Cemex results were a bright spot as units shipped decreased in 2012


April 1, 2013

Sources: New York Stock Exchange, NASDAQ, and Wall Street Journal Market Watch. Currency conversion calculated on 3/5/13.

By George H. Reddin

The fourth quarter of 2012 brought mixed results from the construction materials sector, with companies like Granite and Vulcan reporting slight decreases in aggregates shipped and revenues earned. While there were some bright spots around the country, the composite result appears to be a slight decrease in units shipped. On the bright side, Cemex reported net sales in the U.S. of $756 million in the fourth quarter of 2012, up more than 11 percent from the same period in 2011. Operating EBITDA was $13 million in the same quarter, which marked the first time the company has been EBITDA-profitable in the United States since 2009. In recent years, Cemex, like so many publicly traded construction materials companies, has focused on recovering from the collapse of the market and coping with significant debt levels.

Source: U.S. Energy Information Administration (dollars per gallon, prices include all taxes).

Last year did see overall improvement in unit pricing and continued cost-cutting efforts, while overall shipments were generally flat. The industry is more optimistic for overall unit growth in 2013, with expected increases in residential housing starts and contract awards for non-residential buildings. The consensus appears to be for overall growth in aggregates of mid-single digits for 2013. Aggregates demand from residential construction should increase by double digits, while demand from private non-residential buildings is expected to increase by high single digits. The industry does expect continued unit price growth in 2013 as demand increases.

The passage of the new federal highway bill in July 2012 is providing stability and predictability to future highway funding. Through the first three months of fiscal year 2013, obligation of federal funds for future highway projects is up sharply versus the prior year, a positive indicator of growth in future contract awards. Unfortunately, that may not be sustainable, as overall funding in the highway bill is flat or even slightly down from previous levels.


Recent transactions

Vulcan Materials Co. sold its Oshkosh, Wis., quarry to P&Q North Kosh LLC, which will be operated by Michels Materials. Michels Materials, based in Brownsville, Wis., is engaged in aggregate production, road construction, and concrete paving. The sale of the Oshkosh quarry continues a strategic repositioning of assets by Vulcan in its stated objective of focusing on strategic assets in anticipation of the market rebound.

georgeUntitled-1George H. Reddin is a principal in FMI’s Investment Banking practice. He can be reached at 919-785-9286 or at greddin@fminet.com.

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