Eagle Materials announces 4Q18 results
Published by Lucy Stewardson,
Eagle Materials has announced its financial results for 4Q18 as follows:
- Revenue for the quarter was US$333.3 million, which is down 7% on 4Q17.
- Earnings before income taxes were US$74.5 million, which is up 45% from 4Q17.
- Net earnings per diluted share were recorded as US$1.24, down 40% from 4Q17.
- Approximately 950 000 shares were repurchased for US$69 million.
The company’s results for 4Q17 included two non-recurring items that have affected the comparability of results. These were a tax benefit of approximately US$61 million (or US$1.25/share) as a result of the Tax Cuts and Jobs Act that was enacted on 22 December 2017, as well as a litigation settlement charge of US$39 million (or US$0.56/share). This related to the settlement of class action wallboard antitrust litigation claims against Eagle and its subsidiary, American Gypsum.
“Adjusting for the effects of unusual weather trends during 2018 and a shift in the timing of wallboard prince increases and related buying activity, we estimate that the overall market demand for our building materials, notably cement and wallboard, remained in positive territory in 2018, with growth rates in the low single digits,” said Dave Powers, CEO of Eagle. “The outlook for 2019 continues to be positive, as the basic underlying fundamentals of low unemployment, low interest rates, and higher wages remain favourable. Specific to this quarter’s results cement prices and volume were up, but margins were affected by higher costs, resulting primarily from maintenance outages at two facilities. Our low-cost operations continue to generate strong cashflow that we are investing to improve our operational efficiency and lower our cost position while continuing to repurchase shares in line with our capital allocation strategy. To date, in 2019 we have purchased nearly 2.2 million shares, or 5% of our outstanding shares.”
Cement, concrete, and aggregates results
Revenue in the heavy materials sector, which includes cement, concrete and aggregates, and joint venture and intersegment cement revenue, was US$194.2 million. This was a 3% decline compared to 4Q17. Heavy materials operating earnings decreased by 14% to US$48.2 million. This is thought to be primarily because of higher operating costs within the cement segment and unusually wet weather, which affected both the company’s cement and its concrete and aggregates businesses.
Including joint venture and intersegment revenue, cement revenue was up 1% to US$163.7 million, reflecting improved net sales prices and sales volume. The average net sales price for 4Q18 improved by 1% to US$107.54/t. Cement sales volume for the quarter was 1.3 million t, which was a slight improvement on 4Q17.
Operating earnings for cement were reported to be US$47.2 million, which was 10% below that of 4Q17. This decline in earnings is thought to be primarily due to higher maintenance costs. The company performed two maintenance outages within its cement group and installed upgraded emission control equipment. These outages increased maintenance costs and reduced production output for the quarter.
Concrete and aggregates revenue for 4Q18 was reported to be US$30.5 million, which is a decrease of 21% compared to 4Q17. Operating earnings for the quarter were US$1 million, which is a decline of 70%. The company has stated that this reflects lower sales volume, partially offset by improved concrete pricing. The company’s primary concrete and aggregates markets also experienced heavier than typical rainfall during the quarter, which hampered its ability to move product.
Details of Financial Results
The company conducts one of its cement plant operations through a 50/50 joint venture, the Texas Lehigh Cement Company. It uses an equity method of accounting for its 50% interest in the joint venture. For segment reporting purposes, it proportionally consolidates its 50% share of the joint venture’s revenue and operating earnings. This is consistent with the way the company’s management organises its segments within Eagle for making operating decisions and assessing performance.
In addition, for segment reporting purposes the company reports intersegment revenue as part of a segment’s total revenue. Intersegment sales are eliminated on the income statement.
Read the article online at: https://www.worldcement.com/the-americas/31012019/eagle-materials-announces-4q18-results/
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