Vulcan Materials Q2 report: Average unit sales price up in all major product lines
SAG expenses in the second quarter were $7 million lower than the prior year’s level. This year-over-year decrease resulted from lower spending in most major categories, including the company’s legacy IT replacement project.
Net interest expense in the second quarter was $71 million versus $44 million in the prior year due specifically to $26.5 million of charges incurred in connection with the tender offer and debt retirement completed in June. These charges are due primarily to the difference between the purchase price and par value of the senior unsecured notes purchased in the tender offer and the noncash write-off of previously deferred issuance costs related to the debt retired in June.
All results are unaudited.
Outlook Highlights and Commentary
- Aggregates segment earnings are expected to increase in 2011 versus the prior year.
- Second half aggregates volume is expected to be 2 to 6 percent greater than in the second half of 2010, due in part to large project work in California, Virginia, and Georgia;
- Full year aggregates pricing is anticipated to be 1 to 3 percent higher, reflecting continued improvement across many markets; and
- Focus on production efficiency gains and cost control measures will continue.
- Improved materials margin in asphalt mix should lead to growth in 2011 segment earnings.
- Concrete segment earnings are expected to improve somewhat in 2011 due to better pricing.
- The Cement segment is expected to report a modestly higher loss in 2011 than in 2010.
- SAG costs in the second half of 2011 are anticipated to be lower than in the prior year’s second half with full year expenses of approximately $305 million versus $328 million in the prior year.
- Planned 2011 capital spending of $100 million compares to the previous estimate of $125 million and the $86 million spent in 2010.
- Highway construction activity in 2011 is supported by strong growth in contract awards in 2010 and early 2011 and increased stimulus spending in key Vulcan states that were slower to start work on stimulus-funded projects.
- Private construction activity remains hampered by uncertainty regarding the economic recovery.
- Multi-family construction is increasing due to growth in population and households, while single-family construction remains soft due to a weak job market and continuation of the problems that led to the downturn in the housing market; and
- Nonresidential construction is expected to bottom in 2011.
Commenting on the company’s outlook for the remainder of the year, Mr. James stated, “Trailing 12-month contract awards for highways in Vulcan-served states, including awards for federal, state, and local projects, were up 5 percent in 2010. In 2011, contract awards for highways in our states, after growing modestly in the first quarter, declined in the second quarter due mainly to the uncertainty regarding reauthorization of the federal highway program. Anticipated large project work in certain key markets provides additional support for our outlook for growth in aggregates shipments in the second half of 2011.
“Private construction remains at low levels with indications of improvement in certain categories. In residential construction, single-family housing starts have shown few signs of breaking out of the flat-to-downward trend of recent months. Multi-family starts, on the other hand, have increased sharply since late last year. In Vulcan-served states, multi-family starts have increased 24 percent versus 4 percent in other states — evidence that favorable demographics can provide support for construction activity even with weak economic conditions. Overall, we now expect shipments into residential construction to approximate the prior year.
“While private nonresidential construction remains weak, the rate of decline in contract awards has slowed considerably. Trailing 12-month contract awards for the manufacturing sector have been strong since late last year, while awards for the retail and office sectors have increased modestly in 2011. Contract awards for the institutional and government sectors have continued to decline in 2011. Overall, the start of a sustained recovery in nonresidential construction will be influenced by employment growth, capacity utilization, and business investment and lending activity.
“While we are maintaining our aggregates volume growth expectations of 2 to 6 percent for the second half of 2011, we are reducing our full-year volume forecast to flat to down 2 percent. Because of uncertainty regarding reauthorization of the federal highway program and lingering softness in single-family residential and nonresidential construction, we anticipate that most of the approximately 4-million-ton aggregates volume shortfall in the second quarter will not be recovered in the second half.
MORE FROM Aggbeat Online
SUBSCRIBE & FOLLOW
- Vulcan shareholders reject board changes at annual meeting937 Views
- Excavators uncover ancient quarry in Jerusalem917 Views
- Americans consume 3 million pounds of minerals in a lifetime225 Views
- Diesel fuel price report: May 13, 2013185 Views
- Guest Blog: FMSHRC redefines “flagrant violation”131 Views