First publishedon www.AggBusiness.com
Vulcan Materials, America’s largest producer of construction aggregates, saw its full year 2018 aggregates shipments increase 10%, led by double-digit growth in Alabama, Arizona, Florida, Illinois, Tennessee and Texas. Fourth quarter aggregates shipments were also up 8% versus the prior year quarter. Daily shipping rates in October and November were slowed by Hurricane Michael and wet weather in Texas and a number of south-eastern markets. Strong shipment growth continued in Alabama, Arizona, Florida and Illinois. Shipment growth in Texas and Virginia rebounded after weather-related interruptions in September and October.
Vulcan Materials’ Q4 2018 aggregates segment gross profit increased 24% to $256 million, or $5.16 per ton. As a percentage of segment sales, gross profit margin expanded from 26.8% in the prior year to 29.3% due to solid growth in shipments, compounding price improvements and cost control. For the full year, segment gross profit increased 16% to $992 million, or $4.93 per ton.
Vulcan Materials’ asphalt segment gross profit of $7 million for the fourth quarter was $16 million lower than the prior year's quarter due to lower material margins. Although asphalt mix selling prices increased 7% in the fourth quarter, or $3.74 per ton, a 54% increase in unit costs for liquid asphalt more than offset the price improvement. Full year segment gross profit was $56 million versus $91 million in the prior year. For the full year, higher liquid asphalt costs negatively affected segment earnings by $54 million. Pricing gains are beginning to offset higher liquid asphalt costs, but their impact will be gradual during 2019.
Concrete segment gross profit improved slightly for the quarter versus the prior year's fourth quarter. Same-store shipments decreased 7% year-over-year. Shipment growth in California partially offset lower shipments in Virginia (the Company's largest concrete market) and Texas due in part to wet weather. Same-store average price increases of 3% led to a 5% gain in same-store material margins. Full year segment gross profit increased 10% to $50 million.
Overall, Vulcan Materials fourth quarter 2018 net earnings were $124 million and Adjusted EBITDA was $286 million. For the full year, net earnings were $516 million and Adjusted EBITDA was $1.132 billion (an increase of 15%) despite significantly higher energy costs.
Tom Hill, chairman and chief executive officer, said, "Our fourth quarter results reflect a strong finish to the year. Solid shipment growth, compounding price improvements and strong operating efficiencies in our aggregates business contributed to double-digit growth in revenues and operating earnings. Aggregates pricing continued its upward momentum, and unit profitability expanded further despite higher costs for diesel fuel. This demonstrates the resiliency of our aggregates-centric business model. Our conversion of incremental aggregates sales into aggregates earnings was strong again in the fourth quarter – contributing to a same-store segment gross profit flow-through rate of 64 percent for the year.
"Our aggregates-focused business is well positioned for further gains in our industry-leading unit profitability in aggregates. Since the recovery began in the second half of 2013, our core operating and sales disciplines have contributed to 13 percent average annual growth in aggregates gross profit per ton. We expect double-digit earnings growth again in 2019, given the strength of our operational performance and continuing growth in public sector demand. Aggregates pricing momentum continues to improve. Mix-adjusted pricing in the fourth quarter increased 5 percent, and we expect price growth in 2019 at a similar rate.
"In our key markets across the United States, we are benefitting disproportionally from both strong growth in public construction demand and continued solid growth in private demand. For 2019, we expect reported earnings from continuing operations of between $4.55 and $5.05 per diluted share and Adjusted EBITDA of between $1.250 and $1.33 billion."