first nine months of 2020 Adjusted EBITDA increased 4.1% to US$354.4 million.

For the three months ended 26 September 2020, sales volumes increased 3.1% in aggregates, and decreased 1.0% in ready-mix concrete, 6.4% in asphalt and 11.3% in cement relative to the same period last year. Average selling prices in the third quarter of 2020 decreased 2.2% in aggregates, and increased 0.5% in cement, 4.6% in ready-mix concrete, and were flat in asphalt relative to the prior year period. The company had organic price growth across all lines of business during the third quarter of 2020.

Anne Noonan, CEO of Summit Materials, commented, "Our West segment performance was the highlight of the quarter, delivering 16.5% growth in Adjusted EBITDA in Q3, as migration trends favour certain US central and western suburban and exurban markets that we serve. Company-wide, adjusted cash gross profit margin has held steady. We are focused on consistent organic growth with investment in greenfields and Summit end markets that are underpinned by strong growth fundamentals. Sustainable organic growth serves as a foundation to support strategic acquisitions, such as Multisources of Texas, and Valley Gravel of British Columbia, which we completed in the third quarter while keeping our leverage ratio steady at 3.5x. Most importantly, we continue to vigilantly practice safety and distancing protocols in response to the COVID-19 outbreak."

As of 26 September 2020, the company had US$288.8 million in cash and US$1.9 billion in debt outstanding. The company's US$345 million revolving credit facility has US$329 million available after letters of credit. For the nine months ended 26 September 2020 cash flow provided by operations was US$218.0 million while cash paid for capital equipment was US$140.0 million. Brian Harris, CFO of Summit Materials added, "During Q3, we strengthened our balance sheet by redeeming all of the outstanding US$650 million 6.125% notes due 2023, which was our nearest term maturity, with proceeds from our issuance of US$700 million of 5.250% notes due 2029. Summit reported over US$617 million in available liquidity at quarter end."

Given the uncertainties relating to COVID-19, Summit is not providing Adjusted EBITDA guidance at this time. Noonan continued, "We continue to believe that it is prudent to forego providing guidance pending better visibility into the ultimate resumption of normal business conditions."

The company is expanding its previously announced 2020 capital expenditure guidance to US$175 million to US$185 million, including US$50 million to US$60 million for greenfield projects. This is an increase from the company's previous guidance of US$145 million to US$160 million.

Cement segment net revenues decreased 14.3% to US$84.9 million in the third quarter 2020, when compared to the prior-year period, on lower sales volume of cement. Cement adjusted cash gross profit margin decreased to 45.1% in the third quarter, compared to 46.0% in the prior year period, as lower volumes resulted in higher unit plant costs. In addition, the company’s solid waste processing facility continued to undergo repairs related to an explosion that occurred in April 2020. The Adjusted EBITDA impact from the down time at the facility was approximately US$4.3 million in the third quarter. Organic sales volume of cement decreased 11.3% in the third quarter and organic average selling prices increased 0.5% when compared to the prior year period.

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