Vulcan announces second quarter results

Vulcan announces second quarter results
Published: 06 August 2008

Vulcan Materials Company today announced second quarter net sales of $966m, as compared to $808m in the second quarter of 2007. EBITDA were $339m in the second quarter of 2008, as compared to $281m in the prior year. Operating earnings were $238m in the second quarter of 2008 versus $217m in the prior year. Net earnings per diluted share were $1.27 in the second quarter of 2008 compared to $1.45 per diluted share for the second quarter of 2007. The current year’s second quarter results include net earnings per diluted share of $0.34 referable to the sale of quarry sites divested as a condition for approval by the Department of Justice of the Florida Rock acquisition.
 
Don James, Vulcan’s Chairman and Chief Executive Officer, stated, “We are focused on improving operating efficiency and controlling costs during this period of weaker demand for our products. Our efforts to control selling, administrative and general expenses and operating costs lessened the earnings impact of lower volumes and the effects of sharp increases in energy-related costs. On a comparable basis, our selling, administrative and general expenses in the second quarter were approximately 16 percent lower than the second quarter of 2007. This focus on cost control will make us a stronger company and improve our earnings leverage when volumes begin to recover. Additionally, we reduced inventory levels of aggregates in the second quarter by reducing operating hours. This planned action reduced second quarter earnings but increased cash generation and positions us for improved performance efficiencies going forward.
 
“Pricing for our products remained strong and helped to mitigate the earnings effects of lower volumes and higher energy-related costs. The average freight-adjusted unit price for aggregates in the second quarter increased 8 percent from the prior year’s second quarter. The unit price for diesel fuel increased 70 percent from the prior year’s second quarter reducing net earnings approximately $0.09 per diluted share. The unit price for liquid asphalt increased 60 percent from the prior year’s second quarter, which reduced net earnings approximately $0.12 per diluted share.
 
“During the first half of 2008, we acquired four quarries in California, two in Virginia and one in Illinois as well as reserves adjacent to existing quarries in Texas and North Carolina. Each of these acquisitions helped us defer income taxes arising from the sale of quarry sites required by the Justice Department as part of the Florida Rock acquisition. Taken together, these transactions added approximately 210 million tons of aggregates reserves net of the Justice Department’s required divestitures. Following these transactions, we control approximately 13 billion tons of proven and probable reserves in markets where reserves are limited and where demand is expected to grow at above-average rates for many years to come.”
 
Cement earnings reflect the inclusion of Florida Rock cement operations for the current year’s second quarter. On a sequential basis, second quarter cement earnings were lower than the first quarter’s level due principally to a planned maintenance outage in the quarter.
 
Commenting on the outlook for 2008, Mr. James stated, “Our earnings outlook reflects a prolonged downturn in residential construction, weakness in non-residential and highway construction activity and energy-related costs remaining at the current high levels. Leading indicators such as contract awards weakened in most construction categories in the second quarter. We now estimate full year aggregates shipments, including Florida Rock operations for the full year, to be down 2 to 5 per cent versus the prior year.
 
“During this time of weaker demand, our focus is on those aspects of the business we can control. During the first half of this year, we have reduced operating hours, maintained relatively flat unit variable production costs excluding energy-related costs and decreased cash fixed costs. We will continue aggressively managing costs in all areas. We expect higher selling prices for our products to help offset the earnings effects of lower volumes and higher energy-related costs. For aggregates, we continue to expect full year price improvement of approximately 8 per cent.
 
“We now expect consolidated EBITDA for 2008 to be in the range of $1.0 to $1.1bn. Consolidated earnings from continuing operations should be in the range of $2.85 to $3.25 per diluted share. Our 2008 earnings outlook includes $74m of EBITDA and $0.34 of earnings per diluted share resulting from the sale of quarry sites related to the acquisition of Florida Rock.”